2. Shari’ah Foundation and Application of Islamic Microfinance Presented at Global Islamic Microfinance Forum - Dubai Presented on 06 October, 2013 By: Mufti Aziz Ur Rehman mufti.aziz.89@gmail.com 2

3. Outline 1)Islam / Shari’ah and Faqeir 2)Treatment of Financially Distressed in Islam 3)Protection of Freedom 4)MENA Region and poverty 5)Main issue with Muslim Traders 6)IFIs and awareness 7)Recommendations 8)Final Words Mufti Aziz Ur Rehman3

4. Islam and Faqeir Islam treats Faqeir according to his need and extent of poverty Faqeir is subjected to. Three types of Faqeir; 1.Incapable of Earning( عاجز ) 2.Financially Distressed ( كارثة مالية ) 3.Capable of Earning( قويـًا مكتسبًا ) Mufti Aziz Ur Rehman4 A Social Security System of Islam. Baitul Mall, Zakat.etc.

5.  Man born with some inalienable (absolute) rights.  That are recognized by majority of the nations but are enjoyed by very few people around the globe.  A set of these rights give rise to development, which everyone should ideally have access to. Mufti Aziz Ur Rehman5 F. Distressed & Cap. of Earning

6. Excess to no. 2 & 3 by Islam Financially Distressed ( كارثة مالية ) Support and provision of funds to meet one’s needs enabling the distress to be eased. I mean;  Freeing captives or slaves, those in debts and to pay Diyyat money etc.  Imam Abu Yousuf RA said; يدفع للعاجز عن زراعة أرضه الخراجية لفقره كفايته من بيت المال قرضا ليعمل و يستغل أرضه ( ابن عابدين ) Mufti Aziz Ur Rehman6 Give him Freedom from such situation

7. Islamic Economic prosperity  Islam postulates the concept of welfare state to work for the economic prosperity.  Economic Prosperity connotes betterment of standard of life through; Enhanced capabilities Reduced vulnerability (Liabilities) and Protect Freedoms  lowness of income is a means for capability deprivation only Mufti Aziz Ur Rehman7

8. Protection of freedoms There are five kinds of Freedoms 1. Freedom of social opportunities, 2. Freedom of transparency guarantees, 3. Freedom of protective security, 4. Freedom of political and civil rights, and 5. Economic freedom including opportunities to get credit. Since without freedom people cannot make the choices that allow them to help themselves and others. Mufti Aziz Ur Rehman8

9. Economic Freedom To get credit; Are begging, being dependant on charity and / or being under debts supported and encouraged ? but taking the Fifth Freedom “Economic freedom including opportunities to get credit” Now; how Islamic finance can enhance access, reduce vulnerability, augment capability and so reduce poverty? Of course Faqeir is to come near. Mufti Aziz Ur Rehman9 No

10. Faqeir in MENA Region  About 70 million; < US$ 2 per day and  20 million; < US$1.25 per day. 95% of the adults residing in MENA define themselves as religiously observant. Gallup surveyGallup survey > 19 m avoided interactions with FFIs for religious reasons. (Reba) A mere 18 % of adults (above 15) have accounts in FFIs, the lowest in the world. 27% of adults in Tunisia and Morocco having no account at a FFI and 3 % of respondents in Kuwait & UAE (for only religious reason) Global Findex, 2011 Global Findex Mufti Aziz Ur Rehman10

11. Main Issue with Muslim Traders The main issue here is that many Muslim- headed households and micro, small, and medium enterprises may voluntarily exclude themselves from Formal Financial markets because of religious requirements. Freedom? The combination of above facts has produced a growing interest in IF as a possible tool for reducing poverty through financial inclusion among the religiously conscious Muslim population. Mufti Aziz Ur Rehman11

12. Increasing access to Shari’ah compliant or Islamic law, and the use of various financial services can reduce poverty and its severity (harshness) With no access to Islamic Financial Services, many of the poor in MENA will continue to be trapped in poverty with little to no chance of escaping it in the foreseeable future. Mufti Aziz Ur Rehman12 Faqeir in MENA Region

13. Islamic Legal System The Islamic legal system has guidelines and regulations pertaining to the financial transactions of Muslim believers.  The prohibition of pre-defined interest-bearing loans.  Loss-Sharing Profit-Sharing of the business activities.  Islamic microfinance instruments, such as;  Musharakah  Murabaha could be particularly attractive tools for reaching and providing vital credit to the region’s poor, who represent about 17% of the total population of the MENA countries. Mufti Aziz Ur Rehman13

14. Final Word As repeatedly mentioned in such gathering: ‘If you give a man a fish you feed him for one day’ But ‘if you teach him how to fish you feed him for a life time’. We have to fix the meaning of KYC >>> Kidnap Your Customer KYC >>> Kick Your Customer Mufti Aziz Ur Rehman14

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