View source for Islamic Microfinance Shariah compliant way of poverty allevi




== Top 20 FREQUENT WORDS ==
shari 207
islamic 100
microfinance 85
saudi 45
finance 38
arab 37
scholars 31
transaction 31
institution 28
uae 27
assets 26
arabia 25
court 23
principles 23
compliant 21
products 21
commercial 20
debtor 20
price 20
based 19



== DOCUMENT KEY POINTS ==
*introduction this report has been prepared to assist the international development law organisation idlo in understanding the basic islamic law shari a law principles governing the provision of islamic finance products and services the processes typically involved in obtaining shari a approval for shari a compliant financing transactions and products and the relationship between shari a law and secular law in certain jurisdictions
*in addition we did not undertake an exhaustive search of all information or materials which are publicly available in relation to islamic microfinance and our research on the subject was based on the sources and materials which are listed in section sources

*it consists of general rules and principles derived from the qur an the muslim holy book the practices sunnah and sayings ahadith of the prophet mohammed as discussed in further detail below
*shari a law defined shari a or islamic law is meant to regulate all aspects of a muslim s way of life

*issues relating to interpretation and application of shari a law since shari a law is not a single codified body of law and is open to interpretation the opinions of shari a scholars may differ on the same question of shari a law depending on the school of thought to which particular scholars belong
*this can lead to uncertainty and inconsistency of interpretation and application of shari a law across the islamic world

*there is of course a degree of commercial speculation involved about the future prospects of the company when an investor makes an equity investment but whether such speculation is permissible or not would depend on the intention of the investor ie was the intention to make a quick profit by speculating in the likely movement of the share price over a very short period of time as is arguably the case with day trading or was the decision made on the basis of careful evaluation of the company s past results and future prospects at the other end of the spectrum equity derivatives such as index linked derivatives are generally bk
*key shari a principles and prohibitions relevant to finance there are a number of key shari a principles and prohibitions relevant to finance and commercial transactions which distinguish islamic finance from the conventional for miss for completeness it should be mentioned that there are two main branches within islam sunnism and shiaism

*in the context of modern day islamic finance key examples of gharar are a advising a customer to buy shares of a particular company that is the subject of a takeover bid on the grounds that its share price can be expected to rise b buying a house the price of which is to be specified in the future c when the subject matter or specifications to a contract are unknown and d deferred payment under a contract where the deferment is for an unknown period
*in light of the practical considerations of international commerce and in order to enable muslim investors to participate in it a number of prominent shari a scholars have advanced the view that it is permissible for muslims to invest in businesses or companies which are not entirely shari acompliant so long as certain conditions are met

*d the accounts receivable of the company on the business must not exceed a certain percentage of its assets or market capitalisation usually set between and per cent
*bk

*as such most arrangements involving shari a boards are voluntary and the scope of their involvement can range from getting involved in the operations of the institution and holding regular meetings with its management as is the case with some traditional islamic banks to only being engaged on a transaction by transaction basis to review and approve proposed transactions or products as being shari a compliant
*among the most well known scholars active in the industry are sheikh taqi usmani pakistan sheikh nizam yaquby bahrain doctor mohammed ali elgari saudi arabia doctor abus sattar abu ghuddah syrian based in saudi arabia doctor muhammad imran ashraf usmani pakistan doctor hussain hamid hassan united arab emirates and doctor mohammad daud bakar malaysia

*considerations involved in appointing a shari a scholar or board as mentioned earlier most jurisdictions have yet to develop a detailed regulatory framework governing the appointment of shari a boards or the qualifications required for someone to become a shari a scholar and some jurisdictions do not even require an institution offering shari a compliant products to have a shari a board or indeed engage any shari a scholars

*in the event the shari a co ordinator feels that the transaction or product will not receive shari a approval he will suggest changes that should be made to improve its chances of receiving shari a approval c once any changes suggested by him have been made the shari a co ordinator will submit the necessary details of that transaction or product to the shari a board d the shari a board will consider the transaction or product and will either ask for changes to be made before approving it or they will approve it as submitted and e if satisfied the shari a board will issue a fatwa confirming that that transaction or product is shari a compliant
*where an institution has a permanent shari a board the process for obtaining shari a approval which will culminate in the issuance of a fatwa is generally as follows a the relevant commercial department of the institution will discuss a proposed transaction or product with the institution s shari a co ordinator or the department that co ordinates with the institution s shari a board b the shari a co ordinator will provide feedback on the proposed transaction or product and based on his experience advise the relevant commercial department as to whether or not the shari a board is likely to grant shari a approval

*the constitutions of most arab states refer to the shari a as either a primary source of law or the source of law the difference being that where the constitution describes the shari a as the source of legislation the hierarchy implies that all the other laws and statutes must comply with the principles of the shari a
*shari a law may apply directly as the governing law of a jurisdiction where there is no fully developed codified legal system or indirectly through the application of statute law based fully or partially on shari a law or as a source of law to fill legislative gaps

*the relevance of shari a law in the uae to the enforcement of contracts which are expressed to be shari a compliant and contrasting this with the approach taken in saudi arabia the contradiction between the prohibition of interest under shari a law and legalising the charging and taking of interest under the commercial codes was brought to the attention of the uae supreme federal court in the decision of september
*under saudi arabian law any provision in an agreement for the payment of whether directly or indirectly or the bearing of the cost of any amount based upon calculated by reference to or otherwise related to interest for these purposes interest includes money deemed by saudi arabian adjudicatory bodies to be in the nature of interest is not enforceable under saudi arabian law

*the trial judge gave summary judgement in favour of the plaintiff and held inter alia that english law was the governing law because there could not be two separate systems of law governing the agreements the parties had not chosen shari a law as the governing law because it was not the law of a country and there was no provision for the application of a non national system of law such as shari a law and it was highly improbable that the parties had intended that an english secular court should determine any dispute as to the nature or application of controversial religious principles
*highlighting the approach of the english courts when enforcing an english law governed contract which is also expressed to be subject to shari a law the english courts recently had to consider the issue of the relevance of shari a law to a contract which was governed by english law but which was also expressed to be subject to shari a law

*on january noor islamic bank announced its commitment to serving the unbankable segment of the uae population and on january at the arab economic social and development summit in kuwait city the league of arab states announced the formation of a us billion fund run by the arab development fund that is set to include a microfinance programme that is aimed at helping small businesses through the credit crunch extending credit to cottage industries and reducing unemployment across the arab world
*despite this early initiative in egypt microfinance remains less developed in the arab world than for example in asia africa or latin america and although it seems to have taken hold in many middle eastern and north african mena countries it remains largely undeveloped in saudi arabia and in its infancy in the uae

*the function of the afesd is to assist the economic and social development of arab countries through i financing development projects with preference given to overall arab development and to joint arab projects ii encouraging the investment of private and public funds in arab projects and iii providing technical assistance services for arab economic and social development
*of the uae finance market who would benefit from microfinance initiatives are deemed by most financial services providers to be too costly and unbankable and continued we have spotted this at noor islamic bank a we have been creating another bank in the main bank with a different structure so we can break down the cost per product

*c abdul latif jameel company community service programmes aljcsp i productive families program pfp launched in by the abdul latif jameel company on the basis of a business plan developed by the grameen foundation and benefiting from the continued support of grameen bank advisers the pfp aims to empower low income women in saudi arabia to improve their lives and has piloted a micro retail strategy that uses female loan officers to offer interest free loans ranging from sr to sr to women to start their own household projects

*g saudi credit bank ministry of finance established in with the aim of helping saudi citizens with limited financial resources overcome their financial difficulties the saudi credit bank scb extends interest free loans for marriage home repair vocational pursuits and other social endeavours including family loans up to a maximum of sr to saudi citizens i who are in actual need of the loan ii whose annual income does not exceed sr and iii who do not have any loans or any type of amount outstanding from the scb in return for a sufficient mortgage or acceptable surety from a creditworthy individual or firm
*on january noor islamic bank pjsc announced its intention to establish a company with emirates post holding group offering shari a compliant financial services to the low income and unbanked segment of the uae population combining noor islamic bank s expertise in the provision of shari a compliant financial services with emirates post s country wide reach and brand reputation to offer a comprehensive basket of financial products and services developed for and tailored to the needs of this segment

*as with the musharaka however this is not a popular structure in the context of microfinance as the thorough reporting and transparency requirements surrounding the just distribution of any profit and loss can result in substantial operating burdens and costs on small enterprises unaccustomed to formal accounting
*partner a partner b investors client capital capital project profit loss ii mudaraba trust financing mudaraba involves an investor or investors providing funding for a business venture and a manager with fiduciary responsibilities providing managerial or market specific expertise and sometimes additional funding

*the financier may grant the client a sale undertaking and the client grant the financier a purchase undertaking giving the client the option to purchase the lease assets for a pre agreed residual sum at the end of or during the lease
*financier buys agent to sell commodities on spot commodities from basis broker for price of x financier as agent broker commodities

*step financier leases assets to client for x y n assets financier client rental x y n assets price x step financier buys assets from client for x client iii istisna a construction manufacturing istisna a involves the construction or manufacture and deferred delivery of specified madeto order assets of predetermined quality and quantity in return for instalment or lump sum on delivery payments
*however salam is costly to implement and in the context of forward crop financing in agrarian societies such as for example the sudan it covers little more than production costs and it is the financiers rather than the clients that realise any potential gains at post harvest season and post asset delivery market maturity

*this section sets out an overview of islamic microfinance in south asia and southeast asia by looking at the experience of islamic microfinance in pakistan bangladesh indonesia and malaysia

*in a study by mannan in bangladesh conventional microfinance institutions are based on implicit assumptions of social class conflict and tend to empower women whereas imfis empower families by ensuring joint liability of husband and wife by lending to families or groups of families

*in the event that the loan is not repaid within the agreed duration unless extensions are granted the lender reserves the right to seize and auction the collateral to recover its financing costs with any remaining balance returned to the borrower
*islamic microfinance in malaysia with its rather developed islamic banking system and capital markets malaysia has established several organisations under the aegis of government agencies to provide microfinance to smalland medium sized enterprises using a wide range of islamic financial products

*in addition where the creditor even prior to raising a case of merits has serious reasons to fear that the debtor will escape and the debt is more than aed or alimony the creditor can require the judge to issue an order to prevent the debtor from travelling in the following cases if the debt is known due and not tied to conditions or if the debt is an undecided amount the judge will temporarily evaluate it if the request is supported by written evidence and the creditor provides bail that guarantees the debtor reimbursement for all damages suffered as a result of being prevented from travelling if it transpires that the creditor s allegation was false

*following the grant of a court order requiring payment of the debt the creditor may take the court order to the police station in the locality of the debtor for enforcement

*contributors section ranajoy basu and diane wood section atif hanif ranajoy basu and diane wood section atif hanif and emmanuel hadjidakis section atif hanif and emmanuel hadjidakis section amar meher salam alsmadi and afsha karim section amar meher katherine williams and jonathan marshall section chang chi hoong oscar franklin tan and christina koh section salam alsmadi afsha karim and jonathan marshall production and editing roger wedderburn day atif hanif amar meher and johannes de jong
*bk

*islamic finance qualification a the official workbook securities and investment institute the law and practice of international capital markets geoffrey fuller bk
*sources section shari a law islamic finance a an overview atif hanif ie l

*www dot arabnews dot com
*html bk

*dahlia a el hawary and wafik grais islamic financial services and microfinance june p articles mi hb is ai n deutsche gesellschaft fuer technische zusammenarbeit gtz gmbh islamic microfinance in indonesia by hans dieter siebel with collaboration of wahyu dwi agung http www dot unikoeln
*pdf section defaulting on personal debt in the united arab emirates and saudi arabia uae federal law no


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== DOCUMENT WORD ANALYSIS ==
=== Main Category ===
: AlHuda Material\islamic micro


=== KeyWords ===
islam finance bankable contract client profit purchase financial asset microfin risk sale transact price murabahah busi sharia goodasset payment invest



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== DOCUMENT REFERENCES ==


=== Number of Pages ===
30


=== Published Date ===
2106-02-07 09:28:15


== Full Document ==


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[[Category:Islamic Finance]]

[[Category: Islamic Micro]]