Applying Islamic Finance Principles to Microfinance

Top 20 FREQUENT WORDS

islamic 24 microfinance 13 finance 11 financial 11 financing 8 murabaha 8 muslim 7 business 6 principles 6 aid 5 based 5 client 5 profit 5 sharing 5 systems 5 access 4 banking 4 economic 4 profits 4 prohibition 4 risk 4

DOCUMENT KEY POINTS

what is islamic finance i refers to a system of banking that is consistent with islamic law sharia principles i this system reflects islam s teachings on wealth distribution social and economic justice
i the basic practices and principles of islamic finance date back to the early part of the seventh century

i islam encourages the earning of profits but forbids the charging of interest i to replace interest the ideal mode of financing under the islamic banking system is financing on profit loss sharing pls basis
the holy qur an in verse of surah al baqarah states o ye who believe fear allah and give up what remains of your demand for riba if ye are indeed believers

murabahacost plus financing this involves the purchasing of goods by a bank at the customer s request to be sold to the customer at an agreed mark up
mudaraba profit sharing bank provides all the money and the client provides their expertise skills and invests this money in an attractive business

a a c islamic finance seeks to finance business activity which will lead to the economic empowerment of the poor rather than merely lend to the poor for consumption
a c the focus on financing real tangible economic activity fits very well with the goals of microfinance a c microfinance is already more structurally aligned to applying islamic equity financing structures

similiarities both systems if advocate entrepreneurship if risk sharing if strongly believe the poor should take active part in their own development
if financial inclusion if represent unconventional solutions to financial needs if they start from egalitarian approaches

a c used the murabaha model and purchased commodities for entrepreneurs a c funds totaling were distributed a c repayment rate was by the end of first year impact assessment a c of our clients reported they are much better off a c said their sales and production improved whilst a significant improvement i can buy more raw materials with this money without having to pay high interest so i will be able to expand my business and earn higher profits said noorul rizwan who sells cloth makes paper bags and cooks food for sale from her home to support her three school going children
muslim aid sri lanka murabaha a c muslim aid launched it s first islamic microfinance pilot scheme in april with amana investments ltd

a c self reliant local financial institutions have been established consisting of members a c each start up is self financed a c when ever repayment is satisfactory undp provides an additional capital injection a c profit margin on murabaha is
a c a source of income a c repayment reached by the end of the first year of operation brandsma

a c providing shariah compliant loans has made it possible for finca to expand in areas of afghanistan where other mfis have been turned away for charging interest
finca afghanistan murabaha a c finca loans are based on murabaha principles they don t charge interest but a markup rate

conclusion if diverse approaches are neededmaking this a reality entails breaking down the walls real and imaginary that currently separate microfinance from the much broader world of financial systems if in the context of poor people in muslim societies building inclusive financial systems would most certainly require integration of microfinance with islamic finance
if cultural and religious sensitivities of the islamic world are somewhat unique and these must be given due emphasis in any attempt to build inclusive financial systems and bring the over onebillion muslims into the fold of formal financial syste miss

muslim aid towards economic empowerment thank you muslim aid po box london e wp contact abyan muslimaid
org empowerment muslimaid

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DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\islamic micro

KeyWords

islam finance bankable contract client profit purchase financial asset microfin risk sale transact price murabahah busi sharia goodasset payment invest

DOCUMENT REFERENCES

Number of Pages

17

Published Date

2016-09-17 00:47:06

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