NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, November 5, 2014

Nov 5 (Reuters) – A series of German-funded studies and pilot projects aims to bridge the gap between Islamic finance and microcredit, to the benefit of communities in developing countries which remain on the fringes of the financial industry.

Islamic banking has been growing rapidly over the last few years in several parts of the world, particularly the Gulf and southeast Asia, but sharia-compliant versions of microcredit – the provision of very small loans to low-income borrowers who lack collateral and a credit history – have been slow to develop.

Expanding the appeal of Islamic microfinance is crucial for an estimated 650 million Muslims who live on less than $2 a day, according to the Washington-based Consultative Group to Assist the Poor (CGAP).

The German government’s international development agency GIZ is helping to develop regulations, education and training for Islamic microfinance in developing countries, said Matthias Range, Frankfurt-based internal advisor at GIZ.