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Islamic way of micro credit the best way to help the poor: Basix chief

This Held in first week of August 2009 by HWF New Delhi
Hyderabad: A leading practitioner of Micro Financing in India has strongly advocated the Interest free micro credit or equity financing as the best and the most appropriate method for the country’s poor in enabling them to stand on their own feet.
Vijay Mahajan, chairman, Basix, a micro finance company, said that his company was soon coming out with a pilot project based on the interest free or equity finance.
Vijay Mahajan, a product of IIT and IIM and Princeton University, was speaking at the inaugural session of a five day orientation and training camp on Interest Free Mirco Financing organized by the Human Welfare Foundation in Hyderabad.
“You call it Islamic finance or Shariah compliant finance, it is equity finance in which the investor and the entrepreneur share both the profit and the loss, good fortune and misfortune. Mirco equity fianance is the right way to do it”, he said.
Basix, launched in 1996 has so far provided loans worth Rs 2000 crore to 12 lakh poor household in several states, at an interest rate of 24% and presently has an outstanding of Rs 580 crore with a rate of recovery of 99.1%, he said.
But realizing the tremendous potential in the equity financing, the company was getting ready to launch its new product either in Hyderabad or Chennai soon. “Islamic finance is more equitable for the poor”, he said.
“Interest free finance does not mean only charity. It makes sound business sense. After all, what is venture capital? It is nothing but the equity finance at a large scale and the same has to be brought into the micro finance. It is more equitable specially for the poor people”, he said.
But sounding a word of caution, he said that the interest free credit system can work effectively in small community, where every body knows the other and which is based on Iman or honesty. “The enterprise should be sustainable to ensure that both the investor and the entrepreneur benefit from it”.
In his inaugural presentation Prof A K Siddique Hasan, secretary, Human Welfare Foundation, New Delh,i said that the interest free micro credit was part of the Vision 2016 prepared by the Foundation for the socio-economic development of the poorer sections of the society. The vision includes setting up super specialty and specialty hospitals, clinics, medical aid, schools, scholarships, and empowerment of women, he said.
“This is an ambitious vision and we would like to implement it by 2016 at an estimated cost of Rs 5000 crore”, Prof Siddique Hasan told this correspondent.
Pointing out that Islamic Banking was accepted even by the World Bank, Prof Hasan said that the system was being adopted in several countries across the world.
Pointing out that Muslims in India spend an amount of Rs 12000 crore towards Zakat or obligatory charity every year and there was six lakh acres of Waqf land in the country, Prof Hasan said that the proper and collective use of Zakat and the Waqf could solve all the problems of Muslim community in the country. He said that the Foundation had plans to put in place a network of five hundred micro credit institutions to extend interest free credit to the poor in the country
The camp was being attended by 70 delegates and experts from all over the country