Written by By: P.K. ABDUL GHAFOUR

Islamic micro-finance, which is based on profit-sharing and does not charge interest, can play a significant role in alleviating poverty and transforming the poor into successful entrepreneurs, said Mamoon Al-Azami, a senior community development specialist at the Jeddah-based Islamic Development Bank (IDB).

“Nobel Laureate Mohammed Yunus introduced a new type of micro-finance through his Grameen Bank, inspired by IDB President Ahmed Mohammed Ali,” he said.

“The initiative was aimed at turning beggars into salespersons. He gave them toys and other merchandise worth $5 to $10 and told them to sell them. It was a big success,” he said, while launching a seminar organized by the Indian Forum for Interest-Free Banking (IFIB).

When Grameen launched its beggar-lending project, Yunus expected 1,000 or so beggars to participate, but 100,000 joined almost immediately and within two years, more than 25,000 stopped begging completely after becoming successful door-to-door salespersons.

“The project not only helped in protecting the honor of these people, but also made them self-reliable,” he said.

In his keynote speech, Al-Azami told community leaders to work together to improve the condition of their societies instead of depending on others, including governments and politicians.

He emphasized the role of Islamic finance in strengthening real economy.

“Islam has encouraged lending, not to make money through interest, but to enhance social cooperation, cohesion and harmony.”

V.K. Abdul Aziz, secretary-general of IFIB, gave a presentation on the participatory micro-finance scheme.

“It offers financial services to people who are denied access to the financial market and empowers people who can pursue projects with their own resources, and who lack assistance, subsidies and dependence.”

“It provides financial services to those who are traditionally non-bankable, mainly because they lack guarantees against a loss risk,” he said.

In the spirit of Islam that goes beyond mere profitability, this new financial system aims to maximize social benefits as opposed to profit maximization, said Aziz, a researcher on Islamic banking and finance.

“Micro-finance is a very flexible tool whose models can be replicated, but must be tailored on local socio-economic and cultural characteristics,” he said. Speaking about IFIB’s goat farming project in Kerala, S. Mammu, a barrister and social worker, said it would not only solve the financial problems of the poor farmers, but also help investors make profit.

Under the pilot project, five goats each have been given to 50 families regardless of their religions worth a total investment of Rs1.2 million. The beneficiaries will return three goats and their kids to the facilitator, who will sell them at local market price and distribute 33 percent of the profit to the financier, 33 percent to the farmer, 23 percent to management and 11 percent to the monitoring committee.