CGAP, Deutsche Bank, Grameen-Jameel and Islamic Development Bank have joined the campaign "Islamic Microfinance Challenge 2010: Innovating Sustainable, Scalable, and Market-Driven Models" to elicit new ideas from the Islamic microfinance industry, especially new business models.
The winner will be awarded with US $ 100,000 in grant funds to launch a pilot program of their proposed business, which the competition organizers will then showcase to garner further support for the program's growth and development.
The Islamic finance industry has grown rapidly over the past 40 years, with a current estimated market size of US $ 1.5 trillion. Yet, the Islamic microfinance sector remains constrained in terms of self-sufficiency and substantive outreach. A 2008 CGAP study estimated that 125 financial institutions reach only 380,000 clients with 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. "While Islamic banking has been a successful model in the banking sector, it has not proven to be scalable in the microfinance sector. It is therefore essential to develop Shariah-compliant products which better suit Islamic microfinance clients' needs."
A 2008 report from the Islamic Development Bank, "The Role of Microfinance in Poverty Alleviation," points out that even amongst Islamic microfinance clients there are a broad range of needs, and a "one-size-fits-all solution" to poverty alleviation will not work. As the report notes, 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 to meet the diverse needs of poor Muslims across the world.
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.
Department of Monitoring,
Kavkaz Center
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