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Published On:09 July 2011
Posted by Indian Muslim Observer

IF drive for Afghanistan

By Blake Goud

Very little good news comes out of Afghanistan; nevertheless one might expect that in such a devoutly Muslim country Islamic finance would flourish. Sadly this is not true, as Afghanistan is a country where finance - let alone Islamic finance - has not developed at all.

However, Uncle Sam is stepping in to alleviate this situation (quite ironically too as Islamic finance is having such a hard time gaining a foothold in America) and bring (US dollar-sponsored) Islamic microfinance to the troubled state. With funding from the US Agency for International Development - commonly known as USAID - a Wisconsin-based umbrella organization, the World Council of Credit Unions (WOCCU) has set up 40 Islamic credit unions across Afghanistan. It is hoped that these Islamic investment and finance cooperatives will ultimately serve more than 70,000 people.

The WOCCU program has adapted the simple cooperative finance model used by many credit unions and sought a Fatwa from local scholars. The program has lent a cumulative $43.9m since 2005 - most of the capital being fronted by USAID. It has also attracted $3.5m in savings because bank accounts are not common and livestock is the most common means of savings.

In May 2011, the UK government's Department for International Development provided a two-year $3.2m grant to underwrite an Shari'ah compliant leasing-based hybrid loan program to finance larger agricultural equipment like tractors and processing equipment, which also increases the average loan size from its current average of $742.

The growth of western-sponsored credit unions and Islamic microfinance, has been concentrated in the volatile south and east of Afghanistan and came in response to strong local grassroots demand for Shari'ah-compliant financing. WOCCU is planning to open three more Islamic investment and finance cooperatives in the next year. However, it is also planning to close a number of IIFCs that are not financially self-sustainable as USAID funding is scheduled to end in December 2012.

WOCCU's senior vice president, Barry Lennon told The Islamic Globe that he hopes the organization will roll-out the idea to other developing Muslim nations.

(Courtesy: The Islamic Globe)

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Posted by Indian Muslim Observer on July 09, 2011. Filed under , , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

By Indian Muslim Observer on July 09, 2011. Filed under , , . Follow any responses to the RSS 2.0. Leave a response

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