IslamicFinance.de

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.
Kerala has the highest number of interest-free funds which has now crossed 500 in number. These institutions lend money charging no interest, ranging from Rs 500 to Rs 25000, and without collateral securities. The borrowers pledge gold or personal securities undertaken by others.
The cases of defaults are very rare. Only one institution recorded such instances and it is very low percentage of total transaction. If the borrowers are not able to repay in time, the period is extended. Most of the borrowers are in the age group of 30 to 50. People get access to credit irrespective of caste and religion.