Overcoming the financial challenges facing Islamic microfinance Dr

Overcoming the financial challenges facing Islamic microfinance Dr Ajaz Ahmed Khan, 3 rd Global Islamic Microfinance Forum, Dubai, 6 th October 2013 Blue Mosque, Istanbul, Turkey

Why is Islamic microfinance not more widespread? • Profit sharing involves high transactions costs • Requires high level of transparency - the difficulty associated with calculating profits and losses • Low institutional technical capacity, established policies and procedures and guidance • Authenticity and what is really ‘Shari’ah Compliant’? • Lack of funding Imam Mosque, Isfahan, Iran

How can we overcome the lack of funding? • Provide more services than just credit (savings, takaful, money transfer, etc. ). • Establish better links with the Islamic finance industry and encourage them to downscale. • Establish better links with Islamic institutional donors. • Establish specialist Islamic microfinance investment funds. Sana’a, Yemen

P 2 P lending: the lendwithcare experience • Raised more than $5 million in capital, and growing exponentially - raising more than $300, 000 per month • More than 13, 000 individual lenders (95% from the UK) and attracting 500 new lenders each month • 98% of lenders re-lend • Making microfinance affordable for anyone anywhere Badshahi Mosque, Lahore, Pakistan

Why not create an Islamic peer to peer lending/donation platform? Would offer several advantages: • Generate new capital • Secure, steady, long-term funding for MFIs – much cheaper than commercial sources and independent of the whims of institutional donors • Outlet for sadaqah and zakat • Making microfinance affordable • Ensuring the focus remains on improving poor peoples lives. Timbuktu, Mali

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