Alternative Investments and Credits Limited, Kochi: an Interest Free Venture

The economic system of Islam offers an equitable, yet viable alternative to the interest-based financial system that prevails globally today.This alternative system has been tried successfully in various forms in different parts of the world – both Muslim and non-Muslim countries – for the last 30 years. The growth of this alternative system has been impressive. Understanding the growth of Islamic Banks, major conventional banks have opened Islamic banking branches/ windows worldwide, writes K. K. Ali, CEO of Alternative Investments & Credits Ltd., an interest free financial venture based in Cochin, Kerala.



Introduction: Interest is an integral part of the economic system of the modern states. Considered a means of potential exploitation of the poor and the needy by the rich, it has been denounced by both the ancient religions and ideologies of the recent past. Whether it is a poor individual or an under-developed nation, the misery created by interest-ridden financial system is widely recognized. Many individuals, business entities and nations have gone bankrupt by becoming the victim of undue interest burden. Examples of such tragedies are numerous in our own neighbourhood, both personal and national.

In contrast to such a situation, the economic system of Islam offers an equitable, yet viable alternative. This alternative system has been tried successfully in various forms in different parts of the world – both Muslim and non-Muslim countries – for the last 30 years. The growth of this alternative system has been impressive. Today, there are about 300 such institutions in the world, with more than USD 250 billion in assets. Understanding the growth of Islamic Banks, major conventional banks have opened Islamic banking branches / windows worldwide.

The basic difference between the conventional financial system and the Islamic system is in its very concept. A fixed return on investment or financial participation makes the conventional system inherently exploitative. On the contrary, the Islamic system of investment and financing is based on a more realistic and equitable approach of profit-loss sharing. Conceptually, the lender-borrower relationship prevalent in the conventional system is replaced by a totally different concept of an association of entrepreneur and capital provider.

The Islamic Movement in Kerala took a bold initiative in establishing Alternative Investments and Credits Limited (AICL) as an alternative to the interest based economic and banking system in India. The Company was incorporated in June 2000 and was privileged to join 250 plus Islamic Financial Institutions world wide engaged in establishing economic justice as per Islamic Principles.



 This alternative system has a four fold objective:

• To open a venue for people who intend to invest their savings for a return other than a fixed interest.

• To function as source of finance for entrepreneurs to be availed on a profit / loss sharing basis.

• To commence and run business ventures on its own or joint ventures.

• To educate the society on Islamic and prudential practices of investment and business


Inauguration, License and Office

AICL was formally inaugurated by the former Chief Minister of Kerala Mr. A. K. Antony in the presence of a large gathering representing a cross section of society, at the Town Hall, Ernakulam, on December 22, 2001. This was the first interest free venture of this kind in India with substantial participation of the public.

The company received the formal approval as a Non Banking Financial Company (NBFC) on Jan 9, 2002 from the Reserve Bank of India. The company had obtained its license from the Reserve Bank of India as a Full Fledged Money Changer in March 2001. The company operates at its own office premises admeasuring  about 1500sq ft, situated in Ernakulam city, the commercial hub of Kerala State. The company also opened its branch in April 2003 in the city of Kozhikode, in the northern part of Kerala. Mr. Dr. D. Babu Paul IAS (Former Chief Secretary, Government of Kerala) formally inaugurated the branch.


Sources of Funds

The Company’s source of fund is its Share Capital. Commencing with a registered capital of Rs. 2.5 crores, the authorized capital was raised at various intervals due to increased demand from investors. The authorized capital now stands at Rs. 10 crores. Within a span of six years the company was able to attract share subscription of about Rs 70 million, from about 650 individuals by private placement. The maximum individual holding is limited to Rs 5 lakhs and the minimum to Rs. 10 thousand. About 75% of the share capital is NRI investment.



The business areas of around 50 ventures include general trading, commercial building on rent, ice cream making, bakery, textiles and ready-mades, pharmaceuticals, hospitals, iron & steel industry, fishing industry, educational institutions, infra structure development, etc., The maximum amount per individual investment is Rs. 10 million and minimum is Rs 100 thousand. The Company also deals in foreign currency and has been selling Saudi Riyals to Hajj pilgrims at reasonable prices at the embarkation point of the Kerala State Hajj Committee for the past three consecutive years. A brief statement of last three years working result is given in the table below.


Shariah Compliance

A three-member Ulema Committee ensures compliance with the Shariah rules and supervises the activities of the company. Prominent Islamic scholars well versed in Islamic Shariah in general and Islamic banking and finance in particular, are members of the Committee. The Ulema committee, prior to implementation, approves all products and investment proposals of the company.


Consultancy Division

Understanding the immense scope and immediate need for providing Consultancy service, the Company has given shape to a Consultancy Division to provide project consultancy, investment advices, conduct entrepreneurial training programmes and general awareness programme on savings, moderation in spending etc. As its first step, the Division recently conducted an interactive workshop for businessmen on the theory and workings of Value Added Tax (VAT).


Financial Aid for Non-Business Purposes

AICL Charitable Trust was established in May 2002 to ensure availability of Interest free Loans or non refundable financial aid to under privileged to meet their domestic needs. The Zakat share of the Company’s earnings and funds collected through other possible means are being utilized to offer benign loans and financial aid for such charitable purposes as house repair, medical treatment, education, self employment schemes etc.


Future Plans

Having laid a good foundation the company plans to enhance its subscribed capital to a minimum of Rs 100 million over a reasonable period, in the form of additional share capital. However, alternative sources such as accepting deposits are being explored and action is already initiated to obtain necessary approvals from RBI.

Diversification of activities by heavy equipments leasing, wholesale trade etc. is also on the table. The viability of extending the operation of AICL to the national level also merits consideration. New horizons of banking services and activities will hopefully be open to AICL as and when the Union Government legalizes interest free banking in India.

[The author is the Chief Executive Officer (CEO) of the Alternative Investments & Credits Ltd. (AICL), Cochin. He may be contacted at]

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