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Sucssefull of micro finance Islamic micro finance

Basically Micro finance is ??

intro The financial institutions offer financial services

such as: saving accounts, financing services for the customers, insurance, financing business project and money transfer. The extra services, such as insurance, are considered a worldwide mutual orientation of the financial institutions resulting from the growing need for such services by the customers. Money transfer across continents became easy and fast and different types of insurance appeared in the industrial countries such as, life insurance, sheep insurance and climate insurance.

Finace The success of many MFIs can be deter-mined by its ability to merge the suc-cessful practices of the informal sectors' institutions in the

formal institutions

The practices include: flexibility, money easy access, easy and clear conditions

. The success relies on the ability to transform these attributes from the financiers to the formal financial institution with reducing the revenues margins

To success finance 1-Quick access:2-Clear, easy and flexible terms:3-Permanent services:4-Alternative guarantees and guarantees

substitutes:

Quick access The quick approval and payment of the

financing are crucial issues for customers. Mostly it is the main reason motivates people to deal with the money lenders even with very high revenues margins.

Clear, easy and flexible conditions:

Suitable conditionAdministrative feesNo specific goal Control the client

Conditions in Sudanese banks 1-provide finance to an active poor2- loan amount is 20000SDG3- provide a suitable grantee4- choose the method to pay back

Permanent servicesThe discontinuity of the financing services

is considered the primary weak point for many projects which, despite its effectiveness

Alternative guarantees and guarantees substitutes Poor people usually lack traditional

guarantees. , many MFIs use other types of guarantees known as alternative guarantees or guarantees substitutes. The group guarantees is a good example of the first type while the private properties such as machines and jewelry represent the guarantees substitutes which are not approved in the ordinary banks.

Grantee accepted by formal sector1- group grantee 2- saving of group 3-mortage of propriety except family home 4- salary5- deposits6-personal grantee7- check grantee 8- social grantee

Islamic MF

5.1 Mudarabah Mudarabah has the potential to be adapted

as Islamic microfinance scheme. Mudarabah is where the capital provider or microfinance

institution and the small entrepreneur become a partner . The profits from the project are shared

between capital provider and entrepreneur, but the financial loss will be borne entirely by the capital provider.

MudarabahMudarabah structure may also be based on

two-tier structure or re-mudarabah where 3 parties i.e. capital provider

(public,government, zakat, waqf etc.), intermediate mudarib (IslamicBank) and final mudarib (micro entrepreneur). The profit-sharing ratio on mudarabah is pre-determined only as a percentage of the business

profit and not a lump sum payment.

Musharakah Musharakah can also be developed as a micro

finance scheme where Islamic bank will enterinto a partnership with micro entrepreneurs. If

there is profit, it will be shared based on pre-agreed ratio, and if there is loss, it will then be shared according to capital contribution ratio. The mos suitable technique of musharakah for microfinance could be the concept diminishing partnership or musharakah mutanaqisah.

Murabahah Using murabahah as a mode of

microfinance requires Islamic bank to acquire and purchase

asset or business equipment then sells the asset to entrepreneur at mark-up. Repayments of the selling price will be paid on installment basis

5.4 Ijarah Ijarah Muntahia Bitamleek is an

elaborate concept of ijarah where the transfer of ownership will take place at the end of the contract and pre-agreed between the lessor and the lessee.+

5.5 Qardhul Hasan Another simple concept that can be

advanced for microfinance purposes is qardhul hasan or

simply means an interest free loan. Islamic bank can provide this scheme to the entrepreneurs who are in need of small start-up capital and have no business experience. The Islamic bank then will only be allowed to charge a service fee.