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.
https://www.islamicfinancenews.com/islamic-microfinance-paves-the-way-for-financial-inclusion-in-jordan.html?access-key=8fa8a26d57f0356d7bf6b43adbab9488