IRAQ MICROFINANCE POLICY FORUM in collaboration with USAID-Tijara and CGAP 11-12 April, 2012 Erbil International Hotel Erbil, Iraq Iraq MICROFINANCE POLICY IN ASIA EMERGING TRENDS OF ISLAMIC MICROFINANCE www.alhudacibe.com Muhammad Zubair Mughal
Contents Microfinance Policies in Asia Glimpse of Poverty in Asia Policy, Legal, and Regulatory Frameworks for Microfinance in Asian Countries ( 5 Selected countries ) Poverty Alleviation Strategies in Asia Emerging Trends of Islamic Microfinance Basic Principle of Shariah Based Microfinance. Need Assessment of Islamic Microfinance in Asia Opportunity, Challenges & Case Study.
Glimpse of Asia The world's largest and most populous continent with 52 countries. It covers 30%of the Earth's total Land area It has a population of >4.2 Billion people Asia has the second largest nominal GDP Poverty headcount ratio at $2 a day (PPP) (% of population) East Asia & Pacific 33.2%
Poverty in Asia Country Population Nominal GDP (Current USD) Population living below national Poverty line (%)* Afghanistan 34,385,068 $17,243,112,604 42% Bangladesh 148,692,131 $100,357,022,444 49.8% Bhutan 725,940 $1,516,078,205 23.2% Brunei 398,920 $10,732,435,034 -- Cambodia 14,138,255 $11,242,266,334 35% India 1,170,938 $1,727,111,096,363 37.2% Kuwait 2,736,732 $109,462,798,286 -- Syria 20,446,609 $59,147,033,452 11.9% Japan 127,450,459 $5,458,836,663,871 15.7% Indonesia 239,870,937 $706,558,240,892 13.3% Malaysia $237,796,914,597 $237,796,914,597 3.8% Saudi Arabia 27,448,086 434,666,133,333 --
Poverty in Asia (Cont d) Country Population Nominal GDP (Million of USD) Population living below national Poverty line (%)* Maldives 315,885 $1,908,460,938 16% Lebanon 4,227,597 $39,006,223,284 28% U.A.E. 7,511,690 $297,648,476,848 12.5% Pakistan 173,593,383 $176,869,569,654 32.6% Philippines 93,260,798 $199,589,447,424 26.5% Singapore 5,076,700 $208,765,019,308 -- Sri Lanka 20,859,949 $49,551,751,283 8.9% Thailand 69,122,234 $318,522,264,429 8.1% Vietnam 86,936,464 $106,426,845,157 14.5% Jordan 6,047 $27,573,536 13.3% Israel 7,624,600 $217,332,709,281 23.6%
Poverty in Asia (Cont d) Country Population Nominal GDP (Million of USD) Population living below national Poverty line (%)* Thailand 69,122,234 $318,522,264,429 8.1% Vietnam 86,936,464 $106,426,845,157 14.5% Oman 2,782,435 $46,866,060,196 -- Yemen 24,052,514 $26,365,156,990 34.8% Mongolia 2,756,001 $6,200,357,070 35.2% Kazakhstan 16,316,050 $149,058,911,551 8.2% Tajikistan 6,878,637 $5,640,410,959 46.7% Turkmenistan 5,041,995 $20,701,754 30% Uzbekistan 28,160,361 $38,981,605,338 26% Azerbaijan 9,047,932 $51,774,221,669 15.8% Qatar 1,758,793 $98,313,183,980 --
Poverty in Asia (Cont d) Country Population Nominal GDP (Million of USD) Population living below national Poverty line (%)* China 1,338,299,512 $5,926,612,009,750 2.8% Bahrain 1,261,835 $20,594,899,946 -- Georgia 4,452,800 $11,667,377,224 24.7% Iran 73,973,630 $331,014,973,186 18% Iraq 32,030,823 $82,150,312,821 22.9% *Sources, CIA world fact book & UNDP *world bank (2010 2011 est.) *Vikipedia
Policy, Legal, and Regulatory Frameworks for Microfinance in Asian Countries Countries Characteristics Policy/Legal Basis Regulatory Agency Supervisory Approach Minimum Capital of Regulated MFIs Pakistan The Microfinance Ordinance of 2001, MFI Licensing Rules, Societies Registration Act of 1860, Regulated MF Providers State Bank of Pakistan. Section 42 - SECP Non-regulated MF Providers Traditional Functions of Regulated MFIs Required for MFB s, but there is no requirement for Social Registration Act or SECP section 42. Interest Rates Small Business Finance Corporation; Khushhali Bank; First Microfinance Bank; Kash, NRSP Tameer etc. BRAC, ASA, ASASAH etc. NGOs, MFI s Provide loans; accept deposits, Micro insurance, Remittances No-Regulated NGO/MFI s Only provide loans Market-oriented, Differ from area to area and institution to institution. Qarz-Hassan & without interest programs
Policy, Legal, and Regulatory Frameworks for Microfinance in Asian Countries Countries Characteristics Policy/Legal Basis Regulatory Agency Supervisory Approach Minimum Capital of Regulated MFIs Bangladesh Societies Registration Act of 1860, the Companies Act of 1913, the Cooperative Societies Act of 1984, the Charitable and Religious Trust Act of 1920, the Trust Act of 1882, In 2000 Bangladesh Bank set up a Microfinance Research and Reference Unit. Microfinance Regulatory Authority (MRA) Traditional No specific regulation on minimum capital requirement of MFIs (NGOs). But for MFB s there are certain requirements Regulated MF Providers Non-regulated MF Providers Functions of Regulated MFIs Interest Rates Grameen Bank, Islamic Bank Bangladesh etc. MFI s, NGOs Provide loans; accept deposits, Market determined; subsidized in some
Policy, Legal, and Regulatory Frameworks for Microfinance in Asian Countries Countries Characteristics Policy/Legal Basis Regulatory Agency Supervisory Approach Minimum Capital of Regulated MFIs Philippines The General Banking Act of 2000, Executive Order No. 138, Agriculture and Fisheries Modernization Act; Social Reform and Poverty Alleviation Act Regulated MF Providers Bangko Sentral for rural banks, Cooperative Development Authority for cooperatives Non-regulated MF Providers Risk-based supervision of banks; co-ops not adequately supervised Functions of Regulated MFIs Rural banks, cooperatives NGOs Rural banks lending; deposit mobilization from public; coops lending; deposit taking from members only Required Interest Rates Market-oriented
Policy, Legal, and Regulatory Frameworks for Microfinance in Asian Countries Countries Characteristics Policy/Legal Basis Regulatory Agency Supervisory Approach Minimum Capital of Regulated MFIs Nepal Nepal Rastra Bank Act of 1955; Financial Intermediary Act of 1998; Comprehensive Bank and Financial Act of 2004; Society Registration Act of 1978, Cooperative Act of 1991. Nepal Rastra Bank Traditional Required Regulated MF Providers Non-regulated MF Providers Functions of regulated MFIs Interest Rates Commercial Banks; Regional, MF is, Rural Development Banks; MFB s Cooperatives; Licensed NGOs NGOs Provide loans; accept deposits De-regulated but central bank has power to control
Policy, Legal, and Regulatory Frameworks for Microfinance in Asian Countries Countries Characteristics Policy/legal Basis Regulatory Agency Supervisory Approach Minimum Capital of Regulated MFIs Sri Lanka Banking Law Act of 1988, Cooperative Societies Law of 1972, Companies Act of 1972, the Societies Ordinance of 1891 Central Bank Traditional Required Regulated MF Providers Non-regulated MF Providers Functions of Regulated MFIs Interest Rates Microfinance Bank NGOs, community organizations Provide loans; accept deposits Market-oriented
Some Poverty Alleviation Programmes & Strategies in Asia Country Pakistan India Afghanistan Azerbaijan Programmes Pakistan s national poverty reduction strategy, Vision 2030, Poverty Reduction Strategy Paper II, Pakistan Poverty Alleviation Fund (PPAF) The National Rural Employment Guarantee Scheme (NREGS), (SGSY), (SJSRJ), National Rural Livelihoods Mission (NRLM) Afghanistan National Development Strategy, MISFA State Programme for Poverty Reduction and Sustainable Development (SPPRSD) Bangladesh poverty reduction strategy paper (PRSP) Bhutan Tenth Five Year Plan 2008-2013 Cambodia China Jordan Kyrgyzstan Laos National Poverty Reduction Strategy, National Strategic Development Strategy Plan, Socioeconomic Development Plan China's 8-7 National Poverty Reduction strategy Jordan Poverty Alleviation Strategy, The National Strategy for Microfinance Comprehensive Development Framework for the Kyrgyz Republic, The National Strategy for Sustainable Human Development National Socio-Economic Development Plan (NSEDP)
Some Poverty Alleviation Policies & Strategies in Asia (Cont d) Country Lebanon Programmes Social Action Plan, Five-Year Programme of Work Maldives country s Seventh National Development Plan, Agricultural Development Master Plan 2006-2020 (ADMP), Mongolia Poverty Alleviation Programme, Rural development strategy Nepal 20-year Agricultural Perspective Plan (APP), Poverty Reduction Strategy Paper (PRSP), Indonesia National Medium-Term Development Plan (RPJMN) for 2010-2014 Philippines Sri Lanka Medium-Term Development Plan 2004-2010 (MTDP), National Economic and Development Authority (NEDA), 10-year Mahinda Chintana Idiri Dekma, or Vision for the Future, Syria Tenth Five-Year Plan 2006-2010, Tajikistan National Development Strategy for 2006 2015, Poverty Reduction Strategy for 2010-2012 Turkey Long-Term Strategy 2001-2023, Agriculture Strategy 2006-2010, Yemen Government of Yemen s Strategic Vision 2025, Yemen s poverty reduction strategy paper, five-year development plans
MICROFINANCE POLICY IN ASIA EMERGING TRENDS OF ISLAMIC MICROFINANCE
asic Principle of Shariah Based Microfinance Prohibition of Interest. Islamic Micro finance is a sub-set of Islamic Economic& Financial System Care for the poor is a religious obligation in Islamic Law. Asset Based Financing Risk Sharing Sanctity of contracts Financing in Halal/Shariah Complaint Activities. Prohibition of speculative behaviour ( Gharar ) Micro Takaful ( Islamic Micro Insurance) Assisting the poor is a pillar of Islam
Source of Islamic Microfinance Sources of Islamic Microfinance Islamic Microfinance Products Mechanism Quran Sunnah Ijma a (jurist consensus) Ijtihad & Qiyas (analogy)
- The Products in Islamic Microfinance Contd
The Products in Islamic Microfinance
Factors to be considered while doing IMFs Moral Ethical Social Poverty Alleviation Element and more. Free from Interest Financing Ensure Shariah Compliance Trainings & Quality HR Micro Takaful Islamic Micro Finance Shariah Complaints Investments Free from Gharar Shariah Complaints Funds Shariah Vetted Products A Misconception removed Islamic Microfinance is a system not the Religion, it can be utilized & operated by both Muslims and Non-Muslim Communities for Poverty Alleviation, Social & Economic Development.
For Profit Banks/MFIs : Faimly Bank Bahrain, Al-Amal bank Yemen, Ghana Islamic Microfinance Banks Ghana, HSBC Amanah U.K, Bank Islami - Pakistan Compatibility IMF Products with MF Models Grameen Model: Amna Iftikhar Malaysia, Islami Bank Bangladesh Limited etc. Village Bank Model: Sanadiq program -Jabal al-hoss, Syria, FINCA - Afghanistan etc. Credit Union Model: Muslim Credit Union (Tobago), The Amwal Credit Union etc. Cooperative Model: AlBaraka MPCS Mauritius, Al-Khair Coop. India, Muslim Community Coop. Australia, Karakorum Cooperative Bank Pakistan. Self-Help Group: Aameen Society - India
Need Assessment of Islamic Microfinance for Asia Need Assessment of Islamic Microfinance Asia South Asia South East Asia Countries Bangladesh Muslim Population % 90% Muslim Population 147.96 Countries Muslim Population % Muslim Popula tion Brunei 67 % 0.268 Burma 3.8 1.9 Bhutan 5 % 0.035 India 20 % 248.26 Maldives 100 % 0.30 Nepal 8 % 2.44 Pakistan 97 % 179.26 Sri Lanka 10 % 2.07 Afghanistan 100 % 32.4 Aggregate 36.57% 612.73M * According to 2010-11 &.Figure in Million Cambodia 7 % 1.029 East Timor - - Indonesia 88.2 % 210.09 Malaysia 61.4 % 17.7446 Philippines 10 % 9.57 Singapore 16 % 0.832 Thailand 98 % 7.35 Vietnam 1 % 0.879 Aggregate 47.24 249M (Contd )
Need Assessment of Islamic Need Microfinance for Asia East Asia North/Central Asia West Asia Countries % * Muslim Population Countries Muslim Population % Musli m Popul ation China 10 % 134.59 Japan 0.14 % 0.17934 Mongolia 120 4.4 Korea (North) 3 < 0.1 Korea (South) 0.9 0.44 Macau < 1 < 0.1 Hong Kong 1.4 % 0.094 Taiwan 0.25 % 0.058 Aggregate 8.7% 135M Countries % Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan Aggregate * Muslim Populati on 56.4 8,887 88.8 4,927 99.0 7,006 93.3 4,830 96.5 26,833 85.5% 52,483 * According to 2010-11 &. figure in 000 Azerbaijan 99.2 8,795 Bahrain 81.2 655 Georgia 9.9 423 Iran 99.6 74,819 Iraq 98.9 31,108 Jordan 98.8 6,397 Israel - - Kuwait 86.4 2,636 Lebanon 59.7 2,542 Libya 96.6 6,325 Morocco 99.9 32,381 Oman 87.7 2,547 Qatar 77.5 1,168 Saudi Arabia 97.1 25,493 Syria 92.8 20,895 Tunisia 99.8 10,349 UAE 76.0 3,577 Yemen 99.0 24,023 Aggregate 95.65% 254,234
FINDINGS Assessment Need Assessment of Islamic of Islamic Microfinance for for Asia Central Asia, the Caucasus, and South Asia Total Population of Asia are 4239.1M out of them 1356.28 M are Muslims which are 36.57% of the total Population, these figure reflect a big Demand of Islamic Microfinance Products because Muslim are reluctant to move Interest based MF System, as interest is strictly prohibited in Islam. IMF is beneficial for Muslim as well as for Non-Muslims. According to World bank* report, South Asia is home to half the world's poor, where Muslim population is 33.2% of total population, which shows immediate need of Islamic Microfinance there. * Source World Bank South Asia
Demand for Islamic Micro Finance in Arab Region Survey by Surveyed Countries Respondents Preference (%) CGAP 08 Jordan, Algeria, and Syria 20% - 40% PlaNet Finance 07 West Bank and Gaza 35% - 60 % USAID 02 Jordan 24.9% IFC/FINCA 06 Jordan 32% Frankfurt School of Fin & Mgmt 06 Algeria 20.7% IFC sponsored Study Yemen 40% IFC 2007 Syria 43%-46%
Some Islamic Microfinance Institutions in Asia Countries Indonesia Bangladesh Afghanistan Pakistan Malaysia India Azerbaijan Egypt Syria Lebanon Yeman Jordan Islamic Microfinance Institutions BPRS, Islamic Financial Cooperatives referred as bait Maal wat Tamwil (BMT) Islamic Bank Bangladesh, Social and Investment Bank,Al-Fallah and Rescue FINCA (Qard Hasan), WOCCU, Ariana Financial Services, IFIC, etc. Akhuwat, Farz Foundation, ASASAH, Muslim Aid, Islamic Relief, CWCD,,HHRD, NRSP, NRDP, Naymet etc. Amina Iftikhar, Tabung Haji etc AICMEU, BASIX, Sahulat, Bait-un-Nasr, Al-Khair Co-operative, Marwar Shariah Credit Bait un Nasr Mit Ghamar Project Sanadiq project Jabal al Hoss Mu assat Bayat Al-Mal Hodeidah Microfinance Program, Al-Amal Microfinance Bank Jordan Islamic Bank
Opportunities & Challenges International Islamic Microfinance Network (IMFN) for an effective interface and Coordination among IMFI s Expansion of Market where the Conventional MFI s face limitations especially in Muslim Majority Countries AlHuda Islamic Microfinance Help Desk is offering all Islamic Microfinance Solution. Islamic Banking and Finance is emerging in South Asia, Central Asia & MENA region which will strengthened the Islamic Microfinance effectively. Non - Availability of Donor/Shariah Compliant Sources of Funds Lack of Quality HR in Islamic Microfinance Sector. Reluctance in Research & Implementation of new Products, as only (Murabahah) is serving almost 80% of Islamic
Established: 2001 Model: Qarz-e- Hassan A Case Study from Pakistan AKHUWAT - Pakistan Number of Browers: 125,886 Families Loans Utilized by Males Entrepreneurs : 85,642 Loans Utilized by Female Entrepreneurs : 40,244 Amount Disbursed: PKR 1,534,880,742 Recovery Rate: 99.85% Average Loan. : 25,000 PKR Products Range: Family Enterprise Loan, Education Loan, Liberation Loan, Marriage, Emergency Loan, Housing Loan. Number of Branches: 63 (in 38 Cities ) * Data upto. 30th January, 2012
JazzakAllah Thank you for listening with patience Muhammad Zubair Mughal Chief Executive Officer AlHuda Centre of Islamic Banking and Economics Zubair.mughal@alhudacibe.com www.alhudacibe.com