Islamic Participatory Microfinance by Bank of Khartoum – I – By Dr Mohammed Obaidullah

The name is now familiar among Sudan’s poor, unemployed and recent pass-outs from universities. The Irada program of Bank of Khartoum is experimenting with new and innvovative models of intervention to make a dent on chronic social problems, such as, poverty and unemployment. As part of the Sudanese economic system, it operates as a Shariah compliant bank. At the same time, it uses participatory modes within a model that is rooted in cooperation to create and share wealth in the agriculture sector, something that is not quite aligned with mainstream Islamic commercial banking with murabaha-centric portfolios. As such, it has set an example that in a way redefines “for-profit” commercial banking. Not surprisingly therefore, it was adjudged to be among the top three finalists at the Global Islamic Microfinance Challenge 2014 organized by the CGAP (Consultative Group to Assist the Poor), the Islamic Development Bank, Al Baraka Banking Group, and Triple Jump , which evaluated innovative Islamic microfinance experiments with a focus on product development.

A Parnership to Create and Nurture Partnerships

In 2002, Bank of Khartoum (BoK) was registered as a private limited company and subsequently was acquired and managed by Dubai Islamic Bank, the largest Islamic Bank from United Arab Emirates by purchasing 60% of the government shares in 2005. Bank of Khartoum operates under Islamic Banking Standards and has a comprehensive suite of retail services including a network of 58 branches. Its product portfolio includes auto finance, home finance, education finance and takaful. It has embraced hi-tec banking with 137 ATMs, internet banking and mobile banking, SMS alerts, discount and supplementary cards and has the first and only call center.

BoK offers services to corporate, retail, microfinance and investment business segments; it also owns various subsidiaries in trade, exchange, brokerage, and commercial real estate. The equity of the bank as of Dec 2012 is SDG 860 Million. Headquartered in Khartoum, BoK has 1300 employees. Its major shareholders include local and regional businessmen and various institutions such as Dubai Islamic Bank (DIB), the Islamic Development Bank, Abu Dhabi Islamic Bank, Sharjah Islamic Bank and United Arab Emirates Etisalat.

The Bank of Khartoum’s Microfinance Department (IRADA) was established in 2009 with the support and assistance from the Islamic Development Bank. The department was given the trust to implement the SDG 200 million Al-Aman fund for Microfinance. The fund was formed by a strategic partnership between the Diwan Zakah (apex body fo zakat management in Sudan) and 32 Sudanese Commercial Banks.

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Micro Finance Institutions (MFI’s) from 27 Countries unified for the development of Islamic Microfinance

images Forum concluded in UAE with a unanimous declaration to work together for the advancement of Islamic Microfinance globally.

Three-day “Global Islamic Microfinance Forum” was organized on 8th-10th December 2012, in Dubai World Trade Centre, UAE. The delegates from UAE, Pakistan, India, UK, Bangladesh, USA, UK Bahrain, Yemen, Azerbaijan, Turkmenistan, Kirghizstan, Mauritius, Kenya, Canada, France, Egypt, Philippine, Uganda, Iraq, Nigeria, Sudan along with delegates from other countries participated in the Forum.

The salient topics discussed at the conference included bringing together the Islamic Microfinance Institutions on a single platform, role of Islamic Microfinance in poverty alleviation, Shariah and related issues of Islamic Microfinance Institutions and their solutions, Outreach of Al Huda Centre for Excellence in Islamic Microfinance to different countries and dissemination of Qarz-e-Hasna Model of Akhuwat. Representatives from microfinance institutions from 27 countries expressed their intent to unify their efforts for poverty alleviation and social development through Islamic Microfinance.

Speaking on the successful completion of the forum, Zubair Mughal – Chief Executive Officer AlHuda Centre of Islamic Banking and Economics highlighted that the assemblage of a large number of institutions on the forum of Islamic Microfinance is a clear indication that it is the only viable solution of poverty alleviation around the globe. He urged the World Bank, IDB, USAID, IFC and other international institutions to include Islamic Microfinance in their priority list for social development and poverty eradication; otherwise the achievement of Millennium Development Goals of the United Nations will not be possible.

While addressing the conference, Dr. Amjad Saqib (Executive Director – Akhuwat) declared that Islamic Microfinance Network will be spread all around the world; a specialist Shariah Supervisory Committee will be setup to cope with the Shariah challenges encountered by Islamic Microfinance Institutions. He further stated that the “3rd Global Islamic Microfinance Forum” will be organized by Al Huda CIBE in November, 2013.

Al Huda CIBE hosted the said forum in Dubai with the joint effort of Akhuwat, in which internationally well-renowned speakers addressed the participants. The key-note speakers Justice Khalil ur Rehman, Shariah Advisor – AlBaraka Bank Limited, Mr. Kavilash Chawla MD, Nur Global Strategies- U.S.A, Mahesh Jayanarayan, Chairman UMEX Market Group Ltd-UK, Zaigham Mehmood Rizvi,Expert Consultant on Housing and Housing Finance-World Bank – Washington – U.S.A, Dr. Amjad Saqib, Executive Director – Akhuwat –Pakistan, Pervez Nasim Chairmen Ansar Financial and Development Corporation Canada, Syed Hussain Haider Senior Consultant – Govt of Punjab & Akhuwat, Ms. Katrin Fakiri MD (MISFA)–Afghanistan, Gulnora Yakubova, Operation Director, LLCMDO “ARVAND”-Tajikistan, Md. Ariful Islam, International Programmes Muslim Aid–Bangladesh, Humaiyun Saeed Jamshed, Senior Director (Marketing) SAB International FZ,UAE, Raffick Nabee Mohomed Founder & Secretary, Al Baraka Multi-purpose Co-operative Society Ltd,Mauritius, John D. Harwood, Canada, Aziz Ur Rehman Manager Shariah, Mawarid (Finance) UAE, Mohamed El Mehdi Zidan, Director Baraka Editions-France. Dr. Tariq Cheema CEO World Congress of Muslim Philanthropists – U.S.A and others presented their research papers on Islamic Microfinance to enrich the knowledge of the participants.

From : Al Huda CIBE

AML Compliance Training for Pakistan Islamic Microfinance Banks Shines in Debut

Edcomm Banker’s Academy’s Anti Money Laundering (AML) and Compliance training programs for Pakistan have shined in their recent debut at Tameer Bank, an Islamic Microfinance Bank. Focus on AML for Pakistan and Focus on Compliance for Pakistan have helped Tameer Microfinance Bank Limited to meet all of its needs by successfully teaching its employees everything they need to know to reduce AML and compliance risk at the Bank.

“The courses are perfect,” Tameer Microfinance Bank Limited said. “Banker’s Academy’s service has been attentive and responsive. And most importantly, our students are learning what they need in order to reduce risk at the bank and they love the interactive eLearning format.”

Focus on AML for Pakistan teaches microfinance bank employees about AML laws in Pakistan and familiarizes them with their company’s own policies and procedures. Topics include: the History of Global AML, Penalties of Money Laundering, the Anti Terrorism Act, the AML Ordinance of 2007, Red Flags of Money Laundering, Recordkeeping Requirements, Suspicious Transaction Reporting (STR) and much more. The content is regularly updated to include changing laws and policies.

Focus on Compliance for Pakistan teaches participants about bank history, laws, and management, as well banking standards and responsibility. Topics include: The State Bank of Pakistan Act, Banking Companies Ordinance, Banking Nationalization Act, Prudential Regulations, National Accountability Bureau Ordinance, Microfinance Institutions Ordinance, Payment Systems and Electronic Fund Transfer Act, Financial Institutions (Recovery of Finance) Ordinance of 2001, Basel II and much more.

For more information about programs like this, or to find out how The Edcomm Group Banker’s Academy can customize any training program, log onto http://www.bankersacademy.com or call +1.212.631.9400.

Tameer Microfinance Bank Limited is a microfinance bank located in Pakistan that provides a wide range of financial products designed to allow its customers to grow their businesses and produce significant economic multiplier effects throughout local economies.

The Edcomm Group Banker’s Academy is a 23-year-old multimedia education and communication consulting firm specializing in the development of creative business solutions that improve productivity, customer service and market share – providing bottom-line results. The Edcomm Group Banker’s Academy has had the privilege of assisting many distinguished clients with business solutions in the form of eLearning programs, online bank training and classroom instruction, multimedia production and online and print based documentation. Edcomm Banker’s Academy offers many off-the-shelf and customized courses such as Teller Training, Compliance Training and Systems Training specifically designed for Banks, Credit Unions and Money Services Businesses (MSBs).

source : sanper

The development of Islamic microfinancing in Russia

Linar Yakupov 
Dmitry Shlyakhtin
In the course of the International Summit of Islamic Business and Finance, which was held in 25-26 of June,2009 in Kazan, LLC “IFC Linova” represented the model of russian islamic finance system consisting of financial institutions for big, mid-sized and small business.

Among the base element of mentioned system focused on the extension of the deposit-credit services to the populace and the financing of the small business, the institution of credit cooperation in its different aspects such as credit, consumer’s, agricultural, housing saving, was defined by the participants of the Summit.

The main idea of the credit cooperation is the pooling of populace’s cash assets with the purpose of their maximum effective management for the acquisition of gain and the satisfying the requirements in the obtaining of credit, services and in the receipt of goods.

The history of credit cooperation’s development traces its roots in 1849 when Frederick Raiffeisen, the mayor of bavarian city, established the first credit cooperation. Nowadays Raiffeisen movement comprises 900.000 cooperations, about 500 million of shareholders operating almost in 100 countries of the world, the aggregate capital of which overbalances $4.3 billion.

Nowadays the world movement of the credit cooperations looks like this: in France about 90% of populace use the services of the credit cooperation, in USA 30% of adult population are members of the credit cooperatives (9.935 cooperatives with $650 billion of assets), in Ireland 534 cooperatives join together 70% of commonwealth, in Poland the credit cooperation takes 4.5% of populace (96 cooperations and more than 1.400 of their branches with assets more than $80 million), in Lithuania 53 credit cooperations take 1.2% of commonwealth (with about EUR 53 million of assets).

Before the revolution of 1917 Russia took the key place in the world on number and diversity of credit cooperation’s establishing’s types. In Russia 981 establishments of small loan were counted in 1883,
13 thousand of cooperatives with about 8 million of shareholders were counted in 1914. Currently 750 credit consumer’s cooperatives, more than 450.000 of shareholders exist in Russia.

On the whole the development of microfinance organizations is supported by the goverment of Russian Federation, international public organizations. So, in 19 of December, 2008 the Resolution № 63/229 about the role of the microlending and the microfinancing in the poverty eradication was adopted in the course of the 72th plenary sitting of the UN General assembly. According to it the UN member governments, Bretton Woods institutions (the World Bank and the International Monetary Fund) were suggested in coordinated terms to lend financial and technical support to the efforts of the underdeveloped countries for the capacity development of the microfinancing establishments.

The Islamic economic model, as so as traditional, contains in its armoury the mechanisms of microfinancing: the credit cooperatives occur in abundance in such countries as Egypt, Morocco, Indonesia and Malaysia. It is due to the dispositive regulation of the activity of the credit cooperatives, which in distinction from the banking institutions, have a right to take a deposit and to accommodate with a loan without interest in the presence of appropriate regulation in rules.

In Russian Federation the activity of the credit cooperation is regulated by the Civil Code, the federal laws of credit consumer’s cooperatives of the citizenry, agricultural consumer’s cooperatives, housing saving co-operatives, consumer’s cooperations. The law of the credit cooperation is also prepared for adopting .

The economic activity of the credit cooperatives as well as other finance institutes consists of two directions:
the attraction of money (the contributions, the foreign loans, the sponsorship etc) and its ensuing placement (the lending for members, the foreign investment).

Whatever the credit cooperation is the entity of microfinancing activity, the internal procedure of its economic function must be strictly ordered as in the banking institution. Accordingly, the management of the credit cooperative in its function must be ruled not only by firsthand experience and by the regulations, but also by the domestic rules identifying shared, borrowed, investment, dividend, accounting and fiscal policy of the cooperative.

The disregard of this demand inevitably leads to the bankruptcy of the cooperative and to the prosecution of its directors, as evidenced by the analysis of pyramid investment scheme’s activity, concerning only with the attraction of money with no intent to place it then for profit-making.

According to prohibition prescribed by Shari’ah the contributor – shareholder and the cotributor – borrower are in practice the parties of the investment activity sharing both the profits and the material losses in collaboration with the cooperative, what for the avoidance of possible pretensions must be brought to their notice before their enlistment to the cooperative. Directly in the cooperative the principles of the islamic financing are realized in this way.

Considering current restriction by types of cooperative activity, that is forbidden to loan to the nonmember of the cooperative, to have a share in the nominal capital of the business entity and the partnership association, to issue issuance securities and go long, to trade and to produce. The main instruments of the Islamic financing in the cooperative are such transactions as mudaraba, salam, bai dayn, wadiah,Ijarah,card al hasan, sukuk.

Relying on the objectives of the cooperative activity the member’s subscription may set as the attraction of money to the business accounts in the cooperative (wadiah) and the ensuing trust management (mudaraba) by the cooperative. The foreign loans are also effected as mudaraba.

The cash assets, placing virtually in management, are used by the cooperative for lending on the social terms of no interest to its members (card al hasan), the investment and the financing of contributor’s (legal persons) activity (murabaha, salam, Ijara). The participation of the cooperative in the economically attractive projects of the outside agencies may be implemented through the government, regional bonds (sukuk) floating for the specific projects of the issuer, for instance, the federal programmes, Olympiad, Universiade.

Recognising the need for the Islamic principles’ abidance the Fund of zakat is initiated in the cooperative. Allowances for this Fund are derived by common approbation of cooperative’s members fixed by the special resolution of the general meeting and also being fixed in the regulations.

The implementation of the concerned operations needs the detailed elaboration of all procedures and the use of banking technology, because the cooperative, with the exception of the accounting functions becomes for its members small retail one and at the same time it becomes some investment type of bank.

Certainly, it’s very complicated for cooperative’s initiators and for small business’ representatives to formulate this documentation and to give a good discharge in view of restriction of finance,knowledge and experience. The recruitment of highly qualified bank personnel is also inaccessible, that increases the risk of the activity of concerned microfinancing establishment.

The way out is the handover of a great number of outsourcing’s functions,to which the current legal system contributes serving the functions of the final control device, the credit organ, investment and regulatory authorities which are the nonmembers of the cooperative.

In this case the most optimal scheme of the interplay is the commercial concession where franchisor is the association, the union or second-tier cooperative, which forms and conveys to its franchisee (the cooperative) the right to use the tradename, the documentation, the technology on a non-repayable basis, also trains specialists and renders managerial, auditing and other services.

Consequently, the bimodal federal system of the credit cooperatives can be formed. There the cooperatives of first level function as operating office, and the second-tier cooperative discharge the main financial functions allowing appreciably cut administration costs.

Back on track of russian Islamic financial system sounded by LLC “IFC Linova” on the International Summit of Islamic Business and Finance, notice that the Islamic credit cooperative can’t work itself. Sharia committee, which is capable to issue the appropriate decision, is necessary for the confirmation of its activity’s correspondence to the Islamic principles, the Sharia arbitration is necessary for settlement of disputes, the bank or non-bank credit organization – for the processing operations, special education establishment – for personnel training, mutual insurance company – for the risk reduction.

source : ibf.ru english

Islamic Microfinance Challenge 2010: Innovating Sustainable, Scalable, and Market-Driven Models.

Islamic Micro Finance Challenge for 2010 has been organized by CGAP, Deutsche Bank, Islamic Development Bank, and Grameen-Jameel with the theme of Innovating Sustainable, Scalable, and Market-Driven Models. This contest is to promote Islamic micro finance innovative models.  

For further information

CCGAP.org

http://www.cgap.org/p/site/c/template.rc/1.26.12645/