Out reach of islamic microfinance by dr shabir hussain
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Out reach of islamic microfinance by dr shabir hussain Presentation Transcript

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