CGAP, Deutsche Bank, Grameen-Jameel, IDB join ‘Islamic Microfinance Challenge 2010′

Microfinance Focus, March 9, 2010: CGAP, Deutsche Bank, Grameen-Jameel and Islamic Development Bank have joined the Islamic microfinance industry to develop new ideas for business models in the “Islamic Microfinance Challenge 2010: Innovating Sustainable, Scalable, and Market-Driven Models.”

Islamic finance principles prohibit interest-based contracts, and emphasize risk-sharing and asset-backed transactions. The fundamental challenge for the Islamic microfinance industry remains meeting client demand with affordable, authentic, profitable, and market-driven products.

“The competition will identify innovative product and business ideas that fulfill both Islamic and good business criteria, and thus have the potential to become self-sufficient and profitable,” said Alexander Schuetz, Managing Director and Chief Operating Officer for the Middle East and North Africa region of Deutsche Bank. The winner will be awarded with US $100,000 in grant funds to launch a pilot program of their proposed business.

The Islamic finance industry is currently estimated at $1.5 trillion, though the Islamic microfinance sector remains in its infancy, limited to few programs. A 2008 CGAP study estimated that 125 financial institutions reach only 380,000 clients with Islamic microfinance.

Studies suggest that a much larger number of the world’s poor Muslims could benefit directly from access to Islamic microfinance. “The need for specialized Islamic microfinance products is emerging,” remarked Julia Assaad, General Manager of Grameen-Jameel Pan Arab Microfinance, the first social business supporting the microfinance sector in the Arab world.

A 2008 report from the Islamic Development Bank, “The Role of Microfinance in Poverty Alleviation,” points out that more creativity in developing Shariah-compliant products is critical to addressing poverty in developing countries with Muslim populations. The competition seeks to address this need by catalyzing the development of a range of Shariah-compliant products.

Islamic Microfinance Challenge 2010 is open to the general public, with a deadline for submitting the initial application by May 3, 2010. An independent panel of judges, consisting of leading experts in Islamic law, microfinance, and commercial business, will consider submissions on the basis of their originality, as well as the perceived profitability, sustainability, scalability, and Shariah-compliance of the business model and its products, said statement.

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