Situational Analysis Of Microfinance Supply In Sudan

Top 20 FREQUENT WORDS

islamic 71 contract 59 profit 51 musharakah 49 client 46 riba 46 business 44 finance 44 salam 44 price 40 mudarabah 36 sale 36 partners 33 purchase 33 financing 32 istisna 31 financial 30 microfinance 30 shariah 28 agreed 27 delivery 27

DOCUMENT KEY POINTS

• surah aale imran a after ghazwa of uhud rd hijrah riba was expressly prohibited international institute of islamic economics iiie s blueprint of islamic financial system including strategy for elimination of riba international islamic university islamabad may be seen for full texts of ayat of qur an and ahadith
• muhammad khaleequzzaman islamic banking and finance department international islamic university islamabad training workshop on islamic microfinance nibaf sbp a islamabad a march module one islamic finance a shariah foundation and applications in microfinance objective the demand for shariah compatible financial products and services is increasing with the rapid progress of islamic finance industry

• surah al baqarahibefore hajjat ul wada th or th hijrah declaration of war from allah swt and his prophet pbuh against those who disobey the prohibition and all previous ribavi transactions were entitled to receive principal only and that to give the debtor grace period until he can manage to clear the dues against him ahadith

• muslim it ia on the authority of abu saeed khudri raa who reported that the prophet saaws said while exchanging gold for gold silver for silver wheat for wheat barley for barley dates for dates and salt for salt do so on mithlam bi mithl like for like and yadamm bi yad hand to hand or on spot basis

• rights and responsibilities of the owner of the capital a risk sharing principle in an interest based debt contract the borrower has to service his debt irrespective of the performance of the project he engages in even if poor performance obtains through no fault of the borrower
• islam encourages the earning of profits but forbids the charging of interest because profits determined once the business has succeeded ex post are legitimate socially meeting justice and economically creation of additional assets wealth whereas interest determined before hand ex ante is a cost that is accrued irrespective of the outcome of business operations ie

• the counter value the date of delivery the ability of either the buyer or the seller to fulfill the commitment or ambiguity in the terms of the deal thereby exposing either of the two parties to unnecessary risks
• it can only be treated as potential capital that is it becomes actual capital only when it joins hands with other resources to undertake a productive activity

• the compatibility of the principles of islamic finance with the best practices of microfinance provides sufficient convenience to devise the operational mechanism for introducing islamic modes of financing and expanding the outreach
• ideally the microfinance works through the principle of joint liability peer groups providing short maturity graduating cycles of small loans repayments conforming to the business cash flow as well as promoting saving habits to cope with the unforeseen adversity and maintaining liquidity

• murabahah also known as cost plus sales it is one of the most widely used instruments for short term financing where the investor bank mfi undertakes to supply specific goods or commodities incorporating a mutually agreed contract for resale to the client at a mutually negotiated margin necessarily the cost to be declared
• muhammad khaleequzzaman islamic banking and finance department international islamic university islamabad training workshop on islamic microfinance nibaf sbp a islamabad a march module two islamic modes instruments most of the islamic modes being used by the islamic banks are applicable in microfinance

• in this case mister a cannot sell the commodity to mister c if in above example mister b has allowed to take delivery of specific and identified good from b s warehouse mister a possesses the commodity constructively and can sell to mister c without taking delivery from mister b

• in case the client does not meet the promise the amount can be used to recover actual damage however it cannot be used for covering the cost of funds opportunity cost
• in case of microfinance where repeat murabahah is required the master murabahah facility agreement should be used under which the individual murabahah agreements should be executed

• the basic purpose of this sale was to meet the needs of the small farmers who needed money to grow their crops and to feed their family up to the time of harvest
• it is also beneficial to the buyer as normally the price in salam is lower than the price in spot sale

• the hadith of the holy prophet pbuh says whoever wishes to enter into a contract of salam he must affect the salam according to the specified measure and the specified weight and the specified date of delivery
• for example if gold is purchased in exchange of silver it is necessary according to sharia ah that the delivery of both be simultaneous

• the period of salam in the second parallel transaction being shorter the price may be a little higher than the price of the first transaction and the difference between the two prices shall be the profit earned by the institution
• for example if a has purchased from b bags of wheat by way of salam to be delivered on december a can contract a parallel salam with c to deliver to him bags of wheat on december

• a c the contract of istisna creates a moral obligation on the manufacturer to manufacture the goods but before he starts the work any one of the parties may cancel the contract after giving a notice to the other

• a c since it is not necessary in istisna that the price is paid in advance nor is it necessary that it is paid at the time of delivery it may be deferred to any time according to the agreement of the parties therefore the time of payment may be fixed in whatever manner they wish

• normally in order to secure the payment of the installments the title deeds of the shed or land or any other property of the client may be kept by the financier as a security until the last installment is paid by the client
• a c the following conditions as repeated once again should be met in case of parallel istisna a there must be two different and independent contracts which cannot be tied up and performance of one should not be contingent on the other

• the time of delivery is an essential part of the sale in salam while it is not necessary in istisna a that the time of delivery is fixed
• annexure difference between istisna a and salam keeping in view this nature of istisna a there are several points of difference between istisna a and salam which are summarized below i

• it means that he can offer his money to the group members so that each one of them can act for him as mudarib and the capital of the mudarabah shall be utilized by all of them jointly and the share of the mudarib shall be distributed between them according to the agreed proportion

• a c if the business has incurred loss in some transactions and has gained profit in some others the profit shall be used to offset the loss at the first instance then the remainder if any shall be distributed between the parties according to the agreed ratio

• for the purpose of clarity in the basic concepts it will be pertinent at the outset to explain the meaning of each term as distinguished from the other
• for example if two or more persons purchase an equipment it will be owned jointly by both of them and the relationship between them with regard to that property is called shirkat ul milk

• a c if a lump sum amount or a certain percentage of the investment has been agreed for any one of the partners it must be expressly mentioned in the agreement that it will be subject to the final settlement at the end of the term meaning thereby that any amount so drawn by any partner shall be treated as on account payment and will be adjusted to the actual profit he may deserve at the end of the term

• a c however if all the partners agree to work for the joint venture each one of them shall be treated as the agent of the other in all the matters of the business and any work done by one of them in the normal course of business shall be deemed to be authorized by all the partners
• if there is a dispute between the partners in this matter ie one partner seeks liquidation while the other wants partition or distribution of the non liquid assets themselves the latter shall be preferred because after the termination of musharakah all the assets are in the joint ownership of the partners and a co owner has a right to seek partition or separation and no one can compel him on liquidation

• the question arises whether the partners can agree while entering into the contract of the musharakah on a condition that the liquidation or separation of the business shall not be effected unless all the partners or the majority of them wants to do so and that a single partner who wants to come out of the partnership shall have to sell his share to the other partners and shall not force them on liquidation or separation
• termination of musharakah without closing the business if one of the partners wants termination of the musharakah while the other partner or partners like to continue with the business this purpose can be achieved by mutual agreement

• in musharakah all the partners share the loss to the extent of the ratio of their investment while in mudarabah the loss if any is suffered by the rabb ul mal only because the mudarib does not invest anything
• however if all the partners have agreed that no partner shall incur any debt during the course of business then the exceeding liabilities shall be borne by that partner alone who has incurred a debt on the business in violation of the aforesaid condition

• the share of the financier is divided into a number of units with an understanding that the client will purchase the units of the share of the financier one by one periodically
• however the mfis can use this product for financing of microenterprise or purchase of equipments vehicles and construction renovation of houses etc

• therefore the price of the unit is fixed on the basis of valuation of the business at the time of the purchase of each unit
• mudarabah can be of two types restricted mudarabah mudarabah almuqayyada where rubb ul maal may specify a particular business and unrestricted mudarabah mudarabah al mutallaqa where rubb ul mal gives full freedom to mudarib to undertake whatever business he deems fit

• regarding purchase of units it is preferred that the purchase is effected on the basis of the market value of the house as prevalent on the date of purchase of that unit but it is also permissible that a particular price is agreed in the promise of purchase signed by the client
• in case of such undivided ownership shariah allows to rent the share of one partner bank in this case in property to the other partner client in this case but not to the third party

• although the main objective of the product development is to serve the particular need of the customers poor people in this case with minimum cost and better returns the avoidance of shariah rules would undermine the efforts of distributive justice and would render the product un islamic
• product development in islamic finance a financial product is an instrument based on a contract that results in a financial asset of one enterprise and a financial liability or equity instrument of another enterprise

• the methodology and the utility of instruments should meet the objectives of shariah besides free from all prescribed prohibitions like gharar uncertainty and maysir game of chance which have express reasons for prohibition
• inter dependence when dependence cannot sustain and independence based on self interest is excluded more caring inter dependence based on cooperation is preferred

• legal requisites design of contracts and their acceptability in shariah particularly the prohibitions in respect of combining two or more contracts use of contingent contracts trading of debt should be avoided

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DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\islamic micro

KeyWords

islam finance fund mfis institute developed agricultural financial bankable oper credit rate client econometric mfi loan program beneficiarie imfi sustain

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DOCUMENT REFERENCES

Number of Pages

29

Published Date

2106-02-07 09:28:15

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