Islamic Microfinance.ppt by FBMicrofinance

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That is because they say: "Trading is only like Riba,'' whereas Allah has permitted trading and forbidden Riba

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									                          RIBA (Interest)


         ‫َ ِك ِ َ َه ق ل ِّنم ْ َ ع ِ ْل ِب أ َل ّله ْ َ وحّرم ِب‬
     ]ْ‫[ذل َ بأّن ُمْ َاُىاْ إ َ َا البيْ ُ مث ُ الّر َىاْ وََح َ الَ ُ البيْعَ َ َ َ َ الّر َىا‬



  (That is because they say: "Trading is only like Riba,''
whereas Allah has permitted trading and forbidden Riba)




                                                                  (Surah Al-Baqarah :275)
            Islamic Mode of Financing V/S
                 Conventional Mode
Islamic Financial Institutions          Conventional Financial Institutions
Deal with goods as well as documents   Deal with documents only


Supply/Receipt of Goods against money Money/Documents are traded against
                                      Money/Document
Islamic Finance for the Poor
              Micro
           Entrepreneur
            Islamic MF



      Poorest of the Poor
       Qard – e – Hasna



  Destitute - Zakat
  COMMON MODES OF ISLAMIC
        FINANCING
PARTNERSHIP                  RENTAL
              TRADE BASED
   BASED                     BASED

               Murabaha
  Musharka                     Ijara
               Musawamah

                 Sala’m
                            Diminishing
  Mudarba
                             Musharka
                 Istisna
   CENTRE FOR WOMEN
COOPERATIVE DEVELOPMENT
     VISION
  POVERTY ALLEVIATION
       THROUGH
ENTERPRISE DEVELOPMENT
      MISSION
 To support the Potential Poor in
Pakistan break out of Poverty cycle
by providing them with Necessary
Borrower Islamic Finance, Business
    Development Services and
      Advocating their Rights.
  BOARD OF DIRECTORS
  Mr. Ejaz Ahsan               CHAIRMAN
  Mr. Mushtaq Pirzada          Vice Chairman
  Mrs. Samina Islam            General Secretary
  Mr. Abbas Khan               Finance Secretary
  Mrs. Naseera Bokhari         Joint Secretary
  Dr. Shireen Zaffarullah      Member
  Dr. Waseem Bano              Member
  Mr. Jawaid Tariq             Member
  Mr. Raza Toor                Member
  Mrs. Khalil Ramdey           Member
  Dr. Tayyaba Nasreen          Member
  Eng. Arif Toor               Member
  Mr. Razi-u-Din               Member
  Mr. Abdul Rasheed            Member (C)
  Mr. M. Asghar                Member(C)
  Mrs. Afshan Jabeen           Member (C)
  Mrs. Shafqat Saleem          Member (C)

EXECUTIVE COMMITTEE          AUDIT COMMITTEE
Dr. Shireen Zaffarullah     Dr. Waseem Bano
Dr. Waseem Bano             Mr. Raza Toor, ACA
Mrs. Samina Islam           Mr. Abbas Khan, FCA
Mr. Abbas Khan
Mrs. Farida Tariq             *Mrs. Farida Tariq,
                                CHIEF EXECUTIVE OFFICER
    SUSTAINABLE
     BORROWER

   SUSTAINABLE
  ORGANISATION

A BALANCED APPROACH TOWARDS
   ISLAMIC MICRO FINANCE
 THREE INGREDIENTS TO
ENTERPRISE DEVELOPMENT

                                  ISLAMIC
                               MICROFINANCE
                BUSINESS
              DEVELOPMENT
                SERVICES




                              RIGHT
                            ADVOCACY




SUSTAINABLE BORROWER → SUSTAINABLE ORGANISATION
       Organization Background
• Started up in 1992 with Health & Education
  Projects
• Working in Microfinance with an Islamic
  Approach Since 1999
• Consultation with Scholars in Masjid e Ibrahim
  Lahore in 2002
• Product/Asset based approach since day ONE
• Consultation with Mufti Iftikhar Baig in 2006
• Development of Islamic Model, 2008
                                                                          2009 Till Date
            Vision 2010                                                      Rs. 398,561,329
                                                                            20 Branch Offices
                                                   Opening of Islamic           5 Districts
          Rs.1,000,000,000                             Branches
                                                                             Rs. 19,941,000
         30 Branch Offices                                                  (Islamic 8 Branches)
               Punjab
                                                 Development of                         2007 & 2008
                                                 Islamic Manuals
                                                                                        •Rs.212,220,000
                                                                                        • 14 Branch Offices
                                                                                        • 3 Districts


                               Review of Procedures
                               by Shariah Consultant               2005 & 2006
                                                                   •Rs.122,844,000
                                                                   • 8 Branch Offices
                                                                   • 1 District

                         Enterprise
                    Development Facility          2003 & 2004
                                                  •Rs.12,583,000
                                                  • 2 Branch Offices    Districts Being Served:
                                                  • 1 District
                                                                                   Lahore
1999 & 2000                  2001 & 2002                                        Sheikhupura
• Rs. 658,000                • Rs. 1,753,500                                    Gujranwala
                             • 1 Branch Office
• 1 Branch office                                                                Faisalabad
                             • 1 District`
• 1 District
                                                                                Nankana Sb
                       Financial Highlights
                            2009            2008           2007
Total Assets                342,036,181    241,635,322     187,131,312
Gross Loan Portfolio        145,908,619    116,087,060     106,087,220
Disbursements               105,916,028    113,951,000      98,269,000
Total No. of Clients            16,750         13,749             10,025
Served
Operational Self                88.75%          87.6%             89.78%
Sufficiency
Total Expense/                     12.90           22.86           22.20
Assets
Trade Based Mode
• Murabaha
• Sala’m
• Istisna

Rental Based Mode
• Ijara (Not Currently in Practise)
• Diminishing Musharaka
         MURABAHA


Murabaha has been derived from the concept
of “Bai - Mu’ajjal” which is “Instant Sale”

      Instant Sale on Deferred Payment
Murabaha Vs Interest Bearing Loans
        Murabaha                         Loans
Murabaha Transaction is       Asset backing is not
always asset backed.          prerequisite for Interest
                              bearing loans.
It is fixed price contract.   Interest is charged on daily
Price can not be increased in basis from the Customer.
case of default.
It is purely sale and purchase It is lending of money and
transaction.                   charging of interest.

Relationship between Bank     Relationship between Bank
and Customer is Seller and    and Customer is Creditor
Buyer.                        and Debtor.
                 MURABAHA

                                                  Sells Product at Purchase
                                                  Price Plus Profit Margin
  Buys Product




                   Pays Purchase Price




VENDOR                                                          CUSTOMER
                                           Pays on Deferred
                                         (Installments) Basis
                 Sala’m
Sala’m was permitted to facilitate the poor
farmers and Traders who needed money to
cultivate their crops or buy items in
overseas/foreign lands in order to sell them
afterwards.
                      Sal`m
             Advance Payment against Deferred sale




                PAYS PURCHASE PRICE OF GOODS
                          BEFORE
                  MANUFACTURING/FARMING
                                                     MANUFACTURER
                                                       /FARMER
                        DELIVER GOODS AFTER
                      MANUFACTURING/FARMING
SELL GOODS
 AT PROFIT




                          THIRD PARTY / OPEN
                               MARKET
                   Istisna
• It is an order to the producer or manufacturer
  to produce/manufacture a specific commodity
  for the purchaser.

• Istisna is also a particular kind of sale which is
  executed before the Asset come in to existence.
             ISTISNA

             PAYS PARTIAL PURCHASE PRICE OF
               GOODS alongside Production
                     (Progressively)
                                                MANUFACTURER

               DELIVER GOODS AFTER COMPLETION
SELL GOODS
 AT PROFIT




                       THIRD PARTY / OPEN
                            MARKET
        Diminishing Musharaka
• Financier and his client participate either in the joint
  ownership of a property or an equipment, or in a joint
  commercial enterprise. The share of the financier is further
  divided into a number of units and it is understood that the
  client will purchase the units of the share of the financier
  one by one periodically, thus increasing his own share till
  all the units of the financier are purchased by him so as to
  make him the sole owner of the property, or the
  commercial enterprise, as the case may be.
• The client pays rent for the portion of asset used by the
  client, owned by the financer incase of joint ownership of
  property or equipment
               Diminishing Musharaka

Client
Purchases
CWCD
Ownership &
pays Rental
on
Remaining                                              VENDOR
CWCD                Joint Purchase of Asset
Ownership
                                Asset Purchased is
                             Insured through Takaful

         CUSTOMER
    School Construction/Rennovation
   Up to Rs. 300,000 (Murabaha/Istisna)

• Upper Cap – Rs. 300,000 per case
• Rate is negotiated with the client
• Done under Islamic Mode of Microfinance
  – Murabaha
  – Istisna(Pipeline)
• Project has been completed within 2 months,
  and demand is coming from other enterprises
  for similar facility
Financial Highlights For Islamic
         Microfinance
                                    Apr 2009 – Oct 2009
Total No. of Clients till Date                            391
Average Facility Size                                51,000
Total Amount of Facility Procured                19,941,000
Total Number of Branches                                   8
       Challenges Faced in Islamic
          Microfinance Sector
• Sources of FUND
  – The funds available are not in Islamic Mode and
    hence the Organization can never become
    completely Islamic
• Increase in Cost of Transaction
• Understandability of Islamic Finance
• Availability of trained Human Resource
     CWCD ISLAMIC MICROFINANCE
           TRAINING WING
• Training Opportunities on Procedures of
  Islamic Microfinance, by the experienced
  Trainers of CWCD


Low cost training for the actual working in Shariah
Complaint Microfinance

Interactive Sessions with Shariah Advisor
               Future Plans
• Expansion of Islamic Microfinance within
  Punjab

• Pre testing and Implementation of Musharaka
  & Mudaraba

• Research & Development of new Islamic
  Microfinance Products
Thank You for Your Attention

								
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