Transcript Public Private Partnership for alleviation of Poverty
IsDB Microfinance Experience
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
THE ISLAMIC VISION OF DEVELOPMENT
Knowledge Honour Comprehensive Human Development Maqasid Al-Shariah Security & Basic Needs Nafs (Self) Property Capacity Building Higher Education Science & Technology Aqal (Knowledge)
Protection Values Governance
Deen (Religion)
Justice
Nasl (Posterity) Education Moral Education Sports Research & Development Capacity Building Maal (Wealth ) Fiduciary Duty Islamic Financial Services Industry Institutional Management of Wealth Means to an end Transparency “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Nutrition & health Environmental preservation
Significant resources potential for Islamic Microfinance Industry
1.
More than 300 Islamic Financial Institutions 2.
In over 65 countries 3.
Managing assets of approximately US$ 1.0 trillion in Shariah compatible manner 4.
More than 15% annual growth 5.
Worldwide recognition
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Need for an Islamic Microfinance Development Strategy
Over 3 billion people living on less than two dollars a day
Over 2/3 of world refugees are Muslims
Lowest Five among IDB member countries account for over half a billion (528 million) of the world’s poor (with incomes below $2 a day)
Lowest Ten account for over 600 million of the world’s poor
Among 500 million micro-entrepreneurs: currently Less than10%, i.e. 50 million, can access credit…
The informal sector represents over 60% of the active population of most developing countries
Over 7,000 Micro-Finance Institutions (MFIs) have difficulties to access the capital markets
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IDB’s µFinance Current Strategy
Poverty alleviation thru provision of suitable and sustainable access to financing.
Capacity building Nurturing entrepreneurship support at grass roots level
Introduction of Islamic financing modes “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Main Features of IDB’s Current
µ
Finance
Scheme
• • • • • • Country eligibility: Low Income and LDMCs Mode of Financing: Loan – Service fee 0.75 to 2.5% Tenor: 25 to 30 years with 7 t0 10 grace period
µ
project investment: US$ 5,000 per project Maturity: 3-5 years Beneficiaries contribution: 10-20% of project cost
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IDB LDMC loan at 0.75% for 30 yrs incl 10 yrs grace External auditors Central Bank US$ account in commercial local bank Government Financial Intermediary/NGO Revolving fund + 65% of markup 35% of markup (operational cost of NGOs ) Physical transfer money Reporting to/instructing Key: Micro-entrepreneurs (in local currency) “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IDB µFinance Operations
IDB µFinance ACHIEVEMENTS AND IMPACT “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
The poor request to start his assistance with a:
Promotional Social Safety Interventions Package : (i) Literacy & Awareness, Counseling (ii) Vocational training & Skills upgrading,, career guidance, Management, (iii) Entrepreneurship & Business linkages promotion (Subcontracting, Franchising and Clusters and collaborative production networks), (iv) Community Development Basic skills, (v) Other Poverty alleviation interventions such as Grants to education, house extension Balance of The Poor’s Professional skills “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
The poor request mobilizing Package of Business Development Services Counseling, Training Experiences Networking access to markets “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
The poor request mobilizing Package of Business Development Services “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
The poor request mobilizing Package of Business Development Services “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
The poor request mobilizing Package of Business Development Services Balance of The Poor’s Professional skills “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
VISION / STRATEGY / APPROACH
The poor request mobilizing Package of appropriate Financial Services Balance of Poor Self-Sufficiency Continuing on Skills Upgrading assistance “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
VISION / STRATEGY / APPROACH
The poor request mobilizing Package of appropriate Financial Services Balance of Poor Self-Sufficiency “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Role of Micro-grants in IDB Microfinance Operations
Helps groups: high-risk
In immediate Conflicts and Post conflicts environments
In severely disadvantaged rural areas
In intervention situation for the chronically destitute To
Rebuild livelihoods
Replace lost assets Overcome social isolation
Gain productive skills Graduate to economic self-sufficiency “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
FROM IDB µFINANCE EXPERIENCE
Microfinance Projects Design and implementation mechanism
IDB may adapt Ready-to-Use Microfinance Frame work Package approach adopted CGAP consortium of donors.
More IDB involvement in early phase of Projects/Programs formulation Investment in long-term programs in support of a few policy objectives rather than in short-term stand-alone projects
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Awqaf IFS DEVELOPMENT PROGRAM : THE WAY FORWARD Sadaqa Zakat IDB Pov. All. Fund Corporate Donations Other IFS Comprehensive Human Development IFS Development Fund Others Community A Community B Community C Individual Individual Individual 1 2 3 Individual 1 Individual Individual 2 3 Individual Individual 1 2 Individual 3
M I c r o f I n a n c e
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank 18
Lessons to be learnt from IDB experience
Special Services & treatment
• • • • • • • •
Promotional Social Safety Net Interventions
• •
Respect, connection with pertinent stakeholders Rapid response, and access to services Flexible financing Products Information, Counseling Training, skills upgrading Marketing Assistance Technology devmt, transfer Business linkages ZA WA WA
• • •
Small initial loan sizes Larger loans over time Longer terms Understanding the Poor Rights & Needs Variety of Products ZWA ZWA Asset Building, Risk Mitigating Products Housing loans Education loans Life cycle products ZWA No Collateral
• •
Voluntary savings Health and life insurance
•
Group guarantee WA Waqf applicable ZA Zakat applicable “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
ZWA Zakat &Waqf applic
Lessons to be learnt from IDB experience
Making Economic Policies & Growth Pro-poor • Re-distributive policies (targeting the poor) Providing Social Safety Nets to poor & marginalized groups • Addressing Social barriers & issues facing women in economic development
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Lessons to be learnt from IDB experience
Making Economic Policies & Growth Pro-poor
Targeted programmes and projects to enable the poor to benefit from economic growth through :
• Labour intensive projects, • Telecommunications, electricity, roads, infrastructure, • Food security projects, post-conflict/reconstruction projects, • Environment sustainability and renewable energy, micro-credit, cross-cutting projects, etc.
Continued
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
“Zakat & Waqf Microfinance” efficiency
Income of USD10 million Waqf @ 5% return, would provide average loans of $100 to 5000 Poor .
90,000 benefeciaries would be covered if 90% of the Waqf used in microfinancing.
Appropriate risk management Mechanism should be established to protect the Waqf from decay .
Zakat, Takaful Funds may be the alternative, “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Lessons to be learnt from IDB experience
Promote Islamic Microfinance Houses (IMH)
• Objectives: to complement the Comprehensive Human Development model by providing access to integrated Islamic Microfinance financial services to the poor in our member countries • The Microfinance Houses Development Programme would initially entail a pilot project in 5 member countries for creating and/or strengthening existing Microfinance institutions.
Continued
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Lessons to be learnt from IDB experience
The IMH would also undertake other interventions which would strengthen the livelihood of the poor, such as;
•
Investments in public infrastructure, including roads, communications and education which provide a foundation for self employment activities.
•
Community-level investments in commercial or productive infrastructure (such as market centers or small-scale irrigation infrastructure) to facilitate business activity.
Continued
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Lessons to be learnt from IDB experience
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Rural (esp. agricultural) finance
Services like microinsurance, leasing, and remittances
Social performance measurement
Defining the lower limits of viable microfinance and
Employing other interventions, including grants
Replicable strategies for unlocking country-level capital markets for microfinance
Role of donors relative to international equity and loan funds
Cost-effective and sustainable ways to combine non-financial development services with financial services “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
ISLAMIC FINANCIAL SECTOR DEVELOPMENT AND QWICK WINS MICROFINANCE INITIATIVES
IDB POVERTY ALLEVIATION FUND
THE ISLAMIC MICROFINANCE DEVELOPMENT FRAMEWORK “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Model of an Ideal Islamic Bank
A Universal Bank covering
•
Commercial Banking
•
Investment Banking
•
Advisory Services
•
Custodial Services
•
Asset Management
•
Zakat Management
•
Awqaf Development
•
Microfinance
This bank should be a vehicle for equitable distribution of wealth. “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IDB’s Role in Islamic Financial Sector Development
Previous Initiatives Equity investments in IFIs institutions Establishment of eight infrastructure Research, training and technical assistance Development of financial products/funds (UIF, IBP) and Awqaf sector Recent Initiatives 1.
“Ten-Year Framework for Developing the IFSI”, Joint Initiative 2.
Establishment of a Policy Dialogue Working Group 3.
IFSI Development Technical support proposal 4.
IFSI Development Program
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Macro Perspective: Policy & Regulatory Framework
1. Provide Supportive Legal, regulatory and tax framework 2. Ensure Macroeconomic Stability 3. Keep Inflation in Check 4. Curb Speculative Forces in Financial Markets 5. Integrate Awqaf and Zakah in National Policy 6. Support Civil Society Efforts
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Macro Perspective: Policy & Regulatory Framework
Resolves the Unresolved Issues in Banking Sector Regulation and Supervision that Affect Microfinance 1.
2.
Should there be Prudential Regulation for Non-deposit-taking MFIs?
Should Non-registered Entities be Prohibited from Lending?
3.
How should Islamic MF be Separated from Conventional MF in a Dual System?
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Meso Perspectives: Infrastructure, Networks, Technical Service Providers
1.
2.
3.
Basic financial infrastructure, Range of services required to reduce transaction costs, increase outreach, build skills, and foster transparency Payment Systems: Only large Islamic FIs have access to electronic payment systems MFIs working for the poor may work through the larger Islamic FIs by forging alliances with them 4.
Transparency and Information: High quality auditors and rating agencies, credit bureaus, reliable information software - scarcely available to Islamic MFIs 5.
Existing MF-specific Agencies expand scope to include Islamic MF; or Existing Agencies for Mainstream IFIs to absorb MF services 6.
Proactive role of Donors in Development of Islamic MF Rating
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Micro Perspectives: Islamic Microfinance Providers Diverse Organizational Structures: Informal MF Providers, Member-Based Organizations, Non-Government Organizations, Formal Financial Institutions, Commercial Banks Diversity should be given due recognition in regulation Need to Develop an Integrated Structure
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Micro Perspectives: Islamic Microfinance Providers
Shariah Compliance
Shariah Boards Fiqhi Issues Divergent Perceptions Confidence of Users Collective Resolution of Shariah Issues
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
RECOMMENDATIONS
Concerted Efforts by ALL Stakeholders to Make Finance Work in Muslim Communities through Islamic Finance Cooperatives-NGOs Efficient Management of Community Assets, Combine Social and Economic Agenda Effectively, Islamic Financial Institutions Recognize MF with Distinct Risk-Returns, Undertake Direct and Indirect Financing, Linkage with Grass-root NGOs, Facilitate Capital Market Participation of MFIs Awqaf & Zakah Funds Preserve and Develop Community Assets, Undertake TA, Transform the Destitute into “Bankable” Clients Government Agencies Create Supportive Policy and Regulatory Environment for IMFIs
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
“Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul
Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank