1. Waqf, Zakat & The Experience of Qarz Al-Hasanah Mehr Iran Bank (QMB) By: Siamak Dolati CEO and Banking Expert Qarz Al-Hasanah Mehr Iran Bank (QMB) November 13, 2015 Almaty, Kazakhstan ADFIMI – FFSA JOINT WORKSHOP

2. Objective Waqf Zakat and its conceptual framework Development of Waqf and Zakat institutions in Iran Experience and the socio-economic role of Qarz Al-Hasanah Mehr Iran Bank (QMB)

3. Waqf & Zakat Waqf : Provides the material infrastructure Creates a source of revenue for use in social welfare at family and community levels Zakat : Generates a flow of funds and recruit the necessary manpower Social security system in an Islamic society

4. Concept and History of “Waqf” Derived from: the Arabic root verb Waqafa Literally means: causing a thing to stop, standstill, detention, holding, and keeping In legal terms (religious jurisprudence); it means: tying up an asset or property and releasing the benefits

5. Iran’s Waqf Organization Maintains and administers endowments at the macro level Responsible for organizing and supervising religious places, such as mosques and holy shrines Spreads Islamic teachings

6. IRAN’s Awaqf Organization’s Subsidiaries ALBORZ Cultural Foundation Faculty of Islamic Sciences USVEH Printing and Publishing Company Institute of Fund for Development of The Country’s Endowments GOVAH Company

7. Waqf as a Source of Islamic Microfinance

8. Endowed Microfinance Model

9. Allocation of Resources Partnership contracts Exchange contracts with fixed returns Exchange contracts with variable returns Gharz Al-Hasanah (qard al-hasan) contracts

11. Zakat In The Quran « والمؤمنون و المؤمنات بعضهم اولياء بعض يأمرون بالمعروف و ينهون عن المنكر و يقيمون الصلوة و يوتون الزكاة و يعطيعون الله و رسوله اولئك سيرحمهم الله و الله عزيز حكيم.» The believers, both men and women, are guides to each other. They order what is just and forbid what is evil; they establish their prayers and pay the obligatory charity and obey Allah and his messenger. On these Allah will have mercy. He is mighty, and wise. Surah Al-Taubah: 71

12. وَأَقِيمُوا الصَّلَاةَ وَآتُوا الزَّكَاةَ وَأَطِيعُوا الرَّسُولَ لَعَلَّكُمْ تُرْحَمُونَ So establish regular Prayer and give regular Charity; and obey the Messenger that ye may receive mercy. (Surah Nur: 56) ************ الَّذِينَ يُقِيمُونَ الصَّلَاةَ وَيُؤْتُونَ الزَّكَاةَ وَهُم بِالْآخِرَةِ هُمْ يُوقِنُونَ Those who establish regular prayers and give in regular charity, and also have (full) assurance of the hereafter. (Surah Naml: 3) ************* إِنَّ الَّذِينَ آمَنُواْ وَعَمِلُواْ الصَّالِحَاتِ وَأَقَامُواْ الصَّلاَةَ وَآتَوُاْ الزَّكَاةَ لَهُمْ أَجْرُهُمْ عِندَ رَبِّهِمْ وَلاَ خَوْفٌ عَلَيْهِمْ وَلاَ هُمْ يَحْزَنُونَ Those who believe, and do deeds of righteousness, and establish regular prayers and regular charity, will have their reward with their Lord: on they shall be no fear, nor shall they grieve. (Surah Baqarah, 277)

13. What Does Zakat Legally Mean? “the amount of money or kind taken from specific types of wealth when they reach a specific amount at a specific time which must be spent on specific categories in specific ways”. It can be paid in both in the form of cash and kind.

14. Zakat Beneficiaries 1. The Poor (Fuqara): Those without any means of livelihood and material possessions. 2. The Needy (Miskeen): Those without sufficient means of livelihood to meet their basic necessities. 3. The Administrator of Zakat (Amil): Those appointed to manage and administer zakat. 4. The Sympathizers (Muallaf-at-Quloobuhum): Those whose hearts are inclined towards or have accepted Islam. 5. To Free Slaves (Riqab): Zakat can also be used to free slaves or captives. 6. Those who are in debt (Gharimin): Zakat can be used to pay off the debts of a person who has borrowed to pay for basic necessities. Zakat can also be distributed to those in financial difficulties e.g. bankruptcy due to the loss of employment and heavy debt. 7. For the cause of God (Fisabillillah): Zakat can be used to finance any form of struggle or work for the love of God. 8. Those who are stranded during a journey (Ibnus Sabil): Zakat can also be used to help a traveler facing difficulties in continuing his journey due to reasons such as loss of money etc.

15. Zakat In Iran Imam Khomeini Relief Foundation

16. Qarz Al-Hasanah Mehr Iran Bank (QMB)

17. Gharz Al-Hasanah In The Quran مَن ذَا الَّذِي يُقْرِضُ اللَّهَ قَرْضًا حَسَنًا فَيُضَاعِفَهُ لَهُ وَلَهُ أَجْرٌ كَرِيمٌ Who is he that will give Allah Gharz Al-Hasanah? For Allah will increase it and manifold to his credit. [Al-Hadid:11] **************** وَأَقْرَضُوا اللَّهَ قَرْضًا حَسَنًا يُضَاعَفُ لَهُمْ وَلَهُمْ أَجْرٌ كَرِيمٌ And give Allah Gharz Al-Hasanah, it will be increased manifold to their credit. [ Al-Hadid : 18] ****************

18. مَّن ذَا الَّذِي يُقْرِضُ اللّهَ قَرْضًا حَسَنًا فَيُضَاعِفَهُ لَهُ أَضْعَافًا كَثِيرَةً وَاللّهُ يَقْبِضُ وَيَبْسُطُ وَإِلَيْهِ تُرْجَعُونَ He who will give Allah Gharz Al-Hasanah, which Allah will double into his credit and multiply many times. [Al-Baqarah: 245] ************* تُقْرِضُوا اللَّهَ قَرْضًا حَسَنًا يُضَاعِفْهُ لَكُمْ وَيَغْفِرْ لَكُمْ وَاللَّهُ شَكُورٌ حَلِيمٌ If you give Allah Gharz Al-Hasanah. He will double it to your credit and he will grant you forgiveness. [ Al-Tagabun:17] ************* وَأَقْرَضْتُمُ اللّهَ قَرْضًا حَسَنًا And give Allah Gharz Al-Hasanah. [ Al-Maidah: 12]

19. How was QMB established?  with the participation of 10 Iranian state-owned banks  began activities on December 13 th, 2007  2,750 personnel  540 branches

20. About QMB  1st specialized bank specifically engaged in providing benevolent Gharz Al-Hasanah loan that is absolutely interest- free.  loan is granted to the legal and individual entities in dire need for fulfilling short-term funding requirements.  The receiver of the loan is only required to repay the original amount; however the bank is permitted to charge a minimum service charge of 4% in order to cover the cost of its administrative fees

21. QMB’s Mission Statement  To perform a good deed that is encouraged and appreciated by the Almighty Allah and His Messenger  To strengthen and support the Islamic culture and values in the context of the Gharz Al-Hasanah  To strengthen the national economy  To establish a caring society  To promote the principles of Islamic Economics and raise the public awareness in connection with Gharz Al-Hasanah.

22.  To attract and mobilize Gharz Al-Hasanah financial resources, governmental and public grants and borrow loans from inside and outside the country in order to allocate to the qualified individuals  To facilitate the payment, exchanges, transactions and other services that is the responsibility of the bank as said by the law  To prevent poverty  To establish better relationship among the poor and the rich

23.  To eradicate unemployment problem from the society  To help the newly married couple who are in dire need for financial assistance  To aid people who have difficulty covering their medical expenses  To prevent poverty and destitution being widespread in the country

24.  To establish better relationship among the poor and the rich  To eradicate unemployment problem from the society  To help the newly married couple who are in dire need for financial assistance  To bear part of the housing renovation costs along with making part of the costs of new houses which are nearing completion

25.  To help struggling tenants in order for them to put down a deposit on their rented apartments  To support university students who can no longer bear their academic expenses  To assist traders so that they will be able to meet their basic amenities  To help the manufacturing units for the provision of the raw materials and to finance their working capital

26. Mobilization of Resources in the Interest-free Banking Operations in Iran 1)Opening Gharz Al-Hasanah Accounts: Gharz Al-Hasanah Current Accounts Gharz Al-Hasanah Savings Accounts 2)Opening Investment Deposit Accounts: Short-term Investment Deposit Accounts Long-term Investment Deposit Accounts

27. Allocations of Resources in the Interest- free Banking Operations in Iran Partnership: including civil partnership, Mudarabah, Mozaraeh and Mosaghat ( Contract of farm letting/ sharecropping) Trades and Transactions including Installment sales, leasing, Liability– purchase, in advance–purchase (making a forward purchase) Letter of guarantee, Opening letters of credit (currency, rial) and Jualah: “a promise of reward" is a kind of reward which usually is not based on a written contract and it can raise troubles when it comes to the tribunal. Legally, the offerer is not bound to fulfill the verbal offer or reward Gharz Al-Hasanah

28. Merits of Gharz Al-Hasanah A valuable and desirable loan that will help the poor to meet their needs An efficient method based on religious teachings Financial problems of the needy can be tackled without being concerned about the spirit of laziness and idleness because users have to repay One of the instances of retail banking A means to create jobs Prosperity of small businesses

29. Interest-free loans & Micro-Credit Banking System  2005, the Year of Microcredit!  Interest-free loans as an instance of micro-credit in IRAN based on Islamic teachings  Interest-free loans contribute to production and employment as well as meeting the essential needs of individuals such as marriage, treatment, housing supply and repair and education

30. Social and Economic Effects of Gharz Al-Hasanah Bridging the gap in order to eliminate poverty Leading to frozen assets release Operating as an automatic economic stabilizer Lower spirit of wealth accumulation Having impact on income distribution along with elimination of monopoly fields Serving to strengthen social bonds Having positive psychological effects in the society, Promoting charity Creating a sense of vitality in the community

31. Thank you

32. Q & A