Islamic Finance Meets Microfinance in Syria, Possible Solution to Food Security Issues (08)
"In 2007, Syria became the first country in the Arab region to issue legislation in the area of microfinance. However, microfinance is growing at a slow pace as private and commercial banks are oriented towards high- income clients and reluctant to enter microfinance arena because of the 9% interest rate cap. A few NGOs and donor agencies working towards poverty alleviation support microfinance initiatives in the country. If this trend continues in the future, microfinance will take several years to meet the needs of Syrian society. The only ray of hope is provided by the growth in Islamic banking, still in a very nascent stage in Syria, may accelerate the pace of the microfinance industry."
"Lack of microfinance pushed the villagers in rural Syria to mobilize their own human and financial resources to create Sanduq- local microfinance institution owned and managed by the villagers. According to the Islamic lending methods, the Sanduq fund pays for the goods that the borrower wishes to purchase. The lending interest rate is as low as 1-1.5% per annum. Sanduq was introduced in Jebel-al-Hoss, one of the poorest areas of Syria. It was replicated in Idleb governorate in 2005 and further in 96 villages across northeast Syria in 2008. As a result, new enterprises such as dairy processing units, embroidery laboratories and hardware stores have started due to availability of loans in the poorest areas of north-eastern Syria."
Implications from SFG-ME:
"Loan facility to small farmers to switch to drip irrigation not only increased their incomes but also helped to combat drought and water scarcity. If similar loans are provided to more farmers in other parts, Syria can modernize its irrigation system on a large scale which will have the following benefits-
At present, around 85% of the farmers in Syria use traditional methods to irrigate their fields. However, large scale adoption of drip irrigation will decrease the usage of water by almost 30%.
Increase the crop yield by 60% which will reduce food insecurity in the country."
Implications from IFTF:
The bottom-up, culturally-appropriate example of micro-finance may be an indicator that the model is not reliant on western charity, and can flourish completely independent of foreign influence.
Sources:SFG ME January 2011 pgs. 11-13