We see Islamic social finance as a mechanism that can make a dent on poverty in Sub-Saharan Africa; this is according to Mohammed Obaidullah, Senior Economist at the Islamic Development Bank and Lead Author of the Islamic Social Finance Report.
According to the Islamic Social Finance Report, the poor generally lack a number of elements, such as education, access to land, health and longevity, justice, family and community support, credit and other productive resources, which are best termed as access to opportunity.
The report says these challenges coupled with poverty are more pronounced in Sub-Saharan Africa.
“We see (Islamic Social Finance) this mechanism as an integration of traditional institution of philanthropy with for profit microfinance,” Obaidullah told CNBC Africa.
The recent report presents the trends, future challenges and prospects for the various segments of the Islamic social finance sector in six Sub-Saharan African countries; Sudan, Nigeria, Kenya, Mauritius, South Africa and Tanzania.
“One of the main challenges we are facing has to do with affordability for the poorest of the poor so we see that something has to be done,” warns Obaidullah.
“In the conventional paradigm, we don’t seem to have solutions as traditional donations are seen as one time contributions that are not sustainable as sources of funding.”
He also said the operational costs of conventional microfinance were very high calling for a more realistic alternative that will factor economic dynamics in these economies.
“We have to look for sustainable mechanisms of absorbing furnishing costs of microfinance that are unrealistic for the poorest of the poor.”