Islamic Voice A Monthly English Magazine


 JAMADI-AWWAL / JAMADI THANI
JUNE 2004
Volume 17-06 No : 210

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Let's Bank on Micro-Credit

Let's Bank on Micro-Credit

The community is never tired of proclaiming that interest is haram. With Muslim managed banks collapsing like a pack of cards, it is time to establish micro-credit institutions

By Mohammed Hanif Lakdawala

¨Mubashira, 28, a housewife visits the jeweller at Bandra to take a loan of 25,000 against her ornaments agreeing to pay 10 per cent interest per month.

¨Sana, 48,wife of a declining business man visits the jeweller at Agripada for a loan of 3,00,000 not thinking twice, at the 4 per cent interest rate per month.

¨Zaitunbi, 32,a slum dweller regularly visits a jeweller at Bhendi Bazar to pay monthly interest of Rs 500.She has taken a loan of 15,000 for her husband’s medical treatment.

A unique characteristic of Bandra, Agripada, and Bhendi Bazar, all pre-dominant Muslim areas are, the networks of jewellers who are more interested in giving loans rather than selling gold ornaments.

These jewellers cater to all classes of the Muslim community- slum dwellers, middle class and the elite class. Their monthly rate of interest is anywhere between 4 per cent to 10 per cent every month with compound interest rate.

The community is never tired of proclaiming that interest is haram. It is exactly such type of exploitative interest, which Islam has forbidden, but the community is oblivious of these exploiters who many a time take the help of anti-social elements to recover their dues with interest.

One of the remedies for such type of exploitative loan providers is making micro-credit available to the poor. The term ‘micro’ is, used to denote the small size of loans vis-à-vis those of the mainstream credit market. The clientele is those who are not able to, or have difficulty in, accessing mainstream credit.

It is interesting to note that according to a case study of Mahila Milan Bank, the poor used to borrow in times of desperate need from Pathans/money lenders, pawnbrokers at an interest rate of 10 per cent per month. But on joining saving groups of Mahila Milan Bank, they have been completely relieved from the clutches of such sharks.

The fact is that micro-credit services have existed from time immemorial through chit funds, pawnbrokers and the ubiquitous money-lender (collectively known as the informal credit market). The money-lender, made infamous by the media, however, had and continues to have, a large number of good reasons to survive. It is true that in the last four decades the proportion of informal credit has halved, but the moneylender continues to hold the majority of the market within this sector.

The professional micro-finance service providers in India include banks, financial institutions (both macro and micro), non-government organizations and non-banking finance companies.. They all entered the market with similar objectives - to counter the exploitative arrangements that exist in micro-credit and to make credit more appropriate for the poor. Unfortunately the Indian Muslim community, which has a unique institution of Zakat, has failed to establish micro- credit institutions. Even the concept of interest- free Banking has failed to take off and recently acquired the bad reputation with the collapse of Baitun Nasr, couple of years back ago. Even the other Interest free non-banking institutions managed by the community have nothing substantial to show as an achievement. Indian Muslims must learn from the experiments of Grameen Bank in Bangladesh, Aman, Ikhatiyar in Malaysia; and MYRADA in India. In India, Mumbai has the largest number of slum dwellers (5.82 mn) distantly followed by Delhi (1.82 mn), Kolkata (1.49 mn) and Chennai (1.08 mn). In terms of proportion, Muslim slum dwellers to total slum population, Mumbai again ranked first with 28.5 per cent slum dwellers distantly followed by Delhi (18.8 per cent), Chennai (18.3 per cent ) and Kolkata (12.7 per cent).

For these Muslim slum dwellers, there are very few alternatives available in an emergency. Hence they turn to Pathans/money lenders, pawnbrokers at an interest rate of 10 per cent per month.

The micro credit schemes work on the basis of seeking no collaterals, no external guarantors, directly delivering the finances to the clients’ doorstep, provision for repaying of loans simultaneous with saving facilities, and small loans for income generation activities. The micro credit operates by organising the borrowers in small groups, repayment of loans on weekly basis and on interest charging basis.

Aziza, 41,a widow, is a self-sustaining woman after she acquired a loan from one of the social organisations. She invested Rs 20,000 in starting a Tiffin service and earning enough to take care of her three kids and herself.

Halima, 36,was literally on the streets after the divorce as her parents themselves were living in slums and had no permanent source of income. She was helped by the Mahila Milan to start a vegetable stall.

Today she is not only taking care of her children, but supporting her parents too.

Konkan cooperative credit society in Mumbai is disbursing micro credit to poor Muslim women. They are very successful in filling a gap in this sector. Mahila Milan is also very successful in empowering women through micro credit.

The Muslim community needs many such organisations working at the grass- root, empowering women. We have thousands of deserted women who have nowhere to go for financial assistance. Training them and providing micro -credit will go a long way in alleviating their suffering.

The writer can be reached at mhl@rediffmail.com.

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News Community Roundup Editorial Letters Trends Karnataka Polls - Commentary Elections-2004 Muslim Perspectives Fast Forward Book Review Features Children's Corner Just For the Young Miscellany Quran Speaks to You Hadith Our Dialogue Question Hour Religion Facts on Faith Quran and Science Role Models Reflections Crossfire Journey to Islam Matrimonial
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