Asasah islamic microfinance

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AlHuda CIBE,www.alhudacibe.com

Transcript of Asasah islamic microfinance

  • 1.

2. An Introduction to Islamic Microfinance Muhammad Zubair Mughal Chief Executive Officer , AlHuda: Centre of Islamic Banking and Economics [email_address] www.alhudacibe.com 3. Contents

  • What is Shariah Based Microfinance ?
  • Difference between Conventional & Islamic MF
  • Demand of Islamic Microfinance Worldwide
  • Global Landscape of Islamic Microfinance
  • Islamic Microfinance Update
  • The Way Forward

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 Micro Finance)

  • Quran
  • Sunnah
  • Ijtehad / Qiyas
  • Ijamae Ummah

6.

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

Human Financial Needs Fulfillment of Financial NeedsOwn Capital Others Capital Equity Financing Debt Financing 7. External (Equity & Debt) Financing Debt Market Equity Market Bai al-Istisna(Sale on Order) Bai al-Salam(Commodity Sale) Al-Ijarah(Leasing) Others Bai al-Murabaha(Cost Plus Profit Sale) Al-Musharakah(Joint Venture Profit Sharing) Al-Bai Bithaman (Mu)Ajil(Deferred Installment Sale) Al-Mudarabah(Trustee Profit Sharing) Uqud al-Muawadhat (Deferred Contracts of Exchange) Uqud al-Ishtirak(Contracts of Profit Sharing ) Debt Financing Equity Financing 8. PRODUCT TREE Islamic Modes of Microfinance 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)

9. ONUS SHIFTS!!

  • Customer
  • to Halal Restaurant Owner
  • Halal Restaurant Owner
  • to Halal Meat Supplier
  • Halal Meat Supplier
  • to Halal Abattoir / Butcher
  • Customer to Islamic Banker
  • Islamic Banker
  • to Shariah Scholars

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 in Pakistan 12. International Overview

  • The size of Islamic Financial Industry has reached US$ 950 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

13. International Overview

  • In Feb 1999, Dow Jones introduced the Dow Jones Islamic Market Index (DJIM) of 600 companies world wide whose business complies with Islamic Shariah laws
  • At present there are more than 170 Islamic Funds operational through out the world with a total fund base of over USD 3.50 billion

14. International Overview

  • Governments of Bahrain ,Malaysia and now Pakistan have issued Islamic Bonds (Sukuk) in order to facilitate Islamic Banks in managing their liquidity.
  • Issuance of these bonds has also paved the way for Shariah compliant Government borrowings

15. International Overview

  • Institutions like Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Finance Services Board (IFSB) have been formed.
  • These institutions are playing a key role in setting up and standardizing Shariah , Financial and Accounting standards for Islamic Financial Institutions.
  • Due to these collective efforts Islamic banking is now recognized by IMF, World Bank and Basel Committee.

16.

  • Islamic Microfinance

17.

  • Prohibition of Interest
  • Risk sharing
  • Social Development Mission
  • Prohibition of speculative behaviour
  • Purity of contracts
  • Asset Based Financing
  • Shariah-approved activities .

Principle of Shariah Based Microfinance 18.

  • And ALLAH has permitted trading and forbidden Riba
  • (Al Baqara 275 )
  • Riba means any fixed or guaranteed interest payment on cash advances or on deposits.
  • Islam encourages the earning of profits but forbids the charging of interest

Prohibition of Riba ( Interest) 19. Conventional MFI Client moneymoney + money (interest) Difference Between Islamic and Conventional Microfinance 20. Islamic IMFIS Client Difference Between Islamic and Conventional Microfinance Goods & Services money 21. Modes of Islamic Microfinance 22.

  • For Muslim majority country great need for Islamic MF exist and large target segment isaverse to the interest based microfinance products.
  • Islamic Microfinance emphasize ethical, moral & social factors to promote equality and fairness for the good of the society.
  • Risk Sharing, individual duties, property rights and purity of contracts are part of Islamic Microfinance
  • Approximately 44% conventional microfinance clients worldwide reside in Muslim countries (Source: MF Info Ex) .
  • Asset-based can prevent diversion of funds for consumption

Need & Compatibility 23. Demand of Islamic Micro Finance Survey Surveyed Countries Respondentspreference (%)CGAP 08 Jordan, Algeria, and Syria 20 - 40% PlaNet Finance 07 West Bank and Gaza 35% - 60 %USAID 02 Jordan 24.9% IFC/FINCA 06 Jordan 32% Frankfurt School of Fin & Mgmt 06 Algeria 20.7% IFC sponsored Study Yemen 40% IFC 2007 Syria 43-46% Bank Indonesia 2000 Indonesia (East Java) 49% A recently survey Conducted by AlHuda CIBE in Azad Kashmir exhibits 99% demand (4 Districts) 24. International Experience of Islamic Microfinance Institution Mode of Finance 7 Sudanese Islamic Banks Murabaha, mudaraba,musharaka, and saving deposit [SIB Productive Families] Islamic Cooperatives and Rural Banks of Indonesia Cooperatives Members Musharaka (integrated with Zakat Fund)Rural Banks Various modes Islami Bank Bangladesh, Social Investment Bank and AlFalah & Rescue IBB Mostly bai muajjal SIBL - Recourse generation - Cash Waqf andFinancing through various modes Jordan Islamic Bank Musharaka andMudaraba UNCDF Yemen (HMFP) Murabahah and redeemable Mudarabah Sanabel (12 Arab countries, 64 MFIs meeting 80% of MF needs) Murabaha, mudaraba,musharaka Amana Ikhtiar Malaysia and Islamic Pawn Broking AIM interest free loan Al Rahnu short term interest free loan against collateral at market value 25. Pakistans Experiences Institution Mode of Finance Akhuwat AIM interest free loan Qaraz-e-Hasna CWCD Murabahah, Ijarah, Salam & Istisna MicroTakaful NRSP NWFP Murabahah Mudarabah with BOK for funding Source Khawendo Kor Murabahah but in limited scaleIslamic Relief Murabahah and Qarz-e-Hassan KKCB Murabaha and MicroTakaful Helping HandMuslim Aid Takaful Pakistan Limited Murabahah Murabahah MicroTakaful 26. Products for IMFIs 27.

  • .

Islamic Microfinance Institution Worldwide

  • United States: 4
  • Kiva
  • Helping Hands
  • Muslim Aid
  • Lariba
  • Germany:2
  • - Muslim Society
  • Switzerland: 6
  • UK:
  • - HSBC Amanah
  • - Muslim Aid
  • - Islamic Relief
  • - The Halal Mutual Investment Company
  • Bahrain: 2
  • Malaysia: 11