The document discusses overcoming financial challenges in Islamic microfinance. It identifies that profit sharing involves high transaction costs and requires transparency in calculating profits and losses. It also notes a lack of technical capacity, policies, and guidance. To overcome lack of funding, the document suggests providing more services than just credit, establishing links with the Islamic finance industry and donors, and creating specialist investment funds. It provides an example of a peer-to-peer lending platform that has raised over $5 million and discusses how an Islamic peer-to-peer lending platform could generate new capital and secure long-term funding for microfinance institutions at a lower cost.

2. Overcoming the financial challenges
facing Islamic microfinance
Dr Ajaz Ahmed Khan, 3rd Global Islamic Microfinance Forum,
Dubai, 6th October 2013
Blue Mosque, Istanbul, Turkey

3. Why is Islamic microfinance not
more widespread?
• Profit sharing involves high transactions
costs
• Requires high level of transparency - the
difficulty associated with calculating
profits and losses
• Low institutional technical capacity,
established policies and procedures and
guidance
• Authenticity and what is really ‘Shari’ah
Compliant’?
• Lack of funding
Imam Mosque, Isfahan, Iran

4. How can we overcome the
lack of funding?
• Provide more services than just
credit (savings, takaful, money
transfer, etc.).
• Establish better links with the
Islamic finance industry and
encourage them to downscale.
• Establish better links with Islamic
institutional donors.
• Establish specialist Islamic
microfinance investment funds.
Sana’a, Yemen

6. P2P lending: the lendwithcare experience
• Raised more than $5 million in capital, and growing
exponentially - raising more than $300,000 per month
• More than 13,000 individual lenders (95% from the UK)
and attracting 500 new lenders each month
• 98% of lenders re-lend
• Making microfinance affordable for anyone anywhere
Badshahi Mosque, Lahore, Pakistan

7. Why not create an Islamic peer to
peer lending/donation platform?
Would offer several advantages:
•Generate new capital
•Secure, steady, long-term funding for
MFIs – much cheaper than commercial
sources and independent of the whims
of institutional donors
•Outlet for sadaqah and zakat
•Making microfinance affordable
•Ensuring the focus remains on
improving poor peoples lives.
Timbuktu, Mali

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