Islamic Microfinance Models and Their Viability in Pakistan
This MicroNote reviews the existing literature on operational models in Islamic microfinance and explores the possibilities of implementing such models in Pakistan. It sets the context of Islamic microfinance in the country and examines the current models. The note evaluates the legal framework and other technical details to analyze the viability and sustainability of new models. It observes that the range of credit products and its geographic availability is limited and hence there is a need for Shariah compliant financial services in Pakistan at the micro level. Findings include:
- Qarz-e- Hasan loans are given out to the poor on a profit-sharing basis to sustain their living, especially emerging entrepreneurs;
- Waqf model makes it feasible for MFPs to give out Qarz-e- Hasan loans while the profit-sharing products are sustainable ventures on their own.
- Supporting services needs to be in place so that the claims made by the clients can be paid out promptly.
The note concludes that although the models have potential in meeting the needs of the people and contributing to their development, the modalities of the implementation are debatable. Nonetheless, this is a great opportunity for practitioners to tap into a new market which has a high demand for Islamic products.