Reaching the Unbanked with Sharia-Compliant Financial Products

This paper describes the USAID-funded Agriculture Rural Investment and Enterprise Strengthening (ARIES) program in Afghanistan that is administered by the World Council of Credit Unions Afghanistan (WOCCU-A).For the past five years, WOCCU-A has worked to engage local Afghan populations to establish specialized credit unions that are locally owned and operate with principles compliant with Sharia law. WOCCU-A and the Islamic Investment and Finance Cooperative (IIFC), had to make some initial adjustments to gain community acceptance. These include:

• Renaming of credit unions as Islamic Investment and Finance Cooperatives to avoid use of the word '‘credit', which is prohibited under Islamic law;
• Working directly with local leaders, tribal representatives (Shuras) and religious leaders to develop a values-based, community-owned business model founded on Islamic principles;
• Breaking WOCCU's five-member sector leader board of directors' structure to one that includes tribal leaders;
• Shura securitization of loans.

The ARIES program highlights WOCCUs understanding of Afghan culture, as well as management's ability to translate this understanding into effective operational policies in a difficult operating environment.