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Al-TAAWUN: Building A Savings Reserve On The Basis Of Justice And Cooperation » Women's Courage

Al-TAAWUN: Building A Savings Reserve On The Basis Of Justice And Cooperation

March 9th, 2011 by ntahir Leave a reply »

To: The Islamic Development Bank

From: Neha Tahir, Class of 2012, Stanford University

Subject: A New Group-based Microfinance Model Catering to Women

Executive Summary:

The Islamic Microfinance industry, a consequence of the union between the Islamic Finance and the Microfinance industries, might be the answer to the recent failures that the Microfinance industry has been facing. Islamic Microfinance has been modeled upon the strength of the conventional Microfinance industry, with the scope to correct some of the inherent problems and inefficiencies that exist within the conventional system, while still adhering to the common goals of an Islamic Economic System, such as justice and equality, and a proper distribution of income and wealth.

However, the Islamic Finance system does not offer any significant form of finance that caters to individual financial needs (particularly cash needs), and the Retail/Consumer Banking sector in the industry has a lot of scope for the research and development of new products and services. The relatively new industry also suffers from a very limited outreach; the findings of a global survey on Islamic Microfinance carried out by CGAP in 2007 show that “Islamic Microfinance has a total estimated global outreach of only 380,000 customers”, this meager figure being representative of an estimated one-half of one-percent of total Microfinance outreach (Karim, Nimrah).  This is owing to the narrow range of products and services that the industry currently has to offer; While the Islamic Financial Services Industry has made great strides in recent years, it has not adequately addressed poverty alleviation. This must be remedied, as diverse approaches are needed to provide poor Muslims with access to financial services (Islamic Research Training Institute). The lack of sufficient and diverse products and services in the industry leaves the common man who is in need of an immediate interest-free loan, but is unqualified to receive this money from banks, to resort to pawnshops, despite their high rates of interest.


I would like to propose the model of a new Islamic Microfinance service that will be offered by Banks and/or Microfinance Institutions worldwide. It is particularly suited to the needs of women entrepreneurs looking for an interest-free way to finance their enterprise. There are various discrepancies between Microfinance products that are targeted towards men and women; the characteristics of this model, as will be discussed below, make it more functional for aspiring female entrepreneurs.

The product, “Al Taawun” (which translates: “helping one another”), will be practically experimented in Dubai, UAE, with the city’s expansive Islamic Finance background and expertise. Having been researching the theory and mechanism of this product since June 2010 in Dubai, I have been successful in building a supervisory board of patrons in the city, inclusive of technocrats, senior government officials, ministers, CEOs, and Heads of Islamic Finance in Banks and other Financial Institutions.

The model is built on the foundation of a ‘cooperating with and helping one another’ motto. Al Taawun is basically a cluster of networks that generate money for its members. Every individual member of the group contributes a sum of money to the group, the collective amount of which, every member gets to benefit from at different time periods during the year. Due to the fact that this model works on the basis of group cooperation, with every member of the group being a motivating factor for the other members to not default, and because the model is a savings model that is contingent on its members repaying on time, it is more likely to receive better results if it was specifically targeted towards women. Women entrepreneurs essentially reflect feminine values and the characteristic developmental qualities of women such as relationship, interdependence and cooperation; this is contrary to the management styles of men, which include autonomy, independence, and competition (Mahmood, Ahmed).


Al Taawun is a step in the direction of diversifying the current spectrum of products offered by the industry, without paying very high rates of interest; it is an attempt to contribute towards a fair and just economic system that caters to every individual’s needs, and helps alleviate poverty by providing the poor population, in desperate need of an access to basic finance, with a refuge to relieve its financial problems.


Tarazi, Michael. Reille Xavier. Karim, Nimrah. Islamic Microfinance: An Emerging Market Niche. CGAP Focus Note. August 2008.

Islamic Financial Services Board and Islamic Research Training Institute. Islamic Microfinance Development: Challenges and Initiatives. Working Paper for Islamic Financial Services Board Forum Framework and Strategies for Development of Islamic Microfinance Services, Dakar, Senegal, May 27, 2007, 81p.

Ahmed, Mahmood. “The role of RDS in the development of women entrepreneurship under Islamic Microfinance: A case study of Bangladesh.” In: Islamic Finance for Micro and Medium Enterprises by Mohammed Obaidullah and Hajah Salma Haji Abdul Latiff. Islamic Research Training Institute, Islamic Development Bank and Centre for Islamic Banking, Finance and Management, University of Brunei Darussalam, Jeddah/Brunei, 2008


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