On a positive note, Pre and Post-matric scholarship is real support for a student’s tuition fees and the process is streamlined online to reach its targets. The overseas Masters and PhD student are given scholarships up to Rs 10 lakh. Lawyers who have just finished their graduation and are working under any seniors are also provided with monthly stipends. In addition, Seekho aur Kamao skill development schemes have been instrumental in getting graduates and underemployed youth for self-entrepreneurship and corporate-level job. Also, doctorate students are given monthly stipend in tune with the UGC scale for JRF/NET Fellowship. Moreover, the students with aspiration for civil service examination are provided with free coaching and accommodation facilities.
Apart from the educational scholarships, funds have been budgeted to provide for financing either for education (all levels), skill development, entrepreneurship, small scale industries, funds for construction of a pucca house and purchase of land etc. In addition, Prime Minister schemes like Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Jan Suraksha, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Mudra Yojana and Pradhan Mantri Vaya Vandana Yojana are all cater for social and financial inclusion. So much of a comprehensive package catering to every basic need of below poverty line has been provided by minority and welfare department. For all the schemes to implement and reach it to the ground, local minority offices are established under municipalities across the state, while officers are seen actively promoting and creating awareness through seminars and campaigns. All of these schemes are conceptually and theoretically good but requires effective implementation as to obtain desired results with commitment and conviction from the receiving end parties as well. Despite all these schemes and implementation efforts, they are yet to reach the targeted results in terms of numbers and achieve their objectives. Why?
The dilemma remains: why is there such absolute poverty in a community, where the most downtrodden would rather beg than benefit from such schemes? This has to be addressed at a policy level and administration level.
The problem is the banking interest.
To understand this, let me explain how the Government of India channelizes this process. It engages formal banks for effective regulation and supervision for all their undertaking and schemes implementation. The financing schemes (inclusive of subsidy), are provided in consultation with the nationalized banks for its delivery and recovery. tied with bank interest and insurance, both of which are against the tenets of Islam. Therefore, Muslims tend to avoid avoiding these schemes.
The commercial banks align same interest-based contracts with commercial wisdom and mindsets. Whereas, all the efforts by the government through welfare and minority departments is to alleviate minorities position from absolute poverty to adequate level of livelihood, illiteracy to literacy, penetration in the formal sector from their excessive role in the unorganized sector. The motive behind is cooperation, compassion, welfare and development but the use of interest-based financing contracts makes it deemed not practical in achieving the above-said goals and also anti-faith to the Muslim community.
There are academic and practical case studies to augment the claim that borrower has become true slaves to their loans. The amount being disbursed to achieve development has to achieve those objectives instead of deepening the borrower financial situation. In most of the cases, individuals are left with no option but to restructure the debt with higher interest and fees to pay. There would be scenarios of complete default as well. This is because of interest being charged relative to days of borrowing. Hence, the interest makes all these schemes anti-welfare and instead only strengthens the control of the banks.
But why does the government in consultation with concerned departments frame financial schemes and programs for minorities which is contrary to their faith? In my humble opinion, the government needs to draft the scheme in line with Muslim faith that definitely accommodates all government regulation except the use of interest-based contracts.
The way forward in structuring
Such welfare schemes have to be structured based on the actual cost of borrowing with the relaxation and easement on days of payment in case of default. This has to be done through a separate mechanism that might be within the conventional banks opening up a new state cooperative society exclusively for financing in such a way. Financial inclusion policies and schemes conceptualized through PM’s aspirational Yojana’s and minorities department can be effectively utilised if they are structured without interest and conventional banks routes, rather than being channelized through a specialized institution. This is a fundamental change needed if the government is serious about Muslims actually benefiting from the schemes meant for them.
This is my strong suggestion to all bureaucrats and officers to revisit and relook the proposition of welfare schemes if they are serious about Muslim development and solving their innate problems.
The author is a Certified Islamic Finance professional based in Bhatkal, Karnataka
Courtesy: Two Circle
Editor’s note: The author’s view that banking interest and insurance are forbidden in Islam is his personal view which is not shared by very many Muslims.