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Islamic microfinance by br. raffick nabee mohammed


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International Conference on Islamic Banking & Finance in Mauritius

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Islamic microfinance by br. raffick nabee mohammed

  1. 1. International Conference onIslamic Microfinance in Mauritius<br />Organized By :<br />CENTER OF ISLAMIC BANKING & ECNOMICS<br />
  2. 2. ISLAMIC FINANCIAL CO-OPERATIVES TO MEET THE FINANCIAL NEEDS OF THE COMMUNITY<br />Case Study Of:<br /> Al Barakah Multi-purpose Co-operative society Limited Mauritius<br />Mr. MamodeRaffickNabeeMohomed<br />Founder/Secretary<br />Al Barakah MCSL<br />International Conference on Islamic Banking & Finance<br />05-06 April 2011, Mauritius<br />
  3. 3. About The Speaker<br />Mr. MamodeRaffick NABEE MOHOMED<br />Founder and Secretary of Al Barakah Multi-purpose Cooperative Society Limited, Mauritius.<br />Mr. NabeeMohomed holds a Bachelor of Commerce, a Post Graduate Certificate in Education and a Post Graduate Diploma in Islamic Banking & Insurance (IIBI-London). He is a student at IIIBF for the PG Dip. in Islamic Finance. He is an Educator, also lectures on Islamic Banking & Finance and is an Associate Fellow of the Institute of Islamic Banking and Insurance which is based in London. <br />Mr. NabeeMohomed has also done a thesis on “An empirical study of the Muslim Family in a rural set up”.<br />He has acted as panelist and speaker at International Conferences and seminars on Islamic Finance and presented the case study of Al Barakah MCSL in Trinidad &Tobago, India, Pakistan, Malaysia and South Africa. He has also attended several short courses and training.<br />
  4. 4. SHORT COURSES & TRAINING <br />Muslim Credit Union (Trinidad & Tobago)<br />- Training in Islamic Finance at M.C.U (3rd Feb. to 21 Feb. 1999) <br />National Cooperative Training Centre, Mauritius<br /> - Management & Leadership for Leaders of Cooperative Credit Unions, (24 & 25 Oct.2001)<br />Cooperative College of Malaysia<br /> - Project Preparation and Appraisal (23-27 February 2004)<br /> - Corporate Governance (23-26 May 2005)<br />Association of Asian Confederation of Credit Unions (ACCU)<br /> - Modern Management of Cooperative Credit Unions (02-03 July 2008)<br />International Islamic University, Islamabad (Pakistan)<br /> - Attended the 22nd International Programme for Human Resource Development from 14/11/2005 to 14/12/05 at Dawah Academy, Islamabad.<br />Cooperative Muslimine Malaysia Berhad (Malaysia) <br />-Internship in Islamic Finance & Islamic Accounting for Islamic Co-operative Societies (15 December 2008-02 January 2009)<br />
  5. 5. AGENDA<br />Islamic Finance & Islamic Financial Institutions<br />Concept of Co-operatives<br />Islamic Financial Co-operatives<br />Financing intruments of IFC<br />Reserves & Funds<br />Case Study of Al Barakah Multi-purpose Co-op Society Ltd.-Mauritius<br />Geographical background & Muslims in Mauritius<br />Islamic Banking & Finance & Muslims in Mauritius <br />Integrating Islamic Finance in Cooperatives<br />Organisation of Al Barakah<br />Legal Framework<br />Products & Services<br />Other activities<br />Challenges<br />Conclusion<br />Opportunities with Al Barakah for Islamic Banking & Finance in Mauritius<br />
  6. 6. Islamic Finance & Islamic Financial Institutions<br />Islam is a practical way of life with its own system<br />Inheritance in the economic sphere & scholars at work<br />Initiatives-No working model & since 1960’s IBF started–MitGhamr 1963<br />Emergence of IFI & growth<br /> Satisfaction/Criticism<br />Types of Islamic Financial Institutions (IFI)<br />Dominance & neglected areas & Evolution<br />
  7. 7. Evolution of Islamic Banking &Finance<br />According to Professor Rodney Wilson “Formal Islamic banking first emerged in the early 1960’s through credit unions of Muslim landowners in Egypt and Pakistan who simply pooled their resources and could then in turn draw out funds for agricultural improvements on a non-interest basis.” (The evolution of Islamic banking and emerging trends in Islamic Finance)<br />Interest Free Financial institutions (IFFI) of India are the forerunners in the history of global Islamic financial movement. Tracing the history of growth of interest free financial institutions in India, it is reported that such organized credit society had shown its presence as early as 1890. According to the directory of Islamic banks in India, such efforts in the organized sector in the style of the Patni Cooperative Credit Society Ltd. was established in 1942…<br /> A recent study conducted by Bagsiraj (2003) shows that there are institutions that have grown to a size of 14 Islamic Cooperative Credit Society (ICCS) in India. It may be noted that these institutions primarily fulfill the casual social needs of the people at a very small scale. <br /> (Dr Rahmatullah-IFFI of India in crisis/Bagsiraj-IFII,published by KAU, Jeddah <br /> in 2003)<br />“The history of Islamic Financial system in Thailand started with the establishment of a cooperative society, Pattani Islamic Saving Cooperative that operates based on shariah in 1987….. These Islamic cooperative societies have successfully established themselves as viable financial institutions in managing and mobilizing Muslims in this region.” ( Islamic banking in Thailand: prospects and challenges (SudinHaron & KumajdiYamirudeng)<br />
  8. 8. The Cooperative Ideology Movement and Credit Union<br />Concept of cooperative:<br />- From the beginning of human society, cooperation has always been a vital factor in human development. <br /> - As a social creature, it is the natural urge of man to cooperate with each other. <br /> - Cooperation conveys the idea of helping each other and making joint efforts to achieve a common goal.<br />The Cooperative movement emerged in the middle of the 19th century by the Rochdale Pioneers. On the 24th October 1844, in Rochdale, Lancashire England, a group of people faced with economic exploitation and deprivation set up a cooperative store, based on the principles of self-help and mutual help. They defined a set of principles which became the basis for the cooperative ideology which has spread all over the world be it a capitalist, socialist or Muslim society.<br />
  9. 9. What is a Co-operative ? <br />A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. (<br />7 principles of cooperatives:<br />1. Voluntary and open membership (VoM) <br />2. Democratic member control (DmC)<br />3. Member economic control (MeC)<br />4. Autonomy and independence (A&I)<br />5. Education, training and information (EtI)<br />6. Co-operation among co-operatives (CaC)<br />7. Concern for community (CfC)<br />
  10. 10. Class of co-operative societies<br />Sectors of the economy-PMT<br />Class of Co-op societies/Multi-purpose Co-operatives<br /> - Consumer Co-op, Producers, Marketing, Housing, Catering, Financial Co-operatives/Credit unions etc.<br />What is a Credit union?<br /> - A credit union is a financial cooperative that may accept savings, deposits, provide credit and other financial services to its members. <br /> - Credit Unions are financial cooperatives which are in effect community banks.<br /> - Membership: people from all walks of life, <br /> - Common bond<br /> - Owned & controlled by shareholders/members<br /> - Capital: mobilising from shares ,savings & deposits from members<br /> - Financing/not for profit maximisation<br /> - Surplus-back to shareholders<br />
  11. 11. Islamic Financial Co-operatives<br />Generally Conventional co-operatives/credit unions are interest-based <br />Credit unions called by different names:<br /> - In Africa-Savings And Credit Cooperative Societies (SACCOS) which emphasise on savings before credit. <br /> - In Afghanistan-(IIFC) Islamic Investment and Finance Cooperatives which comply with sharia.<br />IFC are institutions based on the principles of Islamic Finance. <br />Efforts over the past 30 years to set up IFC<br />Community-based and providing Islamic financial services to the community<br />Islamic Financial Co-operatives around the globe<br /> (T&T, Canada, Malaysia, Thailand, Indonesia, USA, Australia, India, Singapore, Afghanistan…)<br />
  12. 12. Islamic Financial Cooperatives<br />Why IFC?<br />1. Conceptual framework <br /> “Cooperate with all in what is good and pious and do not cooperate in what is sinful and wicked….” (Q-5:2)<br />2. Legal framework is less regulated than the corporate sector (Cooperative Societies Act ,CU Act) – Shariah-compliant<br />3. Values - Islamic Finance–based on Islamic ethics: justice, sharing, cooperation.<br /> - Cooperatives based on values: honesty, equity, equality, solidarity, self-help, etc.<br />4. Easy formation & more elastic<br />5. Small capital requirement<br />6. Community –based & more people-oriented( IEViews..)<br />7. Spread ownership of business and reduce concentration of wealth<br />8. Different purposes - open to any type of economic activity<br />9. Incentives & Benefits –Tax<br />10. Democratic<br />
  13. 13. Financing instruments of IFC<br />Murabahah<br />Ijarah<br />Mudarabah<br />Musharakah<br /> Diminishing Musharaka<br />Istisna<br />Qard-ul-hasanah/IFL<br />
  14. 14. Reserves & Funds<br />Statutory Reserve – according to Coop Act<br />Dividend equalization Fund<br />Social Takaful Fund<br />Profit Equalisation Reserve<br />Zakat Fund<br />
  15. 15. Case study<br />Al Barakah<br />Multi-purpose Co-operative Society Limited<br />Mauritius<br />
  16. 16. Geographical Background & Muslims in Mauritius<br />Mauritius-gateway to Africa, South Asia & Asia<br />Multi-religious society: <br /> Population-1.3 M<br /> Hindu :51%, Christians:28%,<br /> Muslims :18%, Chinese :3%<br />Muslims presence in all walks of life: Islamic schools, professionals, orphanage, business, etc.<br />Muslims have contributed enormously in the dvp. of the economy<br />Business operated as family business<br />But as a community, little has been done to establish the financial system of Islam.<br />
  17. 17. Islamic Banking & Finance & Muslims in Mauritius<br /><ul><li>Keen desire by Muslims to re-establish their identity.
  18. 18. Establishing an Islamic bank in Mauritius in 1990’s was a manifestation of this desire.
  19. 19. To become part of the Islamic banking phenomena.
  20. 20. Preliminary work carried out.
  21. 21. Formation of a Credit Union in the Cooperative sector (AL BARAKAH)!</li></li></ul><li>Islamic Finance through Cooperatives <br />Why Al Barakah?<br />To provide an alternative to the interest-based financial institutions for the community. (Community-based)<br />To provide halal investment opportunities and returns.<br />To contribute in a halal way to the overall development of the economy. <br />Formation of Al Barakah<br /> (Registered on 10th June 1998)<br />
  22. 22. LEGAL FRAMEWORK<br />Operates:<br /> Within the Co-operative Societies Act 2005 <br /> Within the framework of its rules and regulations<br /> In accordance with Islamic Financial Laws.<br />
  23. 23. Organisation Structure<br />Advisors– Dr. MonzerKahf (USA)<br /> Dr. AshyrafDusuki(Malaysia)<br /> Br. Imtiaz Ali (T&T)<br />
  24. 24. VISION<br /> To be a leading Cooperative Society in the field of Islamic Finance for a fair and just society.<br />MISSION<br /> To operate as a financial institution based on Islamic cooperative principles and providing a wide range of services on an interest-free basis<br />GOALS<br /><ul><li>To present a practical model of Islamic Finance through the co-operative sector.
  25. 25. To lay the foundation for an alternative financial system to the Mauritian population at large.</li></li></ul><li>Objectives<br />To create a source of credit for its members for provident and productive purposes.<br />To provide savings facilities to members<br />To create the framework to enable members to manage their financial resources for their mutual benefit.<br />To promote the welfare and economic interest of its members. <br />
  26. 26. PRODUCTS & SERVICES BASED ON ISLAMIC FINANCIAL TECHNIQUES<br /><ul><li>Tailor-made schemes based on Murabahah:</li></ul>1. Household General Financing<br /> 2. Computer Financing<br /> 3. Traders Financing<br /> 4. Home Financing<br /> 5. Air Ticket Financing<br /> 6. Motor Vehicle/Cycle Financing<br /> 7. Land & Property Financing<br /><ul><li>Istisnaa Financing (Manufacture-Sale)
  27. 27. Partnership /JV with shareholders (M&M)
  28. 28. Interest-Free Loan (Qard-al-Hasan)
  29. 29. Hajj Savings Account</li></li></ul><li>Reserves & Funds<br />Statutory Reserve <br />Profit Equalisation Reserve <br />Dividend Equalisation Fund<br />Social Takaful Fund <br />OTHER ACTIVITIES<br />Creating awareness about Islamic Finance.<br />Organizing lectures, seminars, conferences and workshop.<br />Organizing mini trade fair, socio-cultural programme.<br />
  30. 30. CHALLENGES<br />Individual/organisational/government level<br />Legal Framework<br />Public acceptance<br />Economic potential<br />Human Resource<br />Mass Education<br />Competition<br />
  31. 31. Islamic Banking & Financial Services?<br />Mauritius wants to connect to this sophisticated and growing global phenomenon that spans banking, non-banking financial services, micro-finance, insurance and capital markets.<br />We will also set the regulatory framework for leasing companies to market products which are shari’ah compliant.(60)<br />And to level the playing field appropriate amendments will be made to the legislation to make normal banking and Islamic banking tax neutral.(62)<br />Budget speech 2008/2009 - Minister of Finance<br />
  32. 32. Opportunities with Al Barakahfor Islamic Finance Projects in Mauritius<br /><ul><li>Legal & Regulatory Framework</li></ul> * The Banking Act 2004-Amendments 2007<br /> * The FSDA 2001-(Non-banking activities) <br /> * The Cooperative Societies Act 2005 <br /><ul><li>Membership for corporate bodies
  33. 33. Projects/Joint ventures etc.</li></li></ul><li>CONCLUSION<br />12 years of operation<br />An eye-opener<br />Islamic finance at different levels<br />Well-being of all citizens<br />
  34. 34. Jazak Allah<br />Thank You<br />MamodeRaffickNabeeMohomed<br />Founder/Secretary Al Barakah M.C.S.L<br />E-mail:<br /><br />Tel: (230) 6275766, <br />
  35. 35. Head Office: 192- Ahmad Block, New Garden Town , Lahore, Pakistan Ph: +92-42-35913096-8, 35858990, 38407850 Fax: +92 -42-35913056E-mail :<br />Web:<br />