Dr. Shafiq Dhanani, Building a Successful Business Model for Islamic Microfinance
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Transcript of Dr. Shafiq Dhanani, Building a Successful Business Model for Islamic Microfinance
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Mitra Bisnis KeluargaVentura - Indonesia
(Family Business Partners)
Microcredit Summit, Valladolid, Spain, Nov 2011
Challenges in Syariah Group Lending
Shafiq Dhanani
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Main Challenges
Legal and Regulatory Approvals
Modification of MFI Governance
Product Design with Syariah Principles
Practical Implementation Issues
Conclusions: Syariah Group Lending?
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Examples of MBK Clients & Houses
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Weekly MBK Centre Meeting: 6 Stages
Read promise/ 5 main rules
Register Attendance
Repay instalments
Read promise/Close meeting
Information, Answer questions
Receive follow-up working capital
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Legal and Regulatory Approvals
National Syariah Council: Full Presentation
(30 members) -->Recommendation
Amendment to Company’s Articles of Association –
Ministry of Justice
Approval by Regulator – Ministry of Finance, Capital
Market and Financial Institutions Supervisory Board
Separate Consultations/Endorsement by Ulama
Councils at provincial, district, sub-district and
village level
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Modifications of MFI Governance
Syariah Supervisory Council reporting to MFI’s Board of
Directors
2 Members recommended by National Syariah
Council
Members employed by MFI
Functions of Syariah Supervisory Council:
Approve Syariah Product Design
Monitor Implementation of Syariah Product in the
field
Report to both MFI and National Syariah Council
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Product Design
Most common Syariah Product is mark-up on Buying
and Selling (Murabahah): one-time purchase
More difficult Syariah Product is Profit-Sharing
(Mudharabah): What Profit-sharing Rate?
Different businessmen abilities
Different industries: trade, agriculture, processing, services
different scale of operations and location (urban/rural)
Expected Profit-sharing rate vs. Actual: difference must be given back to client, or client must pay more, at
the end of loan cycle
Separate Accounting for Syariah Product: Eventually full accounts of Subsidiary Unit
Fines and Penalties donated to social causes, not included in Company Income
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Practical Implementation Issues
Data on business profitability & profit-sharing rate? Complex Field Surveys for different industries and business
scale
Regular updating of field surveys findings
Clients in same group but different profit-sharing rates?
Group Lending MFIs usually have hundreds of
thousands or even millions of micro-clients: How can MFI physically verify every year the profitability of so
many clients?
Most micro-clients do not keep written accounts, many
are illiterate…
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Conclusions: Syariah Group Lending?
Many regulatory, design and practical challenges
Syariah lending Rare in Muslim Bangladesh,
Pakistan and Indonesia
Syariah Loan Products mainly used for
buying/selling
Why Syariah Group Lending Product in MBK?
Resistance / of local Ulamas in a few areas to: Conventional loans based on interest rate
Vested Interests
Resistance to fixed profit-sharing rate
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Thank You
PT Mitra Bisnis Keluarga Ventura