AMANAH IKHTIAR MALAYSIA The Role of Microfinance in Poverty Alleviation: AIM’s Experience ISLAMIC...
-
Upload
rogelio-jerome -
Category
Documents
-
view
226 -
download
6
Transcript of AMANAH IKHTIAR MALAYSIA The Role of Microfinance in Poverty Alleviation: AIM’s Experience ISLAMIC...
AMANAH IKHTIAR MALAYSIA
The Role of Microfinance in Poverty Alleviation: AIM’s Experience
ISLAMIC MICROFINANCE AN INSTRUMENT FOR POVERTY ALLEVIATION
Microfinance Definition
Microfinance is the provision of financial services to low-income clients in solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services
Microfinance is a broad category of services, which includes microcredit
Objectives
To eradicate poverty amongst the poor and achieve sustainable independence
to bring lower income groups and micro enterprise into the mainstream
To enable poor segments of the population and microenterprises to participate in income generating economic activities, thereby equalizing opportunities and reducing inequalities
Microfinance is a broad category of services, which includes microcredit
Microfinance Promoting Balance and Equitable Growth
Financial Services
Healthcare
Education
Housing
Basic Service
Eradicate poverty
Financial Inclusion
Ensure that every economic activity,
geographical region & segment of society
has access to financial services
Ensure all economic sectors, regions an the population at range have access to a broad range of financial products and services
Financial Services
Access to financial services
Access to financial
assistance
Access to financial
information
Access to financing
Introduction to Islamic Microfinance in Malaysia
Evolution of Micro financing in Malaysia
1987 1998 2006 2009
Amanah Ikhtiar Malaysia (AIM)
Tabung Ekonomi Kumpulan Usaha
Niaga (TEKUN)
Micro Institutional Framework
Central Bank (Amendment)
Act 2009
Differentiations of Players and Schemes
Differentiation : Conventional Banks Vs Microfinance Institutions
Conventional Banks Microfinance Institutions
Objective Profit-maximization Non-profit governance / Non government organizations
Type of Service Provider Financial Intermediary between saver and investor in the economy
Fund from external sources
Liabilities Deposit forms and the bulk of the liability Saving (forced) of the client only deposit
Additional Scope Does not include social / educational programs
Include social / educational programs
Collateral Physical Collateral required to get funds Social collateral through group and centre formation
Customer Demographic Clients are relatively well off Clients are poor
Modus Operandi Clients come to the bank MFI goes to the people
Facility Quantum Amount of loan in large Amount of loan is small
Mode of Servicing Capital and interest usually paid at the maturity of the contract
Capital and interest paid in weekly/monthly instalments over a year
Gender Demographic Most clients are men Most clients are women
Differentiation : Islamic Vs Conventional MFI
Islamic MFI Conventional MFI
Liabilities (Sources of Funding)
External FundClients SavingsIslamic Charitable Bodies
External FundClients saving
Assets (Mode of Financing)
Islamic Financing Interest Base
Funds Transfer Goods Transferred Cash given
Financing the Poorest Poorest can be included by integrating with Microfinance
Poorest are left out
Deduction at Contract Inception
No deduction at inception Part of funds deducted in inception
Target Group Family Women
Objective of Targeting Women
Ease of availability Empowerment of women
Deal with default Group / centre / spouse guarantee and Islamic ethics
Group / centre pressure and threat
Social Development Program
Religious (include behavior, ethics and social)
Secular (non – Islamic) behavioral. Ethical and social development
Case Study : Amanah Ikhtiar Malaysia (AIM)
Largest microcredit organization in Malaysia – established in 1987 Objectives – Reducing poverty in Malaysia through disbursement of loans to poor households to finance income generating activities Practice Islamic microfinance scheme – instead of paying interest rates, members pay “service charge” Since inception, more than RM 6.4 billion or USD 2.0 billion has been disbursed to about 280,000 borrowers
Basic Information
Number of Members 286,105
Number of Groups 58,154
Number of Centers 6,779
Number of Branches 114
Number of Staff 2040
Financial Information
Total Loan Disbursed USD 2,109,829,557.7
Loan Outstanding USD 404,810,142.6
Quality Portfolio 99.6%
Business Process FlowSet a group comprising 5 persons of
the same gender without close family relationship, in mutual trust among
each other and responsible with similar socio economic status to obtain credit
The group undergoes compulsory short-term course to be familiar with the rules and procedures
Past the group recognition test (a brief test carried out at the end of 5 days
course) and joint a center
A center is made up of between 2 to 12 groups with a center chief, deputy center chief, secretary and treasurer
elected amongst them
Weekly meeting of the center are held at a convenient place in the locality. All members (i.e
beneficiaries) of the center are required to attend these meetings. AIM’s staff attends the meet to
conduct the transactions, perform weekly reviews of performance etc.
Social collateral is introduced by forming groups since AIM offer small amount of credit on interest to the poor without any physical
collateral
Loan repayment by individual member of the group is the collective
responsibility of all the members in the group and default by a member
disqualifies all members to get new loans
Members in group monitor the activities of each other and peer
preassure induces the repayment of the loan. This format of peer
monitoring mitigates the problem of asymmetric information and reduces
transaction cost
Type of Contract – Qard Hasan
QardIntensive supervisionSkills TrainingHuman Capital DevelopmentConsultation
0% Service Charge
(Ujrah) 10%
Commodity Market
KOMODITI
Enhancement in Microfinance Contract : MurabahahCommodity
AIM
SAHABAT
Commodity Suppliers A
Commodity Suppliers B
Commodity Suppliers C
Commodity Suppliers D
Commodity Supplier E
Purchasing Commodity (Pool of Suppliers)
Cash Payment
Selling Commodity
Deferred Payment
BURSA SUQ AL-SILA
(Trading & Clearing Engine)
Selling Commodity
Cash Payment
1
2
5
3
4
6
Impact of Microfinance to Household Income
Service Types of Training / Service
Training Developing Entrepreneur CharacterBasics of EntrepreneurshipBasic skills (Technical)Business Enhancement Skill
Business Development
Business Transformation
Human Capital Development
Motivational ProgramLeadership Social Skill
Enhancement in Microfinance : (i) Entrepreneurs Development Program
Enhancement in Microfinance : (ii) Entrepreneurs Development - Business Development
From Grocery Shop to Mini Market
Before
Make over
After
Enhancement in Microfinance : (iii) Human Capital Development