CGAP, Deutsche Bank, Grameen-Jameel Pan Arab Microfinance, and Islamic Development Bank partnered to sponsor this global competition in order to uncover viable business models that provide microfinance products compatible with Shari’ah.
Sponsors received over 130 applications from 43 countries for this competition, thus underlining the growing global prominence of Islamic financing options. Applicants included Islamic and conventional microfinance institutions (MFIs), multi-sector non-governmental organisations (NGOs), consultants, and academics.
A significant portion of the 2.7 billion people without access to finance often refuse financial products that do not conform to Islamic law, and are therefore at an even greater disadvantage than other low-income individuals seeking financing to fund their micro-businesses.
"The response to the Islamic Microfinance Challenge has been astonishing," said Julia Assaad, General Manager of Grameen-Jameel Pan Arab Microfinance. "There is great demand for Islamic financing and a lot of enthusiasm among financial groups globally in meeting this demand. We are heartened by both the commitment and innovation we saw from applicants. We hope to see Islamic microfinance flourish in reaching low-income households".
Al Amal Microfinance Bank is the first microfinance bank in the Arab world to offer only Shari’ah-compliant products. Operating for just over two years, the bank has 15,000 active borrowers and 20,000 savers, and has already captured over 25 per cent of the Yemeni microfinance market. The bank's menu of Islamic microfinance services include group and individual financing, project, corporate, and investment financing, savings, investment funds, and insurance.
Al Amal's proposal for the competition was to pilot an Islamic leasing product. The bank plans to self-fund its leasing product by relying on its Islamic investment funds product. It expects to reach operational and financial sustainability by 2012. Al Amal will be recognised and awarded its $104,000 prize funds during the annual Sanabel Conference in June.
"In its short life, Al Amal Microfinance Bank has already distinguished itself as a pioneering institution of Islamic microfinance," said Henry Azzam, Deutsche Bank's Chairman for the Middle East and North Africa. "Al Amal has found creative solutions to self-finance its banking activities and has demonstrated that micro-entrepreneurs can be reached with diverse Islamic finance tools on a large scale."
The judges also named four runners-up, Tameer Microfinance Bank (Pakistan), Tanzania ecoVolunteerism (Tanzania), Bina Insan Sejahtera Mandiri-BISMA (Indonesia), and Center for Women's Cooperative Development-CWCD (Pakistan). "Congratulations to these runners-up for submitting business ideas which strongly meet the combined criteria of sustainability, scalability, and innovation," says Rabih Mattar, Microfinance Team Leader at the Islamic Development Bank. "These applicants have developed interesting ideas to cater to their local markets while remaining committed to Shariah principles. We look forward to hearing about their future pursuits."
Sponsors of the Islamic Microfinance Challenge hope this competition serves as an impetus for deeper exploration of ways to serve the market. "Ultimately," says Mohammed Khaled, the Middle East and North Africa representative at CGAP, "the conclusion of the Challenge marks not the end, but the beginning of a collaborative process to build this sector – as we develop business models, it is also critical that we develop training tools, performance ratios, and reporting standards for common use. Practitioners need to have an honest exchange of ideas on what works and what does not, while donors must encourage innovation by investing in new pilot projects."