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we need to innovate to overcome the challenges facing micro entrepreneurs. A unique Islamic M&SME’s banking experince from Bahrain focuses on entrepreneurship and Islamic Microfinance finance models.
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1
Dr Atef El Shabrawy
CEO of family bank, kingdom of Bahrain
Innovation in Islamic M&SME’s banking
2
Challenges in Muslim Societies
1. Explosion of demand for Islamic finance (Micro & small): 1. Increasing number of unemployed & fresh graduated
2. Exclusion of poor, (youth and women) from financial services
3. Financial services gap of small & micro finance
2. Threats facing MFI’s
1. Weight of microfinance Central Banks rules & regulations on MFI’s
2. Lack of governance & capabilities of MFI’s
3. Weak capabilities & competitiveness of micro entrepreneurs
1. Low skills and absence of proper training
2. Low value-added businesses (farmers, handcrafts, homemade, …).
Copyright Atef El Shabrawy 2013 : [email protected]
3
Example of M&SME’s finance in Bahrain
> BD 20,000
SME Loans
Bahrain Development Bank
Microfinance
Current situation
•Increasing welfare recipients
•High unemployed women %
•Large informal sector
•No specialized finance
•Need to have Islamic finance
Opportunities
Commercial
Banks
> BD >7000
≤ BD 5,000
Copyright Atef El Shabrawy 2013 : [email protected]
4
Innovation in the creation of the model
1- Shareholders composition
The partnership between government, NGO’s &
private sector..
Paid-up capital: BB5m & allowed BD15m
Copyright Atef El Shabrawy 2013 : [email protected]
5
Innovation in the creation of the in model
2- The financial institution type
Shk Issam Ishaq
Dr Osama Bahr
Dr Mohamden Golam
Sharia Advisory Board
A specialized Islamic microfinance bank licensed by Central Bank of Bahrain
Copyright Atef El Shabrawy 2013 : [email protected]
6
Innovation in the creation of the instution
3- The Target group
Major challenges
• Fear of start
• Lack of incentives
• Lack of support
• Rigid services
1. First time in business 1. Individuals receiving Government aid 2. Productive Families (home-based business) 3. Women/Unemployed youth & Handicapped
2. Small & Micro businesses (Startup’s) 3. NGO’s & Charity funds
Copyright Atef El Shabrawy 2013 : [email protected]
Po
vert
y lin
e
Deprived Rich Very poor Relative poor Not poor
Not poor
But vulnerable
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Innovation in the creation of the instution
4- The Guiding principles
Major challenges
• Lack of Collateral
• Lack of legal form
• Lack of guarantee
• Lack of experience
• Islamic finance only • Collateral Free finance • No legal or formal entity required • Low cots finance • Target the Financially Disadvantaged • Bank will go to the Poor • Provide Non-financial services
Copyright Atef El Shabrawy 2013 : [email protected]
8
Key programs
1. Group finance through Grameen BD500 to 3,000 ($0.377=1BD ) 2. Microenterprise finance BD3000 to 7,000 3. Finance schemes through NGOs/ MFI 4. Non-Financial Services (training, counseling, marketing,) Microfinance products : housing, education, live improvement, health finances
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Islamic Developed Products
10/8/2013
• Microcredit 1. Mudharaba Financing
2. Murabaha Financing
3. Murabaha By Tawarrq Financing
• Microfinance 1. Estissnaa Financing
2. Ijara Financing
3. Ijara Manafee Financing
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Innovation in the creation of the instution
5- The operational innovation
Major challenges
• Delivery cost
• Credit behavior
• Cost of collection
• Geographic coverage
• Partnership Tamkeen to subsidy the profit rate • Partner with Remittance co. to use branches • Partner with ministries to use their centers • Partnership with NGO’s to deliver • Partnership with collection company • Partnership with BCCI to use business center facilities • Partnership with a legal firm as CS
Copyright Atef El Shabrawy 2013 : [email protected]
11
Innovation in the creation of the instution
6- The Non-financial services innovation
Major challenges
• Low skills
• absence of training
• Low value-added
businesses
1. Pre-disbursement induction training 2. Obligatory entrepreneurship training 3. Monthly meetings, counseling 4. Extensive marketing & sales supports 5. Monthly awards for good customers 6. Incubators and ministerial services links
Copyright Atef El Shabrawy 2013 : [email protected]
12
Innovation in the creation of the instution
7- The Social Innovation
Major challenges
• Lack of ideas
• Social role
• Impact on the bank
• Establish of “Idea Factory” to introduce creative business ideas
• Organization of “Social Business Weeks” • Collaboration with Universities students to train clients • Collaboration with CocaCola to establish “Kiosks” for
disabled
Copyright Atef El Shabrawy 2013 : [email protected]
13
Partners
NGO’s
15
Achievements since March 2010
Financed business sectors
About 1700 members
Grameen 1350 & MEF 350 active members
Copyright Atef El Shabrawy 2013 : [email protected]
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Achievements since March 2010
0
200
400
600
800
1000
1200
1 2 3
No of clients
2010 2011 2012 0
500
1000
1500
2000
2500
3000
3500
4000
2010 2011 2012 2013 (UptoApril)
Number of created jobs
Copyright Atef El Shabrawy 2013 : [email protected]
19 Copyright Atef El Shabrawy 2013 : [email protected]
20
Thank you for your attention!
www.familybankbh.com
قال هللا تعالى ى عالم
ون إل مؤمنون وسترد
ه وال
فسيرى الله عملكم ورسول
وقل اعملوا
ئكم بما كنتم تعملون هادة فينب غيب والش( 105: التوبة )ال