Islamic Banking and Microfinance
The nexus between Islamic banking and microfinance has been previously discussed, addressing interest free lending while promoting fairness and ethical practices in accordance with Islamic law. More recently, from 28-30 of June, 2011, sixty-one participants from 25 countries participated in an online “Discussion Corner” organized by USAID on the subject of Islamic Banking and Microfinance. The discussants addressed three main themes: 1) What is Islamic Finance? This covered such topics as the reasons for the growth of Islamic finance in recent years, the basic fundamentals of Islamic finance and the five pillars of Islamic finance (e.g. Mudharabah and Murabaha), as well as the reasons for the lower penetration of Islamic banking in poorer countries. 2) Challenges that prevent Islamic microfinance from reaching scale, which includes no literature on Islamic finance, lack of sharia audit firms and lack of standardization of Islamic financial products. 3) How to address these challenges including the need to develop a new business model to address Islamic finance. Read summaries of the 3-day discussions.