Frontier of Islamic Banking - A Synthesis of Social Role and

Top 20 FREQUENT WORDS

islamic 183 mfis 102 funds 78 banks 77 microfinance 50 development 46 rds 40 institutions 39 social 39 rate 38 costs 37 income 37 percent 36 financing 34 operations 34 microfinancing 28 finance 27 beneficiaries 26 financial 25 conventional 24 mfi 24 poverty 24

DOCUMENT KEY POINTS

frontiers of islamic banking a synthesis of social role and micro finance forthcoming in the european journal of management and public policy habib ahmed islamic research and training institute islamic development bank p
given this social role islamic banks can complement the efforts of islamic microfinance institutions in providing the much needed funds to the poor to facilitate their economic upliftment

after the failure of a few decades of topdown trickle down development policies to alleviate poverty in most developing countries the innovative microfinance initiative is considered a new paradigm for bringing about development and eradicating absolute poverty
introduction the last quarter of the th century witnessed numerous financial innovations that catered to various needs of different segments of the society

he points out that if the only difference between islamic and conventional banking practices is whether the business is interest based or not then the non islamic financial institutions probably can deliver islamic services in a better way that islamic banks

can worsen both the adverse selection and moral hazard proble miss physical constraints inhibit the financial institutions to gather information on their prospective clients and once credit is advanced it is difficult to monitor the use of the funds

loan repayment by an individual member of a group is the collective responsibility of all the members in the group and default by a member disqualifies all though different approaches to microfinance have evolved the format discussed here is that of grameen bank which serves as the dominant model for most group based microfinance institutions morduch
whereas commercial banks are profit maximizing firms mfis are either government or non government organizations ngos formed to provide the poor with their much needed finance

knowing these principles and norms are prerequisites to obtain loans from the mfi and are continuously inducted in the members during the weekly meetings at times necessary inputs to implement these social programs like tube wells for water oral re hydration salt etc

assaduzzaman finds that whereas microfinance does increase the income level of the poor the current operations of mfis are not very effective in improving the lives of the extreme poor
a subsidy dependence index sdi developed by yaron indicate that in grameen bank would have to increase its lending interest rate by an additional percent in order to breakeven without subsidies hashemi

thus integrating islamic institutions of zakat charities and waqf with microfinancing will not only include the core poor in the program but also ensure the repayment of the funds to the islamic mfi
for detailed discussions see el asker and haq for zakat and basar and cizaka for waqf

another implication of lack of funds is as the officials of islamic mfis indicate that the benefits package given to employees is not as good as the established mfis operating in the neighborhood
as a result funds from these sources cannot be employed in microfinancing using certain islamic modes of financing like mudarabah and musharakah

social role of islamic banks and microfinancing though there have been discussions on the nature of an islamic enterprise in general for example see siddiqi khan focuses on the objectives of islamic banks
while some training on conventional topics like accounting and administrative aspects are offered from time to time by the governmental agencies islamic oriented training sessions are lacking or too expensive when available

for our analysis we breakdown the total number of employees of the mfi m into those working at the field level mf m and those who are not working there mh m mf
note that these costs can be further divided as those incurred at the field level and those that are incurred away from the field costs at head office and regional offices

the effect of an increase in the interest rate on loans il on the profit will be positive if the resulting increase in income offsets the decrease in income due to lower

the effect of an increase in the employees in the field mf improves the supervision and monitoring of the use of credit and hence increases the income by raising the recovery of loans
similarly an increase in the wages paid to employees wf will increase profit if the improvement in the recovery rate due to improved supervision exceeds that increased wages paid

assuming that the islamic banks offer its beneficiaries the same rate of return as mfis ie ims ris on their savings then we can conclude that the borrowing costs of funds will be lower in case of islamic banks bci than mfis bc m as indicated below
for example the funds from external sources are given on interest and the mfis are required to collect a fixed return from the beneficiaries

larger islamic banks have their own in house training this cannot be done by those mfis in bangladesh that take funds from government funding agency pksf as a condition attached for funding is that the beneficiaries should start paying installments of equal amounts within two weeks of the disbursement of funds
an islamic bank can frame a repayment schedule where the beneficiary pays a token small amount of money at the weekly meetings and pays the bulk of the debt when the asset or produce is sold

as mentioned earlier this approach mitigates the adverse selection and moral hazard problems resulting from the fact that the intended use and user are different from the actual use and user of funds
note that percent of the percent rate of return charged goes to a risk fund that is used repay installments of beneficiaries facing unusual problems and in case of emergencies

the project officer however devotes only a part of the time for rds activities as he is an officer of the bank overlooking the activities of rds

if the income of rds is calculated at a lowest rate of return of pe rcent charged by other islamic mfis then the profit with this rate of return under different assumptions of expenditures are shown in cases
the high quality in house training provided by professionals in the training academy improves the skills of the workers increasing their productivity

as more and more conventional banks begin to provide islamic financial services the spirit of islamic banks reflected by its social role will distinguish islamic institutions from non islamic one

building up capacity for banking with the poor the grameen bank in bangladesh in schneider hartmut editor microfinance for the poor development centre of the organization for economic cooperation and development oecd paris

yaron jacob performance of development finance institutions how to access it in schneider hartmut editor microfinance for the poor development centre of the organization for economic cooperation and development oecd paris
befus transformation lending helping microenterprises become small businesses in otero maria and elisabeth rhyne editors the new world of microenterprise finance kumarian press west hartford connecticut

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 banking

KeyWords

islamic banks banking financial finance investment conventional institutions funds risk financing deposits assets services management international countries equity profit products

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Number of Pages

26

Published Date

2106-02-07 09:28:15

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Frontier of Islamic Banking - A Synthesis of Social Role and

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