1 / 33

ISLAMIC MICROFINANCE COOPERATIVES TO MEET THE FINANCIAL NEEDS OF THE COMMUNITY

AL BARAKAH. m ulti-purpose Co-operative Society Limited MAURITIUS. GLOBAL ISLAMIC MICROFINANCE FORUM December 08, 2012 – Dubai, UAE. ISLAMIC MICROFINANCE COOPERATIVES TO MEET THE FINANCIAL NEEDS OF THE COMMUNITY.

loman
Download Presentation

ISLAMIC MICROFINANCE COOPERATIVES TO MEET THE FINANCIAL NEEDS OF THE COMMUNITY

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. AL BARAKAH multi-purpose Co-operative Society Limited MAURITIUS GLOBAL ISLAMIC MICROFINANCE FORUM December 08, 2012 – Dubai, UAE ISLAMIC MICROFINANCE COOPERATIVESTO MEET THE FINANCIAL NEEDS OF THE COMMUNITY

  2. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Agenda • Microfinance & Models of Microfinance • Evolution of Islamic Banking, Finance & Islamic Microfinance • Global Models of Islamic Microfinance • The Cooperative Movement • Islamic Microfinance Co-operative Model • Case Study of AL BARAKAH Multi-purpose Co-operative Society Limited • Opportunities with AL BARAKAH MCSL for Projects in Mauritius • Conclusion

  3. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community MicroFinance ? • Financial services to the poor and low-income borrowers : to start micro-business or expand them • Provide savings facilities, Micro-Insurance, remittances and stabilize consumption • MF developed out of experiments in Latin America and South Asia, Bangladesh and has now spread globally • Global show • Microfinance means “programme that extend small loans to very poor people for self employment projects that generate income in allowing them to take care of themselves and their families”(Microcredit Summit, 1997). • WB has recognized microfinance programme as an approach to address income inequalities and poverty. • WB declared 2005 as the year of microfinance with the aim to expand their poverty eradication campaign • Promoters of MFI – FINCA , Accion, CGAP,GB

  4. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Models of Micro Finance • Grameen Bank Model – (GBM- B. Desh) • Has popularized collateral-free micro finance • Replicated in many countries in a wide variety of settings • Targeting of the poor/mostly women groups • Village Bank Model – VBM widely replicated mainly in Latin America and Africa.Implementing agency establishes a VB with members. • Self-Help Groups Model (SHGs) – (India), Formed with members who are relatively homogeneous in terms of income. Pools together its members’ savings and uses it for lending • Credit Union Model (CUM) – (Germany), Financial cooperatives are owned and controlled by its members.

  5. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Why Microfinance? • CB have not considered poor people to be a viable market, bankable and MF is an alternative for them • Procedures and processes of disbursements are normally fast and easy • Terms/ Cdns/collateral – short term, simple & flexible • Trade cycle/additional capital • Repayments - D,W/M or longer basis • Charity will not be effective in eradicating poverty • MF is one of the most popular instruments employed for poverty reduction • Assist poor people to become economically independent • The microfinance movement has helped to reduce poverty,increase the income and improve the standard of living of millions of people (bothMuslim & Non-Muslims)

  6. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Islamic Microfinance • Islamic Microfinance is to provide financial services to the poor and low income in a Shari'ah compliant way Why Islamic Microfinance? • Conceptual - Belief & conviction – CMF is based on riba/interest ... IMF is to provide the poor/low income with an Islamic alternative to riba’ • Estimated 72 % of people living in Muslim-majority countries do not use formal financial services (Honohon 2007). -- incompatible with Islamic financial principles. • It is has an integrated approach: charity-based & profit-based • Main objectives of IMF schemes is to alleviate poverty and to assist the poor to become economically independent in a Shari'ah-compliant manner • Since IB have not addressed the needs of financing the poor ,low income, micro entrepreneurs, IMF is missing in IBF • As IB have been away from microfinance, MFIs based on Islamic principles are lagging behind. Hence the need to promote IMF.

  7. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community • Over years, CMFI have been offering financial services to the poor at high rates of interest ( High Trans. Costs & monitoring) • IMFIs will assist the poor and low income to business activities. The initiatives to come from them. They should know that if they fail to do so, Allah will not help them to improve their living standard. • “Allah does never change the condition of a people until they change in themselves” (Rad 13: 11) • Setting up as many as possible IMFIs would be a conduit to the realization of the Maqasid Al-Shari’ah (Goals of Islamic Law). WL • Equitable distribution of income and wealth. • “Wealth does not circulate only among the rich” ( 59: 7) • Distribution of resources/Landholdings .. make full use of all the resources under his/her disposal • Democratisation of the financial system( IFC ) • Consider the poor also as vicegerents of Allah who can take care of themselves, if they are provided with appropriate financial access and equitable opportunities for social mobility.

  8. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Evolution of Islamic Banking & Finance • Professor Rodney Wilson “Formal Islamic banking first emerged in the early 1960’s through credit unions of Muslim landowners in Egypt and Pakistan .…. on a non-interest basis.” (The evolution of Islamic banking and emerging trends in Islamic Finance) • 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 ……, it is reported that such organized credit society had shown its presence as early as 1890. such efforts in the organized sector in the style of the Patni Cooperative Credit Society Ltd. was established in 1942… 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. (DrRahmatullah-IFFI of India in crisis/Bagsiraj-IFII, published by KAU, Jeddah -2003

  9. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Evolution of Islamic Finance/Micro Finance • “The history of Islamic Financial system in Thailand started with the establishment of a cooperative society, Pattani Islamic Saving Cooperative that operates based on Shari'ah 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 (Sudin Haron & Kumajdi Yamirudeng) • Inheritance in the economic sphere- F.C.S eco system-riba • Initiatives /Scholars at work -No working model & since 1960’s IBF started–Mit Ghamr 1963( IMFI/Coop) • Emergence of IFIs since 1960 & growth…. • Types of IFI: F-B-T-L-FH • Satisfaction/Criticism/Dominance by ICB( HNW) & neglected areas like Islamic microfinance & cooperatives

  10. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Global Models of Islamic Microfinance • Islamic microfinance is still in its infancy and business models are just emerging • Village BanksModel: Jabal Al Hoss in Syria, Hodeidah Microfinance Program in Yemen, FINCA implementing this model in Afghanistan • Qard Al-Hasan Model: Mu’assasat Bayt Al-Mal in Lebanon, Ukhuwat-Pakistan. • Grameen Bank Model: Bangladesh, a Shari’ah-compliant replication has been attempted by Islami Bank Bangladesh Limited. • RoSCA Model: Rotating Savings and Credit Association, known in Egypt as the gam’iya. (Mahmoud El Gamal & ors-2011). • Credit Unions: The fifth modelthat has been making its way since the beginning and receiving attention is the variation of Cooperatives/Credit Unions that are member-based Islamic Microfinance Cooperatives.

  11. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community The Cooperative Movement and Credit Union • Concept of cooperative: - From the beginning of human society, cooperation has always been a vital factor in human development. - As a social creature, it is the natural urge of man to cooperate with each other. - Coop conveys the idea of helping each other and making joint efforts to achieve a common goal. • The Coop Mvt. 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……… • They defined a set of principles (7) which became the basis for the cooperative ideology which has spread all over the world be it a capitalist, socialist or Muslim society.

  12. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Islamic Microfinance Cooperatives • A credit union is a financial cooperative that may accept savings, deposits, provide credit and other financial services to its members. • Credit Unions are in effect community banks. Credit unions called by different names: • In Africa-Savings And Credit Cooperative Societies (SACCOS) which emphasize on savings before credit. • In Afghanistan-(IIFC) Islamic Investment and Finance Cooperatives which comply with Shariah. • In Indonesia – BMTs • IMFC are institutions based on the principles of Islamic Finance. • Efforts over the past 30 years to set up Islamic Micro Finance Co-operatives around the globe T&T, Canada, Cameroun, Malaysia, Thailand, Indonesia, USA, Australia, India, S.Lanka, Singapore, Afghanistan…

  13. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Islamic Microfinance Cooperative model Why IFC? • Conceptual Framework “Cooperate with all in what is good and pious and do not cooperate in what is sinful and wicked….” (Q-5:2) MDN • Legal Framework is less regulated than the corporate sector (Cooperative Societies Act ,CU Act) – Shari'ah-compliant • Values- IF based on Islamic ethics: justice, sharing, cooperation - Coop values: honesty, equity, equality , solidarity, self-help, etc. • Easy formation & more elastic • Small capital requirement • Community–based & more people-oriented, poor/rich (IEViews..), services to the community • Spread ownership of business and reduce concentration of wealth • Different/Multi-purposes - open to any type of economic sector - P.S.T • Incentives & Benefits – Tax • Democratic

  14. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Al BarakahMulti-purpose Co-operative Society LimitedAn Islamic Microfinance Cooperative in Mauritius Case study

  15. Mauritius

  16. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Geographical Background & Muslims in Mauritius • Mauritius-gateway to Africa, South Asia & Asia • Multi-religious society: Population-1.3 M Hindu :51%, Christians:28%, Muslims :18%, Chinese :3% • Muslims presence in all walks of life: Islamic schools, professionals, orphanage, business, etc. • Muslims have contributed enormously in the dvp. of the economy • But as a community, little has been done to establish the financial system of Islam.

  17. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Islamic Banking & Financial Services in Mauritius ? • Mauritius wants to connect to this sophisticated and growing global phenomenon that spans banking, non-banking financial services, micro-finance, insurance and capital markets. • We will also set the regulatory framework for leasing companies to market products which are Shari'ah compliant.(60) • And to level the playing field appropriate amendments will be made to the legislation to make normal banking and Islamic banking tax neutral.(62) Budget speech 2008/2009 - Minister of Finance

  18. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Islamic Finance in Mauritius • In 1990’s there was a keen desire by Muslims to establish an Islamic bank in Mauritius. • To become part of the Islamic Finance phenomena. • Preliminary work carried out. • Formation of an Islamic Financial Cooperative/Credit Union in the Cooperative sector -AL BARAKAH • Legal Framework Operates: • Within the Co-operative Societies Act 2005 (Registered on 10th June 1998) • Within the framework of its rules and regulations • In accordance with Islamic Financial principles

  19. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Islamic Micro Finance through Cooperatives Why Al Barakah? • To provide an alternative to the interest-based financial institutions for the community. (Community-based) • To provide halal investment opportunities and returns. • To contribute in a halal way to the overall development of the economy. • Mission – based (Not for profits) & Market-based (For profits) Our approach to poverty alleviation is a composite of a mission-based and market-based interventions • All members of AB do not belong to the extremely poor or the destitute category and are in a position to create wealth for themselves, for the Islamic Microfinance Institution (IMFI) • For-profit financing provides financial sustainability to AB

  20. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Organisation Structure • Shari'ah Advisors: Dr. MonzerKahf (USA) Dr. AshyrafDusuki (Malaysia) Br. QaziAbdusSamad (Pakistan) Br. Imtiaz Ali (T&T)

  21. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community VISION To be a leading Cooperative Society in the field of Islamic Finance for a fair and just society. To operate as a financial institution based on Islamic cooperative principles and providing a wide range of services on an interest-free basis MISSION GOALS • To present a practical model of Islamic Micro Finance through the co-operative sector. • To lay the foundation for an alternative financial system to the Mauritian population at large.

  22. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Objectives • To create a source of credit for its members for provident and productive purposes. • To provide savings facilities to members • To create the framework to enable members to manage their financial resources for their mutual benefit. • To promote the welfare and economic interest of its members • To promotes the concept of family empowerment

  23. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Products & Services Based On Islamic Financial Techniques • Tailor-made schemes based on Murabahah: 1. Household General Financing 2. Computer Financing 3. Traders Financing 4. Home Financing 5. Air Ticket Financing 6. Motor Vehicle/Cycle Financing 7. Real Estate Financing • Istisna Financing • Mudharabah & Musharakah with shareholders • Interest-Free Loan (Qard-al-Hasanah) - E & M • Hajj Savings Account • Takaful Ta’awuni Fund ( Cooperative Solidarity Fund)

  24. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Reserves & Funds • Statutory Reserve (Min. 10 % Coop Act) • Profit Equalisation Reserve • Dividend Equalisation Fund • Takaful Ta’awuniFund • Creating awareness about Islamic Finance. • Organizing lectures, training, seminars, conferences, workshop, • trade fair Other Activities

  25. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Performance 1. CAPITAL USD 1 ≈ MRU Rs. 30

  26. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Performance 2. MEMBERSHIP

  27. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Performance 3. PROFITABILITY

  28. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Challenges • Individual/organisational/government level • Legal Framework • Public acceptance • Economic potential • Human Resource • Mass Education-Islamic EP • Competition

  29. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Opportunities with AL BARAKAH for Projects in Mauritius • Mauritius International Benchmarks

  30. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Opportunities with AL BARAKAH for Projects in Mauritius USD 1 ≈ MRU Rs. 30

  31. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Opportunities with AL BARAKAH for Projects in Mauritius • Legal & Regulatory Framework: • The Banking Act 2004 - Amendments 2007 • The FSDA 2001 - (Non-banking activities) • The Cooperative Societies Act 2005

  32. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Conclusion • 14 years of operation • An eye-opener • Well-being of all citizens • Make use of all the resources and make it a priority to set up Islamic Microfinance Institutions of mass-outreach for community development. • Concurrently, we also have to educate the poor and the community on the concepts, goals and principles of Islamic Microfinance and to live a moderate and balanced material and spiritual lifestyle to attain falah. • Thank Allah for choosing us…..

  33. Islamic Microfinance Cooperatives To Meet The Financial Needs Of The Community Jazak Allah Thank You Questions? Mr. MamodeRaffickNabeeMohomed Founder & Secretary AL BARAKAH M.C.S.L E-mail: albarakahcoop@yahoo.com rafficknm@yahoo.com www.albarakahcoop.org Tel: (230) 6275766, 7781738

More Related