International Conference onIslamic Microfinance<br />Organized By :<br />CENTER OF ISLAMIC BANKING & ECNOMICS<br />Held At...
International Conference on Islamic Microfinance  organised by Al Huda in collaboration with Akhawat<br />13 June, 2011<br...
 PRESENTATION<br />                               MICROFINANCE MODELS  <br />                                OUTREACH  ANA...
FINANCIAL INTERMEDIATION<br /><ul><li> Working Capital
 Fixed Asset  Loans
  Savings</li></ul>SOCIAL  INTERMEDIATION<br /><ul><li>  Community Mobilization
Group Formation
 Social Collateral
 Insurance</li></ul>EDEVELOPMENTSERVICES<br /><ul><li>Entrepreneurship  Training
Production/Skills Training
Marketing </li></ul>SOCIALSERVICES<br /><ul><li>Education
Health & Nutrition
Literacy Training</li></ul>“ Credit Plus”  includes development and social services in comparison with “Credit Only” appro...
MF Models of Outreach based upon the<br /> integration level of supply chain<br />Three- ProngedApproach<br />Promotion of...
   The effectiveness of Microfinance  approaches varies across different levels of poverty<br />HHRD   <br />    Mudarba<b...
OUTREACH ANALYSIS OF SELECTED INTERNATIONAL MODEL OF MFIs<br />
                       Outreach Analysis of  Selected   MFIs in South Asia<br />(Source: www.micromarket.org, <br />
Microfinance is fast emerging viable tool to reduce Poverty <br />(Source: www.micromarket.org. <br />
Outreach features of IMFIs<br />IMFI retains the basic operational format of MFIs <br /><ul><li>Banking with the poor at d...
Weekly/Monthly Repayments
A Social/Development Program (to fulfill the social role of Islamic finance)</li></ul>IMFIs have some distinguishing featu...
Profit-sharing modes (Musharakah and mudarabah)</li></ul>      Amount transferred to the poorest<br /><ul><li> Islamic mod...
Women disseminate knowledge to children</li></ul>Dealing with Arrears/Default<br />Less aggressive and use Islamic teachin...
          SOME MODES OF ISLAMIC FINANCE<br />Islamic microfinance represents the convergence of two rapidly growing indust...
13<br />Findings of IFC Commissioned  Market Studies<br /><ul><li> 60 percent low income survey respondents prefer to Isla...
 25-30 percent reveal religious reason for not seeking conventional loans (Jordon)
 40 percent of the poor demand Islamic financial services regardless of price (Yemen)
 43 percent of respondents consider religious reasons to be largest obstacle in obtaining microcredit (Syria)
49 percent of rural population consider Sharia Compliant financial institutions (Indonesia)</li></li></ul><li>14<br />Outr...
 Bangladesh  has largest outreach  (100,000 +) with two active institutions . However it represent  about one percent  of ...
 Syria and  Indonesia has 3 % and 2 %  of respective microfinance market
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Out reach of islamic microfinance by dr shabir hussain

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Out reach of islamic microfinance by dr shabir hussain

  1. 1. International Conference onIslamic Microfinance<br />Organized By :<br />CENTER OF ISLAMIC BANKING & ECNOMICS<br />Held At:<br />Faisal Auditorium Islamabad - Pakistan<br />
  2. 2. International Conference on Islamic Microfinance organised by Al Huda in collaboration with Akhawat<br />13 June, 2011<br />Islamic Microfinance : <br />An Outreach Analysis in <br /> Global Perspective <br />Presentation By :<br />Dr Shabbir Hussain<br />MD, HHRD <br />
  3. 3. PRESENTATION<br /> MICROFINANCE MODELS <br /> OUTREACH ANALYSIS<br />
  4. 4. FINANCIAL INTERMEDIATION<br /><ul><li> Working Capital
  5. 5. Fixed Asset Loans
  6. 6. Savings</li></ul>SOCIAL INTERMEDIATION<br /><ul><li> Community Mobilization
  7. 7. Group Formation
  8. 8. Social Collateral
  9. 9. Insurance</li></ul>EDEVELOPMENTSERVICES<br /><ul><li>Entrepreneurship Training
  10. 10. Production/Skills Training
  11. 11. Marketing </li></ul>SOCIALSERVICES<br /><ul><li>Education
  12. 12. Health & Nutrition
  13. 13. Literacy Training</li></ul>“ Credit Plus” includes development and social services in comparison with “Credit Only” approach <br />Integrated<br />Approach<br />Minimalist<br />Approach<br />Credit Only<br />Credit + <br />(Financial & <br />Non Financial)<br />
  14. 14. MF Models of Outreach based upon the<br /> integration level of supply chain<br />Three- ProngedApproach<br />Promotion of MED, training & helping linkage with banks<br />NGOs as <br /> Facilitators<br />NGOs<br />V/WOs<br />Specialized Banks<br />Promotion of MED, training & providing Credit Support<br />NGOs<br />NGOs as Financial Intermediaries<br />V/WOs<br />Specialized Banks<br />Promotion of MED, training & providing Credit <br />V/WOs<br />Specialized Banks<br />Banks as MFIs<br />
  15. 15. The effectiveness of Microfinance approaches varies across different levels of poverty<br />HHRD <br /> Mudarba<br />HHRD <br /> Murabah<br />HHRD <br /> Qard Hasn<br />
  16. 16. OUTREACH ANALYSIS OF SELECTED INTERNATIONAL MODEL OF MFIs<br />
  17. 17. Outreach Analysis of Selected MFIs in South Asia<br />(Source: www.micromarket.org, <br />
  18. 18. Microfinance is fast emerging viable tool to reduce Poverty <br />(Source: www.micromarket.org. <br />
  19. 19. Outreach features of IMFIs<br />IMFI retains the basic operational format of MFIs <br /><ul><li>Banking with the poor at door steps
  20. 20. Weekly/Monthly Repayments
  21. 21. A Social/Development Program (to fulfill the social role of Islamic finance)</li></ul>IMFIs have some distinguishing features:<br />Sources of Funds<br /><ul><li>Other than external sources, can also use funds from zakah, awqaf, and other forms of charities</li></ul>Use of funds (Mode of Financing)<br /><ul><li>Sale based and hiring modes (murabahah, salam, ijarah)
  22. 22. Profit-sharing modes (Musharakah and mudarabah)</li></ul> Amount transferred to the poorest<br /><ul><li> Islamic modes are sale based, the price of the asset is paid (no deductions are allowed)</li></li></ul><li> continued---<br />Group Dynamics<br /><ul><li>Islamic values of brother/sister-hood improves cooperation among the group members</li></ul>Financing the poorest<br /><ul><li>Zakat and other charities can supplement MFI activities (non-diversion of funds)</li></ul>Social Development Program<br /><ul><li>behavioral, ethical, and social aspects in light of Islamic teachings</li></ul>Targeting the family through women<br /><ul><li>Spouse co-signs the contract dealing with women more efficient and convenient
  23. 23. Women disseminate knowledge to children</li></ul>Dealing with Arrears/Default<br />Less aggressive and use Islamic teachings to recover loans<br />
  24. 24. SOME MODES OF ISLAMIC FINANCE<br />Islamic microfinance represents the convergence of two rapidly growing industries: microfinance and Islamic finance.<br />
  25. 25. 13<br />Findings of IFC Commissioned Market Studies<br /><ul><li> 60 percent low income survey respondents prefer to Islamic Products over conventional products (West Bank & Ghaza)
  26. 26. 25-30 percent reveal religious reason for not seeking conventional loans (Jordon)
  27. 27. 40 percent of the poor demand Islamic financial services regardless of price (Yemen)
  28. 28. 43 percent of respondents consider religious reasons to be largest obstacle in obtaining microcredit (Syria)
  29. 29. 49 percent of rural population consider Sharia Compliant financial institutions (Indonesia)</li></li></ul><li>14<br />Outreach of IMFIs is very limited<br /><ul><li>380,000 loans through 126 institutions operating in 14 countries
  30. 30. Bangladesh has largest outreach (100,000 +) with two active institutions . However it represent about one percent of its microfinance market
  31. 31. Syria and Indonesia has 3 % and 2 % of respective microfinance market
  32. 32. 80 percent of global outreach is concentrated in three countries :Bangladesh, Indonesia and Afghanistan)</li></li></ul><li>15<br />Outreach of IMFIs in respect of women <br /><ul><li> 59 percent on average but up to 90 percent in Bangladesh are women borrowers of IMFIs
  33. 33. Overall percentage of female participation using Islamic Microfinance products is comparable to those using conventional microfinance products (66 %) globally (Mf Info Exchange 2007)
  34. 34. 70 percent of products offered are Murabah based
  35. 35. Average operational efficiency ratio in Islamic Rural Banks is 20 % higher than 15 % operational efficiency ratio for conventional banks</li></li></ul><li>16<br />Outreach of Islamic Microfinance by Institution Type<br />Source : CGAP 2007<br />
  36. 36. 17<br /> Outreach of Islamic Microfinance<br />Source : Focus Notes No 49, August 2008, CGAP<br />
  37. 37. Islamic Microfinance Programs across the Globe<br />
  38. 38.
  39. 39. OUTREACH ANALYSIS OF MICROFINANCE IN PAKISTAN<br />
  40. 40. Roughly 80% of the current borrowing is from the <br />non-formal sector in Pakistan<br />However, the cost of borrowing from the non-formal sector is 4% higher<br />Borrowing Pattern in Pakistan<br />
  41. 41. Approximately 60% of the non-institutional lending is through<br /> money lenders, Shopkeepers, and agriculture input dealers<br />
  42. 42. 1999 – 2011 MICROFINANCE IN PAKISTAN: HISTORICAL PERSPECTIVE<br />PPAF Phase I & II : US$ 300 Million<br />PPAF begins disbursing microfinance funds<br />PPAF Phase III <br />Microfinance Sector Development Programme (ADB)<br />US$ 150 Million<br />1.4 million<br />40 + MFPs<br />1999<br />2000<br />2001<br />2005<br />2009<br />2011<br />2006<br />5 Microfinance Banks<br />PIR: PMN starts collecting and publishing member MFIs’ performance indicator report<br />Khushhali Bank becomes operational<br />FMFBL,TMFBL,RMFBL, POMFBL,<br />NMFB.<br />BRAC-PAK<br />NRSP, ASA<br />Kashf Bank<br />Microfinance Ordinance<br />
  43. 43. Major Microfinance Providers in Pakistan<br />
  44. 44. SCALE OF OUTREACH<br />
  45. 45. Current Outreach of all MFIs in Pakistan exceeds 1.85 million Active Borrowers<br />Data Source: Microwatch, PMN, Sep 2009<br />Presentation By : Dr Shabbir Hussain,<br />
  46. 46. DtSource: Microwatch, PMN, Sep 2009<br />Presentation By : Dr Shabbir Hussain,<br />
  47. 47. Only 5 to 10 % of the poor population in need of<br />micro credit is currently covered<br />Current Outreach<br />1.83 million borrowers<br />Estimated Demand <br /> 27.7 million borrowers<br />Access<br />Access<br />Quality<br />Quality<br />Products<br />Products<br />Funding<br />Funding<br />Sustainability<br />Sustainability<br />
  48. 48. 29<br /> Conclusion<br />An estimated 72 percent of people living in Muslim-majority countries do not use formal financial services<br />Of the total US $ 500.5 billion global Islamic finance market, 36 percent is located in the Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and UAE), 35 percent in non-GCC Southwest Asia and North Africa, and 23 percent in Asia (primarily Malaysia, Brunei, and Pakistan) (The Banker 2007).<br />Islamic microfinance is concentrated in a few countries, with the top three countries (Indonesia, Bangladesh, and Afghanistan) accounting for 80 percent of global outreach. <br />Bangladesh is a country where conventional microfinance products have the largest outreach—exceeding 18 million borrowers—and Islamic Microfinance represents only 1 percent of its microfinance market.<br />
  49. 49. Presentation By : Dr Shabbir Hussain,<br />TJAZAK ALL<br />Thank You!<br />
  50. 50. 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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