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8/9/2019 Islamic Micro Finance to Micro Entrepreneurs_26112009sdn
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November 26, 2009BY: SAEBANI HARDJONO
Class : Islamic Banking Networking & Micro EnterpriseProf. Nurul Alam, Ph.D
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Islamic Bank An Islamic bank may be defined as a financialintermediary whose objectives and operations as
well asprinciples and practices must conformto the principles of Islamic Law (Shariah); and,consequently, is conditioned to operate all itsactivitieswithout interest.
Islamic bank is not only a financier but alsoa partner in business. The system essentially
involves sharing of risk between the ownerof capital and the entrepreneurs, as well assharing the result of the collective efforts.
In other way we can callIslamic
bankingas participatory banking.
An interest-based system in which
the risk is mainly borneby the entrepreneur
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Islamic Banks Around the-WorldThe Islamic Society of North AmericaCanada (ISN A, 2000), has initiated Islamicbanking activities in recent years and startedlending interest-free funds.
Western banks such as, the KleinworteBenson, Citibank and ANZ Grindlays alsostarted to adopt the pattern of Islamicbanking in cost-plus financing.
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Modes of Investment of Islamic BankThe modes or techniques of accepting deposits and lending funds to
customers differ from conventional banks.
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Microfinance...(continue)Microfinance Institutions (MFIs) are now innovating to help meet these needs,
empowering the world's poor to improve their own lives.
The global repayment rate for microcredit loans is higher than 95 percent,which allows MFIs to re-lend these funds to even more clients.
By giving the world's poor a hand up, a not a hand out,
microfinance can help break the cycle of poverty
in as little as a single generation.
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Microfinance...(continue)
The World Bank, among others, indicates that gender inequalities inhibitoverall economic growth and development. A recent World Bank report confirms
that Societies that discriminate on the basis of gender pay the cost of greaterpoverty, slower economic growth, weaker governance, and a lower living standard
for all people.
Women have a higher unemployment rate than men in virtually every countryand make up the majority of the informal sector of most economies. They constitute
the bulk of those who need microfinance services.
Women have become the
primary target of
microfinance services.
At a macro level,
it is because 70 percent of
the world's poor arewomen.
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IslamicMicrofinanceIsla ic icr fi a ce as ar ly ee e ti e i t is c text, i.e., t e c llectif s all savi gs a t e r visi f s all l a s ase S aria .
In Iran Islamic finance is mandatory
Islamic microfinance: some have been mandated by the state, but lackpopular demand; others have emerged in response to popular demand, butlack regulatory support by the state. Paradox
Indonesia is probably the country with the greatest diversity of both
conventional and Islamic microfinance.
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IslamicM
icrofinance (...continue)Islamic microfinance represents the confluence of two rapidly growing industries:microfinance and Islamic finance.
Today, the total assets of Islamic financialproducts is estimated at US$500.5 billion(The Banker 2007) and the Islamic financeindustrys 100 largest banks have postedan annual asset growth rate of 26.7percent, outpacing the 19.3 percentgrowth rate of their conventionalcounterparts (Kapur 2008).
IMF has the potential to not only respond to unmet
demand but also to combine the Islamic social
principle of caring for the less fortunate with
microfinances power to provide financial access
to the poor.
Unlocking this potential could be the key to
providing financial access to millions ofMuslim poor
who currently reject microfinance products that
do not comply with Islamic law. IMF is still in its
infancy, and business models are just emerging.
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Isla ic Micr fi a ce (...c ti e)
The supply of Islamic microfinance is veryconcentrated in a few countries, with the top threecountries (Indonesia, Bangladesh, and Afghanistan)accounting for 80 percent of global outreach.Nevertheless, demand for Islamic microfinanceproducts is strong. Surveys in Jordan, Algeria, andSyria, for example, revealed that 2040 percent ofrespondents cite religious reasons for not accessingconventional micro loans.
Islamic microfinance has the potential to expand access to finance tounprecedented levels throughout the Muslim world.
An estimated 72 percent of people living in Muslim-majority countries do not use formal financial services
(Honohon 2007).
In recent years, some microfinance institutions (MFIs) have stepped in to service low-income Muslim clients who demand products consistent with Islamic financialprinciples leading to the emergenceof Islamic microfinanceas a new market niche.
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IslamicMicrofinance (...continue)The most widely available types of Islamic microfinance contracts :
Murabaha Sale (cost plus markup sale contract). The most widely offered Sharia-compliant
contract is murabaha, an asset-based sale transaction used to finance goods needed
as working capital. Typically, the client requests a specific commodityfor purchase, which
the financier procures directly from the market and subsequently resells to the client, after
adding a fixed mark-up for the service provided.
Ijarah (leasing contract). Ijarah is a leasing contract typically used for financing equipment,
such as small machinery. Duration of the lease and related payments must be determined
in advance to avoid any speculation. For the transaction to be considered Islamic (and not
a sale with camouflaged interest), the ijarah contract must specify that the ownership of
the asset, and responsibility for its maintenance, remains with the financier.
Musharaka and Mudaraba (profit and loss sharing). The profit and loss sharing (PLS) schemes
are the Islamic financial contracts most encouraged by Sharia scholars. Musharaka is equity
participation in a business venture, in which the parties share the profits or losses according to
a predetermined ratio. Mudaraba denotes trustee financing, in which one party acts
as financier by providing the funds, while the other party provides the managerial expertise
in executing the project.
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IslamicMicrofinance (...continue)
In Indonesia, the government has actively promotedIslamic microfinance. In 2002, Bank Indonesia prepared
A Blueprint of Islamic Banking Developmentin Indonesia in which it developed a nine-year planfor development of the Islamic finance sector, includingsupport for the 105 Sharia rural banks. Indonesia nowprovides a supportive regulatory framework and haslicensed 35 new Islamic rural banks in the past five
years. Bank Indonesia also is spearheading effortsin capacity building by establishing a center in Medanto offer training and certification on Islamic financialoperations to Sharia rural bank staff, managers, anddirectors.
Indonesia
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EconomicActors
IFS
CFS
TMLS
MBFSMarket BasedFinancing Systems
Islamic Financing Systems
Traditional Money Lending System
Cooperative
Financing Systems
M
ajorF
inancial Institutions
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EconomicActors
(FOs & SCIs)
PoliticalSystems
LegalSystems
Govern-ment
FamilyClan
Religion
CountryCulture
How each of those factors influence the lending & borrowing systemSociety
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Creates The UniverseConnection
Buyer & Seller
Network of humanbeing in the world
Network man to the God
Position of human
NETWORK
How s all we are
What is Network
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IndustrialNetwork
ctors
ctivity
Resources
PersonalNetwork
NETWORK
1 Instrumental Network
2 Personal or (affective) network
3 Symbolic or (moral) network
Instrumental network: e.g. in supply and sales contacts, PR relationsPersonal (affective) network : rooted in sympathy or mutual support.Symbolic (moral) network : a rooted in common attitude/goal (political,ethnic, religious, moral)
Different Types of Networks
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PL
DF
FSHC
SM
MFS Institution MES
Intra
Organizational
NW
Economic Actors
Islamic
Bank
Economic Actors
Intra
Organizational
NW
TEAMGROUP
MICRO ENTREPRENEURS
Micro Finance &Micro Enterprise Networking
Micro Finance System Micro Enterprise System
5 - 5
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Religious GroupSocial LeadersLocal Leaders
Isla icFi a ci g
S ste (IFS)
GL S steS S steS S ste
The Network Triangle
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