Islamic Micro-finance helpdesk is established by Alhuda – Centre of Islamic Banking and Economics (CIBE) for the objective to provide the technical and Shariah guidance to the local and international micro-finance institutions in the conversion process of micro-finance structure into Shariah compliance micro-finance.

This helpdesk will perform the services of Islamic financial product development, research, technical assistance, training & education and Shariah. Mr. Zubair Mughal (CEO) Alhuda CIBE said, Islamic Micro-finance is the most effective tool for the poverty alleviation from the society. He also said that Islamic Micro-finance is not only to reduce the poverty but also generate a pleasant change in the society and it will provide the better living standards for the poor.

Through Islamic Micro-finance, necessary goods, equipment and machinery is provided to the clients instead of just money lending to run up the business at micro level. The 40% population of Pakistan is living below the poverty line and the indicator is still positive day by day, it is very important for us to control the rising indicator of poverty and I recommend that Islamic Micro-finance is the most effective tool to achieve the goals.

There are so many Islamic Micro-finance institutions in practice in all over the world for the poverty alleviation and economic welfare including Sudan, Egypt, Syria, Indonesia and Malaysia. He also emphasized the government to support the Islamic micro-finance institutions for the poverty alleviation in Pakistan

Source : TMC News – July 01, 2009

Presentation of Alhuda Islamic Micro-finance helpdesk

Vision and Mission
AlHuda Centre of Islamic Banking and Economics (CIBE) is a pioneer organization committed to facilitate and strengthened microfinance industry through Islamic Product Development, innovation, standardization and also Provide Technical & Shariah expertise. Basic purpose to establish Islamic Microfinance Help desk to coordinate the Poverty alleviation Factors through Islamic Financial methodology for the broader prospects of social well being.

Islamic Micro Financial Services
AlHuda CIBE provides Islamic Micro Financial services to their stakeholders in following ways.
- Establishment of Islamic Microfinance Institution/Bank.
- Islamic Financial Product Development.
- Shariah Advisory.
- Shariah Audit & Review
- Shariah Audit.
- Documentation.
- Shariah vetting of Products
- Process flows of Islamic Financial Products. Islamic Microfinance Product Development

Islamic Microfinance Product Development
We seek to establish innovative Islamic Microfinance Products in line with our strong social objectives.  We are committed to invest our resources to achieve these goals, expanding client outreach within our target markets and developing appropriate Islamic Financial products to address our clients’ needs.

Training & Capacity Building
The objectives of AlHuda CIBE Islamic Microfinance training program include bringing new courses to the region, building a cadre of certified trainers who can serve the industry and to offer industry stakeholders and members relevant and high quality training courses in Islamic Microfinance. AlHuda CIBE also pleased to introduce Distance learning training program “Certified Islamic Microfinance Manager”.

Innovation and Research
Foster innovation in the microfinance sector by researching and highlighting leading trends in technological developments, product diversification and new financial services.

Networking and Awareness
To improve the awareness of Islamic Microfinance internationally and create a forum to share experience and knowledge to build confident and improve the self-sufficiency, transparency and management in a sustainable manner, Awareness objective is to promote the Islamic micro-entrepreneurships development in sectors of  micro economic resources in a professional and serious way.

Publication of Islamic Microfinance
AlHuda CIBE is dedicatedly working for publications of Islamic Finance by two specialized magazine for this sector, namely, “True Banking” and “Islamic Banking and Finance News.

Distance Learning Program : “Certified Islamic Microfinance Manager”

Islamic Microfinance is a new emerging market in the field of Islamic Finance, so there is an immediate need to have a comprehensive Education, Training, Market Study and Awareness on this subject. Al-Huda CIBE humbly offers a Specialized Comprehensive Certificate Program on Islamic Microfinance on Distance Learning basis. It is highly structured, interactive and innovatively designed Program with an interactive methodology under the auspicious supervision to a panel of Academicians, Shariah Scholars and professionals to ensure high quality material.

The aim of the course is to provide educational facilities and trainings to the people who cannot leave their homes and jobs with an additional opportunity for their educational uplift under Islamic financial system Certified Islamic Microfinance Manager program comprises of two modules, each having two months duration. Strong tutorial support is an integral part of the distance education system. The material provided by the tutorial sessions will help the students to update their knowledge according to the latest terms and concepts globally used in Islamic Microfinance.

Source : Alhuda CIBE

Pak-Qatar Family Takaful Limited, the pioneer of Family Takaful in Pakistan and Qatar’s first direct investment company with 525 million rupees of paid-up capital, has launched its first Individual Family Takaful products in the country, starting with their Share & Care – Savings Takaful and ABC – Education Takaful plans. These plans are the first of its kind to be launched in Pakistan.

The CEO of Pak-Qatar Family Takaful Limited, Mr. P. Ahmed said that Share & Care – Savings Takaful is an ideal plan for families who would like to save smaller amounts of money and accumulate them into large investments for particular future needs like buying a house or providing financial support in old age. Together with the benefit of saving, this plan also offers a financial protection to the family, if their bread-winner should be unable to provide for them in the future due to unfortunate events.

He elaborated that the ABC – Education Takaful Plan was particularly designed for families who want to ensure the continuity of the child’s ongoing education even if the sponsor parent wouldn’t be around. It helps to multiply savings for the ever increasing educational expenses in future. On completion of the membership-term the investment value of the Plan will be paid either as a lump sum or in regular installments to be utilized for the payment of college/university fee.

CEO of Pak-Qatar Family Takaful said that initially Pak-Qatar Family Takaful Limited has established its Head-office in Karachi and branches in Islamabad, Lahore, Kotli, Peshawar, Gujrat and Faisalabad. By the end of 2008 we would have established 16 more branches including in cities such as Sialkot, Multan, Hyderabad, Sukkur and Quetta. Eventually, we plan to create a distribution network throughout every city and town in Pakistan, remarked Mr. Ahmed, thus creating thousands of job-opportunities for people from all walks of life, either being from common or religious educational backgrounds.

He said that risk mitigation and financial protection is something that everybody needs to be concerned about. In order to do this efficiently, a tool that is not only effective in mitigating risks but that also offers impeccable client service and is competitively priced as well as in compliance with ethical and religious beliefs of the majority of the people of Pakistan is needed. That tool is Takaful.

Source: Apna Pakistan Network

Meezan Bank, Pakistan’s biggest Islamic lender, plans to open banks overseas and triple the number of branches at home after capturing half the market in the world’s second-most populous Muslim nation. “We have received requests to set up affiliate companies in Arab countries where we will keep a minority shareholding and manage the banks”. “We feel positive about Syria and others such as Egypt and Dubai are still in the initial thought process” its chief executive, Irfan Siddiqui, said.

Remittances from Pakistanis living overseas increased 23 percent to a record $4.45 billion in the 10 months that ended on April 30, central bank data show. Pakistani exports rose to a record high of $13.9 billion in the same period and imports climbed to a high of $25 billion, according to the Federal Bureau of Statistics.

Meezan, Pakistan’s first Islamic bank, will spend as much as 1.5 billion rupees, or $25 million, to extend its network to 200 outlets in 50 cities by the end of 2009, Siddiqui said. Meezan has 64 branches in 21 cities across Pakistan. “The market for Islamic finance is ripe in the most unexpected places across the country,” said Siddiqui, who has been at the helm since the bank was licensed in 2002.

The Islamic finance industry in Pakistan may grow fivefold over the next five years to 15 percent of all banking assets, the central bank governor, Shamshad Akhtar, said in January. It is expected to be one of the fastest-growing segments in banking, she said. Six companies, including Dubai Islamic Bank and Emirates Global Islamic Bank, hold Islamic banking licenses and operate 108 branches, according to central bank data.

Meezan Bank is 30 percent owned by Pak Kuwait Investment, an alliance between the governments of Pakistan and Kuwait. Shamil Bank of Bahrain, Kuwait-based Noor Financial Investment and Islamic Development Bank respectively own 26 percent, 16 percent and 9 percent of the bank.

Source: Bloomberg News

Meezan Bank Limited has launched a new finished goods Islamic financing facility called Meezan Tijarah. The facility is available to SMEs and commercial/corporate customers seeking Shariah compliant working capital financing solutions. Meezan Tijarah would facilitate the customers that sell finished goods on a credit basis. The product can be used for providing financing facility in transactions where final / transformed goods are available for sale.

The facility will enable the customers to sell their finished goods, meet their working capital requirements and enjoy the benefits of cash sales. It is available for trading and manufacturing concerns and can also be used to facilitate customers to convert their interest based financing facilities to Islamic banking.

Read also: Meezan Bank Pakistan, The Premier Islamic Bank

Faysal Bank Ltd. plans to expand its domestic branch network in Pakistan and start a new Islamic division to take advantage of rising demand for Shariah-compliant products and farm loans. The bank will increase its number of outlets to 150 by December 2009, including smaller towns and villages, and intends to double its farm loans.

The bank plans to use Islamic products including cards and insurance developed by Shamil Bank BSC, a Bahrain-based lender that owns 68 percent of Faysal. The lender also plans to introduce Internet and phone banking. Read: Bloomberg

Several financial institutions from the GCC and South East Asia have announced they were moving into Pakistan to set up banks or insurance companies by teaming up with local entities or by going it alone. The likes of Al Baraka, Habib bank, Oman International Bank, Dubai Islamic Bank and most recently Maybank, have entered the country. Maybank said it was preparing to pay around $930 million to acquire a 20 per cent stake in Pakistan’s MCB Bank.

In the summer of 2007, Qatar Islamic Bank, the fifth largest Islamic bank in the world and the largest Islamic bank in Qatar, said it was planning to launch an Islamic bank in Pakistan with paid up capital of $100 million. Ahmad Barghout, senior manager of the corporate investment and developments group at Qatar Islamic Bank speaking to CPI Financial said, “Both Pakistani and GCC companies are opportunity driven. There are opportunities in both areas and I think investors are taking the long term view.”

While the current economic and political instability in Pakistan is causing concern in some circles, Mansoor Khan, managing director of Lahore-based law firm Khan Associates told CPI Financial that conventional banks would probably be more affected by the turmoil than their Islamic counterparts. “The conventional banks are western, risk-averse and do not understand ‘Pakistan risk.’ Islamic banks are primarily Middle Eastern or Asian and have a better understanding of the mentality of Pakistan. They will not be put off,” he said.

Source : Pakistan First

Malaysia’s top lender, Malayan Banking Berhad, said MondayMay 5, 2008 it plans to buy up to 20 percent of Pakistan’s MCB Bank Ltd. for $933 million as part of an aggressive regional expansion. It marks the third regional acquisition in two months for Malayan Banking, widely known as Maybank, as it seeks to counter slowing economic growth in Malaysia and increased competition in the domestic financial market.

In a statement, Maybank said it has agreed to buy 15 percent of MCB Bank, Pakistan’s fourth largest bank in terms of assets, for $686 million. In addition, it said it has the rights to buy an additional five percent equity in MCB Bank for a maximum $247 million to bring its stake to 20 percent.

“It is an attractive opportunity for us to enter a high growth and profitable market. It is extending Maybank’s reach in South Asia” in line with its plan to become a key regional player, Maybank Chief Executive Abdul Wahid Omar told reporters. Despite volatility in the global market, Pakistan’s economic outlook remains steady and there is “limited execution risk,” he said. Maybank expects the deal to be completed by the end of June 2008, he said.

Islamic banking, retail services, credit cards and small medium enterprise banking will be key partnership areas with MCB Bank, the Maybank statement said. MCB Bank has 1,026 branches and employs 17,000 workers.

In March 2008, Maybank announced plans to acquire Indonesia’s sixth largest bank, Bank Internasional Indonesia, as well as a 15 percent stake in Vietnam’s An Binh Bank.

The Associated Press, May 5, 2008

About Maybank

Maybank was incorporated on 31 May 1960 and commenced operations on 12 September 1960. On 17 February 1962, Maybank was listed on the then Kuala Lumpur Stock Exchange (now known as Bursa Malaysia and today is one of the largest company by market capitalization in Malaysia. Maybank is the largest financial services group in Malaysia and the Group offers a comprehensive range of financial services and products ranging from commercial banking, investment banking, Islamic banking, offshore banking, leasing and hire purchase, insurance, factoring, trustee services, asset management, stock broking, nominee services, venture capital and Internet banking. The Group has over 450 offices in the 14 countries namely, Malaysia, Singapore, Philippines, Brunei Darussalam, Indonesia, Vietnam, Cambodia, Papua New Guinea, Hong Kong SAR, People’s Republic of China, Bahrain, Uzbekistan, Pakistan, Great Britain and United States of America.

About MCB Bank Limited

MCB is a leading private sector bank in Pakistan, offering a wide range of products and services to corporate and retail customers through a variety of delivery channels. It has a network of nearly 1,020 branches, including eight Islamic banking branches within Pakistan and six overseas.

About Bank Internasional Indonesia

PT Bank Internasional Indonesia Tbk is one of the largest banks in Indonesia, with over 230 branches and 700 ATMs across Indonesia, as well as a banking presence in Mauritius, Mumbai, and the Cayman Islands.

By Paul Wouters

Worldwide, the Islamic finance industry is developing rapidly. While it makes sense for the Islamic financial institutions to foster growth and to regularly compare themselves against the financial market as a whole, sometimes it is also worthwhile to keep an eye on developments in different countries.

It is easy to talk about “market shares” and “deposits”, but what do these terms really mean? And what can be expected in the near future? For a better idea, we will examine the Islamic banking system in some countries: Turkey, Indonesia and Pakistan.

Turkey and Indonesia are secular republics where Muslims form the majority of the population, but Islamic finance developed differently in the two nations. With a population that is roughly slightly over half that of both countries combined; the Islamic Republic of Pakistan is used as an outside comparator. To put all that into better perspective, the writer has included some data from Malaysia as benchmark.

Turkey

From the very start in 1985 with Albaraka Türk, the Turkish participation banks (before called Special Finance Houses) were poised to aim at the Turkish market as a whole. Therefore they did not really target the small niche of the “convinced” Muslim population in particular. This of course influenced marketing and product development.

Partly as a consequence of this strategy (and compared to Indonesia), the Turkish participation banks were able to flourish, and now they hold roughly 3.5 % of total assets in the country’s banking industry. It has outperformed its conventional counterpart for eight consecutive years now.

The collapse of Ihlas Finance House (2001 – alleged fraudulent insolvency) meant the loss of 40 % of the deposits held by the sector at that time and the subsequent stampede on the other Special Finance Houses (now participation banks) meant another 35 % loss.

Because of their ties to the “real economy”, the Special Finance Houses were not hit by the big financial crisis that hit Turkey in 2001 and they recovered fast. Their deposits now have been taken into the guarantee fund of the banks (to avoid other shock withdrawals) and the sector has acquired bank status.

Other differences to note: There is no specific government aid to the sector and nor is there (government or corporate) Islamic bond, although th eissuance of a government sukuk could be in the making, so it has been rumored for some time now. The talks on the projected rent (Ijarah) certificate are progressing slowly, due to inactive local financial markets, cheap conventional international funding and political factors.

Neither is there access to money markets, so we can hardly talk about a level playing field, as compared to conventional banking.

As there are no Islamic windows, foreign players can only enter the market via shareholdings in existing participation banks (or have to start their own participation bank from scratch.) A well thought off strategy of decentralization – for instance using techno / tax incentives and privatizations – created upcoming of several bigger conglomerates throughout the country.

Indonesia

In the world’s most populous Muslim nation, with its first established Bank Muamalat Indonesia (together with Bank Syariah Mandiri still today front runner), the situation differs profoundly. From the start, products and marketing were targeted at that very same group of “convinced” Muslim (market share of roughly 1.5 %).

Whilst the current impressive government initiatives aim to broaden that base (a potential “floating market” of approx. 75 % of the population would be within reach), Bank Muamalat confirms to adhere to its strict policies and target market. This means the other Islamic finance market players could see greater potential for growth.

The need to mobilize internal capital and attract foreign investments require special measures, and so Bank Indonesia announced in July 2007 that, subject to full implementation of the “blue print for development of the Indonesian Shari’ah Banking system”, total assets of the Islamic banks (and Islamic business units) are expected to triple by the end of 2008 (growth of approx. USD 6 billion) to reach an overall volume of 5% on the total Indonesian banking assets. When deposits/ loans follow same development, it will be clear that opportunities are at hand (growth potential of approx. USD 5 billion).

Foreign banks have yet to make their presence felt in the Indonesian Islamic finance market. HSBC was the first big international institution to establish a Shariah head office in Jakarta. The projected growth potential is enormous: HSBC calculated that roughly half of their clients would be willing to use the products if priced competitive. Recently, Albaraka Group announced the intention of expanding its a branch there.

The first government Sukuk (plans to raise up to USD 1 billion have been announced) is in the pipeline. Actual issuance could however be postponed till the fourth quarter of 2007 or even the first quarter of 2008, pending parliamentary approval. Indonesia alreday recognizes corporate Ijarah and Mudharabah Shari’ah Bonds.

Conventional banks that want a piece of the “Islamic pie” need to dedicate 5% of their assets to such venture. This commitment, together with other incentives, will be instrumental to the rapid growth over the next two years.

Pakistan

From the late 70s onwards, Pakistan has had a protracted history of Islamic banking. Beginning 1st July, 1985 all commercial banking in Pakistani rupees became interest free. The sudden conversion (and lack of preparedness) posed difficulties for the implementation of this practice.

However, from 2001 an evolutionary process was in place in order to nurture acceptability and development in a more structural approach. The first “Islamic bank license” was awarded to Meezan Bank back in 2002 (founded 1997). Most note worthy is the present Islamic Banking Policy (December 2001), under which Islamic banking is promoted parallel to conventional banking. Implementation of set by the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) is under way.

Image: Meezan Bank ‘07 Annual Report

Besides a draft for the new Government Securities Bill, Draft Risk Management and Draft Shari’ah Compliance guidelines have been published.

A growth of 40% per annum is expected and a % 15 market share is targeted. Conventional banks are allowed to operate Islamic bank subsidiaries or even “standalone Islamic banking branches” along-side full-fledged Islamic bank. A vast concentration of Islamic banking in the cities (Karachi and Lahore) is evident. There are government and corporate Sukuk on the market.

In 2007 ABN AMRO opened an Islamic branch, Emirates Global Islamic Bank has started a dedicated Islamic commercial bank and QATAR Islamic bank has confirmed plans to setup a Shari’ah compliant banking unit soon. Citibank was another big foreign entry.

Malaysia

Starting off with Bank Islam Malaysia in 1983, Malaysia now has separate Islamic legislation and banking regulations that co-exist with those for the conventional banking system.

In order to create an efficient, progressive and comprehensive Islamic financial system, Bank Negara Malaysia recognized the need to attract a large number of global players; develop a variety of instruments and, install comprehensive financial infrastructure.

Image: Bank Islam ‘07 Annual Report

Malaysian banks currently offer more than 100 of Islamic financial products and services that use various Islamic concepts – such as Mudharabah, Musharakah, Murabahah, Bai’ Bithaman Ajil (Bai’ Muajjal), Ijarah, Qard, Istisna’ and Ijarah Thumma Bai’ — alongside the Islamic Interbank Money Market.

Probably subject to pressure from the Dubai International Financial Center, Malaysia recently opened up regulations to allow sukuk issuance in foreign currencies and is competing with Singapore to be the prime Islamic finance hub in the Asian region. Hong Kong has decided to join the race as well.

Observations

First of all, it has to be noted that real entrance of foreign investments in Turkey, Indonesia and Pakistan still bounces on inadequate tax regimes.

Though it is difficult to distract far-reaching conclusions from the accompanying table, at first glance, it is clear that both Malaysia and Turkey share the following characteristics: relative big concentration of the population in bigger cities, lower portion of population working in agriculture and a lower weight of that sector in the overall economy. The GDP per capita (calculated in relative purchase power – not in hard dollars) in Malaysia and Turkey also is two to four times higher then in Indonesia and Pakistan.

Also in Indonesia and Pakistan, Islamic finance flourishes first in the big cities and then branches out to smaller concentrations of the population while the rural areas (probably due to lack of cash) appear to be dependent on micro finance.

In both countries, the agriculture sector appears to attract socially important (statistically less so for the total economy) “rural Islamic banks” targeting micro finance. There is no such sector in Turkey (neither conventional or Islamic.) Only recently, initiatives from the United Nations Development Program have been undertaken to introduce microfinance on a sustainable basis there.

Neither the percentage of the Muslim population (in Indonesia, Turkey, or Pakistan), nor the respective governments’ zeal to promote Islamic banking (in Indonesia, Pakistan) appears to be a determinant for success so far.

A marketing strategy of the Indonesian Islamic banks proved to be successful for the loyal but small niche of the “convinced” Muslim population, but did not succeed to appeal to the “public at large.

Admittedly, Turkish participation banks are at a serious disadvantage because of the above mentioned differences from the conventional system (lack of sukuk and money markets, limited products, no government incentives and no Islamic windows.) Nevertheless, they prospered thanks to the neutral banking approach focusing on financial advantages, with slight emphasis on ethical merits.

Looking at the mix of relevant measures applicable to the different countries, perhaps the following can serve as guidelines in contributing to the success of Islamic banking:

• dedicate sufficient means to Islamic rural banking / micro finance for agricultural areas
• create a level playing field in order for Islamic banks to compete with conventional banks (for instance, access to Sukuk and the money markets), without any specific need to issue prime conditions (that also distort the market)
• open up markets for international institutions (this attracts financial power and innovation)
• ensure possibilities for all financial institutions to create Islamic windows and/or branches (better product awareness and overall acceptance of Islamic banking would benefit the dedicated Islamic banks)
• ensure conventional banks that want access to the market commit sufficient means from the start (the need to dedicate assets enhances market growth)
• promote diversification of products (diversity is one of the handicaps of Islamic finance vis-à-vis the very mature conventional counterpart)
• try to spread wealth from existing bigger cities to smaller ones but do not focus on the existing metropolises
• try to create sufficient liquid financial markets and stock exchanges, if necessary through strategic alliances
• give sufficient attention to international accounting standards, (corporate) governance, transparency and accountability
• build strong prudential controls
• give bank status and deposit protection
• without loosing sight on the underlying Islamic principals, focus on market competition, quality of products and pricing thereof.

Source : Dinar Standard