Islamic Microfinance in Chicago
Written by Jan Jaben-Eilon Thursday, February 10 2011
Snapshot: Karen Hunt Ahmed
Karen Hunt Ahmed is president of the Chicago Islamic Microfinance Project, an economic development project started with partners Cynthia Shawamreh and Tariq Malhance. She also is an assistant professor of finance and management at DePaul University. Before receiving her doctorate from the University of Chicago, she worked in the banking sector in Chicago and for Shuaa Capital in Dubai, United Arab Emirates. Her research interests include Islamic finance, globalization, moral beliefs and business practice, ethical investing and the sociocultural implications of business practice.
Hunt Ahmed lived in Dubai for many years and traveled extensively in the Middle East, Pakistan, Africa, and Europe. Mother of two daughters, her interests include karate and playing squash.
Womenetics: There are several examples in this country of investment funds that are touted as “socially responsible.” Why is it necessary to have a specifically Islamic microfinance project?
Karen Hunt Ahmed: Chicago Islamic Microfinance Project (CIMFP) is not an investment fund; it is a not-for-profit organization. Our funding would come from charitable donations. Faith organizations tend to be embedded in communities, and they know and are willing to help citizens who could benefit from microfinance services. We believe we are filling a need for both economic/community development and faith-based microfinance in the Chicago area.
Womenetics: As you well know, Americans are a little nervous about anything that talks of shari’a law. Your project is said to offer shari’a-law compliant investment development. Can you please explain what you mean by shari’a-law compliant?
Hunt Ahmed: Islam, like many religions, prescribes a holistic approach to everyday life. That is, religious law provides guidance on most aspects of daily life, including how to conduct oneself in a business setting. Islam is an Abrahamic religion; therefore, most of its laws will be familiar to Jews and Christians, including commercial law. The aspect of Islamic finance that gets most attention is the prohibition against charging or paying “riba.” Riba is interpreted to mean interest or usury. This prohibition is present in all Abrahamic religions, but has been interpreted in slightly different ways throughout history. Islamic finance is revisiting those arguments against riba and putting into practice a financial model that tries to avoid the exploitative aspects of interest.
Womenetics: Will your investments be made only in Islamic-run development projects?
Hunt Ahmed: Shari’a compliant refers to the structure of the financial transactions, not the nature of the project or the religion (if any) of people involved in the project. The only restriction outside of financial structure that is “shari’a compliant” is that we will adhere to basic shari’a principles of not investing in projects whose core business does not align with shari’a, such as trading in pork or alcohol or other immoral activities.
Womenetics: Will you attract investors only from the Islamic world? And, I should add, from the United States?
Hunt Ahmed: We welcome investors from any part of the world. Potential funders from the Gulf countries as well as from here in Chicago have expressed interest in the project. This is a not-for-profit organization, so donations are tax deductible for U.S. donors.
Womenetics: Please explain microfinance and Islamic finance.
Hunt Ahmed: Microfinance is the provision of financing or other money-management services (savings or insurance plans, for example) on a smaller scale than traditional financial institutions are interested in providing. For example, say a mother of young children wants to start a business selling homemade baked goods out of her home. She has identified a market (Her neighbors will buy birthday or wedding cakes from her because they work outside the home and don’t have time to make their own). The woman needs money up front to buy supplies and a bigger oven. For a larger, more established business, a bank would provide this money, but maybe she needs only $1,000. Also, perhaps the woman has no other source of income so she is not seen as a viable credit risk even though she generally pays her bills on time and is generally fiscally responsible. A traditional bank would not normally find this small amount or uncertain credit risk worth its time. A microfinance institution would get to know her to determine the risk of this project and her personally and provide this relatively small amount of financing along with repayment terms appropriate for that situation.
Islamic finance is based on the finance provider working closely with its customers to share risk as well as profits. Because both microfinance and Islamic finance tend to pay more attention to the specifics of the situation rather than on the impersonal “numbers,” there is great synergy to combining the two approaches to community financing.
Womenetics: . . . And Mudaraba structure?
Hunt Ahmed: Mudaraba is simply a structure in which one party (the financial institution, or CIMFP) provides the capital for a project and the other party (the entrepreneur) provides the knowledge and “sweat equity” for the project. Both institution and entrepreneur take on the risks of the project, and both share in the profits.
Womenetics: When did you launch this program?
Hunt Ahmed: We just received tax-exempt status in 2010 and have received startup capital from private donors and a private company. We have gotten feedback that there is tremendous interest in this project within the Chicago area, but the uncertain economy (and the fact that all three partners have families and full-time jobs) makes fundraising a slow process.
Womenetics: What are your goals for the program?
Hunt Ahmed: Our goal is to provide financing opportunities for people in Chicago who want to start a business, but do not have access to traditional banks or other sources of financing for various reasons, including that the amount of financing they require is too small for a big business lender to take it seriously.
Womenetics: You are the professor for the business school portion of the project, yet you are also an assistant professor at DePaul. Are you going to be working two jobs?
Hunt Ahmed: Don’t women always work at least two jobs? It is our goal that the business-and-law-school portion of the project be housed at a university in the Chicago area. At that point, I would just shift from being a plain old “business school professor” to having my job concentrate on the Islamic finance and microfinance specialties, as well as supervising students and the research associated with the proposed Microfinance Project and Research Center.
Womenetics: Your background is quite unusual and very interesting. Where are you from and how did it lead you to Dubai?
Hunt Ahmed: Thanks for saying that. I’ve certainly never been bored. I went to college at Washington University in St. Louis where I received a degree in psychology and music, and I also have an MBA. While doing my MBA, I discovered microfinance and got a job in banking to get the experience I thought I needed to work in microfinance. In 1991 I moved to Dubai, where I worked in private equity, and that is where I was introduced to Islamic finance. I could always see the similarities between Islamic finance and microfinance. Both acknowledge the reality that finance is about the people who utilize the money and the society in which they live and not just about the numbers.
When we were transferred back to Chicago for my husband’s job, I began a doctorate program in comparative human development at the University of Chicago, where I was able to integrate my interests in psychology and the social aspects of business practice. I am currently working on turning my dissertation into a book, The Business of Culture: Moral Beliefs and Business Practice in Islamic Finance.
Womenetics: I presume you are Islamic. Did you convert from another religion and why?
Hunt Ahmed: I grew up Methodist and was very involved in social service projects throughout my childhood and teen years. I converted to Islam when I got married, but it was an easy conversion because of Islam’s similar attitude toward social service.
Womenetics: When you were a child, what did you want to be when you grew up?
Hunt Ahmed: I wanted to be a doctor for as long as I can remember. Somewhere along the way my interests evolved and I did become a doctor, except that I can’t do surgery or prescribe drugs.
Jan Jaben-Eilon was a founding staff writer of the Atlanta Business Chronicle. Since then, she has been the international editor of Advertising Age magazine and has written for such publications as The New York Times, International Herald Tribune, Washington Journalism Review, and Consumer Reports. She is the author of soon-to-be-published (There is) Life After Cancer. Jan and her husband have homes in Atlanta and Jerusalem.
