Islamic Principles and Pro-Poor Financing

Islam has a strong connectivity with commerce, but it also gives us clear guidelines for charity, equity, partnership and social and economic justice. Islamic finance is a market-driven community banking proposition, enabling a wider base of society to participate in the financial market consistent with their beliefs. It can also be used as a medium for economic and social development, using tools such as musharaka, mudaraba, murabaha, zakat and waqf. The case of Islamic microfinance is particularly interesting. Several questions need to be addressed in order to predict its success. Will existing microfinance institutions be ready to eliminate interest in order to tap into Islamic funding sources? Can the Islamic finance industry initiate microfinance windows? And can it develop the right tools to promote pro-poor financing?