IslamicFinance.de

Two billion people worldwide still lack access to formal and regulated financial services. In 2015, the World Bank Group with private and public sector partners committed to promoting financial inclusion and achieving Universal Financial Access by 2020. According to the Pakistan Microfinance Network
the estimated potential market size for microfinance is 20.5 million in Pakistan, yet the current Microfinance outreach is close to 3.7 million active borrowers, showing there is a long way to go.

Gemeinschaftsbank für Leihen und Schenken (GLS), a German bank that focuses on investing in socially responsible and ecological projects, recently invested EUR 13 million (USD 14.5 million) in Sanad Fund for MSME, a Luxembourg-based public-private partnership that provides debt and equity financing in the Middle East and North Africa. As of March 2016, Sanad has raised total investor commitments of USD 186 million. As of 2013, GLS had total assets of EUR 3.2 billion (USD 4 billion), deposits of EUR 2.8 billion (USD 3.5 billion), a loan portfolio of EUR 1.7 billion (USD 2.1 billion) and 165,000 customers.

Thousands of Pakistani households are turning to microfinance institutions which provide loans based on Islamic law, or Sharia. The available video looks at micro financing solutions in Pakistan provided by Achuwat which provides interest free loans. Religious lending is expected to grow in the coming years, and this video looks at case studies of a school teacher and tailor. The majority of clients of micro financing solutions are women.

In Iraq, authorities continue to battle ISIS while advancing important political reforms. And microfinance – in the broad sense of providing credit, savings, payments, and insurance to low-income households and small businesses – is one intervention poised to promote local economic activity and help manage economic shocks. The 2014 Findex survey found that only 11% of the adult population has an account at a formal financial institution. It also revealed a significant gap between Iraqi citizens who borrowed formally (4%) and those who did so informally (65%), hinting for a much higher demand than that currently served by the financial sector. This is notably because Iraq’s financial system remains seriously underdeveloped, as highlighted in the World Bank’s 2011 Financial Sector Review.

MicroDahab MFI, the microfinance subsidiary and corporate social responsibility initiative of the United Arab Emirates-based conglomerate Dahabshiil Group; and SolarGen Technologies, a Somalia-based distributor of renewable energy technologies, have announced a joint energy project in Somalia. The project will allow low-income Somali farmers and entrepreneurs to acquire a “solar-powered water pump” under a “lease to purchase” agreement. The African Enterprise Challenge Fund (AECF), a Kenya-based fund that promotes for-profit enterprises operating in Africa, has provided unspecified support to the initiative. MicroDahab will bear both the capital cost and risk of asset ownership, while its clients reap the benefits of using the water pumps, at minimal rents.

The 18th Microcredit Summit, “Frontier Innovations in Financial Inclusion” will be held in Abu Dhabi, United Arab Emirates on March 15-17, 2016. The objective of the event is to provide a platform for participants to discuss financial inclusion policies, regulatory frameworks, resilience and empowerment solutions, microfinance products, and synergies with the aim of promoting social inclusion for all. The conference will address themes: (1) “National Financial Inclusion Strategies;” (2) “Pathways to Social & Financial Inclusion;” and (3) “Partnerships that Build Bridges to New Frontiers.” Additional information is available on the event website http://18microcreditsummit.org/.

PBMT is the coordinating body of BMT (Baitul Maat wat Tamwil / House of Social and Business) organizations in Indonesia. BMT itself is a microfinance institution which also acts as a social enterprise, using the principles of Sharia economy to lift people out of poverty. In Indonesia, the BMT helps the poor through a systematic step-by-step mechanism. First, the very poor people are given a grant from the donors’ donations, and guidance to start their micro-enterprises. Once they are on the right track, they will be granted a non-commercial loan with no interest. In the last stage, these people would ideally have established their own micro-enterprises.

A new study from IFC has found that external risks, security concerns, and over-indebtedness are perceived as the most serious challenges facing the microfinance sector in the Arab World. The survey, conducted in conjunction with Sanabel, the Microfinance Network of Arab Countries, said tackling those problems will be key to spurring the development of the industry. Microfinance has grown at a much slower rate in MENA over the last six to seven years, than it has in other parts of the developing world. The report marks the first in a series of studies on the microfinance sector to be developed by IFC and Sanabel. The initiative is part of IFC's wider efforts in MENA to expand access to finance, support to micro, small, and medium enterprises, and create jobs.

The paper “Is Islamic Banking Good for Growth?”; by Patrick Imam and Kangni Kpodar analyzes the relationship between the development of Islamic banking and economic growth in low- and middle-income countries. The focus note “Costs and Sustainability of Sharia-Compliant Microfinance Products” by Mayada El-Zoghbi and Kaylene Alvarez assesses the operational costs, overall cost structures and business models of Sharia-compliant financial service providers (FSPs). The paper “Islamic Microfinance in Yemen: Challenges and Opportunities;” by Ali Saleh Alshebami and Dr DM Khandare reviews the Islamic banking sector in Yemen from 1997 to 2013, identifying challenges to the implementation of Islamic banking practices in the country.

Under the benefaction of AlHuda Center of Islamic Banking and Economics (AlHuda-CIBE) and Akhuwat, the 5th Global Islamic Microfinance forum (GIMF) was held in Kuala Lumpur, Malaysia. The forum had their focus on financial inclusion, outreach strategies of Islamic Microfinance, Innovation and sustainable operational strategies with emphasis on linkages, institutional support, cross boarder knowledge sharing with practical experiences and donor linkages for the development of the Industry. The Guest of Honor at the Forum, Dr. Azeema Adam, Governor, Maldives Monetary Authority (Central Bank), Maldives, gave detailed overview of Maldives Monetary Authority for the development of Islamic Microfinance and other Islamic Financial components.

As the Shariah-compliant Islamic finance sector booms in the GCC region, the President of the Islamic Development Bank (IDB) Group, Dr. Ahmad Mohamed Ali, asked experts in the field to develop new Islamic microfinance structures. Ali says the industry needs to leverage existing technologies and business approaches, such as mobile banking, to start developing microfinance initiatives that would support small and medium enterprises (SMEs). Ali said those actions would help local economies and cement the Islamic finance industry’s place as a leader in the global economy.
Ali’s remarks came at a conference in Kuwait entitled "Islamic Finance: Meeting Global Aspirations." There, Ali told the assembled financial professionals that Islamic microfinance would facilitate the inclusion of more people from various income brackets into the financial industry and provide greater access to financing, grow small local businesses and contribute to financial stability.

There is, however, some risk with lending money to inexperienced business owners. That means that on top of providing Islamic microfinancing, the banking industry needs to help educate and guide SMEs.

Professor Badr El Din A. Ibrahim, President of the Microfinance Unit at the Central Bank of Sudan, discusses ways to implement Shari'ah-compliant microfinance. There are some options to introduce it in the existing conventional microfinance institutions (MFIs). Hence, separate windows for conventional MFIs, not banks, are necessary to extend interest-free finance. Challenges for the Islamic windows-based business model are Shari'ah compliance and the need for changing regulatory requirements to allow for this model. The choice of Islamic windows requires raising new capital exclusively for the window.

Queen Noor of Jordan, the founder and chairperson of the King Hussein Foundation (KHF), recently announced the launch of Ethmar, a microfinance institution (MFI) that is compliant with Shariah. Queen Noor expressed the vision of Ethmar becoming an innovative model for economic empowerment similar to the other pioneering programs launched by the King Hussein Foundation. As of 2015, the foundation operates programs including the Jubilee Institute; the Information and Research Center; the National Center for Culture and Performing Arts and the National Music Conservatory.

In Turkey almost all businesses are micro, small or medium-sized enterprises (MSME), and only 0.1 percent of businesses are large firms. MSME lending constitutes a significant share of banks’ lending – it was 26% of the total banks’ portfolio in 2013, including 7% extended to microenterprises, despite the naturally much smaller average loan amounts. There are several barriers preventing Turkish banks from increasing their lending to microenterprises, despite an interest in reaching further down market. One such barrier is the high level of informality and semi-formality in the micro-segment of the Turkish MSME sector. Turkey has no dedicated microfinance sector of a significant scale.

The TBLI Conference Europe 2015 is going to take place at the Gottlieb Duttweiler Institute in Zurich on November 19-20, 2015. The cost of the event is CHF 625 (USD 639). A set of three private meetings with potential investors and business partners is available for an additional fee of CHF 500 (USD 511). Additional meetings can be booked at CHF 150 (USD 154) each. TBLI Conference offers a series of presentations and workshops that focus on environment, social, governance (ESG) and impact investing topics. This year’s conference will focus on ESG and impact investing across asset classes. Find more information on http://www.tbligroup.com/tbliconference/europe2015.html.

HM Queen Noor Al Hussein officially launched Ethmar, Jordan’s first Shari’ah-compliant microfinance institution on 8 August. Ethmar is an affiliate of the King Hussein Foundation, which promotes social equity and economic empowerment in Jordan. Jordan News Agency Petra reported Ethmar Chairman Faris Sharaf as saying three Shari’ah-compliant products would be launched in collaboration with public and private organizations in the country.

According to a March 2014 data from the Central Statistics Agency, 28 million Indonesians are still below the poverty line, which is defined as living on less than IDR 10,091 (USD 0.86) per day. Of this number, 63% people live in the rural areas, while the remaining 37% have been urbanized. Jamil Abbas, the General Manager of PBMT Social Ventures in Singapore, thinks there is one solution that may be effective in solving this problem, which is through the ‘BMT’ concept. The BMT stands for Baitul Maal wat Tamwil, which can be informally translated to “The House of Social and Business”. BMT is an Indonesian model of Islamic microfinance institution.

The event "Women’s World Banking (WWB) Presents Making Finance Work for Women Summit, November 11-12, 2015, Berlin, Germany" is going to take place on November 11-12, 2015 in Berlin, Germany. The Making Finance Work for Women Summit is a two-day event that will focus on how women’s access to financial services relates to economic opportunity and macroeconomic growth. Sessions will cover best practices to serve the women’s market for financial services. The fee to attend the event is USD 500.Find more information on http://www.womensworldbanking.org/summit/.

The Islamic Financial Services Board (IFSB) has issued the Exposure Draft of its joint paper with the International Association of Insurance Supervisors (IAIS). The ‘Issues in Regulation and Supervision of Microtakaful (Islamic Microinsurance)’ paper has been issued for public consultation until August 6, a statement said. It has invited comments from regulatory and supervisory authorities, international organisations, market players, academics and other interested parties, it said. The main objective of the Joint Paper is to highlight and identify regulatory issues prevailing in the Microtakaful sector and outline the role this sector can play in enhancing financial inclusion.

A bitcoin startup based in the US is now helping Muslims get loans without breaking Islamic law. Matthew J. Martin, who converted to Islam five years ago while he was working fintech world, set up Blossom Finance which partners with microfinance institutions to make “investments” in small businesses then takes a 20 percent cut of the profits in order to still make money. In particular, Martin chose to use bitcoin since it doesn’t incur high transactions costs. Apart from that, the digital currency also features transparency, as the transactions are recorded in a public ledger called blockchain. Blossom is based in Indonesia, where there is a strong demand for financing that is compliant with Islamic law. The company has gotten its first investment from BMT Nusantara Condet, which help 10 to 20 micro businesses within Indonesia to expand.