ISLAMIC MICRO
FINANCING
Presented by : MUHAMMAD MEHRAN M.COM (Finance)
Supervisor : SIR SOHAIL AHMAD
I.B.M.SUNIVERSITY OF AGRICULTURE
FAISALABAD
CONTENTS
Introduction to Islamic Microfinance Principles of Islamic Microfinance Riba ( Interest ) Modes of Islamic Microfinance Difference between Islamic &
Conventional Micro Finance Islamic Micro financing in Pakistan &
Worldwide
MICRO FINANCE
Means of providing financial services to poor
Average transaction size is very small
Services offered by profit and non-profit organizations
Microcredit, micro savings, micro insurance, and other transactional products
ISLAM AND SHARIAH
Islam
Aqidah(Faith & Belief)
Shariah(Practices & Activities)
Akhlaq(Morality & Ethics)
IBADAT(Man to God Worship)
Muamalat(Man to Man Activities)
Political Activities Economic Activities Social Activities
Banking & Financial Activities
SOURCES OF FIQ’H IN ISLAM (ISLAMIC MICRO FINANCE)
Quran
Sunnah
Ijtehad / Qiyas
Ijama’e Ummah
Poverty Alleviation
Asset Based Financing
Micro Takaful
Free from InterestFinancing
Joint Responsibilities
IslamicMF
Islamic Microfinance deals in
Risk Sharing
PRINCIPLE OF SHARIAH BASED MICROFINANCE
Prohibition of Interest
Risk sharing
Social Development Mission
Prohibition of speculative behaviour
Purity of contracts
Asset Based Financing
Shariah-approved activities.
PROHIBITION OF RIBAH(INTEREST)
And ALLAH has permitted trading and forbidden Riba
(Al Baqara 275)
Islam encourages the earning of profits but forbids the charging of interest.
Fulfillment of Financial Needs
Own Capital Others’ Capital
Equity Financing
Debt Financing
Human Financial Needs
MODES OF ISLAMIC MICROFINANCE
PARTNERSHIP BASED
Musharka
Mudarba
TRADE BASED
Murabaha
Musawamah
Sal’m
Istisna
RENTAL BASED
Ijara
Diminishing
Musharka
BASIC DIFFERENCE IN ISLAMIC AND CONVENTIONAL MICROFINANCE
ClientIMFI
MFI Client
Goods and Services
MONEY
Islamic
CONVE..
money
Money+Interest
Functions and operations are based on fully man made principles
Functions and operations are based on Sharia’h principles
assured of pre-determined rate of interest
Promote risk-sharing between provider of capital (investor) and user of funds (entrepreneurs)
Aim at maximising profit without any restrictions
Aim at maximising profit but subject to Sharia'h restrictions
Creditor-Debtor relationship Partners, investor and traders, buyer or seller relationship
Based on money trading. Money is a medium of exchange and not a commodity
Encourage asset-based financing and based on commodity trading & Services
Conventional Micro Finance
Islamic Micro Finance
It is almost risk free banking and depositor has no risk of losing its money because interest is guaranteed.
No right of profit if there is no risk involved. The profit and loss sharing depositor may lose money in case of loss.
It can charge additional money in case of defaulters
Islamic banks have no provision to charge any extra money from the defaulters
Conventional Micro Finance
Islamic Micro Finance
ONUS SHIFTS!!!
Customer to Halal Restaurant Owner
Halal Restaurant Owner to Halal Meat Supplier.
Halal Meat Supplier to Halal Butcher.
Customer to Islamic Banker
Islamic Banker to Shariah Scholars
INDUSTRY PROGRESS IN PAKISTAN
Year 2001
•Meezan Bank•Al Baraka
•Meezan Bank•Al Baraka•MCB•Alfalah•SCB•Bank AlHabib•Habib AG Zur.•Metropolitan•Bank of Khyber•Soneri Bank
2002 2003
•Meezan Bank•Al Baraka•MCB
•Meezan Bank•Al Baraka•MCB•Alfalah
2 10
2012- 14
•Meezan Bank (161) •Al Baraka (30) •MCB (8) •Alfalah(40) •SCB (11) •Bank AlHabib(4 ) •HMB(4) •Bank of Khyber(16) •Soneri Bank ( 5) •HBL(1) •Bank Islami(102) •DIB (25) •EGIBL (40) • Dawood(21) •NBP(5) •RBS (3) •Askari(18) •UBL (5)
2007 - 09
1843
INTERNATIONAL OVERVIEW
The size of Islamic Financial Industry has reached
US$ 950 Bln. and its growing annually @ 15% per
anum.
70 countries have Islamic Banking Institutions
37 Muslim countries including Bahrain, UAE, Saudi
Arabia, Malaysia, Brunei and Pakistan
34 non-Muslim countries including USA, UK, Canada,
Switzerland, South Africa and Australia
.•United States: 4•Kiva•Helping Hands•Muslim Aid•Lariba
•Germany:2•- Muslim Society•Switzerland: 6•UK:
•- HSBC Amanah•- Muslim Aid •- Islamic Relief•- The Halal Mutual Investment Company
•Bahrain: 2
•Malaysia: 11•2 - Pure Islamic Banks (Bank Islam, Bank Muamalat)•Rest - conventional banks
•UAE: 8•- Dubai Islamic Bank•- Abu Dhabi Islamic Bank•- HSBC Amanah
• Afghanistan: 4•- FINCA , WOCCU•- CHF• Ariana
•Kuwait: 2•- Kuwait Finance House
•Iran: 8
•Egypt: 9•- Alwatany Bank of Egypt•- Egyptian Saudi Finance
•Indonesia: 4
•Sudan: 3
•Pakistan: 11•India: 3•Bangladesh:9
•Turkey: 7•- Faisal Finance Institution•- Ihlas Finance House
•Yemen: 1
Islamic Microfinance Institutions Worldwide