Author(s):
Mohammed Khaled

Mohammed Khaled, MENA Regional Representative, The Consultative Group to Assist the Poor (CGAP), Palestine While it is estimated that roughly two thirds of the Moslem poor either insist on or prefer financial products that comply with Islamic law (Sharia), the outreach of microfinance banks and institutions providing such products has been very limited, and does not exceed 1% of the outreach of conventional microfinance. The author believes that this is mainly because a majority of institutions try to replicate conventional microfinance business models and tweak them to conform to Sharia, instead of thinking “outside the box” and developing innovative models. To build upon the conviction that Islamic microfinance can offer an alternative paradigm for millions of poor people who are currently not served by conventional microfinance, CGAP, Deutsche Bank, Islamic Development Bank, and Grameen-Jameel launched the Islamic Microfinance Challenge 2010. The objective of this challenge was to canvass the industry for ideas for sustainable, scalable, and authentic Islamic microfinance business models to meet the financial needs of the Muslim poor. As an introduction, this paper will provide background on this competition. It will then explore reasons why microfinance has not succeeded in reaching as many clients as conventional microfinance. The paper will conclude with proposed elements for a good business model. It will also suggest pre-requisites for successful implementation of a scalable and market-driven business model.