Presenters
PART I: Rafi-uddin Shikoh PART II: Atif R Khan
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Agenda
Presentation: 45 min Q&A: 30 min
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Agenda
Section 1: Global Microfinance Context (Part 1) Global Microfinance Drivers/ Opportunities What is Microfinance? Landscape key players Impact & Challenges Section 2a: Islamic Microfinance What is Islamic Microfinance? Key Islamic Microfinance drivers/ Opportunities Landscape Key players/ geographies Impact, Challenges & Opportunity Section 2b: Islamic Microfinance -- Part 2 to be delivered at the next session Islamic Microfinance core models Islamic Microfinance structures
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Summary
MICROFINANCEBanking for the poor Big need exists However poverty alleviation is too big a promise; Industry is growing but showing signs of problems (*primarily excess lending and aggressive collection; akin to sub-prime mortgage lending) However many success stories, best practices developing and growing. Problems should be removed. Islamic Microfinance in infancy making finance accessible to many low-income Muslims and with universal potential.
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19% of developed world adults do not have bank accounts 72% of adults in the developing world do not have accounts
Source: Financial Access 2010 Report, by CGAP and World Bank
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An estimated 72 percent of people living in Muslim-majority countries do not use formal financial services
(CGAP Islamic Microfinance Note 2008)
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2. Addressing needs of
MICRO-ENTERPRISES
Unmet demand for finance is large, but the exact number (or even a rough but credible number) has been hard to pin down, with estimates ranging from half a billion people to three billion.*
*Financial Access 2010 Report, by CGAP and World Bank
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What is Microfinance?
Microfinance services low income groups (extreme poor, moderately poormain clients), mostly not served by commercial banks. Services offered are Credit facilities, savings account, money transfers, remittances, insurance and even investment 1. Low-income population 2. Microenterprises
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What is Microfinance?
Pioneered the group-based responsibility model but other models exist*
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Top 100 Microfinance Institutions in the World: MIX 100 that are profitable and top performers in each of three areas: outreach, efficiency, and transparency
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Impact
Poverty alleviation: Many studies indicate positive impact over the last twenty years, as well as some findings that suggest limited or negative impact. Example:
Since Kiva was founded in 2005: 680,458 Kiva lenders $279 million in loans 98.93% Repayment rate Work with: 146 Field Partners 450 volunteers around the world 60 different countries www.EthicaInstitute.com | www.DinarStandard.com
Shortcomings
Social fallout: Family issues High interest rates: Loan sharks, 30%, 40% even 60%+ Per year Excessive lending/ over indebtedness: Major defaults in India Aggressive debt collection: The past five years have seen the aggressive selling of loans to often illiterate villagers, followed by equally aggressive debt collection. As a result, the past decade witnessed more than 200,000 farm suicides in India. Reports Indias leading rural journalist, The Hindus P. Sainath: Those who have taken their lives were deep in debt. Exclusion: Poorest of the poor; Self-exclusion due to prohibition of interest for Muslims
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Agenda
Section 1: Global Microfinance Context (Part 1) Global Microfinance Drivers/ Opportunities What is Microfinance? Landscape key players Impact & Challenges Section 2a: Islamic Microfinance What is Islamic Microfinance? Key Islamic Microfinance drivers/ Opportunities Landscape Key players/ geographies Impact, Challenges & Opportunity Section 2b: Islamic Microfinance -- Part 2 to be delivered at the next session Islamic Microfinance core models Islamic Microfinance structures
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Micro-savings
MUDARABA-BASED accounts
Micro-transfer
Micro-Insurance
TAKAFUL
IJARA (Leasing)
QARD HASAN
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