The World Council of Credit Unions has launched a manual discussing how to establish and operate sharia-compliant credit unions in developing countries, which could help to broaden the Islamic finance industry's retail customer base.
With the exception of Islamic insurance, the cooperative financing model of credit unions is not widely used in Islamic finance, although the industry can trace its modern roots to Egypt's Mitt Ghamr cooperative, a credit union set up in 1963.
The World Council, a U.S.-based trade association which operates internationally, hopes the manual will help to develop Islamic credit unions across a wide range of markets.
"The manual now provides a cornerstone for local credit union development in countries as diverse as Libya and Pakistan to Australia and the United States," said Brian Branch, the World Council's president and chief executive.
"We believe the guide is complete but we also recognise that this is an ongoing project as Islamic finance spreads to other credit union systems."
The council used its nine-year experience establishing cooperatives in Afghanistan to create a manual that follows Islamic principles such as bans on interest and pure monetary speculation.
"The manual is written to be adaptable to contexts outside Afghanistan as well, and we understand there are other credit unions applying the manual to varying degrees for Islamic finance windows," Branch told Reuters.
According to the council, there are now 30 sharia-compliant credit unions in Afghanistan, comprising the world's youngest credit union movement and the only one to claim full compliance with Islamic law.
"We are aware of credit unions in the U.S., one in Kenya and many in Indonesia that offer Islamic financial services as well," said Branch.