A Better World Volume 1

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(TA), to reach out the poor and informal entrepreneurs. The

Microfinance Development Program (MDP) provides technical

assistance to develop the Islamic microfinance sector and assists

in establishing or strengthening Islamic microfinance institu-

tions by way of equity participation and developing regulations.

The MDP offers interventions in close consultation with the

member countries’ governments or institutions depending on

their specific needs. Eight countries are benefiting from the TA/

MDP including Bangladesh, Indonesia, Sudan, Senegal, Tunisia,

Egypt, Pakistan and Tajikistan. In some countries the projects are

completed; for instance in Sudan, IDB has assisted in establishing

the Irada microfinance institution (in partnership with Bank Al

Khartoum) and Bank El-Ebdaa’ (in partnership with the Arab

Gulf Program for Development, or AGFUND) which are self-

sustaining institutions focused on poverty alleviation through

providing Islamic microfinance. Several initiatives have been

introduced to enhance financial inclusion.

IDB Islamic Microfinance Facility

IDB has established the Islamic Microfinance Facility, a highly

focused initiative to help economically empower disadvantaged

women and productive households by eliminating livelihood

barriers through Islamic microfinance. IDB attributes the success

of this programme to three basic principles:

• doing business with the poor and unemployed

• supporting Income-generating activities by providing

productive assets

• financial products ensure equitable distribution of wealth

in the value chain through profit and risk sharing among

stakeholders.

Through this programme, strategic partners are identified to

accompany and transfer knowledge to the targeted beneficiaries

while also having a share in the profits.

The IDB Islamic Microfinance facility through the three basic

principles addressed both social and economic inclusion and not

just financial inclusion of women.

1. Microfinance institutions supported through the facility

treat women as business partners. Traditional collateral is

of secondary importance when the focus is to conduct trade

and investment with productive women.

2. The asset-based nature of Islamic Microfinance products

ensures that the financing provided is for productive purposes

and mitigates the risk of women coerced to borrow on behalf

of their male counterparts, while leaving them indebted.

3. The risk and profit sharing nature of Islamic Microfinance

products enhances women’s bargaining power in the value

chain that is often dominated and controlled by men.

Through their financing, Islamic Microfinance Institutions

help women to get higher prices for their products and lower

prices for the inputs that they require.

Business success in Guinea

In 2001 IDB provided support to the Government of Guinea to

help empower the country’s poor through a microfinance project.

The project aimed to increase access to finance for micro and

small enterprises, to support the institutionalization of local

microfinance institutions and to disseminate information and

training on Islamic finance. To date, over 10,000 people have

benefited from the project. The project helped to strengthen the

nation’s agricultural, trade and industrial sectors by facilitating

the creation and growth of numerous financially sustainable and

productive micro and small enterprises that will continue tomake

valuable contributions to Guinea’s economy for years to come.

The project originally set out to finance 600 activities through

its microfinance institution partners, but in the end more than

650 activities were able to benefit from IDB’s funding. It had a

tremendous positive impact on the participating micro-entrepre-

neurs, 62 per cent of whom were female (against a target of 50

per cent). Health conditions and school enrolment rates in bene-

ficiary families improved; given the average family size of nine

people in Guinea, the project directly contributed to improving

the living conditions of almost 6,000 people. In a country with

few opportunities for securing a respectable living, IDB’s project

gave budding entrepreneurs a chance to make an honest living

and even provide employment to others in their communities.

This was of particular benefit to women.

With a 97 per cent repayment rate IDB has been able to create

a revolving fund that continues to operate with equal rates of

success. The fund has already extended funding to more than 600

additional activities, bringing the total number of clients to over

1,200. IDB’s systematic introduction of Islamic finance created a

strong demonstration effect that was felt across the donor commu-

nity in Guinea. By the end of the project, upwards of 50 per cent

of financing facilities offered by other donor agencies were being

channelled through similar Islamic modes of financing.

Integrated Microfinance Support Program

IDB has established the Islamic Solidarity Fund for

Development (ISFD) as a Waqf (trust), with the aim to reduce

poverty in IDB member countries by focusing on supporting

pro-poor growth, human development (especially improve-

ments in health-care and education), and enhancing the

Benin: empowerment through financial inclusion

“These loans have helped us a lot. Before, we had to ask our

husbands if we wanted money, now we are independent. Thanks

to this programme I can now also read, write and count … so I can

calculate what I spend and what I sell, and work out my profit.”

– Blandine Dansou, Maria Gbê women’s group, Cotonou

Image: IDB

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