After China and the US, India is considered to be the third-largest country in the world where start-ups have been prospering. Just before the outbreak of COVID 19 pandemic, the US-India Strategic and Partnership Forum (USISPF) was hopeful of attracting an investment of over 21 billion US dollars that could create around 6 lakh jobs directly and 14 lakh indirect jobs. All this has been shattered due to COVID 19. In Jammu & Kashmir the several startups especially in hospitality, tourism, handicrafts, horticulture had already suffered a major setback. Many of them had to wind up their operations post abrogation of article 370 last year. As they were trying to settle down, COVID 19 just broke the backbone of these entrepreneurs.
Sahulat Microfinance
This year in January I got a chance to visit Sahulat Microfinance Society in Hyderabad. The visit was facilitated by Shri Vijay Mahajan (V M), one of the pioneers of the Microfinance Movement in India and a gold medalist from IIM Ahmedabad. V M is a great supporter of Interest Free Banking in particular Interest Free Micro Financing and has done great work in this direction. Sahulat was awarded the best Islamic Microfinance Entity of the year in 2018 at an event organized by Islamic Finance Forum for South Asia at Colombo. Sahulat Microfinance Society was established in 2010 as a voluntary, non-political, non-profit making social service organization. The company is providing interest free micro finance options for reducing socio-economic disparities and to achieve justice and equity for educationally and financially backward sections of the public at large. Sahulat also facilitates, organizes and develops institutions, more particularly in the co-operative sector. Mohammad Zakiuddin, Executive Director Sahulat Hyderabad, informed me during my visit that company aims at facilitating, promoting and developing interest-free micro-finance institutions (IFMIF). He also said that Sahulat undertakes and promotes need based research and developing different products and financial instruments for IFMFI.
Working Model
In India Interest-free microfinance institutions can be run as legal entities under various cooperative legislations or multi-state acts. There are 26 such legal entities working as Interest Free Microfinance Institutions (IFMIF) in India with 63 branches in 12 different states of India. In Jammu & Kashmir I haven’t heard of any such institution in spite of the fact that such NBFC could be of great help to small entrepreneurs. “IFMFI is owned by the members which can be hundreds in number. Company is democratically controlled by the members which facilitates credit need at competitive rates for the members. IFMFI also provides other financial services to its members ” said Mukhtar Ahmad Programme Manager Sahulat Microfinance during my interaction with him.
UNDP on Islamic Finance
In September 2017 public and private stakeholders, including investors gathered in New York for a high level event titled- Realizing Agenda 2030: How Islamic Finance through Impact Investing can help achieve the Sustainable Development Goals (SDGs). During the event it was thoroughly discussed how Islamic finance can be tapped for global development especially to end poverty and above all to achieve the target goals by 2030. The event was co-organized by the Islamic Development Bank (IDB) and United Nations Development Programme (UNDP) with the support Organization of Islamic Cooperation (OIC) New York office. The event coincided with the 72nd session of the UN General Assembly. While deliberating on Islamic Finance and its role in global development, Magdy Martínez-Solimán, UN Assistant Secretary General and Director of UNDP’s Bureau for Policy and Programme Support said:
“Islamic Finance is one of the fastest growing sources of finance in the global financial industry. Global assets in Islamic finance are expected to reach US$3.5 trillion by 2021. Considering the scale, I would like to underline that Islamic finance could offer a strong, non-traditional source of financing to advance SDG implementation “
IDB & UNDP partnership
On May 18th 2016 Islamic Development Bank (IDB) and United Nations Development Programme (UNDP) signed a Memorandum of Understanding (MoU) to strengthen the collaboration between the two leading development institutions, to support the effective implementation and achievement of the SDGs. IDB & UNDP are collaborating on priority areas such as crisis response and recovery, peace building, poverty eradication, youth employment, skills, innovation, disaster reduction, climate change, sustainable energy etc. In addition to it the partnership is to focus on scaling-up ongoing initiatives, and exploring new opportunities to collaborate for the effective realization of the Sustainable Development Goals (SDGs). The partnership will also work to promote inclusive markets, business models for inclusive development and increased entrepreneurship including advancing the Global Islamic Impact Investing Platform for blending Islamic financing and private sector resources in achieving the SDGs.
Conclusion
Small business units, especially startups run by young men and women have been severely hit in Kashmir. First, they suffered a jolt in August 2019 during article 370 abrogation, and now due to outbreak of COVID 19 pandemic. For the last one year, prolonged curfews, hartals and lockdowns have broken the backbone of our economy. This has caused a great disruption in our supply chain and severe drop in demand in most of the sectors. One kg cherry box which was sold @ Rs 150 is being sold @ Rs 50 nowadays. Same is the case with the transport sector, hospitality and other sectors. At a time when traditional banking institutions are charging huge interest from the customers, I believe ” Shariah Compliant” Non Banking Finance Companies (NBFCs) or Interest Free Micro Finance Institutions (IFMIF) could play a major role to support our Micro, Small and Medium-sized Enterprises (MSMEs). The idea of writing this piece today on the International Day of MSMEs is a wake up call for those who really care for their people and want to get involved into ethical business. Such people need to come forward, study Interest Free Microfinance Models and start taking this model to people. This only requires a creation of a cooperative society and RBI regulations don’t apply for such Non Banking Finance Companies (NBFCs).