World Islamic Economic Forum Dhaka, Bangladesh 1 Islamic microfinance: An Instrument for Poverty Alleviation

World Islamic Economic Forum Dhaka, Bangladesh 2 B B The background 1

World Islamic Economic Forum Dhaka, Bangladesh 3 The background B B The facts about the low income society 1.The low income segment is significant, particularly in developing countries; 2.There is a need to establish special vehicles to accommodate the low income society with appropriate financial facilities providing them fair chances to develop themselves, and 3.In some countries, this becomes part of national initiatives in reducing unemployment rate and promoting broader production base.

World Islamic Economic Forum Dhaka, Bangladesh  Poverty alleviation program  Zakat, infaq and sadaqah institutions  Poverty alleviation program  Zakat, infaq and sadaqah institutions 4 B B  Commercial n rural banks, and microfinance institutions  Government supported programs  Zakat institutions  Commercial n rural banks, and microfinance institutions  Government supported programs  Zakat institutions  Commercial n rural banks with plafond of USD  Government supported programs  Commercial n rural banks with plafond of USD  Government supported programs  Capital market  Commercial banks  Other sources  Capital market  Commercial banks  Other sources Sources: Ministry of cooperative and small and medium enterprises Sources of financings Big enterprises Medium enterprises Small enterprises Micro enterprises Marginally poor Absolute poverty 4.3k (0.01%) 39.6k (0.08%) k (1.01%) 50.7 M (98.9%) The background

World Islamic Economic Forum Dhaka, Bangladesh 5 The background B B Critical issues Persisting demand-supply gap in terms of fund, particularly in remote areas. Lack of coherent microfinance policy and comprehensive microfinance development strategy, enabling legal environment and regulatory framework, insufficient supervisory authority (esp. for BMTs & Zakah Fund Institution)  livelihood of MSMEs & MFIs – Macro Level Diverse financial / non-financial infrastructure comprising of technical service & training providers, rating agencies & auditors, professional networks & associations, credit bureaus, transfer & payment system operators, and IT providers – Meso Level Relatively weak human and institutional capacity – Micro Level

World Islamic Economic Forum Dhaka, Bangladesh 6 B B MFIs ZFIs MSMEs Economic Growth Economic Growth Broader Supply Broader Supply Broader Demand Broader Demand Working capital to support productions Working capital to support productions Fundamental support for consumptions Fundamental support for consumptions The rationale for development The background

World Islamic Economic Forum Dhaka, Bangladesh 7 B B Financing scheme 2

World Islamic Economic Forum Dhaka, Bangladesh 8 B B Financing scheme MFIsDefinitionsRegulators Islamic Rural Bank (IRB)Small banks offering more limited range of services (compared to Islamic Commercial Bank) Central bank Islamic microfinance institutions An Islamic Savings & Credit Cooperative which is governed by cooperative law Ministry of Cooperative & SMEs Units of Islamic Commercial Banks Functioning as the arm of Islamic banks microfinance Central bank Zakah Fund Institution (ZFI) Private Owned Institution which managing Islamic Social Funds (Zakah, Infaq, Shadaqa & Waqf) Ministry of Religion & National Zakah Body Regional Financing Institution Functioning as the arm of the local government in Local Government

World Islamic Economic Forum Dhaka, Bangladesh 9 B B Financing scheme MFIsFundingFinancing Islamic Rural BankDepositors, ICB, ApexFormal MSMEs Islamic microfinance institutions Members, ICB, Apex, Government, NPOs, CSR of Companies Informal MSEs (members) Units (Islamic Business Unit of BRI) DepositorsRural MSMEs Zakah Fund Institution (ZFI) Muzakki, CSR of CompaniesPoorest of the poor Regional Financing Institution Local Government BudgetUnemployed & informal MEs

World Islamic Economic Forum Dhaka, Bangladesh 10 B B The programs 3

World Islamic Economic Forum Dhaka, Bangladesh 11 The programs B B Lack of fin support Lack of fin support Lack of fin support Lack of fin support No collateral Life problem Lack of integrity Lack of integrity Basic needs Basic needs Spiritual treatment Spiritual treatment Technical assistance Technical assistance Commercial funds Commercial funds Social funds Problems Solution Development program Development program

World Islamic Economic Forum Dhaka, Bangladesh 12 The programs B B Islamic banks or microfinance institutions Islamic banks or microfinance institutions Government Supported programs Government Supported programs ZISW Spiritual treatment Spiritual treatment Technical assistance Technical assistance Commercial funds Commercial funds Social funds Institutions Programs Development program Development program Consultant or university Consultant or university

World Islamic Economic Forum Dhaka, Bangladesh 13 B B Thank you for your kind attention and support