Al huda presentation on introduction to islamic micro finance

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Presentation of Islamic Banking Seminar in Afghanistan organized by AlHuda Centre of Islamic banking and Economics

Transcript of Al huda presentation on introduction to islamic micro finance

  • 1.

2.

  • Zubair Mughal
    • Chief Executive Officer
    • AlHuda : Centre of Islamic Banking & Economics
    • Editor in Chief.
    • Islamic Banking and Finance News ,True Banking.
    • An Introduction to
    • Islamic Banking & Finance

3. Outline of Presentation

  • Introduction to Microfinance
  • Riba ( Interest )
  • Product of Islamic Microfinance
  • Progress of Islamic Banking in Pakistan and Worldwide
  • Difference between Islamic & Conventional MF..

4. Islam and Shariah Islam Aqidah (Faith & Belief) Shariah (Practices & Activities) Akhlaq (Morality & Ethics) IBADAT (Man to God Worship) Muamalat (Man to Man Activities) Political Activities Economic Activities Social Activities Banking & Financial Activities 5. Sources of Fiqh in Islam(Islamic Finance)

  • Quran
  • Sunnah
  • Ijtehad / Qiyas
  • Ijamae Ummah

6. Basic Difference between Islamic and Conventional MF

  • Conventional

Bank Client MoneyMoney + Money(interest) Bank Client Islamic Micro Finance Goods & Services money 7. Riba in Quran

  • ...God has permitted trade and forbidden interest...
  • (Sura Al-Baqara 2:275)

8.

  • Murabahah
  • Ijarah
  • Salam & Istisna etc
  • Musharakah
  • Modarabahah
  • Other Products

Human Financial Needs Fulfillment of Financial NeedsOwn Capital Others Capital Equity Financing Debt Financing 9. PRODUCT TREE Islamic MicrofinanceModes Trade BasedModes Partnership BasedModes Rental BasedModes

  • Musharaka
  • (Joint Venture Profit Sharing )
  • Mudaraba
  • ( Trustee Profit Sharing)
  • Murabaha
  • (Cost Plus Profit Sale)
  • Musawama
  • (Bargain sale )
  • Salam
  • (Commodity Sale)
  • Istisna
  • (Sale on Order)
  • Ijarah
  • ( Leasing )
  • Diminishing
  • Musharaka
  • ( Transfer of Ownership)

10. Industry Progress in Pakistan

  • 6 Full fledge Banks having 239 and 12 Conventional Banks have 167 SAIBBS and 10 Sub Branches till 1 stJanuary , 09
  • Total IB Branches = 519

Year2001

  • Meezan Bank
  • Al Baraka
  • Meezan Bank
  • Al Baraka
  • MCB
  • Alfalah
  • SCB
  • Bank AlHabib
  • Habib AG Zur.
  • Metropolitan
  • Bank of Khyber
  • Soneri Bank

2002 2003

  • Meezan Bank
  • Al Baraka
  • MCB
  • Meezan Bank
  • Al Baraka
  • MCB
  • Alfalah

2 10 2007 - 09

  • Meezan Bank (161)
  • Al Baraka (30)
  • MCB (8)
  • Alfalah(40)
  • SCB (11)
  • Bank AlHabib(4 )
  • HMB(4)
  • Bank of Khyber(16)
  • Soneri Bank ( 5)
  • HBL(1)
  • Bank Islami(102)
  • DIB (25)
  • EGIBL (40)
  • Dawood(21)
  • NBP(5)
  • RBS (3)
  • Askari(18)
  • UBL (5)

2004 - 06 18 4 3 11. Industry Progress & Mkt. Share 17 48 70 150 289 519** No. of Branches 3 7 9 12 12 12* Conventional Banks with Islamic Banking Branches 1 2 2 6 6 6* Full Fledge Islamic Banks 0.5% 1.3% 1.8% 2.4% 3.6% 4. 7 % %age of Banking Industry 10 30 48 72 166 185 Financing. & Invest.0.4% 1.2% 1.9% 2.8% 4.1% 5 .2 % %age of Banking Industry 8 30 50 83 169 198 Deposits0.5% 1.4% 2.1% 2.9% 4.2% 5.3% %age of Banking Industry 13 44 72 118 235 271 Total AssetsDec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec -08 @ Description (Rs. in Bn) 12. City - Wise Breakup 13. City - Wise Breakup 14. Industry Progress in Pakistan 15. Islamic products and services offered by 300+Financial Institutions around the world

  • .
  • United States: 20
  • -Al Manzil Financial Services
  • - American Finance House
  • - Failaka Investments
  • - HSBC
  • - Ameen Housing Cooperative
  • Germany:4
  • - Bank Sepah
  • - Commerz Bank
  • - Deutsche Bank
  • Switzerland: 6
  • UK: 26
  • - HSBC Amanah Finance
  • - Al Baraka International Ltd
  • - Takafol UK Ltd
  • - The Halal Mutual Investment Company
  • - J Aron & Co Ltd (Goldman Sachs)
  • Bahrain: 26
  • - Bahrain Islamic Bank
  • - Al Baraka
  • - ABC Islamic Bank
  • - CitiIslamic Investment Bank
  • Malaysia: 49
  • 2 - Pure Islamic Banks (Bank Islam, Bank Muamalat)
  • Rest - conventional banks
  • Saudi Arabia: 17
  • - Al Rajhi
  • - SAMBA
  • - Saudi Hollandi
  • - Riyadh Bank
  • UAE: 13
  • - Dubai Islamic Bank
  • - Abu Dhabi Islamic Bank
  • - HSBC Amanah
  • Qatar: 4
  • - Qatar Islamic Bank
  • - Qatar International Islamic
  • Kuwait: 9
  • - Kuwait Finance House
  • Iran: 8
  • Egypt: 12
  • - Alwatany Bank of Egypt
  • - Egyptian Saudi Finance
  • Indonesia: 4
  • Sudan: 9
  • Pakistan: 21
  • India: 3
  • Bangladesh:9
  • Turkey: 7
  • - Faisal Finance Institution
  • - Ihlas Finance House
  • Yemen: 5

16. International Overview

  • The size of Islamic Financial Industry has reached US$ 300 Bln. and its growing annually @ 15% per anum.
  • 70 countries have Islamic Banking Institutions
  • 37 Muslim countries including Bahrain, UAE, Saudi Arabia,Malaysia, Brunei and Pakistan
  • 34 non-Muslim countries including USA, UK, Canada, Switzerland, South Africa and Australia

17.

  • Trade Based Modes of Islamic Microfinance

18. Basic Rules of Bai ( Buying & Selling )

  • Existence of Product/Commodity
  • Ownership of Product/Commodity
  • Possession of Product/Commodity

19. Basic Rules of Bai

  • Unconditional basis
  • Product have value/Price.
  • Bai on Such product which is permissible in Islam.

20. Basic Rules of Bai

  • Product Must be Identify, clear with all demanding Qualities.
  • Not based on any incident, struggle etc
  • Price must be clearly identified.

21. Bai (Buying & Selling)

  • Basic Kinds of Bai

22. Kinds of Bai

  • Bai Musawamah
  • Bai Murabaha
  • Bai Surf
  • Bai Salam
  • Bai Istisna
  • Bai Urboon

23. Basic Kinds of Bai

  • Bai Eenna
  • Bai Touliya
  • Bai Wadhia

24. Bai

  • There are three basic type of Bais which are using in Islamic Banking as the mode of financing in Pakistan
  • Murabahah
  • Salam
  • Istisna

25. Murabahah

  • Basically, its not a mode of financing but a source to avoid interest Dealing
  • Its not a type of loan, but a deal (Bai)
  • Murabahah can be used as source of financing when client needs funds to purchase any product/Machinery etc.

26. Murabahah

  • Sharing of Risk of loss differentiate Murabahah from the interest category
  • Product Must be bought from third party for avoid buy back transaction
  • Roll over is not Valid in Murabahah
  • If actual cost can not be identified then Murabahah deal not possible.

27. Bai

  • Important Note
  • Following 3 Basic Rules of Bai are exceptional for Salam & Istisna
  • Existence of Product/Commodity
  • Ownership of Product/Commodity
  • Possession of Product/Commodity

28. Salam

  • Pay 100% amount in Advance.
  • Product must be quantified, identified and Measured with quality.
  • Date of delivery, Time, Place must be mentioned clearly in advance.
  • Salam is not valid for a specific farm/land/garden.

29. Istisna

  • Not necessary to pay the 100% amount in advance Like Bai salam.
  • Pri