Our World

Islamic Lending

Islamic banking and its fit with Acumen’s values

One of Acumen’s portfolio companies in Kenya is currently going through a capital restructuring. The entrepreneur is Muslim and at some point during the negotiations, the request to explore sharia-compliant financing came up. Not knowing much about Islamic banking, I did a bit of research. What I learned really impressed me. Sharia forbids of all forms of riba, or interest, on monetary loans—and the reasoning behind this is quite profound.

The Islamic financial model works on the basis of profit sharing, in which investors and investees share the risks of an investment and divide any profits or losses between them. This participatory arrangement reflects the Islamic view that the borrower must not bear all the costs of a failure, which is intended to lead to a more balanced distribution of income and a more open economy. I am accustomed to a lending system in which the distribution of risk among the haves and have-nots is disproportional: those with less money, the more vulnerable, have greater risk. Sharia financing shifts the risk across the strata of society.

Unlike conventional banking, Islamic banking selects projects on the basis of profitability and not creditworthiness, which further leads to an emphasis on stability and growth. When investors are more concerned with interest rates and guaranteed returns than they are with operations and the use of funds, they lose out on the opportunity to add value and provide much-needed guidance to the investee.

At Acumen, we invest for impact. Islamic banking therefore seems to fit our approach of treating the entrepreneurs as partners, and being concerned with the success of the company as a whole. We’re not just interested in whether we can recover our investment. We invest to help ensure that our portfolio companies grow and are able to reach more of the world’s poor.

This diagram on Islamic banking refers to Musharakah (joint venture), which more closely resembles Acumen Fund’s investment approach.

___

Nicolás Argüello is an Agriculture Portfolio Associate in Acumen’s East Africa office.

Comments

Imagining the world as it could be

Christine Gitau is an East Africa Fellow and an enterprise coach at Craft Afrika, which provides business support services to craft entrepreneurs, enabling them build viable and thriving businesses in Kenya. At Acumen we often use the term “Moral Imagination” when talking about leadership. Christine wrote a reflection on how this concept has shifted her thinking. We could not be more proud of what she is building! [Read More]

How two Acumen Fellows are disrupting the education model in India

Whether its running youth soccer programs, providing vocational training services, or transforming the education system in India, Acumen India Fellows are driving real change in their communities.  Abbas Dadla and Abhilasha Sinha are India Fellows who are addressing the teacher shortage in India through the use of technology and peer collaboration. Find out what they are building below.  If you have grit, resilience and a commitment to creating change in your community in India, East Africa or Pakistan, we encourage you to apply for the Regional Fellowship Program! [Read More]

Meet Manjushree Patil, Founder of Aatman Academy

This month saw violent tragedies in Pakistan and Kenya, regions where Acumen works and which five classes of Acumen regional fellows call home. Among them there are dedicated teachers like Acumen India Fellow Manjushree Patil, crusaders against sex trafficking, builders of government, creators of liberating mobile medical technologies, and curators of slum sports programs. The need for strengthening the connections between those who are working for positive change against seemingly impossible odds has never been greater. We at Acumen have never been prouder to be the thread tying together these courageous individuals. Read more about Manjushree and how she is changing her community in India below! [Read More]

No, not silence again!

The Acumen Fellowship’s Cambridge Leadership Associates (CLA) training is notorious for digging deep, breaking Fellows down to reveal their deepest fears, identifying the sources of resilience that will fuel them with the tenacity to continue along the path to social change. Kahabi G. Isangula is an East Africa Regional Fellow living in Tanzania and recently participated in our CLA training. Get an idea of what it is like, below!  [Read More]

Announcing the Class of 2015 Acumen Global Fellows

Acumen Global Fellows are architects for the impact sector. They are innovators, game changers, visionaries, with various professional experiences looking to make substantial change in the world. They have thrived in companies such as Google; they have started their own companies in Sri Lanka, Canada and Malaysia.  They are choosing the challenge of working alongside our portfolio companies and immersing themselves in a rigorous leadership training. [Read More]

Welcoming Ajit Mahadevan as Acumen India Country Director

We are pleased to announce that Ajit Mahadevan will be joining Acumen as India Country Director. Ajit joins Acumen from Ernst & Young, where he has served as Advisory Partner & Leader (Life Sciences) for the past six years.  At EY, he was a strategic advisor to the leadership of some of the leading Indian and global life science and healthcare players with the focus being business transformation and growth.  Prior to his time at E&Y, Ajit was President of Piramal Healthcare, one of the leading pharmaceuticals companies in India, where he built the international business from inception in 2002 to $300M by the end of 2008. Ajit held multiple leadership roles across strategy, M&A and business leadership. During his tenure at Accenture’s Strategic Services practice in UK and India, he led the development of one of the firm’s largest and most successful internal projects – the Offshore Development Centre in 2001, which has now grown to about 100,000 people across multiple cities in India. Ajit has worked in an advisory capacity to Acumen in the past, most recently participating in Regional Fellows selection panels in Mumbai. [Read More]

Why We All Need A ‘Rikki’

Caren Wakoli is an emerging leader in East Africa who has launched a foundation to support the next generation of female leaders for Africa. Caren applied twice for the fellowship and was not accepted, but she did not give up. Her resilience and grit allowed her to persevere, and this year we are proud to have her as an East Africa Fellow. Below she shares her story on why everyone needs a ‘Rikki,’ and failure is never final.  [Read More]

Acumen Joins Beyond the Grid as Founding Partner

Acumen is proud to be a founding partner of Beyond the Grid, an innovative framework under President Obama’s Power Africa initiative to increase energy access for underserved populations across sub-Saharan Africa. Beyond the Grid will leverage partnerships with investors and practitioners committing to invest over $1 billion into off-grid and small scale solutions for this underserved market. [Read More]

Life after Lean

In May 2013, Sabrina Natasha Premji & Afzal Habib participated in +Acumen’s inaugural Lean for Social Change course based on Lean Start-Up principles. Enrollment for the next session of the Lean for Social Change course is open now. If you are working on a social issue in your community, are interested in pursuing your own social venture, or are just interested in creating an impact in this world…Register today! Sabrina & Afzal joined the course with a simple idea and the passion to transform the childcare crisis in East Africa’s informal settlements. Seven weeks later, they had developed a customer-tested business model ready to pilot in Kenya’s densest slums. Read their story below. [Read More]