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

Tuesday, April 14, 2015

The Islamic Financial Services Board (IFSB) is adding financial inclusion to the industry’s to-do list, launching initiatives aimed at widening the reach of sharia-compliant banking to include poorer people.

After years of rapid growth, Islamic finance is under pressure from some scholars to build stronger credentials for social responsibility. One criticism is that it has neglected farmers, small traders and poor households.

Guidance from the Kuala Lumpur-based IFSB, one of the main standard-setting bodies for Islamic finance globally, could help address this issue in majority-Muslim countries where less wealthy people have stayed out of the formal banking system for religious reasons, such as Islam’s ban on interest payments.

“Going forward, the IFSB plans to include a dedicated work stream on financial inclusion in its new strategic performance plan 2016-2018,” IFSB secretary-general Jaseem Ahmed told Reuters.

The programme will cover the preparation of new guidelines and policy advice for regulatory authorities, Ahmed said. The IFSB’s strategic plan is to be discussed next Sunday at a closed-door meeting in Abu Dhabi.

“A key component of this process is consultations with our key stakeholders, the members of the IFSB, on their views on the directions of the IFSB, and their expectations from us.”