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Potential Microfinance clients are categorically rejecting non-Sharia compliant products. As a result Islamic Microfinance is emerging as a strong alternative paradigm.

There are obstacles to growth. But this year’s Islamic Microfinance conference (30th January – 1st February 2012, Istanbul) will demystify new policy and regulation, help you to understand where best to invest and ensure that you are up-to-date with which Islamic Microfinance business models work best in practice.

Scalable Business Models For Islamic Microfinance
30th January – 1st February 2012 | Istanbul | Turkey

www.islamicmicrofinance-summit.com

Bringing together MFIs, investors, policy makers and Sharia specialists from Pakistan, Iraq, Syria, Tanzania, Yemen and across the Middle East, this year’s conference will unlock the potential of Sharia compliant Microfinance.

What will you learn?

• Work with your peers to develop a strong, global and transparent framework that will allow you to invest profitably in Islamic Microfinance
• Familiarize yourself with the latest policy updates and regulations that will dictate the way in which you implement your Islamic Microfinance strategy
•  Identify the Islamic models available and which ones will work best in practice: Profiling Muhabara, Salem, Istisna and Ijara in practice
• Find out what kind of investment you can provide and which institutions are ready to receive commercial funding
• Investigate the enhanced Islamic Microfinance products available: From education and marriage loans to housing and liberation loans, understand the diversity on offer

Who will you meet?

Over 18 speakers from across the Muslim world will come together to share their top tips on how they have developed Islamic Microfinance in their organizations:

• Wasim Ahmed Abdulwahab, Senior Country Specialist, Islamic Development Bank
• Mohammed Al-Lai, Chief Executive Officer, Al-Amal Microfinance Bank
  Atallah Fitzgibbon, Policy & Strategy Manager, Islamic Relief Worldwide
• Muhammad Junaid, Team Leader, Sustainable Microfinance, Tijara – USAID
• Ali Kayyali, Head of Rural Development, Ministry of Agriculture, Syria
• Zubair Mughal, Chief Executive Officer, Al-Huda Centre of Islamic Banking and Economics
• Dr Amjad Saqib, Executive Director, Akhuwat
• Farhat Abbas Shah, Founder and Chief Executive Officer, Farz Foundation
• Farida Tariq, Founder and Chief Executive Officer, Centre for Women Co-Operative Development
• Mohamed Yasin, Chief Executive Officer, Tanzania Eco-Volunteerism

Visit following web for further details.

www.islamicmicrofinance-summit.com

http://www.legal500.com/assets/images/stories/microfinance.pdf

http://www.legal500.com/assets/images/stories/microfinance.pdf

Dr . Zeesh a n Ahmed , Ph .D. , CFA LUMS,  has made a presentation on Potential of Waqf for Poverty Alleviation and Socioeconomic Development
at the international Conference on Islamic Business and Finance – Feb 8-9, 2011.

The presentation slides could be downloaded from following link.

http://www.icib-riu.org/downloads/Dr%20Zeeshan%20Ahmed-%20Potential%20of%20Waqf%20for%20Poverty%20Alleviation%20and%20Socio-economic%20Development.pdf

Brother  Saleem Ullah Director Islamic Banking Department, State Bank of Pakistan,  has made a presentation on Islamic Microfinance
at the international Conference on Islamic Business and Finance – Feb 8-9, 2011.

The presentation slides could be downloaded from following link.

http://www.icib-riu.org/downloads/Saleemullah-%20Islamic%20Microfinance.pdf

Brother  Salman Ahmed Shaikh of Halal Tamweel – A Subsidiary of BMC PakistanHead, Islamic Financial Advisory Services,BMC Pakistan has made a presentation on Microcredit using Equity Financing: an Alternate
Approach to Micro Financing in an Interest Free Economy at the international Conference on Islamic Business and Finance – Feb 8-9, 2011.

The presentation slides could be downloaded from following link.

http://www.icib-riu.org/downloads/Salman%20Ahmed%20Shaikh-Microcredit%20using%20Equity%20Financing.pdf

http://www.ibtra.com/pdf/journal/v5_n2_article4.pdf

Our model begins with providing carefully self-selected client groups with murabaha contracts before providing musharaka finance. The murabaha financing agreement includes fixed payments each period of repayment and therefore is easier to administer and can be used to screen out potentially problematic clients who are most likely to default. Those clients who are in groups with successful repayment of the murabaha finance will have a choice between murabaha and musharaka financing in the future. Finally, we describe our implementation strategy and preparations for a pilot study in Colombo and Bibile, Sri Lanka.

visit here to download the article.

Muslim Aid Sri Lanka’s Micro Finance programme is run with the vision of alleviating both, poverty and dependency syndrome existing within the conflict affected poor who have no access to the formal financial sector. Providing the selected beneficiaries with micro loans, the Micro Finance Team then focuses on inculcating the spirit of competition and excellence within those individuals or groups by providing market linkages, Business Development Services and close Field officer – client relationship that motivate beneficiaries to repay their loans and then expand their enterprises by being granted a second and bigger loan and thus keep growing.

Islamic Microfinance provision in Sri Lanka is very low. Islamic financial  Institutions still  couldn’t reach the village level people in Sri Lanka. Muslim Aid is the pioneer in initiating a comprehensive Shari’ah microfinance package in Sri Lanka. And also Muslim Aid is creating and facilitating the Islamic Microfinance market and conducive environment by providing innovative solutions and creating knowledge among the stakeholders, specially creating awareness among the village community in general on Islamic Microfinance concept, theory and practice.

Clients belong to all communities and are selected from the segment of the entrepreneurial poor who were affected by, poverty and the recently concluded civil war. The large majority of them are sole proprietors where their own kith and kin help out in the running of the business. These enterprises are mainly located in village or market centers. Muslim Aid focuses on sectors such as Agriculture, Livestock, Fisheries, Trade/ Business and Skilled Labors.

MASL offers following Islamic Microfinance services to the poor to develop their livelihood interventions in innovative and sustainable manner.
Financial Services
• Murabaha
• Salam
• Isthisna
• Musharaka
At the end of March 2010, MASL has active clients of more than 700 in both Trincomalee District (Muthur Branch) and Batticaloa District (Batticaloa Branch).

http://www.muslimaidsl.org/microfinance.php

AlHuda CIBE is offering a one month specialised Training programme on

CERTIFIED ISLAMIC MICROFINANCE MANAGER

from 7th March 2011.

TOPICS TO BE DISCUSSED

Fundamentals of Islamic Finance

• What is Islamic Finance – Basic concept
• Introduction & Types of Riba
• Islamic Financial Products Structures & Mechanisms for Islamic Micro Finance Institutions

Islamic Micro Finance

• Incidence of Poverty and Low Economic opportunity
• Micofinance a tool for poverty alleviation
• Islamic Microfinance Shariah compliant way of poverty alleviation
• Challenges and Opportunities for Islamic Microfinance Institutions
• SBP efforts for Development of Islamic Microfinance
• Potential of Islamic Microfinance for social Development
• Need of Islamic Microfinance Network

Trade Based Mode of Financing in Islamic Microfinance

Murabaha

• Islamic Law of Contracts
• Understanding the key concepts of Murabaha
• Product compositon of Murabaha
• Practical execution in IMF System

Bai Salam & Istisna

• Basic rules & types of Bai
• Bai Salam & Parallel Salam
• Bai Istisna
• Practical implementations in IMF Institutions

Partnership based Mode of Finance

Mudaraba & Musharaka

• What is Mudaraba & Musharaka?
• Internal Product Structures
• Profit & Loss Distribution
• How can serve up IMF

Rental Based Products practiced in Islamic Microfinance

Ijarah

• Ijarah as the alternative of Conventional Lease
• Product structure of Ijarah financing
• Rental Mechanism & Practicing in IMF institutions

Diminishing Musharaka

• Concept and Definition
• Determination of Rental Mechanism
• Unit Sale Mechanism
• DM as Micro Housing Finance

Zakat & Awqaf for Poverty Alleviation

Islamic Microfinance Bank Model

Micro & Banca Takaful

• Principle of Takaful business
• Practical aspect of Micro Takaful
• Banca Takaful as distribution channel for Micro Takaful

Sukuk

• What is Sukuk? Shariah Legitimacy of Sukuk
• Sukuk for  Microfinance Sector

Innovaiton and Development in Islamic MIcrofinance Sector

• Technological Intergration in Islamic Microfinance Sector
• Web based Islamic Microfinance – A new Approach
• International Trends of Islamic Microfinance – Case Study
• Funding Sources of Islamic Microfinance
• How Islamic Microfinance is beneficial for Donor Agencies
• Delinquency Management for Islamic Microfinance

Panel of Lecuturers

Mr Zubai Mughal

CEO – Al-Huda CIBE

Chief Editor True Banking

Mr Hamad Rasool

Director Research & Development – Al-Huda CIBE

Mr Aamir Malik

Head of Islamic Microfinance Department

Mr Mujahid Rasheed

Head of Islamic Housing Finance Department – Meezan Bank Limited

Course structure

Date: 07th March 2011 onwards

Duration: 1 month – First 3 days of the a week

Time: 6.00 p.m. to 9.00 p.m.

Fee: PKR 9,500/-

CONTACT:

Rooma Malik

Trainings Manager,

AlHuda, Centre of Islamic Banking and Economics

192 Ahmed Block, New Garden Town, Lahore – Pakistan

Ph: + 92 (0)42 – 35913096 – 8 , 38407850

Fax: + 92 (0)42 – 35913056

Email: info@alhudacibe.com

web: www.alhudacibe.com

Today, microfinance and Islamic finance are professionalized industries with diverse products, growing client bases, and widening geographical coverage. Both have developed innovative solutions to cater to populations that are outside the fold of conventional financial access. They share objectives of providing inclusive banking through financing productive, asset-backed activity, and lay special emphasis on economic empowerment through entrepreneurship. These complimentary objectives create a ready framework for the confluence of both sectors—into a special niche industry referred to as ‘Islamic microfinance,’ which is just taking off.

High unemployment, poverty, and low levels of financial access in Muslim countries continue to create high demand for microfinance. While conventional microfinance has successfully reached large numbers of poor in Muslim countries (most notably, Bangladesh and Indonesia), there is evidence to suggest that there are many potential clients of microfinance that categorically reject products that do not comply with Islamic principles.

IFC commissioned market studies reveal that in Algeria and Jordan, approximately 20% of the poor cite religious reasons for not seeking conventional microfinance, while in Yemen and Syria, this percentage rises to 40%. In a 2008 CGAP survey, local practitioners and key informants suggested similar demand trends in Indonesia, Afghanistan, Pakistan, and the Palestinian territories, and also in Muslim majority areas of India, Sri Lanka, Brunei, Cambodia, and the Philippines.

Broadly speaking, the market for microfinance in the Muslim world can be divided into three segments: 1) individuals who will accept conventional finance products; 2) individuals who state a clear preference for Shariah-compliant finance but—due to unavailability or price differentials—accept conventional finance, and finally, 3) individuals who only use Shariah-compliant products.  The ratios of these groups fluctuate by region. For example, individuals who would insist on Islamic financing (category 3) constitute far more than one third of the market in Yemen, and less than a third of the market in Bangladesh.  Overall, it is estimated that roughly 2/3 of the microfinance market in the Muslim world either insists on, or prefers Islamic financing.

The 2008 CGAP survey revealed that global Islamic microfinance supply is very limited and concentrated in only a few countries (80% of the 380,000 clients of Islamic microfinance worldwide are in Bangladesh, Indonesia, and Afghanistan). Moreover, Islamic microfinance does not exceed more than .05% of total microfinance outreach. In the Arab world, MFIs that have been in the market for 7-10 years typically only reach between 2,000-7,000 active borrowers using Islamic microfinance. In direct contrast, MFIs of similar age operating in the same region reach tens and hundreds of thousands active borrowers using conventional microfinance.

Islamic microfinance offers an alternative paradigm for millions of poor people who are currently not served by conventional microfinance. In order to provide access to sustainable services on scale, it is imperative for the industry to adopt innovative and sound practices and prove that these models work. To this end, the industry requires deeper market research and a comprehensive initiative to build the capacity of players in the micro, meso and macro levels, in order to help in developing and implementing appropriate business models.

Responding to this need, CGAP, Deutsche Bank, Islamic Development Bank, and Grameen-Jameel launched the Islamic Microfinance Challenge 2010. The objective of this challenge was to canvass the industry for ideas for sustainable, scalable, and authentic Islamic microfinance business models to meet the financial needs of the Muslim poor.  The competition was made open to the general public. Institutions as well as independent consultants were invited to apply, with the stipulation that applicants have the capacity to roll out a pilot project using the prize funds.

The competition generated a lot of interest and received over 130 applications from 43 countries, with the highest number from Indonesia, Pakistan, and India, respectively. Applicants included Islamic and conventional microfinance institutions (MFIs), multi-sectoral NGOs, apex institutions, consultants, and academics. A review board with expertise in microfinance practice, microfinance investment and Islamic finance, judged submissions against the criteria of profitability and scalability and Shariah-compliance.

Five applications, namely, Al Amal Microfinance Bank (Yemen), Bina Insan Sejahtera Mandiri (Indonesia), Centre for Women’s Cooperative Development (Pakistan) Tameer Bank (Pakistan), and Tanzania ecoVolunteerism (Tanzania) were shortlisted by the judges. These applicants were asked to apply to the second phase with more detailed plans on implementation.

On February 16, 2011, the sponsors named Al-Amal Microfinance Bank from Yemen as the finalist and recipient of US$ 104,000 in prize funds. Al Amal Microfinance Bank is the first microfinance bank in the Arab world to offer only Shariah-compliant products. Operating for just over two years, the bank has 15,000 active borrowers and 20,000 savers, and has captured over 25% of the Yemeni microfinance market. Al Amal’s proposal for the competition was to pilot an Islamic leasing product. The bank plans to self-fund its leasing product by relying on an Islamic investment funds product. It expects to reach operational and financial sustainability by 2012. The bank’s menu of Islamic microfinance products include group and individual financing, project, corporate, and investment financing, savings, investment funds, and insurance.

Going forward, sponsors of the Islamic Microfinance Challenge 2010 seek to engage with the broader microfinance and Islamic finance communities to find new ways to foster development and support this sector going forward. Given that the group of 2.7 billion unbanked includes a vast number of Muslims, expanding the availability of affordable and sustainable Shariah-compliant services can prove to be transformative for microfinance.

–Nimrah Karim and Mohammed Khaled

For three weeks starting today, this blog will host a special series on Islamic microfinance, featuring finalists of the Challenge and other global experts. Watch this space for a new post every week and we look forward to your comments and discussion.

source: http://microfinance.cgap.org/2011/02/23/taking-islamic-microfinance-to-scale/