Islamic Microfinance Alternative Development in Northern Leb
From HodHood
Contents
Top 20 FREQUENT WORDS
islamic 200 microfinance 119 banking 48 banks 38 micro 35 financing 32 riba 32 entrepreneurs 27 based 26 entrepreneur 25 finance 25 mudarabah 25 loan 24 conventional 23 risk 21 credit 20 schemes 20 financial 18 asset 17 goods 17 model 17
DOCUMENT KEY POINTS
- the paper first introduces the concepts of microfinance and presents a case for islamic microfinance to become one of the components of islamic banking
- principles of microfinance microfinance grew out of experiments in latin america and south asia but the best known start was in bangladesh in following the wide spread famine in
- the basic principle of microfinance as succinctly expounded by doctor muhamad yunus the founder of grameen bank bangladesh and the recipient of the nobel peace prize in that credit is a fundamental human right
- in the case of grameen bank of bangladesh women comprised of of the borrowers and they are more reliable than men in terms of repayments gibbons and kassim
- in other words interest or riba supports the possibility for wealth to accumulate in the the revelation on the prohibition of riba in the qur an can be classified into stages the first stage was on the moral denunciation of riba in al rum verse the second stage was on comparing riba with the jews in al nisa verse the third stage was on the legal prohibition in al imran verse and finally the fourth stage was on al bay trading as the alternative to riba in al baqarah verse
- group lending with joint responsibility as prescribed by the grameen model can however lower the incidence of strategic default when project returns can be observed by the borrowers neighbours under the fear of suffering from social sanctions borrowers will declare their true return and repay their debt obligation de maghion and murdoch
- on the other hand the islamic bank provides the solution to the muslims in terms of principles instruments and issues in dealing with banking business activities where the operations of the activities are based on the principles of the shari ah
- secondly since interest or riba is predetermined and the creditor is certain to receive the interest imposed it may prevent the creditor from being involved in any occupation because it is certainly easy to receive income from the interest on a loan qureshi
- apart from the relationship between the bank and the depositor in which a form of pls that is based on mudarabah is institutionalized islamic banks in the vast majority now avoid pls as the most important basis for their investment activities
- the assets of islamic banks worldwide are estimated at more than us billion and financial investments are above us billion
- in support of providing access to islamic financing to the poor and small entrepreneurs chapra has succinctly argued that lack of access of the poor to finance is undoubtedly the most crucial factor in failing to bring about a broad based ownership of businesses and industries and thereby realizing the egalitarian objectives of islam
- at a very basic level the disbursement of collateral free loans in certain instances is an example of how islamic banking and microfinance share common ai miss this close relationship would not only provide obvious benefits for poor entrepreneurs who would otherwise be left out of credit markets but investing in microenterprises would also give investors in islamic banks an opportunity to diversify their investments
- comprehensive islamic microfinance should involve not only credit through debt finance but the provision of equity financing via mudarabah and musharakah savings schemes via wadiah and mudarabah deposits money transfers such as through zakat and sadaqah and insurance via takaful concept
- in a way it is a compulsory levy imposed on the muslims so as to take surplus money or wealth from the comparatively well to do members of the muslim society and give it to the destitute and needy
- there are a number of shari ah compliant microfinance schemes notably those operated by hodeibah microfinance program in yemen the undp murabahah based microfinance initiatives at jabal al hoss in syria qardhul hasan based microfinance scheme offered by yayasan tekun in malaysia various schemes offered by bank rakyat indonesia and bank islam bangladesh
- the imbalances of focusing too much on low risk murabahah types of instruments at the expense of profit and loss sharing instruments based on mudarabah and musharakah are long standing criticisms for islamic banking can be mitigated by focusing certain portion of financing activities for microfinance
- micro islamic bank entrepreneurs figure simple mudarabah mudarabah structure may also be based on two tier structure or re mudarabah where parties ie capital provider public government zakat waqf etc
- in the context of microfinance the capital provider may need huge capital and expertise to manage such initiative and may need to manage higher risk because the islamic bank need to involve directly in the farming sector through provision of asset such as land
- if there is profit it will be shared based on pre agreed ratio and if there is loss it will then be shared according to capital contribution ratio
- sell at mark up price repayment by installment micro islamic bank entreprenur cash payment seller figure murabahah to the purchase orderer dhumale and sapcanin in their study on the feasibility of islamic microfinance funded by the world bank has evaluated islamic financing schemes namely murabahah mudarabah and qardhul hasan as potential schemes to be advanced for islamic micro finance
- a number of shari ah principles must be met for the contract to be valid haron and hock such as the goods must in existence at the time of sale ownership of the goods must be with the bank the goods must have the commercial value the goods are not be used for a haram purpose the goods must be specifically identified and known the delivery of goods is certain and not conditional upon certain other events and the selling price is fixed at cost plus mark up murabahah could be easily implemented for microfinance purposes and can be further exemplified by the used of deferred payment sale bai al muajal
- alternatively the islamic bank as the owner of the asset should has the right to repossess the asset haron and hock
- comparatively qardhul hasan murabahah and ijarah schemes are relatively easy to manage and will ensure the capital needs qardhul hasan equipments murabahah and leased equipments ijarah for potential micro entrepreneurs and the poor
- if islamic banks consider giving financing to the poor is risky business despite the various risk mitigation techniques available then the proposal made by wilson for microfinance institution to adopt and adapt the wakalah model as widely used in islamic takaful insurance should be seriously considered
- received wisdom that lending to poor households is doomed to failure costs are too high risks are too great savings propensities are too low and few households have much to put in terms of collateral murdoch
- according to wilson an advantage of the wakalah model is that it combines some of the features of a credit union with professional financial management but ensures the interests of the participants by the management as there is a potential for a conflict of interest with participants losing out if management remuneration is excessive and not transparent
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DOCUMENT WORD ANALYSIS
Main Category
- AlHuda Material\islamic micro
KeyWords
loan microfin islam borrow programmatic repay busi financial incom officeas finance activa insurable applic service relief policies local amount econometric
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DOCUMENT REFERENCES
Number of Pages
16
Published Date
2008-05-20 04:57:33
