According to a report entitled ‘Islamic way of microcredit the best way to help the poor: Basix Chief’ [1] which is available on the Two Circles online information portal [2], the chairman of the Indian MFI, Basix [3], Mr Vijay Mahajan, was stated to have strongly advocated the use of interest free microcredit or equity financing as an appropriate way of enabling the poor in India gain financial independence. Speaking at the inaugural session of an orientation and training camp on interest free micro-financing in Hyderabad, Mr Mahajan was quoted as stating that financing techniques where the investor and the microentrepreneur share both the loss and profit or ‘micro equity finance’ is particularly suitable for poor people although he did caution that it will work most effectively in small communities where people know and trust each other and where the Islamic concept of ‘Iman’ or honesty can thrive.
Basix submits data to the MIX Market portal [4] which houses financial and other data on MFIs across the globe. According to its profile [5] on the MIX Market portal, Hyderabad-based Basix was established in 1996 and has a gross loan portfolio of USD 73,600,059 as at 2008. Its total assets is stated to be USD 111,073,398. Basix has a capital to asset ratio of 11.36 percent and a debt to equity ratio of 7.81 as at 2008.
Professory AK Siddique Hasan, secretary of the Human Welfare Foundation in New Delhi, was quoted as stating that microcredit was part of ‘Vision 2016’ [6] which was introduced by the foundation to further the socio-economic development of poorer communities in the area. According to information on its website, the vision includes plans to establish specialty hospitals, clinics, schools and other initiatives to empower women in the community. It is hoped that the vision will be accomplished by 2016 at an estimated cost of Rupees 5000 crore (approximately USD 104.6 million). Professor Hasan was quoted as stating that the foundation has plans to put in place a network of five hundred MFIs which extend interest free microcredit to Muslim clients in the country.
The idea of applying Islamic finance techniques to microfinance is not a new one and has been covered by previous publications, some of which are captured on the Microcapital.Org portal. These publications are referenced in the Bibliography section below [7] – [16].
By Chinq Yee Chong, Research Assistant
Bibliography:
[1] Report entitled ‘Islamic way of microcredit the best way to help the poor: Basix Chief’: http://twocircles.net/2009aug02/islamic_way_micro_credit_best_way_help_poor_basix_chief.html
[2] Two Circles online information portal: http://twocircles.net/about.html
[3] Basix: http://www.basixindia.com/
[4] The MIX Market portal: http://www.mixmarket.org/
[5] Basix’ profile on the MIX Market portal: http://www.mixmarket.org/mfi/basix/data
[6] Human Welfare Foundation, Vision 2016: http://www.vision2016.org.in/
[7] CGAP Focus Note on ‘Islamic Microfinance: An Emerging Market Niche’: http://www2.cgap.org/p/site/c/template.rc/1.9.5029/
[8] World Bank Lecture Series on Islamic Approaches to Microfinance: http://info.worldbank.org/etools/BSPAN/PresentationView.asp?PID=2035&EID=933
[9] MICROCAPITAL STORY: Islamic Microfinance – What Next? Nigeria Promotes “Non-Interest” Banking
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