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Interest-Free Micro-Finance Without Any Religious Connotation: An Inclusive Global Model
Abstract
The purpose of this chapter is twofold: to investigate the relevance and the significance of interest-free formulae for conventional microfinance in non-Muslim countries, (with no religious connotation), and to lay out the foundation of a global interest-free microfinance model. The major result is that the interest-free Musharakah is just a simplified limited liability with limited duration conventional partnership. Sales-based Murabahah can also be a rewardable complement to interest. Islamic Ijarah is a leasing formulae also practiced in Europe and Africa. Salam is not far from conventional forward contact. Other finance formulae can also be used by conventional lenders to ‘complement' the interest rate. These results, contrary to the general belief, concluded that investment formulae of the two systems are not far from each other. Moreover, interest-free formulae are practiced in Africa without being related to Islam. This indicate that if we look at the interest-free formulae from the point of view of their usefulness, and not from a religious point of view, these will have universal applications without being identified as Islamic. The chapter lays out the foundation of a global interest-free microfinance model capable of serving Muslims and non-Muslims alike.
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