Financing the Poor Towards an Islamic Microfinance: A Short Report

This April, the Islamic Finance Project (IFP) of the Islamic Legal Studies Program (ILSP) at Harvard Law School hosted a symposium on “Financing the Poor: Towards an Islamic Microfinance.” The symposium brought together a diverse, international group of speakers from the microfinance and Islamic finance sectors who shared their experiences and offered their opinions on potential collaboration between the two sectors. Nazim Ali, the Director of IFP, opened the symposium and noted the inspiration behind this conference: that microfinance has repeatedly arisen as a topic of interest for Islamic finance as a means to reach the average person and help alleviate poverty. Baber Johansen, Acting Director of ILSP and Affiliated Professor at Harvard Law School, commented upon the burgeoning interest in financing the poor, and Islamic finance’s longstanding interest in promoting equitable economic development, as reflected in the ample attendance at this symposium. The keynote speakers then opened the symposium with discussions on the synthesis of Islamic finance and microfinance. The first keynote speaker was Robert A. Annibale, Global Director of Microfinance at Citigroup, who shared his insights about Islamic finance and microfinance, especially since the two have not been integrated in many discussions. In his experience, microfinance institutions, “bankers to the poor,” originally took root in domestic, local markets, but now have expanded to larger markets with a broader range of services. He noted that these microfinance institutions tend to have high operating costs that are offset by charging high interest rates, which are hard for the poor to afford. Therefore, Annibale urged institutions to make their methods more efficient, because the customer pays for the inefficiencies.