MICROCAPITAL STORY: HSBC Ammanah partners with Islamic Relief to Launch Microfinance Program in Pakistan

HSBC Amanah, the global Islamic banking division of HSBC group, has partnered with Islamic Relief, an international development and relief organization, to offer Islamic Microfinance in Pakistan. Islamic microfinance, just like Islamic banking, will provide financial services to devout Muslims in accordance with the Shariah, the Islamic law. HSBC Amanah will provide both training and funding for Islamic Relief’s microfinance projects, starting in Rawalpindi, Pakistan.

Islamic Relief (IR) started working in Pakistan in 1992 and has its main office in Islamabad. The organization has implemented development projects in water and sanitation, health, education, income generation, disaster response and orphan support. In 2005 IR initiated Small Scale Enterprises for Women (SSEW) in Rawalpindi City, Pakistan. The aim of the project is to provide entreprise development services (EDS) to low-income groups.

IR works with Pak Swiss Small Scale Enterprise Promotion Programma (SSEP), supported by Swiss Agency for Development and Co-operation, that specializes in EDS. Working with the United Nations Development Program (UNDP ), the United Nations Children’s Fund (UNICEF), the International Labor Organization (ILO) and the International Union for Conservation of Nature (UICN) as well as the International financial institutions such as the World Bank and the Asian Development Bank, SDC provides yearly funding to Pakistan’s SSEP, Community Services Programme (CSP) and the Civil Society Human and Institutional Development Programme (CHIP) in the amount of USD 13.6 million.

After providing EDS, which includes identifying potential beneficiaries, forming the groups and giving financial training on credit and savings scheme, IR assesses credit needs and provides microcredit. The estimated number of beneficiaries is 75 families over the duration of SSEW. HSBC Amanah will assist IR in developing the required Shariah structure for giving microcredit. The financial details of the partnership have not been made public.

HSBC Amanah was established in 1998 to provide Islamic banking. The Global Shariah Advisory Board (GSAB) advises HSBC Amanah on compliance of its financial services with the Islamic law. GSAB comprises of representative scholars from all Regional Shariah Committees (RSC) of HSBC Amanah in addition to other Shariah scholars of international standing. Islamic banking is the prohibits all kinds of interest; “nominal” or “excessive,” simple or compound, fixed or floating.Other elements include the emphasis on equity financing, which requires partnership and profit sharing, as opposed to debt financing, the linking of finance to productivity, the desirability of profit sharing, and the prohibition of gambling. Islamic investment discourages speculation.

HSBC Amanah is a global division of the HSBC group. Headquartered in London, HSBC has operations in 77 countries, 20 of which are member of Organization of Islamic Conference (OIC). The group has 10,000 offices, with almost 110 million customers, in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. In 2007 the group’s total assets amounted to USD 2.4 trillion and its profit before tax was USD 24 billion.

The HSBC Group is currently involved in microfinance activities in 7 countries;India, Mexico, Phillipines, Russia, Sri Lanka, China and USA. The group plans to expand its microfinance involvement to Argentina, Brazil and Turkey. In 2007 HSBC launched a rural bank in China. HSBC’s locally incorporated China unit, separate from the new rural bank, operates 40 outlets and employs around 4,000 people. Microcapital reported on HSBC’s microfinance involvement here and here.

Islamic Relief, founded in the UK in 1984, has offices in Afghanistan, Albania, Bangladesh, Bosnia, Chechnya, China, Egypt, Kosova, Indonesia, Mali, Pakistan, Palestine, Sudan, Ethiopia, Jordan, Kenya, India, Iraq, Somalia, and Yemen. By the end of 2007, Islamic Relief had total incoming resources of USD 78.4 million, the total value of humanitarian relief delivered was USD 33.4 million.

By Ipek Kuran, Research Assistant

Additional Resources:

HSBC Amanah

Islamic Relief

Islamic Relief financial report 2007

Institute of Islamic Banking and Insurance

Swiss Agency for Development and Co-operation

Islamic Microfinance Development: Challenges and Initiatives – Islamic Research and Training Institute – May 2008

Microcapital News Wire – Thursday, August 16, 2007 – HSBC First Foreign Bank to Launch China Rural Bank

Microcapital Story – Thursday, December 7, 2006 – Indian Microfinance Bank MDMSB Creates Partnership With International Bank HSBC

Microcapital Story – Wednesday, April 19, 2006 – HSBC Shows Interest in Expanding Microfinance Investment Activity