Islamic Microfinance in Sri Lanka

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Islamic Microfinance in Sri Lanka
Presented By Faraaz Shaul Hameed
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Thrust of the presentation

• What is Microfinance?
• What is Islamic Microfinance?
• Microfinance in Sri Lanka
• Microfinance coverage in Sri Lanka
• How does FGIHL operate Islamic Microfinance?
• Microfinance
• First Global Islamic Pawn Brokering (Al Rahn)

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What is microfinance?

• Microfinance is often defined as financial
  services for poor and low-income clients
• More narrowly to refer to loans and other
  services from providers known as Microfinance
  Institutions (MFIs)
• These institutions commonly tend to use new
  methods developed over the last 30 years, taking
  little or no collateral.
• These methods include group lending and
  liability, pre-loan savings requirements,
  gradually increasing loan sizes, and an implicit
  guarantee of ready access to future loans if
  present loans are repaid fully and promptly
• Microfinance envisions a world in which
  low-income households have permanent access to a
  range of high quality financial services

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What is Islamic microfinance?

• Refers to a program that extends small
  facilities to poor people for self employment
  projects that generate income to take care of
  themselves and their families
• It is a financial support to develop the income
  generating activity of the poor on a profit
  sharing basis, where capital should be returned
  along with the profit share
• Microfinance has proved to be one of the most
  successful programs of poverty alleviation
  globally

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Microfinance in Sri Lanka

• Microfinance dates as far back as 1906
  establishment of Thrift and Credit Co-operative
  Societies (TCCSs) under Co-operative Societies
  Ordinance introduced by British colonial
  administration
• In 1985 the Government established 17 Regional
  Rural Development Banks to reach remote rural
  areas that lacked access to financial resources
• 1980s and 1990s saw the entry of several local
  and international NGOs into microfinance
• Government plays a key role in the delivery of
  microfinance
• Around 65 of microcredit in Sri Lanka is
  provided through the government
• Post Tsunami which struck Sri Lanka in 2004,
  there was an influx of foreign aid of which
  substantial amount was channelled to microfinance
  
• Recently emerging trend is entry of commercial
  banks and registered finance companies and other
  large corporate entities into microfinance
• Absence of cohesive regulatory and supervisory
  system for microfinance is one of the barriers to
  future growth

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Microfinance coverage in Sri Lanka
Microfinance Outlets by Sector
Microfinance Outlets by Province
Source Microfinance Industry Report Sri Lanka
2009, GTZ ProMiS in collaboration with The
Banking With The Poor Network
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How does FGIHL operate Islamic Microfinance?

• Target Groups
• Small business set ups
• Entrepreneurs who plan to expand their businesses
• Handicraft industry
• People living below the poverty line in rural
  villages
• Self employed individuals
• Widows
• Structure of First Global Islamic Microfinance
• Direct relationship with beneficiary
• Forming a group through which facilities would be
  advanced to beneficiaries
• Establishing relationships with village level
  societies who manage groups to direct facilities
  to beneficiaries

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How does FGIHL operate Islamic Microfinance?

• Characteristics of the Beneficiaries
• Persons with similar standard of living
• Age, gender, education, income level, etc.
• Same neighborhood
• Similar attitudes
• Nature of business
• First Global Islamic Microfinance Schemes
• Communication
• Fishing
• Food production
• Handicrafts
• Service stations
• SMEs

• First Global Islamic Microfinance Product
  Structures
• Murabahah
• Mudarabah
• Qardh Al Hassan
• Bai Muajjal Musawamah

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First Global Islamic Pawn Brokering (Al Rahn)

• Our Intention
• Help the Needy People
• Provide a service totally Interest free and
  without any profits in return
• To charge only a nominal fee as Administration
  Fee to protect the Capital funds
• Opportunity to get out of Riba
• Requirements
• Age over 18 years old
• Same party whose requirement is related to
• Should produce a valid NIC/ Pass port / Temporary
  ID
• Not with the influence of alcohol or drugs
• Should be able to prove from where the articles
  are

• Purpose of Pawning
• Education
• Medical
• Janaza
• Pay utility bills (red notice)
• Settle a debt
• Redeem a pawn
• Consumption
• Housing
• Wedding expense

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First Global Islamic Pawn Brokering (Al Rahn)

• Articles for Pawning
• Accept
• Ring
• Bangle
• Chain
• Bracelet
• Necklace
• Pendant
• Coin
• Biscuit

• Articles for Pawning
• Reject
• Hollow items
• Covered with beads, stones and other ornaments
• Items with more alloy
• Articles less than 18 karat

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Thank You Jazaka Allah Khair
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Mohamed Faraaz Shaul Hameed MBA(USA)
BBA,PGDIBM-UK,AMABE-UK,DIBF-SL,DHRM-UK,DIBM-UK,DIM
-UK
Mr. Faraaz is a Professional Banker for more than
20 years locally and internationally and embarked
into Islamic Banking in 2007, and to date, he has
gained a wealth of knowledge and experience,
through his diverse positions held in various
organizations in Banking Operations, Management
Consultancy, Business Management, Strategic
Planning Budgeting, Islamic Banking Finance,
Retail, Commercial and Investment Banking,
Business Development, Compliance, Treasury
training and career development etc.

• Organizations
• Commercial Bank Ltd, Sri Lanka (Best bank for
  last 11yeras-in Sri Lanka)
• Al - Rajhi Bank, Saudi Arabia
• Seylan Bank, Sri lanka
• Thomas Cook Ltd, India
• Standard Chartered Bank , Sri Lanka
• Amana Bank , Sri Lanka
• First Global Investments Holdings Limited, Sri
  Lanka

Deputy CEO/Acting CEO First Global Investments
(Holdings) Sri Lanka faraaz_at_firstglobal-group.com
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