Kosher money: Islamic micro finance fails to take centre stage

Published: December 12, 2011
There is huge untapped potential in the Pakistani market. DESIGN: JAMAL KHURSHID

There is huge untapped potential in the Pakistani market. DESIGN: JAMAL KHURSHID


Despite the extraordinary potential in the country, financial institutions in Pakistan are still not taking Islamic micro financing seriously, said Al Baraka Bank Chief Operating Officer Ahmed Shuja Kidwai.

Speaking about the state of this budding sector in Pakistan, he said that Islamic micro finance is particularly important for Pakistan because it’s a developing economy and has a huge untapped market. In fact, even traditional modes of micro finance are growing at much slower rates than anticipated. The State Bank of Pakistan is paying special attention to this sector of banking but so far the response has been less than satisfactory.

Kidwai said that he was one of those managers who believe in learning the fundamentals of a market and exploring how to make it into a success.

Al Baraka Bank, with 89 branches in Pakistan, is in a better position now to pursue small and medium size businesses that can grow with Islamic micro financing, he said, adding that his bank has plans to focus on this market in 2012.

Citing the example of Italy, he said the country had given micro financing to its small and medium size industries, after World War II, which have since then grown into mega corporations. There were many car parts manufacturers with small facilities and now they are major car parts manufacturers of the world, he said.

Pakistan also has the examples of Iran, India and Malaysia which have grown their industries through micro financing in just 10-15 years, added Kidwai.

He explained his rationale with practical examples of how microfinance can work as an economic catalyst for growth. “Suppose, five car mechanics work in a garage at a salary package of Rs25,000 a month. If they all start their own shops, they will work more and gradually start earning more than their job; this would also encourage competition in the market.

“It is not too difficult to comprehend. When people get loans to start or expand their business, they think 24-hours a day for their business compared to an 8-hour routine job,” he explained, “Gradually, these small businesses expand into something bigger and may eventually turn into corporations.”

“With the prevailing difficult economic conditions in the country, I think Islamic micro finance is the best way out for Pakistan,” Kidwai said.

State Bank of Pakistan, Director Islamic banking, Saleem Ullah Khan said that the central bank expects growth in Islamic microfinance, but unlike banks, right now, NGOs are more active in Islamic micro financing in Pakistan.

There are half a dozen NGOs in Pakistan that are active in Islamic micro financing but there is less activity in the formal banking sector, he said, adding that the central bank gives priority to microfinance sector which also includes Islamic microfinance.

“The growth in Islamic micro financing has been slow but its recognition is growing in the country,” he said.

Adviser to Karachi Chamber of Commerce and Industry on Banking and Insurance, Ateequr Rehman said that growth in Islamic banking and Islamic micro financing is crucial for the growth of the middle and lower-middle class of Pakistan.

“With a high unemployment rate in the country, we really cannot give jobs to all our youth. This is the time when we must encourage entrepreneurship in the country and this is possible through Islamic micro financing,” Rehman said.

Published in The Express Tribune, December 12th, 2011.

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Reader Comments (9)

  • Mard-e-Haq
    Dec 12, 2011 - 8:02AM

    It is halal money, not kosher. Kosher is Jewish!!!


  • You Said It
    Dec 12, 2011 - 9:57AM

    Funny to see “Islamic” finance described as “kosher”, which is a Jewish term.


  • Dec 12, 2011 - 12:44PM


    Well.. Halal or Haram… Islamic Banking is no different from the ordinary banking. Just using alternatives for “usury” or “interest” would not make it Islamic. We need to do a lot more. You may have a look at the following Urdu article to know the truth.


  • pakistani baloch
    Dec 12, 2011 - 12:58PM

    donot use paper money …..use some tengible sikka …paper money is haram


  • antanu
    Dec 12, 2011 - 6:07PM

    @pakistani baloch:
    who told paper money is haram….your comment is way out of context of the article. Is;amic finance system is a great success in UK. People are attracting to it. Go and google some on the net to find true story.


  • Ch Allah Daad
    Dec 12, 2011 - 7:03PM

    Whoever uses word Islam in finance and banking is for attraction only. Basic requirement of a business is a cheap, reliable, accessible and limitless supply of money and providers need assured, legitimate, honest, competetive and trustworthy businesses. All parties are doomed if all are not winners.


  • Say No To Islamic Banks
    Dec 12, 2011 - 11:46PM

    Alternative view on islamic banking. Islamic banking (or participant banking) (Arabic: المصرفية الإسلامية‎) cliams that their banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees (known as Riba or usury) for loans of money. Investing in businesses that provide goods or services considered contrary to Islamic principles is also Haraam (forbidden). While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community.


  • Dec 13, 2011 - 10:25AM

    Pakistan should first emphasize upon developing required infrastructure for Islamic Micro Finance. Anything called upon Islam may not suceed but professionalism is required. Islamic Micro Finance also need professional approach rather than religiuos faith based approach. When it comes to money faith and unfaith all behaves same. So, before visualizing desired growth in Islamic Micro Finance, State Bank of Pakistan should develop required infrastructure for its growth otherwise, temporament of faith based finance would not last long especially when it will have stiff competition with interest based finance.


  • farhan
    Dec 13, 2011 - 4:37PM

    did you have to wash your hands, wash your mouth, etc after uttering the word “Jewish” ? what is wrong in saying kosher ? have a sense and be more accommodating. Moses after all was a Prophet and Allah says that He has created all/many faiths amongst us. Get off your high horse and give respect. Do not judge Allah’s people, especially on the basis of their political stand. At best, try to have a conversation.Recommend

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