Download tanzania-islamic-microfinance - East Africa Microfinance Summit 2016

Islamic Microfinance
Muhammad Zubair Mughal
Chief Executive Officer
Allhuda centre of Islamic banking and economics
[email protected]
Contents
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Basic Principles of Islamic Microfinance
Source of Islamic Micro Finance Product Products
Compatibility of IMF Products with Conventional
Microfinance Models
Islamic Microfinance Products
Need Assessment of Islamic Microfinance
Opportunities & Challenges Faced by Islamic Microfinance
Basic Principle of Shariah Based Microfinance
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Prohibition of Interest.
Care for the poor is a religious obligation in Islam.
Asset Based Financing
Risk Sharing
Sanctity of contracts
Financing in Halal/Shariah Complaint Activities.
Prohibition of speculative behaviour ( Gharar).
Technological Integeration
Micro Takaful ( Micro Islamic Insurance)
“Assisting the poor is a pillar of Islam”
Islam and Shariah
Islam
Aqidah
(Faith & Belief)
Shariah
(Practices & Activities)
IBADAT
(Man to God Worship)
Political Activities
Akhlaq
(Morality & Ethics)
Muamalat
(Man to Man Activities)
Economic Activities
Banking & Financial Activities
Social Activities
Source of Islamic Microfinance Product
Sources of Islamic
Finance
•Quran
•Sunnah
•Ijma’a (jurist
consensus)
•Ijtihad &
Qiyas
(analogy)
Islamic Banking & Microfinance
Product Mechanism
Islamic Microfinance Products
Murabahah – Cost Plus Sale
Literally it means a sale on mutually agreed profit, also known as cost plus sales, it is
one of the most widely used instruments for short-term financing where the MFI
undertakes to supply specific goods or commodities at mutually agreed profit to the
client.
Utilization :
Murabahah can be utilize for Purchase of raw materials, equipment, agri. Inputs,
Consumer goods, Vehicle, Houses etc..
Currently Practiced:
AlBaraka Bank, Al Amal Bank, HSBC, Amanah
Islamic Bank,Islamic Bank Bangladesh, FINCA-AF,
Islamic Relief, BMT’s in Indonesia etc.
Islamic Finance Products for Halal Industry
Salam – Forward Sale
Salam means a contract in which advance payment is made for
goods to be delivered later on. The seller undertakes to supply
some specific goods to the buyer at a future date in exchange of
an advance price fully paid at the time of contract
Utilization in Halal Industry:
Salam is ideal product for Agricultural Financing, it can also
utilize for other business purposes as well.
Currently Practiced:
CWCD, Albarakah MPCS,
Islamic Microfinance Products
Istisna - Manufacturing contract
A pre-delivery financing instrument used to finance projects where
commodity is transacted before it comes into existence. It is an order to
manufacture and payment of price, unlike Salam, it’s flexible, where
price may be paid in advance, or in installments or on delivery of good.
Utilization:
Istisna May Utilize for small manufacturing Business, for production use,
Micro entrepreneur Development sectors etc.
Currently Practiced:
Meezan bank, Ghana Islamic Microfinance bank,
DIB, MayBank, Standard Chartered etc.
Islamic Microfinance Products
Musharaka - Partnership
Musharakah means a relationship established under a contract by the
mutual consent of the parties for sharing of profits and losses in the joint
business.
Utilization :
Musharka can be used for Microenterprise & SME’S setup’s, Small
productive projects, Working capital financing
Currently Practiced:
CIMB, Amanah Islamic bank, AlBarakah, DIB,
etc
Islamic Microfinance Products
Mudaraba - Partnership
A trustee-type finance contract under which one party (MFI) provides the
capital for a project and the other party ( Client) provides the
labor/Skill. Profit sharing is agreed between the two parties on mutual
consent but the losses should be borne by the provider of funds .
Utilization:
Small Business, Microenterprise setup’s, Small productive projects,
Working capital financing
Currently Practiced :
Bank of Khyber, Islamic Bank Bangladesh, CWCD,
Islamic Relief, Awqaf South Africa etc.
Products in Islamic Microfinance
Ijara – Islamic Lease
Ijarah Means Operating lease. It is an arrangement under which the Islamic
Micro Finance Institution lease equipments, light Vehicles, Instruments,
buildings or other facilities to a client, against an agreed rental.
Utilization :
Auto Financing, Equipment Financing, House
Lease, small production unit lease etc.
Currently Practiced:
Al-Amal Microfinance Bank, NRDP, CWCD etc.
Amanah Islamic Bank – Philippines.
Products in Islamic Microfinance
Diminishing Musharkah
Diminishing Musharkah is a form of Musharakah where the MFI and his
client participate in a joint commercial enterprise or property. This
attains the form of undivided ownership of both the financier and the
client. Over certain period the equity of financier is purchased by the
client
Utilization:
This is an ideal product for Housing Finance sector, but also utilize for
other ventures as well.
Currently Practiced:
CWCD, Ariana Financial Services, Helping hands etc
Products in Islamic Microfinance
Other Products
Qard-e-Hassana Model, Waqf Model, Zakhat Model, Cooperative Model, BMTs,
Micro Takaful ( Islamic Micro insurance )
Utilization :
Qard-e-Hassana : for Emergency Loan, benevolence loan, Student, Maternity etc
Zakat : Health, Shelter, Safety net programs, Education and where Zakat
applicable. MicroTakaful: Micro Risk Management, Crop & Livestock Insurance
etc.
Currently Practiced
AIMS- Malaysia, Akhuwat, Awqaf South Africa ,
Al-Amal Microfinance bank, BMTs - Indonesia etc
Market for Islamic Microfinance Products
Salam, Istisna
and other
products
Non-Poor
MicroTakaful
Transitory Non-Poor
Transitory Vulnerable
Transitory Poor
Chronic Poor
Extremely Poor
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Qarz-e-Hasan,
Murabahah, Ijarah,
Mudarabah
Zakat, Sadqa, Ushar
Factors to be considered while doing
Islamic Finance
Moral
Ethical
Social
Micro Takaful
Free from
Interest
Financing
Ensure Shariah
Compliance
Trainings &
Quality HR
Poverty Alleviation and more….
Element
A Misconception
removed
Free from
Gharar
Islamic
Micro
Finance
Shariah
Compliants Funds
Shariah Vetted
Products
Shariah
Complaints
Investments
Islamic Microfinance is a
system not the Religion,
it can be utilized &
operated by both
Muslims and
Non-Muslim
Communities for Poverty
Alleviation, Social &
Economic Development.
Demand for Islamic Micro Finance
Research Studies by International Institutions.
Survey by
CGAP 08
PlaNet Finance 07
USAID 02
IFC/FINCA 06
Frankfurt School
of Fin & Mgmt 06
Surveyed Countries
Jordan, Algeria, and
Syria
Respondents
Preference (%)
20% - 40%
West Bank and Gaza
Jordan
Jordan
35% - 60 %
24.9%
32%
Algeria
20.7%
IFC sponsored
Study
IFC 2007
Bank Indonesia
2000
Yemen
Syria
40%
43%-46%
Indonesia (East Java)
49%
AlHuda-CIBE
Pakistan (4 Districts)
99%
Islamic Microfinance Institution Worldwide
•Germany:2
•- Muslim
Society
•UK: 5
•United States: 3
•Helping Hands
•ISNA
•Lariba
•- HSBC Amanah
•- Muslim Aid
•- Islamic Relief
•Faith Matters
•- The Halal Mutual
Investment Company
•UAE: 4
•Switzerland
:2
•- Dubai Islamic Bank
•- Abu Dhabi Islamic Bank
•- HSBC Amanah
•Kuwait: 2
•- Kuwait Finance
House
•Bahrain: 2
Family Bank
• Afghanistan 9:
•Iran: 8
•- FINCA , WOCCU
•- CHF
• Ariana
•Turkey: 2
•Pakistan: 11
•India: 3
•Bangladesh:9
•- Faisal Finance
•Malaysia: 11
Institution
•- Alwatany Bank of Egypt
•- Ikhlas Finance •2 - Pure Islamic Banks
•- Egyptian Saudi Finance
(Bank Islam, Bank
House
•Sudan: 13
Muamalat)
•Rest - banks
•Yemen: 05
•Egypt: 3
•South Africa
IMFI’s Worldwide: 300 *
in Countries: 32
Market Size: 1 billion USD
Awqaf SA
•Al- Amal
•Al Kuraimi
•Indonesia: 133
•BPRS , BMT.
Muaritius
AlBaraka MPCS
Some Islamic Microfinance Institutions - Worldwide
Countries
Islamic Microfinance Institutions
Indonesia
BPRS, Islamic Financial Cooperatives referred as bait Maal wat Tamwil
(BMT)
Bangladesh
Islamic Bank Bangladesh, Social and Investment Bank, Al-Fallah and
Rescue
Afghanistan
FINCA (Qard Hasan), WOCCU, Ariana Financial Services , IFIC, etc.
Pakistan
Akhuwat , Farz Foundation, ASASAH, Muslim Aid, Islamic Relief, CWCD,
,HHRD , NRSP, NRDP, Naymet etc.
Malaysia
Amina Iftikhar, Tabung Haji etc
India
AICMEU, BASIX, Sahulat, Bait-un-Nasr , Al-Khair Co-operative, Marwar
Shariah Credit
Egypt
Mit Ghamar Project
Syria
Sanadiq project Jabal al Hoss
Lebanon
Mu’assat Bayat Al-Mal
Yeman
Hodeidah Microfinance Program, Al-Amal Microfinance Bank etc.
South Africa
Awqaf South Africa
U.K
Faith Matters, Islamic Relief, Muslim Aid, HSBC Amanah etc.
Tanzania
Hajj Trust, Four SACCOS
Compatibility IMF Products with MF Models
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Grameen Model:
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Village Bank Model:
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Credit Union Model: Muslim Credit Union (Tobago), The Amwal
Amna Iftikhar – Malaysia, Islami Bank
Bangladesh Limited etc.
Sanadiq program -Jabal al-Hoss, Syria,
FINCA - Afghanistan etc.
Credit Union etc.
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Cooperative Model:
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Self-Help Group:
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For Profit Banks/MFIs Ghana Islamic Microfinance Banks –
AlBaraka MPCS – Mauritius, Al- Khair
Coop. – India, Muslim Community Coop.–
Australia, Karakorum Cooperative Bank –
Pakistan.
Aameen Society - India
Ghana, HSBC Amanah – U.K, Bank Islami
- Pakistan
Need Assessment of Islamic
Microfinance in Tanzania
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FSDT Report
Financial Inclusion
Poverty alleviation and Social Development
Entrepreneur development
Huge Demand of Islamic Financial Services
Islamic Asset-based Financing – can prevent diversion
of funds for consumption.
Islamic Microfinance have proven track record that its
deals with long lasting & Complete solutions for
Sustainability.
Challenges faced by Islamic Microfinance in
Tanzania
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Non - Availability of Donor/Shariah Compliant Sources
of Funds
Lack of Linkages of Tanzania with Int’l Donor’s even from
Muslim world
Need to develop a uniform regulatory and legal
framework for the Islamic Microfinance Institutions.
Accounting & I.T systems., Rating Agencies.
Lack of Quality HR in Islamic Microfinance Sector.
Policies & Regulations on Zakat & Awqaf.
Opportunities
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International Islamic Microfinance Network (IMFN) for an
effective interface and Coordination among IMFI’s
IDB - Microfinance Development Program (MDP )
Donor Linkages can develop Zanzibar Islamic
Microfinance Industry
Islamic Banking and Finance is emerging in East Africa
which will strengthened the Islamic Microfinance
effectively.
Sustainable operation through Shariah Compliant mode
Utilization of Zakat, Awqaf and CSR concept.