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التمويل الأصغر الإسلامي يمهد الطريق للشمول المالي في الأردن

Country Feature: Jordan

 Islamic microfinance paves way to achieve financial inclusion in Jordan

By Ziad Al Refai

Despite the spread of Islamic financial institutions throughout the region, the fact is that Jordan's potential demand for tailored Islamic finance products is still largely unmet — only the needs of 4% of clients who prefer Shariah banking, have been met by institutions offering a mix of conventional and Shariah compliant products. Therefore, the company has been established on the principles of Islamic Shariah and its procedures and policies have been developed to be Shariah compliant. This is crystallized in the Shariah committee which is composed of theologians with distinguished experience. It has also been granted a legal advisory opinion (Fatwa) from the Jordanian Dar Al-Ifataa to implement the provisions of Shariah in an integrity way in all its transactions.

Ethmar is Jordan's first Shariah compliant finance company that adheres to innovation as an approach to design and develop its products to meet the needs of the underserved clients. The idea of Islamic mcrofinance is based on the principles of sharing capital, work, effort and risk in any business or investment project in accordance with the provisions of Islamic Shariah laws. Founded in 2015 by the King Hussein Foundation (KHF) and licensed by the Central Bank of Jordan (CBJ), Ethmar for Islamic Microfinance (Ethmar) aims to fight poverty and unemployment by providing financial solutions to low-income individuals such as employees, workers and retirees as well as licensed and household businesses, to improve their standard of living and address their social problems.

In order for social and financial services to reach all segments of the Jordanian society, an innovative model of economic and social empowerment is needed to provide innovative Islamic financial products and solutions. To achieve financial inclusion, branchless operations are created to engineer creative Shariah compliant products for nearly 2500 new and existing home based business and licensed businesses as well as employed clients and paid retired clients. In this way, finances are disbursed in less than 30 minutes and 92% of clients utilize electronic wallets.

In order to meet the increasing demand for Shariah compliant financial services at the lower end of the market, innovative products and services are continuously developed to meet market trends in terms of needs, behaviors and preferences. Demand for Islamic financial services is increasing in high population density areas in Jordan especially customer segments. As at December 2018, Ethmar’s total loan disbursement have reached JOD6 million, serving over 6,000 borrowers and an outstanding portfolio of close to JOD2.4 million with over 2200 active borrowers.

Islamic microfinance tailored products are considered efficient instruments to encourage entrepreneurship and facilitate the creation of micro and small enterprises. However, access to credit remains a serious bottleneck to financial institutions as well as to micro, small and medium sized enterprises (MSMEs) as evidenced by Jordan’s very low ranking in the most recent ‘Doing Business’ /World Bank index.

The focus on building the quality of its products and services is not only through traditional Islamic products such as Murabahah, in addition to niche products such as Ju'ala, Istisnah and installment sale, a cost free finance.

Recently, Ethmar has developed vocational and educational product to meet the unmet demand targeting unemployment and youth that aims at financing educational programs, provide opportunities for students and youth form middle and low-income class to obtain vocational education with guaranteed job opportunities to enhance their competencies and skills through financing the needed training and lowering the burden of educational debt on parents.