DUBAI, UAE – The global Islamic microfinance industry has surpassed US$60 billion in value within the $3.8 trillion Islamic finance landscape.
This achievement highlights the growing recognition of Islamic microfinance as a tool for poverty alleviation. The industry’s potential to bridge financial gaps while adhering to Shariah principles positions it as a viable alternative for fostering financial inclusion and tackling global poverty challenges.
Despite ongoing efforts and UN Millennium Goals, global poverty eradication remains an unfinished task.
This challenge is particular in Muslim majority countries, where conventional financial structures often hinder progress due to their reliance on prohibited elements like Riba (interest). Financial exclusion due to these factors underscores the necessity for alternative financial solutions that are Shariah-compliant.
Addressing this need, AlHuda CIBE, an Islamic finance consultancy and advisory firm since 2005, has established the Center of Excellence for Islamic Microfinance. This initiative aims to introduce Islamic microfinance as a powerful poverty alleviation tool in diverse countries around the world.
AlHuda CIBE has collaborated with the United Nations (UN), World Bank (WB), IFC, Asian Development Bank (ADB), USAID, GIZ, and Islamic Development Bank (IsDB).
Muhammad Zubair, CEO of AlHuda CIBE said Islamic microfinance plays a crucial role in tackling global poverty. The industry represents just two percent of the total Islamic finance landscape, a release issued by AlHuda CIBE said.
He called for the rapid introduction of Shariah (Islamic) FinTech services, a revolutionary concept combining Islamic finance, microfinance, and cutting-edge technology. This three-fold approach, he believes, holds the key to achieving the UN’s top priority goal of poverty alleviation.
A staggering 72 percent of the unbanked population hails from Muslim-majority countries, indicating a substantial gap in financial inclusion.
Islamic microfinance serves as a compatible and highly viable solution, seamlessly integrating with various micro-credit lending approaches such as Grameen lending, village banking, co-operative societies, credit unions, self-help groups, and commercial microfinance models, the release added.
Shariah FinTech’s cross-border accessibility and less regulated nature make it a game-changer in the financial world.
As technology, including blockchain, cryptocurrencies, and the Metaverse, merges with microfinance, accessing Islamic microfinance services becomes more convenient.
This integration empowers impoverished populations, fosters financial inclusion, nurtures new startups, and drives expansions in existing small businesses.
Zubair urged governments and central banks to collaborate on introducing FinTech regulations, creating an enabling environment for innovation.