The Development And Implementation of a Shariah Based Microfinance Using The Grameen Group Financing Methodology

The objective of this project is to develop and implement an Islamic microfinance model using the Grameen group financing approach initially to murabaha and mudaraba contracts. Our model begins with providing clients in carefully self-selected groups with murabaha contracts before providing mudaraba finance. The murabaha financing agreement includes fixed payments each period of repayment and therefore is easier to administer and can be used to screen out potentially problematic clients who are most likely to default. Those clients who are in groups with successful repayment of the murabaha finance will have a choice between murabaha and mudaraba financing in the future. Finally, we report some preliminary results from our pilot study in Colombo and Bibile, Sri Lanka.