Dr. Shafiq Dhanani, Building a Successful Business Model for Islamic Microfinance
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Transcript of Dr. Shafiq Dhanani, Building a Successful Business Model for Islamic Microfinance
Mitra Bisnis KeluargaVentura - Indonesia
(Family Business Partners)
Microcredit Summit, Valladolid, Spain, Nov 2011
Challenges in Syariah Group Lending
Shafiq Dhanani
Main Challenges
Legal and Regulatory Approvals
Modification of MFI Governance
Product Design with Syariah Principles
Practical Implementation Issues
Conclusions: Syariah Group Lending?
Examples of MBK Clients & Houses
Weekly MBK Centre Meeting: 6 Stages
Read promise/ 5 main rules
Register Attendance
Repay instalments
Read promise/Close meeting
Information, Answer questions
Receive follow-up working capital
Legal and Regulatory Approvals
National Syariah Council: Full Presentation
(30 members) -->Recommendation
Amendment to Company’s Articles of Association –
Ministry of Justice
Approval by Regulator – Ministry of Finance, Capital
Market and Financial Institutions Supervisory Board
Separate Consultations/Endorsement by Ulama
Councils at provincial, district, sub-district and
village level
Modifications of MFI Governance
Syariah Supervisory Council reporting to MFI’s Board of
Directors
2 Members recommended by National Syariah
Council
Members employed by MFI
Functions of Syariah Supervisory Council:
Approve Syariah Product Design
Monitor Implementation of Syariah Product in the
field
Report to both MFI and National Syariah Council
Product Design
Most common Syariah Product is mark-up on Buying
and Selling (Murabahah): one-time purchase
More difficult Syariah Product is Profit-Sharing
(Mudharabah): What Profit-sharing Rate?
Different businessmen abilities
Different industries: trade, agriculture, processing, services
different scale of operations and location (urban/rural)
Expected Profit-sharing rate vs. Actual: difference must be given back to client, or client must pay more, at
the end of loan cycle
Separate Accounting for Syariah Product: Eventually full accounts of Subsidiary Unit
Fines and Penalties donated to social causes, not included in Company Income
Practical Implementation Issues
Data on business profitability & profit-sharing rate? Complex Field Surveys for different industries and business
scale
Regular updating of field surveys findings
Clients in same group but different profit-sharing rates?
Group Lending MFIs usually have hundreds of
thousands or even millions of micro-clients: How can MFI physically verify every year the profitability of so
many clients?
Most micro-clients do not keep written accounts, many
are illiterate…
Conclusions: Syariah Group Lending?
Many regulatory, design and practical challenges
Syariah lending Rare in Muslim Bangladesh,
Pakistan and Indonesia
Syariah Loan Products mainly used for
buying/selling
Why Syariah Group Lending Product in MBK?
Resistance / of local Ulamas in a few areas to: Conventional loans based on interest rate
Vested Interests
Resistance to fixed profit-sharing rate
Thank You
PT Mitra Bisnis Keluarga Ventura