U.S.-based aid agency Mercy Corps has appointed consultancy IFAAS to help launch an Islamic microfinance business in Ethiopia, aiming to offer interest-free products to local communities, the firms said in a joint statement.
Mercy Corps, one of the largest humanitarian organizations delivering aid to conflict zones including Syria, hopes Islamic finance can support financial inclusion efforts in the landlocked country.
The appointment follows a study conducted by IFAAS to assess the financial landscape in Ethiopia, a country where around a third of the population of 100 million is Muslim.
“The study carried out by IFAAS into interest-free finance in Ethiopia is instrumental to our financial inclusion work in the country,” said Josh Ling, Director of Financial Inclusion at Mercy Corps.Mercy Corps work in the project is partly-funded by Britain’s Department for International Development.
IFAAS would assist a local microfinance firm to establish a separate unit known as an Islamic window, which would follow religious guidelines such as a ban on gambling and outright speculation.
Islamic banking has been steadily growing in several parts of the world, particularly the Gulf and Southeast Asia.
But sharia-compliant versions of microcredit, the provision of very small loans to low-income borrowers who lack collateral and a credit history, have been slow to develop.