Poverty & Underdevelopment in the Muslim World (Part 1)
The harsh reality of the present day Muslim World is that despite being in possession of enormous potential and immense resources , most of the countries are at a lower level of development, barring a few exceptions , mostly the natural-resources-rich countries .
However, a major chunk of the global Muslim population continues to languish in abject poverty. A sizable number of populace in Muslim countries, with large populations, lives below the internationally defined poverty line; in some cases, this ratio is as high as 60 and 70% (Exhibit 1).
Exhibit 1: Population below Poverty in Selected Muslim Countries
|Country||Population below Poverty Line
% of Total Population
Source: The PEW Center’s Forum on Religion and Public Life, 2011
Though some improvements have been recorded, imbalances and inequalities between and within the countries are obvious. Studies have observed that “the disparity between the OIC member countries has been widening since 1975” and “the real surge in disparity started after 2000, where some countries got extremely rich compared to others” .
Some economic and socio-economic statistics will be useful to mention in this connection. According to Annual Economic Report on the OIC Countries 2012 , “having accounted for 22.8 per cent of the world total population, the 57 OIC member countries produced only 10.9 per cent of the world total GDP.” IMF also adds that this gap would not be filled in the medium term. The report further highlights that the average GDP per capita in the OIC countries increased continuously and reached to $5,507 in 2011, compared to $4,724 in 2007. However, the point of concern is that “the gap between the average per capita GDP levels of the OIC member countries and other developing countries has widened further.”
Unfortunately, the indicators of social sectors, education and health, also paint a very dismal picture. The OIC average of adult literacy rate, i.e. 70.2%, for the period of 1999-2008 was approximately 10 percentage points lower than the world average of 79.6%. For Sub-Saharan Africa and South Asia, the figure was even lower, with 56.6% and 54.4% . On average, 2.7% of the total GDP of the OIC Member Countries was spent on public education in the period of 1999-2008, which was less than the World average of 4%. As to the average health expenditure from the total GDP of the OIC Member Countries, it stood at almost half of the world average, in percentage.
Infrastructure development is at the lower ebb; fiscal deficits are high; trade deficits except for commodity exporting countries are disturbing; and foreign debts are taking their toll on the economies of a number of OIC member nations. Many of these issues are characterized by the lack of access to finance, both for institutions involved and the individuals.
The state of underdevelopment and poverty in the Muslim World stated above continues in a global scenario where on one hand, conventional financial system has suffered existential blows  and is fighting hard for its survival, while on the other, Islamic Finance industry can be seen as flourishing all over the world. IMF estimated at the end of year 2008 that the size of the Islamic banking industry at the global level was close to $820 billion , which now stands closer to $1.35 trillion, according to Global Islamic Finance Report (GIFR) 2012. At present, the Islamic financial industry comprises 430 Islamic banks and financial institutions, in addition to around 191 conventional banks having Islamic banking windows that are operating in more than 75 countries.
However, Islamic banks are confronting a variety of challenges . Among these challenges, one is that they are operating within an overall conventional system of finance, which forces them to adopt the safest modes to remain competitive; this puts them in a crisis of desired credibility in regard to their Islamic approach. Theoretical and operational developments are, therefore, required for the increased level of credibility; and such credibility of Islamic finance in general and banks in particular can be ensured when the overall system is also geared up towards the Islamic ideals. Proper coordination among Islamic financial institutions is also required.
As regards to micro-finance, one finds an encouraging trend in form of a number of initiatives being taken all across the Muslim world to provide micro-financing services, as per the Islamic guidelines. For instance, one initiative of Qard-e-Hasan-based micro-finance in Pakistan, named Akhuwat, alone has now operations worth PKR 3 billion ($30 million, approximately, ). According to Islamic Microfinance Network – an organization established in 2011 – there are at least 300 Islamic microfinance institutions, providing services in 32 Muslim countries. A three-day ’Global Islamic Microfinance Forum’ was held in Dubai from December 8-10, 2012, which brought together Islamic micro-finance organizations and their umbrella associations, from at least 27 Islamic countries.
At the same time, it is important to note that despite the fanfare and attention it enjoys at the global level, the extremely exploitative nature and resultant repercussions of the conventional microfinance are well known. Such is the extent of exploitation that the exorbitant rates of interest and intimidations for recovery have actually led dozens of borrowers to commit suicide, as has recently happened in the Indian state of Andhra Pardesh, as a result of which the state government had to ban all microfinance institutions working there. Another example that has been observed in India is that while [conventional] microfinance clientele has reached over 200 million, it that microcredit traps the poor into a debt cycle . Nevertheless, it is also a reality that around 44% of the global clients of conventional microfinance are in the Muslim world .
Contrary to the exploitative nature of the prevalent global economic order, widespread charitable practices exist within the Muslim countries and societies. It needs little mention that Islamic societies are ‘giving’ in their orientation, by and large, and charity (Sadaqah) has amply been serving the purpose of a potent social-safety net in the Muslim countries for over past fourteen centuries, with notably positive impacts on the poor .
 The resources occupied by the OIC countries are not limited to hydrocarbons (Muslims control 70% of global oil reserves and 49% of gas); vast agricultural lands, huge untapped mineral wealth, hydro-resources and most importantly, human resource can also be counted in this connection.
 Even within the oil-rich Gulf States, the actual development that has been witnessed over past decades is not substantial and all-encompassing, except for some major infrastructure projects in UAE and Saudi Arabia.
 SESRIC, Explaining Income Disparity among OIC member Countries.
 SESRIC, Statistical Year Book of OIC Member Countries 2009
 Experts, such as Martin Jacques, have already termed it as an existential crisis of the Capitalism. According to IMF, the losses to the banks alone have been in the tune of 4.1 trillion US dollars. Both the US and Euro-zone economies continue to face the uphill task of recovery, and the experts are warning that effects of the crisis may spread to other parts of the world; in connection to this, the developing countries should also prepare their economies to face the possible shocks.
 The initiative was started only in 2001 with a small donation of Rs 10000 ($100). The organization describes its mission as: “to alleviate poverty by empowering socially and economically marginalized families through interest free microfinance and by harnessing entrepreneurial potential, capacity building and social guidance”. Importantly, the core principles followed by the organizationi.e. interest-free loans, use of religious places for field operations, spirit of volunteerism, and transforming borrowers into donors--provide an excellent example to be replicated. For details see http://www.akhuwat.org.pk/
 Sudhirendar Sharma, “Are micro-finance institutions exploiting the poor?” available at http://infochangeindia.org/poverty/analysis/are-micro-finance-institutions-exploiting-the-poor.html (accessed on June 15, 2013.)
 Event Summary: “Global Islamic Microfinance Forum”, Al-huda Center for Islamic Banking and Economics, Dubai, 9-10 December 2012 accessible at http://www.alhudacibe.com/imfc2012/summary.php
 For detailed account of ‘giving’ practices in the Muslim world, see Amy Singer, Charity in Islamic Societies, and Khalil Jassemm, Islamic Perspective on Charity.