Reaching the Unbanked with Sharia-Compliant Financial Products

Case study
Date Published: 
Sep 2009

Meeting the demand for faith-based financial services

This paper describes the USAID-funded Agriculture Rural Investment and Enterprise Strengthening (ARIES) program in Afghanistan that is administered by the World Council of Credit Unions Afghanistan (WOCCU-A).For the past five years, WOCCU-A has worked to engage local Afghan populations to establish specialized credit unions that are locally owned and operate with principles compliant with Sharia law. WOCCU-A and the Islamic Investment and Finance Cooperative (IIFC), had to make some initial adjustments to gain community acceptance. These include:
  • Renaming of credit unions as Islamic Investment and Finance Cooperatives to avoid use of the word '‘credit'’, which is prohibited under Islamic law;
  • Working directly with local leaders, tribal representatives (Shuras) and religious leaders to develop a values-based, community-owned business model founded on Islamic principles;
  • Breaking WOCCU'’s five-member sector leader board of directors'’ structure to one that includes tribal leaders;
  • Shura securitization of loans.
The ARIES program highlights WOCCU’s understanding of Afghan culture, as well as management'’s ability to translate this understanding into effective operational policies in a difficult operating environment.
Case study
South Asia