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.
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