Islamic microfinance best route to inclusive growth.

Byline: AHSAN NISAR

It is generally believed that Islamic banking was re-launched to bring the large unbanked population within the folds of the microfinance bank industry. Since its re-launch, the Islamic banking industry is

still concentrated in urban, semi-urban areas where financial services have greater availability while a significant percentage of faith-sensitive voluntary exclusion signifies huge potential demand for Islamic banking in the country. The State Bank of Pakistan (SBP) and the industry need to collaborate further to expand their network to regions where there is no or limited availability of financial services particularly in the areas of SMEs, agriculture and microfinance.

Microfinance cannot be separated from Islamic finance if targeting the ultimate objective of social welfare enhancement by promoting inclusive growth and encouraging wealth distribution.

Structures of Islamic microfinance have got inherent checks, and the ability to deal with varying levels of poverty while providing foundations for the sustainability of institutions. However, the presence of Islamic microfinance is still very low and is concentrated only in a few countries depicting a huge potential market for Islamic financial institutions as well as microfinance institutions to capture faith-sensitive microfinance clients. Although there are a number of microfinance banks and fintechs like FINCA, Khushhali Bank, Apna Bank, Advans, First MF Bank, NRSP, Pak Oman, Telenor Bank, Kashf Foundation, Akhuwat, Waseela and U Bank owned by Mobilink and Ufone respectively, in this article I would specifically discuss the recent contributions of Akhuwat and Kashf Foundation.

Akhuwat Foundation

Akhuwat Foundation is a non-profit company established in 2001 and registered with the Securities and Exchange Commission of Pakistan (SECP). Akhuwat aims to alleviate poverty by creating a bond of solidarity between the affluent and the marginalized. Their goal is to develop and sustain a social system based on mutual support. They extend a helping hand to the poverty-stricken by providing interest-free loans so they can start a business and become self-reliant.

Other than having almost 1,000 branches in almost all cities of Pakistan to conduct its operations of distributing Qarz-e-Hasna - interest-free loans - Akhuwat also uses places of worship, like mosques and churches to disburse credit. The primary tool being used by Akhuwat Foundation is micro-credit in a...