RIBA (Interest)
الَّل�ُه� ] َّل� َأ�َح� َو� َب�وا� الِّر� ْث�َّل� ِم� ال�َب�ْي�ُع� ا �َّن�َم� ِإ � ال�وا َق� ْم� �َّن�ُه� َب�َأ َذ�ل�َك� � َب�وا الِّر� َم� ِّر� َو�َح� [ال�َب�ْي�ُع�
(That is because they say: "Trading is only like Riba,'' whereas Allah has permitted trading and forbidden Riba)
(Surah Al-Baqarah :275)
Islamic Mode of Financing V/S Conventional Mode
Islamic Financial Institutions Conventional Financial InstitutionsDeal with goods as well as documents Deal with documents only
Supply/Receipt of Goods against money Money/Documents are traded against Money/Document
Islamic Finance for the Poor
MicroEntrepreneurIslamic MF
Poorest of the Poor Qard – e – Hasna
Destitute - Zakat
COMMON MODES OF ISLAMIC FINANCING
PARTNERSHIP BASED
Musharka
Mudarba
TRADE BASED
Murabaha
Musawamah
Sala’m
Istisna
RENTAL BASED
Ijara
Diminishing Musharka
CENTRE FOR WOMEN COOPERATIVE DEVELOPMENT
VISION
POVERTY ALLEVIATION THROUGH
ENTERPRISE DEVELOPMENT
MISSIONTo support the Potential Poor in
Pakistan break out of Poverty cycle by providing them with Necessary Borrower Islamic Finance, Business
Development Services and Advocating their Rights.
BOARD OF DIRECTORS Mr. Ejaz Ahsan CHAIRMAN Mr. Mushtaq Pirzada Vice Chairman Mrs. Samina Islam General Secretary Mr. Abbas Khan Finance Secretary Mrs. Naseera Bokhari Joint Secretary Dr. Shireen Zaffarullah Member Dr. Waseem Bano Member Mr. Jawaid Tariq Member Mr. Raza Toor Member Mrs. Khalil Ramdey Member Dr. Tayyaba Nasreen Member Eng. Arif Toor Member Mr. Razi-u-Din Member Mr. Abdul Rasheed Member (C) Mr. M. Asghar Member(C) Mrs. Afshan Jabeen Member (C) Mrs. Shafqat Saleem Member (C)
*Mrs. Farida Tariq, CHIEF EXECUTIVE OFFICER
EXECUTIVE COMMITTEE Dr. Shireen Zaffarullah Dr. Waseem Bano Mrs. Samina Islam Mr. Abbas Khan Mrs. Farida Tariq
AUDIT COMMITTEEDr. Waseem Bano Mr. Raza Toor, ACAMr. Abbas Khan, FCA
SUSTAINABLE BORROWER
SUSTAINABLE ORGANISATION
A BALANCED APPROACH TOWARDS
ISLAMIC MICRO FINANCE
THREE INGREDIENTS TO ENTERPRISE DEVELOPMENT
SUSTAINABLE BORROWER → SUSTAINABLE ORGANISATION
RIGHT ADVOCACY
BUSINESS DEVELOPMENT SERVICES
ISLAMIC MICROFINA
NCE
Organization Background
• Started up in 1992 with Health & Education Projects
• Working in Microfinance with an Islamic Approach Since 1999
• Consultation with Scholars in Masjid e Ibrahim Lahore in 2002
• Product/Asset based approach since day ONE• Consultation with Mufti Iftikhar Baig in 2006• Development of Islamic Model, 2008
1999 & 2000• Rs.
658,000• 1 Branch
office• 1 District
2001 & 2002• Rs.
1,753,500• 1 Branch
Office• 1 District`
2003 & 2004• Rs.12,583,
000• 2 Branch
Offices• 1 District
2005 & 2006• Rs.122,844
,000• 8 Branch
Offices• 1 District
2007 & 2008• Rs.212,220
,000• 14 Branch
Offices• 3 Districts
2009 Till DateRs. 398,561,329
20 Branch Offices5 Districts
Rs. 19,941,000(Islamic 8 Branches)
Vision 2010
Rs.1,000,000,00030 Branch Offices
Punjab
Districts Being Served:
LahoreSheikhupuraGujranwalaFaisalabad
Nankana Sb
Opening of Islamic Branches
Development of Islamic Manuals
Enterprise Development Facility
Review of Procedures by Shariah Consultant
Financial Highlights2009 2008 2007
Total Assets 342,036,181 241,635,322 187,131,312
Gross Loan Portfolio 145,908,619 116,087,060 106,087,220
Disbursements 105,916,028 113,951,000 98,269,000
Total No. of Clients Served
16,750 13,749 10,025
Operational Self Sufficiency
88.75% 87.6% 89.78%
Total Expense/Assets
12.90 22.86 22.20
Trade Based Mode
• Murabaha• Sala’m• Istisna
Rental Based Mode
• Ijara (Not Currently in Practise)• Diminishing Musharaka
Islamic Modes Chosen by CWCD
MURABAHATRADE
BASED Murabaha has been derived from the concept
of “Bai - Mu’ajjal” which is “Instant Sale”
Instant Sale on Deferred Payment
Murabaha Transaction is always asset backed.
Asset backing is not prerequisite for Interest bearing loans.
It is fixed price contract. Price can not be increased in case of default.
Interest is charged on daily basis from the Customer.
It is purely sale and purchase transaction.
It is lending of money and charging of interest.
Relationship between Bank and Customer is Seller and Buyer.
Relationship between Bank and Customer is Creditor and Debtor.
Murabaha Vs Interest Bearing Loans
LoansMurabaha
MURABAHA
VENDOR
Buys
Pro
duct
Pays
Pur
chas
e Pr
ice
Sells Product at Purchase Price Plus Profit Margin
Pays on Deferred (Installments) Basis
CUSTOMER
Sala’m
Sala’m was permitted to facilitate the poor farmers and Traders who needed money to cultivate their crops or buy items in overseas/foreign lands in order to sell them afterwards.
TRADE
BASED
Sal`mAdvance Payment against Deferred sale
DELIVER GOODS AFTER MANUFACTURING/FARMING
PAYS PURCHASE PRICE OF GOODS BEFORE
MANUFACTURING/FARMING
THIRD PARTY / OPEN MARKET
SELL GO
OD
S AT PRO
FIT
MANUFACTURER/FARMER
Istisna
• It is an order to the producer or manufacturer to produce/manufacture a specific commodity for the purchaser.
• Istisna is also a particular kind of sale which is executed before the Asset come in to existence.
TRADE
BASED
DELIVER GOODS AFTER COMPLETION
PAYS PARTIAL PURCHASE PRICE OF GOODS alongside Production
(Progressively)
THIRD PARTY / OPEN MARKET
SELL GO
OD
S AT PRO
FIT
ISTISNA
MANUFACTURER
Diminishing Musharaka
• Financier and his client participate either in the joint ownership of a property or an equipment, or in a joint commercial enterprise. The share of the financier is further divided into a number of units and it is understood that the client will purchase the units of the share of the financier one by one periodically, thus increasing his own share till all the units of the financier are purchased by him so as to make him the sole owner of the property, or the commercial enterprise, as the case may be.
• The client pays rent for the portion of asset used by the client, owned by the financer incase of joint ownership of property or equipment
Rental Based
Diminishing Musharaka
VENDORJoint Purchase of Asset
Client Purchases CWCD Ownership & pays Rental on Remaining CWCD Ownership
CUSTOMER
Asset Purchased is Insured through Takaful
School Construction/Rennovation Up to Rs. 300,000 (Murabaha/Istisna)
• Upper Cap – Rs. 300,000 per case• Rate is negotiated with the client• Done under Islamic Mode of Microfinance– Murabaha– Istisna(Pipeline)
• Project has been completed within 2 months, and demand is coming from other enterprises for similar facility
Financial Highlights For Islamic Microfinance
Apr 2009 – Oct 2009
Total No. of Clients till Date 391
Average Facility Size 51,000
Total Amount of Facility Procured 19,941,000
Total Number of Branches 8
Challenges Faced in Islamic Microfinance Sector
• Sources of FUND– The funds available are not in Islamic Mode and
hence the Organization can never become completely Islamic
• Increase in Cost of Transaction• Understandability of Islamic Finance• Availability of trained Human Resource
CWCD ISLAMIC MICROFINANCE TRAINING WING
• Training Opportunities on Procedures of Islamic Microfinance, by the experienced Trainers of CWCD
Low cost training for the actual working in Shariah Complaint Microfinance
Interactive Sessions with Shariah Advisor
Future Plans
• Expansion of Islamic Microfinance within Punjab
• Pre testing and Implementation of Musharaka & Mudaraba
• Research & Development of new Islamic Microfinance Products
Thank You for Your Attention