1. Islamic Finance and NGOs in India AUSAF AHMAD Coordination Meeting of NGOs in India JAN 06 2008 income saving Investment

2. This Presentation Shall tell you what is the relevance of Islamic Finance in Muslim Minority Countries. Shall tell you what is the relevance of Islamic Finance in Muslim Minority Countries. What is the present situation of Islamic Finance What is the present situation of Islamic Finance Conduct a SWOT analysis Conduct a SWOT analysis Suggest remedial measures. Suggest remedial measures.

3. Are the IFIs NGOs? A non governmental organization (NGO) is a legally constituted organization created by private persons or organizations with no participation or representation of any government. In the cases, in which NGOs are funded totally or partially by governments, NGOs maintain their non governmental status so far it excludes government representatives. A non governmental organization (NGO) is a legally constituted organization created by private persons or organizations with no participation or representation of any government. In the cases, in which NGOs are funded totally or partially by governments, NGOs maintain their non governmental status so far it excludes government representatives.http:/Wikipedia.org/wiki/NGO

4. TYPES OF NGOs INGO [International NGO] INGO [International NGO] BINGO [Business oriented NGO] BINGO [Business oriented NGO] EINGO [Environment] EINGO [Environment] GONGO [Government Operated] GONGO [Government Operated] QUANGO [Quasi autonomous] QUANGO [Quasi autonomous] TANGO [Technical Assistance] TANGO [Technical Assistance] CSO [Citizens Sector Organization] CSO [Citizens Sector Organization]

5. PRESENT SCENE OF IFIs Islamic Banks in the Government Sector Islamic Banks in the Government Sector –Pakistan, Sudan, Iran Islamic Banks in the Mixed Sector Islamic Banks in the Mixed Sector - Malaysia, Egypt Islamic Banks in the Private Sector Islamic Banks in the Private Sector-Gulf Non Banking Financial Institutions Non Banking Financial Institutions - India Islamic Financing by standard Commercial Banks Islamic Financing by standard Commercial Banks

6. FINANCIAL NEEDS OF HOUSEHOLD

7. Much of the Development of Islamic Banking that has taken place in the eighties and nineties in the Gulf and elsewhere has been in the organized Corporate Sector Much of the Development of Islamic Banking that has taken place in the eighties and nineties in the Gulf and elsewhere has been in the organized Corporate Sector ISLAMIC BANKING IN THE CORPORATE SECTOR

8. LIMITATIONS OF THE CORPORATE SECTOR REQUIRES: 1. Large Capital 2. Large size of Market 3. Favorable Political Climate 4. Institutional and Legal Framework Negative Mental block against Islamic banking is a big barrier against it in the Muslim Minority countries.

9. OBSTACLES IN THE ESTABLISHMENT OF IFIs 1. Lack of Political Support 1. Lack of Political Support 2. Lack of Expertise and Know- how 2. Lack of Expertise and Know- how 3. Lack of Organizational Finance 3. Lack of Organizational Finance 4. Lack of Favorable Political Climate 4. Lack of Favorable Political Climate

10. INTEREST FREE FINANCIAL INSTITUTIONS IN INDIA More than 200 institutions, mostly loan societies and investment companies. More than 200 institutions, mostly loan societies and investment companies. Operating in the unorganized sector Operating in the unorganized sector Misnomer to describe them as Islamic Banks Misnomer to describe them as Islamic Banks Societies registered under Societies Act. Many remain unregistered. Societies registered under Societies Act. Many remain unregistered. Different sources of funds Different sources of funds Lack control and regulation due to absence of legal framework. Lack control and regulation due to absence of legal framework. Non Banking Financial Companies and Islamic Investment Companies. Non Banking Financial Companies and Islamic Investment Companies.

11. NEEDS FOR MICRO FINANCE IN INDIA With 63000 branches of commercial banks, 14000 branches of regional rural banks and 100,000 branches of cooperative banks, banking is out of reach for millions. With 63000 branches of commercial banks, 14000 branches of regional rural banks and 100,000 branches of cooperative banks, banking is out of reach for millions. 75 million household depend on money lenders. 75 million household depend on money lenders. 90 percent in Rural India have no access to institutional credit. 90 percent in Rural India have no access to institutional credit. Micro credit can change lives. Micro credit can change lives.

12. Interest Free Societies in India 1. Interest Free Credit Associations 2. Interest Free Financial Companies 3. Investment Funds

13. Interest Free Credit Associations Mostly established in late 70 and 80s. Coincides with employment upsurge in the Gulf Mostly established in late 70 and 80s. Coincides with employment upsurge in the Gulf Concentrated in South India: Karnataka, kerala, AP and Chinnai. Concentrated in South India: Karnataka, kerala, AP and Chinnai. Motivation: Avoid Riba Motivation: Avoid Riba Registration: Charitable Societies or unregistered. Registration: Charitable Societies or unregistered.

14. Interest Free Credit Associations II Sources of Funds: Different for Charitable Societies, Cooperative Societies, Sources of Funds: Different for Charitable Societies, Cooperative Societies, Size of Capital involved: Difficult to tell Size of Capital involved: Difficult to tell Business Practices: Business Practices: -Deposit taking -Deposit taking - Providing Loans - Providing Loans - Leasing? - Leasing?

15. SWOT ANALYSIS OF IFCAs Strength: Grass Root organizations Micro Financing Weakness: Unorganized Sector Lack of professionalism Lack of regulation (security) Opportunity: Mobilization of hidden resources Mobilization of hidden resourcesThreat: Disintegration Disintegration

16. Islamic Financial Companies Al Ameen (Bangalore) Al Ameen (Bangalore) Al Falah (Delhi) Al Falah (Delhi) Al Mizan (Chinnai) Al Mizan (Chinnai) Al Najeeb, (Bijnor, U.P.), Muslim Fund Al Najeeb, (Bijnor, U.P.), Muslim Fund Al Idafa (Mumbai) Al Idafa (Mumbai) First three have been closed by the RBI for non compliance. First three have been closed by the RBI for non compliance.

17. SPIRIT OF COOPERATION Democratic Participation Democratic Participation One person One vote One person One vote Open membership Open membership Cooperative Education Cooperative Education Cooperate with other organizations. Cooperate with other organizations.

18. REMEDIES Require Legal Framework Require Legal Framework Professionalism Professionalism Transparency Transparency Productivity and Efficiency. Productivity and Efficiency. Needs to be organized Needs to be organized