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Islamic microfinance   challanges and oppurtunies
Islamic microfinance   challanges and oppurtunies
Islamic microfinance   challanges and oppurtunies
Islamic microfinance   challanges and oppurtunies
Islamic microfinance   challanges and oppurtunies
Islamic microfinance   challanges and oppurtunies
Islamic microfinance   challanges and oppurtunies
Islamic microfinance   challanges and oppurtunies
Islamic microfinance   challanges and oppurtunies
Islamic microfinance   challanges and oppurtunies
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Islamic microfinance challanges and oppurtunies

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  • 1. International Conference onIslamic Microfinance<br />By :<br />CENTER OF ISLAMIC BANKING & ECNOMICS<br />
  • 2. ISLAMIC MICROFINANCECHALEENGES AND OPPORTUNITIES<br />
  • 3. 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 />
  • 4. 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 />
  • 5. 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 />
  • 6. 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 />
  • 7. 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 />
  • 8. 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 />
  • 9. 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 />
  • 10. 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 : info@alhudacibe.com<br />Web: http://www.alhudacibe.com<br />

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