International Conference onIslamic Microfinance<br />By :<br />CENTER OF ISLAMIC BANKING & ECNOMICS<br />
ISLAMIC MICROFINANCECHALEENGES AND OPPORTUNITIES<br />
ISLAMIC FINANCE & MICRO FINANCE<br />Islamic economic goals of;<br />equality, fairness, social solidarity through risk sharing, property rights, and the sanctity of contracts; entrepreneurship, partnership, income generation through productive activity for poverty alleviation are consistent with elements of Micro Finance.<br />A successful marriage of both in Islamic Microfinance should reinforce each other.<br />
DISCONTENTS OF IF & MF IN PRACTICE<br />Islamic financial services industry has shown little interest in MF and poverty alleviation aiming for Shariah compliance in form not in spirit.<br />Conventional MF industry has shown inadequate interest in religious and cultural sensitivities; also largely excludes the poorest of the poor.<br />Islamic MF for enhancing financial inclusion<br />
ISLAMIC MICRO FINANCE EXPERIMENTS<br />MENA: Sanadiq at Jabal al-Hoss, SYRIA<br />Mu’assasatBayt Al-Mal in LEBANON<br />HodeidahProgram in YEMEN<br />IBBL, SIBL in BANGLADESH<br />Akhuwatin PAKISTAN<br />Manarain INDIA<br />FINCA in AFGHANISTAN<br />Amana Ikhtiarin MALAYSIA<br />BPRS, BMTs in INDONESIA<br />AzaouadFinance in NORTHERN MALI<br />
Issues of Islamic Microfinance<br />Sustainability<br />Most of the programs are not sustainable in Pakistan<br />Overall Operational and Financial Sustainability records at 89% and 74%, respectively. <br />High interest rates eats up sustainability of clients<br />Transparency<br />Flat interest rates, un-explained fees, hidden charges <br />High Cost Debt Economy than Real Economy<br />Separates finance from real economy<br />Absence of cooperation when client loses<br />Exclusion <br />Self-exclusion due to prohibition of interest<br />Poorest of the poor and Women in gender segregated societies<br />
Role of Islamic Microfinance<br />Developing social capital among clients and MFI, instead of clients only <br />Meeting Demand For Islamic Microfinance<br />Promoting Entrepreneurship<br />Debt not allowed in Islam as usual practice<br />Asset creation and entrepreneurship is promoted <br />Transparency and Sanctity of Contracts<br />Islamic values prevent violation of contract and require disclosure of full knowledge relating to financial transaction<br />
Issues for Islamic Microfinance<br />Regarding MFIs<br />Limited number of IMFIs (i.e. 4 – 6) <br />Limited resource base of IMFI<br />Ineligibility of collecting savings<br />Product concentration in Murabaha<br />Capacity building of MFI<br />Sharia advisory<br />Regarding Islamic banks<br />Perception about microfinance as high risk area<br />Informal sector environment<br />Absence in rural areas<br />Absence of credit guarantee scheme<br />
Recommendations<br />Corporate Social Responsibility: Fard al Kafaya<br />Business case:Profits and high rate of recovery<br />Limitations: Informal sector/regulatory implications, absence in rural areas<br />Possible Course of Action:<br />Phase – I: <br />Linkage with MFIs [Mudaraba or Musharaka]<br />Urban Operation through Islamic MF Division or Cell<br />Phase – II <br />Linkage continues<br />Extension of branches in rural areas<br />
Thank You<br />CENTER OF ISLAMIC BANKING & ECNOMICS<br />Head Office: 192- Ahmad Block, New Garden Town , Lahore, Pakistan Ph: +92-42-35913096-8, 35858990, 38407850 Fax: +92 -42-35913056E-mail : firstname.lastname@example.org<br />Web: http://www.alhudacibe.com<br />
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