KOCHI: Shariah-complaint microfinance cooperatives are making inroads in rural Kerala much to the relief of the poor and needy and the most interesting feature of it is that the bad debt is almost nil, according to a paper presented at the International Conference on Islamic Finance: Products, Institutions and Regulators that concluded here recently.
According to Mohammed Palath, a researcher in economics at the Kannur University in northern Kerala who made a presentation on the role of these collectives called nidhis have proved the best tool for poverty alleviation and financial inclusion.
The author who conducted a sample survey among fifty beneficiaries from five interest-free nidhis practicing Islamic microfinance in the tiny southern Indian state concludes that they were contributing immensely for poverty eradication in the state and are deeply rooted in the villages.
Presently, there are 360 such units registered with Interest Free Establishments Coordination Committee (INFECC), recently formed to coordinate and guide them. Loans are used for small trades, renovation of houses, farming, self-employment, medical treatment and buying consumer durables.
The self-employment projects include vegetable cultivation, manufacturing of fast moving consumer goods like notebooks, umbrellas, schoolbags, school uniforms and textiles. Short-run loans are provided to individuals for various purposes on personal or mutual guarantee.