Selasa, 09 April 2013

Poverty to profit: Islamic microfinance – part 2


The provision of Islamic microfinance Mudarabah contract falls under, a participatory agreement in which one party provides the capital (main) and the other (the worker) is used for commercial purposes, in which the profit from the trade is shared according to an agreed proportion and the loss, if any, unless caused by negligence or breach of contract by the worker, is confirmed by the principal. Here are some considerations:

>> The main Bank should not interfere in routine operations of the activity of the worker, even if the Bank is permitted to provide technical advice. The worker must provide regular periodic reports to activity State Bank;

>> Profit earned by a business Mudarabah is distributed among client and worker on the basis of proportion settled in advance;

>> No fixed amount as profit, salary or Commission, could be dismissed in favor of the parties in advance; Islam permits, establishing the profit in percentage terms (e.g. “10% of share your profits with me every month”), but prohibits the fixing profits in absolute terms (such as “give me $ 100 of your monthly profits”), the obvious difference is that the former is linked to business performance, whereas the latter is plugged into anything;

>> In a business running, losses can be compensated with business earnings until the business closes and accounts are paid;

>> scholar of qualified Sharia should be consulted throughout the investment process to ensure that transactions are in accordance with Islamic law.
A Grameen model Islamicized version looks like this:

1. a group of 5 customers the approach an Islamic Bank microfinance investment capital to 5 separate projects.

2. After the feasibility evaluation for each of the 5 projects, the Bank shall draw up separate agreements, explaining the reimbursement schedules and profit-sharing percentages and pointing out the possibility of more investment in the future depending on their individual performance.

3. the Bank invests primarily in 2 individuals.

4. these first 2 individuals repay a quarter of each of their original investments each week for four weeks (scratching your profits in the field each week) until the end of the month that is paid back the entire original investment and 75% of all the profits remain with the individual and 25% of the profits return to the Bank (mainly to finance growth and future Bank operations); in the event of leaks, only what’s left of the investment is repaid.

5. in the second month, the Bank then evaluates the performance of these first 2 individuals and decides whether to reinvest; growing investment size for those individuals with higher return rates to 10%; keeping the size of existing investment for those individuals with rates of return between 0% and 10%; and reducing investment for loss of individuals, where a second round of losses would disqualify them from any future investment, forcing the remaining group to find another partner of the group.

6. Also in the second month, the Bank started investment in next 2 individuals, using the same rebate program and profit-sharing agreement with regard to the first 2 individuals.

7. in the third month, the Bank assesses the performance of 4 existing customers and decide whether to reinvest, using the same criteria.

8. Also in the third month, the Bank invests in the fifth and final single of the group, using the same rebate program and profit-sharing agreement with regard to the previous 4 individuals.

9. the Bank continues this transaction cycle, using the same rebate program, the profit-sharing agreement and reinvestment policy for all future investments.

These simple steps are effective in a rural village in a Muslim country like in an urban ghetto in a non-Muslim, if the client is male or female, young or old, Muslim or not. Size groups, repayment plans, the goals of profit-ability, reinvestment policy, investment duration and other integrals of the transaction can be customized to meet the needs of the customer as necessary.

In calculating profit, the client must provide only three kinds of information: purchase price, selling price and quantity purchased. It is fundamental that from the beginning, customers explained that profitability (and, implicitly, by declaring honestly profits) translates into more investment in the future.

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