RIBA (Interest)

الَّل�ُه� ] َّل� َأ�َح� َو� َب�وا� الِّر� ْث�َّل� ِم� ال�َب�ْي�ُع� ا �َّن�َم� ِإ � ال�وا َق� ْم� �َّن�ُه� َب�َأ َذ�ل�َك� � َب�وا الِّر� َم� ِّر� َو�َح� [ال�َب�ْي�ُع�

(That is because they say: "Trading is only like Riba,'' whereas Allah has permitted trading and forbidden Riba)

(Surah Al-Baqarah :275)

Islamic Mode of Financing V/S Conventional Mode

Islamic Financial Institutions Conventional Financial InstitutionsDeal with goods as well as documents Deal with documents only

Supply/Receipt of Goods against money Money/Documents are traded against Money/Document

Islamic Finance for the Poor

MicroEntrepreneurIslamic MF

Poorest of the Poor Qard – e – Hasna

Destitute - Zakat

COMMON MODES OF ISLAMIC FINANCING

PARTNERSHIP BASED

Musharka

Mudarba

TRADE BASED

Murabaha

Musawamah

Sala’m

Istisna

RENTAL BASED

Ijara

Diminishing Musharka

CENTRE FOR WOMEN COOPERATIVE DEVELOPMENT

VISION

POVERTY ALLEVIATION THROUGH

ENTERPRISE DEVELOPMENT

MISSIONTo support the Potential Poor in

Pakistan break out of Poverty cycle by providing them with Necessary Borrower Islamic Finance, Business

Development Services and Advocating their Rights.

BOARD OF DIRECTORS Mr. Ejaz Ahsan CHAIRMAN Mr. Mushtaq Pirzada Vice Chairman Mrs. Samina Islam General Secretary Mr. Abbas Khan Finance Secretary Mrs. Naseera Bokhari Joint Secretary Dr. Shireen Zaffarullah Member Dr. Waseem Bano Member Mr. Jawaid Tariq Member Mr. Raza Toor Member Mrs. Khalil Ramdey Member Dr. Tayyaba Nasreen Member Eng. Arif Toor Member Mr. Razi-u-Din Member Mr. Abdul Rasheed Member (C) Mr. M. Asghar Member(C) Mrs. Afshan Jabeen Member (C) Mrs. Shafqat Saleem Member (C)

*Mrs. Farida Tariq, CHIEF EXECUTIVE OFFICER

EXECUTIVE COMMITTEE Dr. Shireen Zaffarullah Dr. Waseem Bano Mrs. Samina Islam Mr. Abbas Khan Mrs. Farida Tariq

AUDIT COMMITTEEDr. Waseem Bano Mr. Raza Toor, ACAMr. Abbas Khan, FCA

SUSTAINABLE BORROWER

SUSTAINABLE ORGANISATION

A BALANCED APPROACH TOWARDS

ISLAMIC MICRO FINANCE

THREE INGREDIENTS TO ENTERPRISE DEVELOPMENT

SUSTAINABLE BORROWER → SUSTAINABLE ORGANISATION

RIGHT ADVOCACY

BUSINESS DEVELOPMENT SERVICES

ISLAMIC MICROFINA

NCE

Organization Background

• Started up in 1992 with Health & Education Projects

• Working in Microfinance with an Islamic Approach Since 1999

• Consultation with Scholars in Masjid e Ibrahim Lahore in 2002

• Product/Asset based approach since day ONE• Consultation with Mufti Iftikhar Baig in 2006• Development of Islamic Model, 2008

1999 & 2000• Rs.

658,000• 1 Branch

office• 1 District

2001 & 2002• Rs.

1,753,500• 1 Branch

Office• 1 District`

2003 & 2004• Rs.12,583,

000• 2 Branch

Offices• 1 District

2005 & 2006• Rs.122,844

,000• 8 Branch

Offices• 1 District

2007 & 2008• Rs.212,220

,000• 14 Branch

Offices• 3 Districts

2009 Till DateRs. 398,561,329

20 Branch Offices5 Districts

Rs. 19,941,000(Islamic 8 Branches)

Vision 2010

Rs.1,000,000,00030 Branch Offices

Punjab

Districts Being Served:

LahoreSheikhupuraGujranwalaFaisalabad

Nankana Sb

Opening of Islamic Branches

Development of Islamic Manuals

Enterprise Development Facility

Review of Procedures by Shariah Consultant

Financial Highlights2009 2008 2007

Total Assets 342,036,181 241,635,322 187,131,312

Gross Loan Portfolio 145,908,619 116,087,060 106,087,220

Disbursements 105,916,028 113,951,000 98,269,000

Total No. of Clients Served

16,750 13,749 10,025

Operational Self Sufficiency

88.75% 87.6% 89.78%

Total Expense/Assets

12.90 22.86 22.20

Trade Based Mode

• Murabaha• Sala’m• Istisna

Rental Based Mode

• Ijara (Not Currently in Practise)• Diminishing Musharaka

Islamic Modes Chosen by CWCD

MURABAHATRADE

BASED Murabaha has been derived from the concept

of “Bai - Mu’ajjal” which is “Instant Sale”

Instant Sale on Deferred Payment

Murabaha Transaction is always asset backed.

Asset backing is not prerequisite for Interest bearing loans.

It is fixed price contract. Price can not be increased in case of default.

Interest is charged on daily basis from the Customer.

It is purely sale and purchase transaction.

It is lending of money and charging of interest.

Relationship between Bank and Customer is Seller and Buyer.

Relationship between Bank and Customer is Creditor and Debtor.

Murabaha Vs Interest Bearing Loans

LoansMurabaha

MURABAHA

VENDOR

Buys

Pro

duct

Pays

Pur

chas

e Pr

ice

Sells Product at Purchase Price Plus Profit Margin

Pays on Deferred (Installments) Basis

CUSTOMER

Sala’m

Sala’m was permitted to facilitate the poor farmers and Traders who needed money to cultivate their crops or buy items in overseas/foreign lands in order to sell them afterwards.

TRADE

BASED

Sal`mAdvance Payment against Deferred sale

DELIVER GOODS AFTER MANUFACTURING/FARMING

PAYS PURCHASE PRICE OF GOODS BEFORE

MANUFACTURING/FARMING

THIRD PARTY / OPEN MARKET

SELL GO

OD

S AT PRO

FIT

MANUFACTURER/FARMER

Istisna

• It is an order to the producer or manufacturer to produce/manufacture a specific commodity for the purchaser.

• Istisna is also a particular kind of sale which is executed before the Asset come in to existence.

TRADE

BASED

DELIVER GOODS AFTER COMPLETION

PAYS PARTIAL PURCHASE PRICE OF GOODS alongside Production

(Progressively)

THIRD PARTY / OPEN MARKET

SELL GO

OD

S AT PRO

FIT

ISTISNA

MANUFACTURER

Diminishing Musharaka

• Financier and his client participate either in the joint ownership of a property or an equipment, or in a joint commercial enterprise. The share of the financier is further divided into a number of units and it is understood that the client will purchase the units of the share of the financier one by one periodically, thus increasing his own share till all the units of the financier are purchased by him so as to make him the sole owner of the property, or the commercial enterprise, as the case may be.

• The client pays rent for the portion of asset used by the client, owned by the financer incase of joint ownership of property or equipment

Rental Based

Diminishing Musharaka

VENDORJoint Purchase of Asset

Client Purchases CWCD Ownership & pays Rental on Remaining CWCD Ownership

CUSTOMER

Asset Purchased is Insured through Takaful

School Construction/Rennovation Up to Rs. 300,000 (Murabaha/Istisna)

• Upper Cap – Rs. 300,000 per case• Rate is negotiated with the client• Done under Islamic Mode of Microfinance– Murabaha– Istisna(Pipeline)

• Project has been completed within 2 months, and demand is coming from other enterprises for similar facility

Financial Highlights For Islamic Microfinance

Apr 2009 – Oct 2009

Total No. of Clients till Date 391

Average Facility Size 51,000

Total Amount of Facility Procured 19,941,000

Total Number of Branches 8

Challenges Faced in Islamic Microfinance Sector

• Sources of FUND– The funds available are not in Islamic Mode and

hence the Organization can never become completely Islamic

• Increase in Cost of Transaction• Understandability of Islamic Finance• Availability of trained Human Resource

CWCD ISLAMIC MICROFINANCE TRAINING WING

• Training Opportunities on Procedures of Islamic Microfinance, by the experienced Trainers of CWCD

Low cost training for the actual working in Shariah Complaint Microfinance

Interactive Sessions with Shariah Advisor

Future Plans

• Expansion of Islamic Microfinance within Punjab

• Pre testing and Implementation of Musharaka & Mudaraba

• Research & Development of new Islamic Microfinance Products

Thank You for Your Attention