Islamic microfinance can be an effective tool to eradicate poverty if it ensures distributive justice to the downtrodden people, analysts said yesterday.
Poverty has multi-dimensional aspects: it means not only a lack of money but other issues such as poor access to clean water and sanitation, inadequate physical security, lack of voice, insecurity, powerlessness and exclusion.
They spoke at a roundtable on "Islamic Microfinance: An Instrument for Poverty Alleviation" at Radisson Hotel in Dhaka.
Malaysia-based WIEF Foundation and Bangladesh-based SEACO Foundation co-organised the programme in collaboration with the Bangladesh Federation of Women Entrepreneurs, Bangladesh Malaysia Chamber of Commerce and Industry and the High Commission of Malaysia in Dhaka.
Mohammad Abdul Mannan, managing director of Islami Bank Bangladesh, said conventional microfinance failed to benefit the poor as it runs in an exploitative manner. "So, Islamic microfinance can be a role model."
There is a philosophical difference between conventional banking and Islamic banking, he said. "Conventional banking is fully based on individual greed, while Islamic banking is based on universal brotherhood and distributive justice."
The banker said Islamic microfinance can be an effective tool to satisfy the financial needs of the poor as it focuses on a credit-plus integrated poverty alleviation scheme.
“It means we not only provide credit rather we integrate other issues such as zakat (compulsory transfer), waqf (an inalienable religious endowment), and kaffara (atonement),” he said.
Speaking as chief guest, Atiur Rahman, governor of Bangladesh Bank, said Islamic banking has been thriving in the vibrantly growing Bangladesh economy and accounts for a fifth of total banking sector assets and liabilities.
In Bangladesh, compliance of banks and financial institutions with Islamic Shariah principles is being overseen by their Shariah boards, while Bangladesh Bank oversees their soundness, solvency and capital adequacy, he said.
The governor urged the Islamic banks and the Islamic windows of conventional banks in Bangladesh to pursue vigorous promotion of Islamic micro and SME financing, in line with the country's efforts for faster poverty eradication with deeper, wider financial inclusion.
As a panel discussant, Dadang Muljawan, senior economic researcher of Islami Development Bank in Saudi Arabia, said Islamic financing would grow further as it is gaining popularity in Muslim and non-Muslim countries.
He said Shariah-based banks emphasise the development of the poor as it not only provides funds, but also transforms people's life.
Datuk Hajah Zabidah Ismail, managing director of Amanah Ikhtiar Malaysia, said Shariah-based microfinance can be an alternative tool to eradicate poverty as it promotes a balance of equitable growth.
Abul Hasan M Sadek, vice chancellor of Asian University in Bangladesh, said microfinance is only a part of Islamic banking. It can be an effective model to eliminate poverty as the conventional system charges higher interest.
source: The Daily Star