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Currently a Master of Public Administration (MPA) student at Bowling Green State. University in Bowling Green, Ohio, USA. Specializing in International Development with focus on sub-Saharan Africa.
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Islamic banking, banking in accordance with the religious laws of Islam, has been around for thousands of years and still prevails today in its modernized form. Islamic banking has restrictions that are, at times, very different from Western banking. These include profit-sharing between entrepreneur and investor and the prohibition of charging interest. In Islam, one of the five pillars is zakat: the giving of a portion of one’s income to charity. Additionally, the Koran encourages Muslims to give benevolent loans to those in need, which is very similar to interest-free loans in Islamic microfinance. With the rise of microfinance throughout the world, many Muslims are trying to bring awareness to this type of banking and modify it in accordance with Islamic law. With Islamic microfinance, the amount paid back equals the amount lent out, and therefore does not violate Islamic banking laws. According to the United Nations, Muslims compromise 46 percent of the world’s total poverty. Additionally, there are many Muslim countries on the United Nation’s list of least developed countries, including Afghanistan and Mauritania. These nations represent a very large portion of the world’s poor who could greatly benefit from a modified version of microfinance that they would feel more comfortable using.
One question on everyone’s mind then is “how do the banks make money?” Sometimes, banks will charge a higher price, which includes the actual cost, plus a previously agreed upon profit margin. Additionally, banks will sometimes enter into a joint venture with the investor, and the two will share the profits. Both of these types of banking can be modified and applied to Islamic microfinance.
To discuss this issue of Islamic Microfinance, delegates from more than thirty countries around the world will meet at the Global Islamic Microfinance Forum on December 8th of this year in the UAE. Delegates will attempt to introduce Islamic microfinance as a useful tool for poverty alleviation, set its standards, and further develop the system internationally. Additionally, the forum seeks to bring awareness to this type of microfinance and to show how it could function in the marketplace. Participants will have the opportunity to learn about Islamic microfinance through different sessions, speeches, and presentations. There is also a two-day post event workshop for those wanting some more in depth information and discussions.
For more information on the event, click here.