Islamic microfinancing in Pakistan

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SHAFAQNA – In Pakistan, millions of low-income households face an extra hurdle when looking for financial products: finding a loan that complies with Islamic law, or Shariah.

Traditional loans don’t comply with Shariah because interest, which is believed to increase inequality and injustice in society, is forbidden. The rule creates a challenge for Shariah-compliant microfinance institutions, which have to provide financial services and expand their operations without charging interest.

But organizations like Akhuwat, a microfinance firm based in Lahore, are figuring out ways to allow Muslims to get loans while staying in line with Islamic teachings. In this video, two women in eastern Pakistan used an interest-free loan to lift themselves out of financial turmoil.

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