Designing Products for Islamic Microfinance by Mr. Ahmad Ali
From HodHood
Contents
Top 20 FREQUENT WORDS
islamic 65 financing 42 microfinance 36 business 24 modes 19 selling 18 assets 15 banks 15 micro 13 ijarah 11 murabaha 11 products 11 shariah 11 development 10 musharakah 9 qard 9 funds 8 option 8 alternative 7 finance 7 goods 7 linkages 7 mfis 7 model 7
DOCUMENT KEY POINTS
- if to make islamic banking as a alternative banking system it is necessary to develop products in a manner in which they are not only shariah complaint but also practical and marketable
- islamic product development importance if new product development research is an important area in which all islamic banks need to focus
- islamic banking products a c all transactions are generally asset based a c it is socially responsible banking because it operates under shariah restrictions a c does not permit financing of prohibited goods industries a c ethics and moral values play a major role in investment decisions
- not a choice but a must
- the sunnah of the holy prophet saw
- ijma consensus of the ummah
- riba if riba al nase ah if riba al fadhl
- gharar al jahalah bai qablal qubz etc
- product development deciding factors a c market survey a c shariah compliance mode nature of assets involved process documentation a c risk profile a depositors a c cash flow a assets side a c possibility of managing mismatchliquidity vs
- profitability a c risk mitigation measures a c legal matters a c regulatory aspects sbp secp in vogue seeking changes through effective case presentation
- target market if the potential target market of microfinance is the population below the poverty line who are willing to work themselves out of the poverty vicious cycle
- if transitory vulnerable are transitory non poor that have high probability of getting poor
- microfinance islamic finance need compatibility mechanics if for muslim majority country great need for islamic mf exist and large target segment is averse to the interest based microfinance products
- if risk sharing individual duties property rights and sanctity of contracts are part and parcel of islamic code of finance
- if different studies have revealed that in countries like syria jordan yemen algeria gaza responded showed preference for islamic financial products
- islamic microfinance products general characteristics of microfinance products if normally mf products are not backed by physical collateral they usually mitigate risk by use of social collateral pgs
- if financing is usually made to members of a group and peer pressure from group members is used to ensure repayment
- if islamic microfinance bank ismfb can purchase the required goods from market then sells the goods on credit to the client for a known profit
- application if purchase of raw material live stocks goods for cottage industry agricultural products pcos etc
- if the assets would be purchased by ismfb either directly or through the agency agreements with the customer if the asset would remain in the ownership and risk of ismfb through out the lease period application include agri machinery farming tools small shops carts transport other related equipments
- islamic modes for microfinance ijarah financing if ijarah is an islamic alternative for leasing if as per the concept of islamic micro leasing an ismfb can lease certain fixed assets to individual microfinance customers
- application if islamic bank could purchase agricultural products like rice wheat pulses etc from small farmers to be delivered after a specified period on a future date against full payment of the selling price at spot
- islamic modes for microfinance bai salam financing if a type of sale with spot payment and delivery at a deferred date if mainly used for agriculture outputs
- islamic modes for microfinance qard e hasana if islamic banks mfis can utilize charity funds for providing qard e hasana to mf clients if a special trust or fund could be established applications if small cash loan at zero percent could be given as qard to eligible microfinance customers
- if could also be used as an additional incentive loan for timely payment history
- if from zakah special waqf or fund could be established applications if the fund can be used to provide training providing health care education to the needy
- islamic modes for microfinance zakah funds if zakah from individual and government can be an ideal helpful source used for poverty alleviation
- if waqf invests funds in profitable avenues but only that are permissible in shariah like murabaha tijarah salam istisna ijarah musharakah mudarabah sukuk etc
- islamic modes for microfinance developing linkages with mfis ngos if rather than getting into the operational side of managing the microfinance assets islamic bank can develop special linkages with other active mfis ngos
- if islamic microfinance product menu could be shared if it could result in efficiencies for islamic bank s microfinance program in form of lower costs better outreach low default rate efficient recovery etc
- islamic modes for microfinance these linkages can be developed along the following lines wakalah if islamic bank ib can appoint a specialized mfb mfi as wakeel to manage the special musharkah pool smp for a fixed fee
- if profits of the pool after deducting the related costs including agency fee shall be distributed as per the musharkah or mudarbah agreement between mbl and depositors
- if profits earned by the mudarbah musharkah would be distributed between mbl and the mfb mfi according to the pre agreed ratio at the gross profit level
- islamic modes for microfinance mudarabah musharakah if ib will enter into a mudarabah or a musharakah agreement with a specialized mfb mfi
- advantage a c you create individuals into business persons a c provides economies of scale in procurement of animals fords medicine etc a c provide a better opportunity to sell the milk to large companies like nestle engro at a premium
- incubators example acquire acres of farm land and establish a milk center wherein individuals will be provided a financing to buy cows each ie cows per center
- incubators example a c acquire acre of land and establish a textile stitching unit with stitching machines where one man owns one machine
- a c many textile will be able to outsource to these individuals
- islamic financing alternatives used zakah qard e hasan ijarah for durable assets murabaha for consumable assets istisna where manufacturing of premise involved diminishing musharakah where the asset can not be solely financed by funds provided by bank
- capital up to pkr usd only micro business opportunities within this capital limit a c selling confectionary ite miss a c mending leather boots bags belts etc
- islamic alternative used zakah qard e hasan ijarah for durable assets murabaha for consumable assets istisna where manufacturing of premise involved diminishing musharakah where the asset can not be solely financed by funds provided by bank
- a financing coal stove for baking sweet potatoes a selling vegetables fruits animal feed etc with little more variety and capital
- islamic alternative used zakat qard e hasan ijarah for durable assets murabaha for consumable assets istisna where manufacturing of premise involved diminishing musharakah
- islamic alternative used zakat qard e hasan ijarah for durable assets murabaha for consumable assets istisna where manufacturing of premise involved diminishing musharakah
- micro business opportunities within this capital limit a financing taxi for fare small vans a financing a shop stall in a shopping centre to sell garments shoes perfumes etc
- islamic alternative used zakat qard e hasan ijarah for durable assets murabaha for consumable assets istisna where manufacturing of premise involved diminishing musharakah
- possible options for islamic banks following options could be adopted by islamic bank for microfinance options
- mf counters in existing branches
- option of islamic mf business option mf counters in existing branches if requires minimal changes in organizational structure
- lower monitoring if counter manger either report to branch manager or the division at head office as per bank s discretion
- option of islamic mf business option standalone mf branches mf exclusive branches with separate mf division at head office
- if more focus approach if separate policies and business model if no separate license fee required
- if independence focused approach if separate business model strategies if support from parent group if operating cost would be higher
- option of islamic mf business option establishment of independent subsidiaries islamic banks can also establish mfbs with independent board management
- if no approval required from central bank if banks may opt for whole sale financing to ngo mfis for their on lending needs and or if banks may develop linkages agency arrangements for extending loans through ngo mfis
- option of islamic mf business mechanics option developing linkages with ngo mfis if partnership with the ngos
Please note, This is an auto generated summary based on sentances position in the document and other factors
DOCUMENT WORD ANALYSIS
Main Category
- AlHuda Material\islamic micro
KeyWords
islam finance bankable contract client profit purchase financial asset microfin risk sale transact price murabahah busi sharia goodasset payment invest
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DOCUMENT REFERENCES
Number of Pages
48
Published Date
2016-09-17 00:47:15
