A few years ago, Ahmet Bubalku of the Kosovar village of Zabel i Ultë borrowed 3,400 euros, to build up a small farm.
The microfinance institution START, established and funded by Islamic Relief, lent him the money. It enabled Ahmet to buy seeds to grow potatoes, tomatoes and onions and rear chickens and a cow. Ahmet says without this loan he wouldn't be able to feed his three children.
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Ahmet Bubalku and his children
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Starting a business in a developing country can be hard. Banks ask for a regular income or a deposit and this isn't always possible. In some cases, micro-credit loans can offer a solution. But these relatively small loans often have high interest rates.
For Muslims, this can present more than financial problems - Islamic law prohibits interest charges on loans. To get around this problem, some Islamic aid organisations have introduced Islamic Microcredit.
Ahmet Bubalku is just one of the 1375 people in Drenica valley, one of the poorest regions of Kosovo, who has benefited from such a loan.
No interest charged
Islam Hassani is the managing director of Islamic Relief's microfinance program in Kosovo. He explains how START gets around the problem of charging interest:
"The difference between the loan we provide from the other microfinance institutions is that we don't charge any interest on the loans. They only have to pay administration fee which is 60 euros for a loan ranging between 400 to 5000 euro."
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Islam Hassani
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Under Islamic banking principles, this form of microcredit is called Qard al-Hassan (benevolent loan), that is, not aimed at making a profit.
The loans, funded since 2002 by Islamic Relief, are flexible. This means they can be restructured to accommodate people."Those who are not able to pay are not pushed to the wall like ‘you have to pay or die'," says Hassani.
Ahmet found this out when his daughter broke her leg. With a hospital bill to pay, he could not pay back his loan in time. He thinks an ordinary bank would have probably confiscated his cow and his house.
There are other microfinance institutions in the region with rates starting from 22%. START does not provide big loans like they do. But because of the Koran-compatible conditions, the poor still choose to come here.
Ahmet hopes he can get another loan from START, this time to build a greenhouse. Although this month, his repayment leaves him with just one euro until the end of the month, Ahmet makes sure his payment is a priority.
And he is not the only one who meets his commitments. The farmers know their capacity and borrow accordingly, says Hassani. The repayment rate last year was as high as 98%. Just as well because a high rate of repayment encourages organisations like Islamic Relief to continue underwriting these special loans.