chapter  6
12 Pages

Islamic microfinance in the oPt

Thus far it has been asserted that a rigid framework has been applied through restrictive policies and regulations, stemming not only from the occupation but the imposition of a linear development model. This has ensured the oPt has struggled to develop a financial sector capable of supporting self-organisation. Hierarchical policies and regulations passed through the PMA have therefore combined with conditions under the occupation to make local investment a less reliable source for the growth of the financial sector. Banks in particular remain reluctant and take a dutiful approach to risk alleviation. In turn this has pressured existing clients and restricted the ability of society in general to gain access to finance. However, there is still a need for Palestinian society to gain a modicum of self-organisation within the parameters which exist, so as to ward off increasing poverty levels and reliance on donor funding. As previously noted, one way of stimulating greater interaction is through investments in smaller local ventures (through SMEs, for example). While this is a somewhat riskier venture, it can be seen as more profitable for a Palestinian state in the long term, especially when compared to the popular current practice of individual loans, which tend to support the importing of consumer goods (notably from Israel) rather than develop local business activity. Emphasis on risk alleviation rather than the sharing of risk also challenges the Islamic financial mantra. Because of this, Islamic banks in the oPt have struggled to circulate finance, which affects their ability to maintain a balance between their own survival, local development and ethical practice. What has emerged then is an ever increasing need for banks to seek investments outside of the oPt, thus threatening the link between finance and development, and although this has been recognised by local and international actors alike, solutions for filling this gap have mainly revolved around donor aid. Nevertheless, attempts have been made to address this issue through the use of microfinance methods, particularly of an Islamic variety orchestrated by the Deprived Families Economic Empowerment Progamme (DEEP) in coordination with the UNDP. Nevertheless, the ability of this sector to promote access to finance, encourage selforganisation, and in the long term the sustainability of the microfinance institutions is also affected by the strict parameters and lack of investment opportunity currently available.