IDB Microfinance Experience

Transcription

1. 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
2. THE ISLAMIC VISION OF DEVELOPMENT Comprehensive Human Development Maqasid Al-Shariah Security & Basic Needs Knowledge Honour Nafs (Self) Property Capacity Building Nutrition & health Higher Education Protection Science & Technology Aqal (Knowledge) Governance Deen (Religion) Values Nasl (Posterity) Education Moral Education Justice Sports Research & Development Capacity Building Environmental preservation 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
3. 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
4. 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 $2 a day) §  Lowest Ten account for over 600 million of the world’s poor §  Among 500 million micro-entrepreneurs: currently Less than10%, i.e. 50 million, can access credit… §  The informal sector represents over 60% of the active population of most developing countries §  Over 7,000 Micro-Finance Institutions (MFIs) have difficulties to access the capital markets “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
5. IDB ’s µFinance Current Strategy q  Poverty  allevia,on  thru  provision  of  suitable  and  sustainable   access  to  financing.   q  Capacity  building   q  Nurturing  entrepreneurship  support  at  grass  roots  level   q  Introduc,on  of  Islamic  financing  modes   “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
6.   Main  Features  of  IDB’s     Current  µFinance  Scheme       –  –  –  Country eligibility:  Low Income and LDMCs Mode of Financing: Loan – Service fee 0.75 to 2.5% Tenor: 25 to 30 years with 7 t0 10 grace period –  µproject investment: US$ 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
7. IDB LDMC loan at 0 .75% for 30 yrs incl 10 yrs grace Government US$ at max. 2.5% pa External auditors Central Bank US$ account in commercial local bank 24-30% pa (local currency) Max 5 yrs incl 2 yrs grace Physical transfer money 20-22% pa (local currency) Key: 35% of markup (operational cost of NGOs) Repayment Revolving fund + 65% of markup Financial Intermediary/NGO Micro-entrepreneurs (in local currency) Reporting to/instructing “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
8. IDB  µFinance  Opera,ons     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
9. 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
10. The  poor  request  mobilizing  Package  of  Business  Development    Services   Counseling, Training Experiences Networking access to markets 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
11. The Bala Poo nce r ’s Prof of essi ona l sk Business Incubators Services Counseling, Training Experiences Networking access to markets The  poor  request  mobilizing     Package  of  Business  Development    Services   ills “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
12. The  poor  request  mobilizing  Package  of  Business  Development    Services   l skills Upgrading services for BDSIs and MFIs Business Incubators Services Counseling, Training Experiences Networking access to markets Balance of The Poor’s P rofessiona “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
13. The  poor  request  mobilizing  Package  of  Business  Development    Services   Designing innovative BDS & appropriate technologies Adapted to the Poor’ needs Upgrading services for BDSIs and MFIs Business Incubators Services Counseling, Training Experiences Networking access to markets 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
14. 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
15. VISION / STRATEGY / APPROACH The  poor  request  mobilizing          Package  of  appropriate  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 MicroInsurance Micro-Pensions Education loans Micro-Housing loans Consumer loans Micro-Savings Micro-Grant Capital loans Balance of Poor Self-Sufficiency
16. Role  of  Micro-­‐grants  in     IDB  Microfinance  Opera=ons   Helps  groups:  high-­‐risk     q In  immediate  Conflicts  and  Post  conflicts  environments   q In  severely  disadvantaged  rural  areas   q In  interven,on  situa,on  for  the  chronically  des,tute     •  •  •  •  •  To     Rebuild  livelihoods    Replace  lost  assets    Overcome  social  isola,on    Gain  produc,ve  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
17. FROM IDB µFINANCE EXPERIENCE Microfinance  Projects  Design  and  implementa,on   mechanism         q   IDB may adapt Ready-to-Use Microfinance Frame work Package approach adopted CGAP consortium of donors. q  More IDB involvement in early phase of Projects/Programs formulation q  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
18. IFS DEVELOPMENT PROGRAM : THE WAY FORWARD Awqaf Sadaqa Corporate Donations Zakat IDB Pov. All. Fund Comprehensive Human Development IFS Development Fund Other IFS Others Community A Individual Individual 1 2 Individual Community B Community C Individual Individual Individual 1 2 3 Individual Individual Individual 1 2 3 3 MIcrofInance “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
19. Lessons to be learnt from IDB experience Special Services & treatment Promotional Social Safety Net Interventions •  •  •  •  •  Information, Counseling Training, skills upgrading Marketing Assistance Technology devmt, transfer Business linkages Variety of Products •  Housing loans •  Education loans •  Life cycle products •  Respect, connection with pertinent stakeholders •  Rapid response, and access to services WA ZA Understanding the Poor Rights & Needs ZWA ZWA No Collateral •  Group guarantee Flexible financing Products WA ZWA •  Small initial loan sizes •  Larger loans over time •  Longer terms Asset Building, Risk Mitigating Products •  Voluntary savings •  Health and life insurance WA Waqf applicable ZA Zakat applicable “Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, Istanbul ZWA Zakat Presentation by A. Slaoui Microfinance Specialist , Islamic Development Bank &Waqf applic
20. 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
21. 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
22. “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
23. 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
24. 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 selfemployment 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
25. 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
26. q   Rural  (esp.  agricultural)  finance       q  Services  like  microinsurance,  leasing,  and  remiQances     q  Social  performance  measurement     q  Defining  the  lower  limits  of  viable  microfinance  and     q  Employing  other  interven,ons,  including  grants   q  Replicable  strategies  for  unlocking  country-­‐level  capital  markets  for  microfinance   q  Role  of  donors  rela,ve  to  interna,onal  equity  and  loan  funds   q  Cost-­‐effec,ve  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
27. q  ISLAMIC  FINANCIAL  SECTOR  DEVELOPMENT  AND  QWICK   WINS  MICROFINANCE    INITIATIVES       q IDB  POVERTY  ALLEVIATION  FUND     q 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
28. 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
29. IDB ’s Role in Islamic Financial Sector Development Previous Initiatives Œ Equity investments in IFIs  Establishment of eight infrastructure institutions Ž 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
30. 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
31. Macro Perspective : Policy & Regulatory Framework Resolves the Unresolved Issues in Banking Sector Regulation and Supervision that Affect Microfinance 1.  Should there be Prudential Regulation for Non-deposit-taking MFIs? 2.  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
32. Meso Perspectives : Infrastructure, Networks, Technical Service Providers 1.  Basic financial infrastructure, Range of services required to reduce transaction costs, increase outreach, build skills, and foster transparency 4.  Transparency and Information: Highquality auditors and rating agencies, credit bureaus, reliable information software - scarcely available to Islamic MFIs 2.  Payment Systems: Only large Islamic FIs have access to electronic payment systems 5.  Existing MF-specific Agencies expand scope to include Islamic MF; or Existing Agencies for Mainstream IFIs to absorb MF services 3. MFIs working for the poor may work through the larger Islamic FIs by forging alliances with them 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
33. 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
34. 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
35. 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