The Government of Albania requested the support of the Islamic Development Bank (IsDB) to introduce murabaha microfinance to the country’s rural populations through Agrokredit, a local finance company. However, Agrokredit was a conventional institution with no knowledge of Islamic finance. As part of its efforts to raise awareness, IsDB conducted a workshop demonstrating the benefits of Islamic finance and how it has helped the poor in other rural populations. Once implemented, the project successfully provided access to an affordable and inclusive source of funding for impoverished segments of society, mainly in rural mountainous regions and the poor urban pockets of Albania.
I have a favorite fruit for every season: watermelon in winter, peach in spring, strawberries in summer and apples in autumn. Growing up on my family orchard in the district of Elbasan, central Albania, I always looked forward to the different seasons, watching the shades of tree leaves transform slowly, reflecting onto the Shkumbin River like a watercolor painting. The change in temperature brought with it a blossom of new fruits, which I would eagerly anticipate throughout the year.
My family mostly grew fruit and vegetables for their own consumption, but in the 1990s, I began cultivating our land to grow more produce so that we could sell it wholesale to the local market. Today that is what I do for a living. Like me, my wife and two children are also fond of farming fruit and vegetables and help whenever they can. Horticulture is slow work which requires a lot of time, effort and patience. It has taken years to build what we have. I spend my days digging, planting, weeding and harvesting, and my evenings watering everything I’ve sowed.
My wife works in a store, and my children are both studying. When they return home from school, the first thing they do is run to the fields to see what I’m doing. I watch them while I work, climbing the apple tree or sitting under its shade as they read their books. When my wife returns home and starts to make dinner, she often sends the children out to collect fruit or vegetables that she can use for her cooking. The delicious aroma of gjellë me perime – a traditional Albanian vegetable stew – wafts through the window as I finish my day’s work out in the fields. I feel very grateful that we can grow our own produce rather than rely on the economy’s fluctuating market prices.
"With the help of IsDB, Agrokredit was rolling out a plan to provide microloans to poor rural populations in Albania."
Agricultural production in Albania has long been constrained by small and geographically fragmented plot sizes, limited capacity for technological development, and unclear land titles resulting from communist-era cooperative systems. Although more than half the population of Albania is employed in the agricultural sector, it makes up only 18% of the country’s gross domestic product. For small-scale farmers like me, yields are low and input costs are high. As a result, many farmers from Elbasan often migrate to seek better employment opportunities elsewhere. I have thought of doing this myself but cannot bear the thought of being away from my wife and children.
I have always wanted to expand my business, but loans with high interest rates left me wary. For people like me, access to finance is both difficult and expensive. But one afternoon, at the trader’s market, a farmer informed me about something called murabaha microfinance, which was being introduced by Agrokredit, a local finance company. With the help of IsDB, Agrokredit was rolling out a plan to provide microloans to poor rural populations in Albania. I had never heard about this type of financing before but was told that it was promoted in many Muslim countries, as an alternative to conventional interest-based banking.
Although I am Muslim, I do not know much about Islam. Albania is religiously diverse, and Muslims make up about 58% of the population, with the remaining identifying as Roman Catholic or Orthodox Christian. Religious observance and practice are generally lax and compared to other countries, few Albanians consider religion to be a dominant factor in their lives. In fact, Albania was declared the world’s first and only atheist state by the former communist dictatorship, which imposed an official ban on any religious observances between 1946 and 1990.
However, there was a clear need for alternative microfinance products in rural parts of Albania, and the concept of murabaha appealed to many of the farmers in our village. The potential for developing rural agriculture and tourism in Albania was high, especially following heavy government investment in secondary and rural roads. To support this, IsDB invested USD 40 million to construct 108.43 km of secondary and rural roads, giving poor rural populations much-needed access to develop their local economy.
Following this success, our government requested IsDB support for Agrokredit to provide microloans to poor rural populations. IsDB approved more than USD 5 million comprising an IsDB Loan (USD 4 million), an Islamic Solidarity Fund for Development loan (USD 1 million) and a capacity-building grant (USD 0.3 million) to finance this project.
"The financing has allowed me to expand my business, so that I can grow and sell more fruit and vegetables at a better price."
However, Agrokredit was a conventional microfinance institution that had no knowledge of Islamic finance. In fact, staff at the company were concerned about meeting IsDB’s requirement for financing to be sharia compliant. This was not just due to a lack of competency in Islamic finance; Agrokredit was concerned that introducing a sharia-compliant product would be viewed negatively among their clients, as many people were still wary of the implications of taking finance based on religious teachings.
As part of its efforts to raise awareness, IsDB conducted a workshop on Islamic microfinance, explaining its benefits to the management staff of Agrokredit, who were a mix of Muslim, Orthodox Christian and Roman Catholic. Although most of the company’s management staff were non-Muslims, they were intrigued by a proposed alternative mode of finance that did not rely on interest and could be beneficial in financing real economic transactions. They were also keen to learn how to implement the best practices of Islamic microfinance, which had been proven to benefit the poor in other rural populations.
The microfinance project provided access to an affordable and inclusive source of funding for impoverished segments of society, mainly in rural mountainous regions and the poor urban pockets of Albania. Upon learning of its benefits from other farmers who had used the product, I also applied for murabaha. Using my household appliances and furniture as collateral, I was able to obtain financing of up to 500,000 Albanian Leks. I was impressed with how quickly this was processed, and the relatively low costs associated with it.
The financing has allowed me to expand my business, so that I can grow and sell more fruit and vegetables at a better price. I have also been able to increase my range of products, which has led to an increase in service quality and consequently, an increase in income. Business is doing well, and I can offer my family a better quality of life, as well as spend more valuable time with them. Murabaha financing with the help of IsDB has not only provided a better future for rural Albanians, but prevented a stream of people leaving Elbasan in search of a better life, by enabling them to create one where they are.