Microfinance is a critical issue which needs to be patronised in the Islamic finance sector, a group of panellists led by Nobel Prize winner Muhammad Yunus has said at a finance forum in Dubai on Sunday.
The panel, composed of Islamic finance professionals from all over the world, discussed at the International Islamic Finance Forum (IIFF) in Dubai how the global Islamic finance sector needs to undergo a paradigm shift to begin alleviating poverty.
"There is a blueprint for microfinance - it is an issue of someone championing it in our space," said Rushdi Siddiqui, global director of Dow Jones Islamic Indexes.
"At this point, we are still working out the technicality of Islamic finance [in the sector], but have yet to look at its spirituality."
Muhammad Yunus, the Grameen Bank founder and 2006 Nobel Prize winner, led the panel discussion at IIFF, which runs in Dubai from April 13-17, and is being held under the patronage of Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum, also UAE vice president and prime minister.
Wasim Saifi, chief executive of UAE Islamic mortgage firm Tamweel, also participated in the panel and spoke of why Islamic banks had failed to effectively work in Islamic finance.
"I don't think any of the Islamic banks have had much success in microfinance," said Saifi. "It is primarily because the pressures are still there to create the Islamic finance sector, and widening its scope was not part of the immediate focus."
Nevertheless, microfinance and Islamic finance are intrinsic to each other, Saifi said.
"The scope is certainly there, and it is really a marriage match made in heaven," said Saifi. "Once realised, microfinance will be able to tap into the cash-rich Islamic finance industry for its activities."
Claire Cabanel Rey, executive director of PlaNet Finance UAE, said that there were currently successful Islamic microfinance programmes in Afghanistan and informed delegates that a significant portion of the $10 billion poverty-reduction fund established by the Islamic Development Bank is dedicated to microfinance.
Ahmed Al Janahi, deputy group CEO of UAE-based Noor Islamic Bank, also on the panel, said that his bank is currently creating unit dedicated to 15% of the UAE finance market who are deemed "unbankable".
"Most banks in the UAE find many Emiratis are unbankable - it is embedded and it doesn't make sense to open accounts for small businesses, students, or address the smaller customer," Al Janahi said.
"We have spotted this at Noor Islamic Bank - we have been creating another bank in the main bank, with a different structure so we can break down the cost per product. This way, we can reach the 15% in the UAE who have not banked till now."
According to Thomson Financial, Islamic finance assets are growing at an annual pace of 20% and are set to hit $2 trillion in 2010 from the current $900 billion.
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