ISLAMIC FINANCE TOP AGENDA AT WORLD ISLAMIC ECONOMIC FORUM IN CAMBODIA

Phnom Penh, Cambodia, 21 Shawwal 1436/6 August 2015 (MINA) – Islamic microfinance as an alternative to conventional micro-lending was on top agenda at the World Islamic Economic Forum roundtable in Phnom Penh, Cambodia on Tuesday, with experts split on its possible inclusion in the country’s basket of microfinance product offerings, The Phnom Penh Post Cambodia news reported.

At the meeting, attended by Deputy Prime Minister Men Sam An, small and medium enterprise development and higher learning institutions in Cambodia were also discussed, in which the event is a precursor to the 11th World Islamic Economic Forum (WIEF) to be held in Malaysia this November.

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Speaking on Islamic microfinance, Tun Musa Hitam, chairman of the WIEF Foundation, said that while microfinance institutions (MFIs) seemed rudimentary to many, they were key to the functioning of an economy like Cambodia’s. International Islamic News Agency (IINA) quoted by Mi’raj Islamic News Agency (MINA) as reporting.

“It may be useful for Cambodia to examine the viability of deploying the Islamic microfinance model, which is a hybrid of Islamic finance’s social principle and microfinance’s efficiency in reaching the poor,” Hitam said.

Syed Othman Alhabshi, deputy president of academics at the international center for education in Islamic finance in Malaysia said this model of microfinance, while being interest free, also charges loan takers only for the operation costs and utilizes cost-free capital.

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He said, that currently MFIs are using venture capital funds to give out loans, given that MFI customers are not bankable, leading to high interest rates to mitigate that risk, whereas, this was not the case with Islamic microfinance.

“We have an endowment fund in the form of social funds that can be utilized and cost-free funds. If any, It is naturaly operating costs, ” Alhabs said.

Islamic microfinance, like Islamic banking and finance, is based on the dictates of Sharia, where the loans should be interest free and take care of the welfare of the participants rather than accumulate wealth for the loan giver. (T/Imt/RO6)

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Mi’raj Islamic News Agency (MINA)