Almost a quarter of the world is Muslim. These 1.6 billion people contribute 16% of global GDP, with a 6% annual growth rate. By 2020, the Islamic finance industry is projected to reach $3 trillion in total assets, with one billion users. Islamic finance offers huge opportunities for redistributing wealth and reducing poverty.
Consider zakat, which is a type of alms, or mandatory giving of wealth. Approximately $200 billion is given as zakat every year. This money could be harnessed to help the world’s poorest. But it has yet to be used to its full potential.
Seven out of ten adults in Muslim countries still do not have a bank account. In the rest of the world, more than six out of ten adults do. Many of these unbanked adults in Muslim countries are women. They are struggling to access capital to set up their own business.
But women face more than just financial barriers. Entrenched social and cultural obstacles hinder female entrepreneurship. Women are routinely paid less and have greater difficulty securing assets such as property, due to legal and customary restrictions. Their responsibilities to their family restrict their ability to travel for business, or move nearer to suppliers or customers.
Regulatory environments often further disadvantage women. For example, travelling to an urban centre to register a new business can be difficult. When legislation is in place to support women, it is often poorly implemented. NGOs such as Islamic Relief, working at the community level, have been mobilising and empowering women to overcome these barriers. But fintech (shorthand for financial technology) could take our interventions to a new level.
For some time, the developing world has been seeking other forms of capital investment. Traditional financial vehicles have high barriers to entry and are simply not able to tackle global inequality.
How do we approach financial equity from an ethical perspective, which addresses the needs and barriers which grassroots communities face? How do we make use of the Muslim moral economy and its enormous resources? Fintech is a fast-growing platform of innovative systems aiming to close these gaps. NGOs have the access and expertise to be a major player. Many successful initiatives like Kiva are already having a real impact.
Microfinance can increasingly be delivered through fintech. When operated in accordance with Islamic financing principles that forbid interest and promote risk-sharing, it can foster even greater inclusion. It can enable financially excluded entrepreneurs to access debt or micro-venture capital, and to sell their products in an online marketplace.
Female entrepreneurship programmes can create new ways of business, because they go beyond financial issues to tackle social and cultural constraints on female empowerment. Their models bring greater transparency by reducing reliance on (mostly) male middle-men.
In recognising this, Islamic Relief provides women with practical skills to manage loans. It educates them about nutrition, hygiene, early marriage and health. This combined approach builds women’s trust and confidence in their own decision-making. They realise that household decisions are equally as important as the decisions they make about their business. The two are intimately linked.
Increasing women’s access to capital and their ability to run their own business has a direct impact on child health outcomes, numerous studies have shown. Women often invest a higher proportion of their income back into their families than men. Fintech’s magic ingredient is a virtuous feedback loop: it increases women’s ability to make smart business decisions, which bolsters their autonomy within the family and community. Women are more likely to help other women with loans and advice, often through savings groups. Supporting one woman has a multiplier effect. The magic is amplified.
For fintech to a be truly revolutionary tool, the technology threshold still needs to be lowered. This has already happened with mobile money, for example. In Kenya, simple handsets which are available to everybody - not just the urban elite - have massively increased financial inclusion. As a stepping stone towards a formal bank account, Mpesa has been an instrumental leveller, removing social obstacles that have previously prevented women's access to credit.
More than ever, there is opportunity for greater collaboration between Islamic banks, NGOs, startups and social enterprise to lower the entry points to financial technology. Only then will millions of women (and men) be able to realise their potential. Finally, we may begin to see financial equity.
"We were struggling to have three meals a day."
Yaron, 46, lives in Rangpur in North Bangladesh. When her husband left, she and her children had no assets. Her parents gave her some land but she was forced to stop cultivating it after her brothers resented her success.
Islamic Relief's interest-free loan allowed her to buy two goats, which bred four more. Yaron was able to buy land and a cow, while her training in early marriage, dowries and domestic violence gave her greater confidence as a businesswoman and mother.