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AlHuda CIBE-Islamic Agricultural & Rural Finance
Religiosity and threshold effect in social and financial performance of microfinance institutions
Mohammad Ashraful Mobin
Islamic Agricultural & Rural Finance
Muhammad Zubair Mughal
Chief Executive Officer
Allhuda centre of Islamic banking and economics
Why Islamic Agricultural and Rural Finance ?
Source of Islamic Agricultural and Rural Finance Product.
Compatibility of Islamic Financial Products with Conventional Rural Credit lending Models.
Opportunities, Challenges and Innovation.
Why Islamic Agricultural & Rural Finance?
Prohibition of Interest – Financial Inclusion
53% of population in the OIC countries live in rural areas – SESRIC - OIC
20% Financial Inclusion in Muslim World – World Bank.
OIC countries occupy 29% of the world agricultural land.
Asset Based Financing & Risk Sharing – Impact.
Takaful ( Islamic Insurance) – Crop, Livestock and Rural
Economy supported Product
Source of Islamic Agri. Finance Products
Sources of Islamic Finance
Ijma’a (jurist consensus)
Ijtihad & Qiyas (analogy)
Islamic Agricultural Finance Products
Murabaha – Cost Plus Sale
Murabaha means a sale on mutually agreed profit, also known as cost plus sales, it is one of the most widely used instruments for short-term agricultural financing where the Bank/MFI undertakes to supply specific goods or commodities at mutually agreed profit to the client.
Murabahah can be utilize for Purchase of seed, fertilizer, harvesting and planting equipments, agri. Inputs, tractor, pesticides, farming goods, Solar Tube-wells etc.
MBL and some other Banks, NRSP – KPK, Al Amal Bank, Islamic Bank Bangladesh,
FINCA-AF, Islamic Relief, BMT’s in Indonesia etc.
Salam – Forward Sale
Salam means a contract in which advance payment is made for goods to be delivered later on. The seller undertakes to supply some specific crop/goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract
Salam is ideal product for Agricultural Financing, through which a farmer can fulfill all the financial needs of whole crop circle e.g. liquidity, seed, pesticide, fertilizer, harvesting, irrigation, transportation, market linkages etc.
Wasil Foundation, Albarakah MPCS, MBL etc.
Istisna - Manufacturing contract
A pre-delivery financing instrument used to finance projects where commodity is transacted before it comes into existence. It is an order to manufacture and payment of price, unlike Salam, it’s flexible, where price may be paid in advance, or in installments or on delivery of good.
Istisna May Utilize for small manufacturing Business, dairy or Agri. production, Construction of wharehouses and cold storage, Rural entrepreneur Development etc.
AlBaraka MPCS, Ghana Islamic Microfinance bank,
Al-Amal Bank, Bank of Khartoum etc.
Ijara – Islamic Lease
Ijarah Means Operating lease. It is an arrangement in which the Islamic Bank lease Agri. equipments, Tractor & light vehicles, Agri. Instruments, buildings or other facilities to a client, against an agreed rental.
Leasing of Tractors, Agri. Equipment, Threshers, Tub wells, small production unit lease, Sugarcane planter, Rice planter, harvesting vehicles etc.
Al-Amal Microfinance Bank, NRDP, Wasil Foundation.
Amanah Islamic Bank – Philippines.
Diminishing Musharkah is a form of Musharakah where the Bank/MFI and the client participate in a joint commercial enterprise or property. This attains the form of undivided ownership of both, Over certain period the equity of financier is purchased by the client
It can be utilize for Rural housing, forest development, agri. Inputs, farming, sprinkler/drip/solar pumps, tube wells, Refrigeration vans etc.
Islamic Bank Bangladesh, some Islamic banks etc.
Musharakah & Mudarabah- Partnership
Musharakah & Mudaraba means a relationship established under a contract by the mutual consent of the parties for sharing of profits and losses in the joint business.
Musharkah and Mudarabah can be used for Microenterprise & SME’S setup’s, Agricultural Joint venture projects, Dairy and livestock development etc.
BOK, Amanah Islamic bank, AlBarakah MPCS etc
Some other and Charitable Models of Islamic Agri. Finance
Muzahara ( Crop Sharing )
Musaqaa ( Irrigation Purposes )
Mugarsaa ( Orchid Financing )
Charitable Models :
Qarz e Hassan
Islamic Agri. And Rural Products
Salam, Istisna and other products
Qarz-e-Hasan, Murabahah, Ijarah, Mudarabah
Zakat, Sadqa, Ushar
Compatibility with other Rural Finance 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
For Profit Banks/MFIs Ghana Islamic Microfinance Banks – Ghana, Al – Amal Bank, Bank Islami - Pakistan
Size of Islamic Agri. & Rural Finance
Total Islamic Finance Industry size is 2.1 T. USD
More than 2,000 Islamic Financial Institutions are working in 100+ Countries.
Islamic Banking have 1.5 T. USD Share
Sukuk (Islamic Bond) have about 400 Billion USD.
While rest belong to Islamic Insurance, Islamic Funds, Islamic Leasing etc.
The Share of Islamic Micro and Rural Finance is Less than 1% within IF Industry.
Big Potential in African Countries
Islamic Micro/Rural finance Institution Worldwide
- Muslim Society
- Dubai Islamic Bank
- Abu Dhabi Islamic Bank
- HSBC Amanah
- Muslim Aid
- Islamic Relief
- The Halal Mutual Investment Company
- Kuwait Finance House
United States: 3
- FINCA , WOCCU
- Faisal Finance Institution
- Ikhlas Finance House
- Alwatany Bank of Egypt
- Egyptian Saudi Finance
2 - Pure Islamic Banks (Bank Islam, Bank Muamalat)
Rest - banks
BPRS , BMT.
IMFI’s Worldwide: 300 * in Countries: 32
Market Size: 1 billion USD
Some Islamic Microfinance Institutions - Worldwide
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
Mit Ghamar Project
Sanadiq project Jabal al Hoss
Mu’assat Bayat Al-Mal
Hodeidah Microfinance Program, Al-Amal Microfinance Bank etc.
Awqaf South Africa
Faith Matters, Islamic Relief, Muslim Aid, HSBC Amanah etc.
Hajj Trust, Four SACCOS
Factors to be considered while doing Islamic Agri. & Rural
A Misconception removed
Islamic Finance is a system not the Religion, it can be utilized & operated by both Muslims and
Non-Muslim Communities for Poverty Alleviation, Social & Economic Development.
Poverty Alleviation Element
Free from Gharar
Free from Interest
Shariah Compliant Funds
Ensure Shariah Compliance
Shariah Vetted Products
Trainings & Quality HR
Shariah Compliant Investments
Challenges for the Development of Islamic Agri. & Rural Finance
Non - Availability of Donor/Shariah Compliant Sources of Funds
Need to develop a uniform regulatory and legal framework for the Islamic Agricultural Finance.
Accounting & I.T systems., Rating Agencies.
Lack of Quality HR in Islamic Agri./Rural Finance Sector.
Standardization of Products.
Reluctance in Research & Implementation of new Products, as only (Murabahah) is serving almost 80% of Islamic Agri./Microfinance Industry.
Introduce new product line on the basis of Musaqa, Muzara’a & Mugharasa
Development of Shairah Expertise towards the Growth of Islamic Agricultural Finance.
IDB - Microfinance Development Program (MDP )
I.T Integration of Islamic Rural & Agri. Finance Products
Supportive role of Government.
Expansion of Market where the Conventional Agri. Finance Products face limitations especially in Muslim Majority Countries
AlHuda Centre of Excellence in Islamic Microfinance is offering Services for the development of Islamic Agri. Finance Products
Islamic Banking and Finance is emerging in South Asia, Central Asia & MENA region which will strengthened the Islamic Agri. Finance products effectively.
JazzakAllah Thank you for listening with patience
Muhammad Zubair Mughal
AlHuda Centre of Islamic Banking and Economics
AlHuda CIBE FZ LLE - U.A.E
P: + 971 56 9286664, + 971 55 938 99 00
AlHuda Center of Islamic Banking & Economics - Pakistan
Ph: (92-42) 35913096 - 98, Fax: (92-42) 35913056
In this slide we will learn that what islamic Microfinance Product will be ideal for what sector, We can categories poverty into Six levelAmanah
Islamic Finance is a system not the Religion, it can be utilized & o