Philanthropic financing and its application in microfinance

1. Philanthropic Financing and its
Application in Microfinance
Presented by
Md. Fariduddin Ahmed
Advisor
Export Import Bank of Bangladesh Limited
Former
Managing Director & Chief Executive Officer
Islami Bank Bangladesh Limited
Export Import Bank of Bangladesh Limited

2. The goal of philanthropy (RbwnZKi,
Rb‡mevg~jK) is to improve the quality of life
of less advantaged people.
What is Philanthropy?
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Philanthropic Financing

3. First Model
Models of Philanthropic Financing
3
Traditional Foundations, Waqf Estates. Managed by
professional staff.
Second Model
Funded by individuals. Managed by professional staff.
Partnership structure. Fund is provided by the
partners from time to time.
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4. Microfinance
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Financial services for poor and low-income clients
offered by different types of service providers at a
fixed rate of interest.
Microfinance & Microcredit
Microfinance refers to credit (investment), savings,
insurance, money transfer, etc. while microcredit
means small loan (investment) for non-salaried
persons on the basis of interest.
Microfinance: Conventional

5. History of Microfinance
Microfinance: Conventional
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 Monks in the past.
 European credit union movement in the 19th
century.
 Dr. Muhammad Yunus in 1970s (Grameen Bank
Model)

6. How does microfinance help the poor?
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Access to finance help the target groups to meet
consumption needs and generation of income and
thus alleviate poverty to some extent.
Is the microfinance industry sustainable?
Both cost bearing and non-cost fund including
subsidies and charitable fund can make it viable and
sustainable.
Microfinance: Conventional

7. Microfinance debates and challenges
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 High rate of interest (Profit).
 High operational cost.
 Finance for unproductive purposes.
 Inclusive financial tools.
Microfinance: Conventional

8. What is the Government’s role in supporting
microfinance
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 Setting sound macroeconomic policy that
provide stability and low inflation.
 Creation of special fund.
 Introduce appropriate modes of finance.
Microfinance: Conventional

9. Poverty meaning
Islamic perspective of philanthropy
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A situation of deprivation. Hard core poverty –
Miskeen. General Poverty – Assets below Nisab.

10. Basic Needs
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Zaruriat – Basic Needs
Hajiat – Requirement/ Comfort
Tahsiniat – Beautification
Islamic perspective of philanthropy

11. 6 (Six) Zaruriat (Basic Needs)
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1. Deen/Akida : Iman
2. Nafs : Life style such as food, shelter, education,
treatment & security
3. Nasl : Family formation / Posterity
4. Akl : Intellect / Reasoning
5. Maal : Property / Wealth
6. Hurriat : Freedom
Islamic perspective of philanthropy

12. Positive Measures to Eradicate Poverty
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1. Income generation and gradual growth of
income.
2. To make beggar, the worker.
3. Distribution and transfer of Income and
Wealth.
4. Equal opportunity for works and jobs.
Islamic perspective of philanthropy

13. Preventive Measures to Eradicate Poverty
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1. Control of ownership
2. Definite principles for earning, consumption
and distribution of wealth
3. Prohibition of concentration of wealth
4. Prohibition of earning through corrupt &
Haram means
5. Prohibition of Riba, Gharar & Maisir
6. Check unnecessary spending.
Islamic perspective of philanthropy

14. Transfer Mechanism to Eradicate Poverty
Corrective Measures
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1. Zakat
2. Usr
3. Kaffarah
4. Fidia (for fasting inability)
5. Muhr
A. Farj
Islamic perspective of philanthropy

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1. Sadaqatul Fitr
2. Nafaqat (bearing expenses of wife)
3. Korbani
4. Akika
5. Najar/ Manat
B. Wajib
Transfer Mechanism to Eradicate Poverty
Corrective Measures
Islamic perspective of philanthropy

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1. Sadaqat-e-Nafele (provide assistance to poor
only to please Allah)
2. Hiba
3. Wasiat
4. Waqf
5. Zarair (provide assistance according to need)
6. Minah (provide production utensils for a fixed
period)
C. Nafal
Transfer Mechanism to Eradicate Poverty
Corrective Measures
Islamic perspective of philanthropy

17. Waqf
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Religious endowment donating immovable asset
or immovable property for charitable purposes.
Transfer Mechanism to Eradicate Poverty
Corrective Measures
Islamic perspective of philanthropy

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Finance
Is allocation of assets and liabilities overtime
under conditions of certainty and uncertainty on
the basis of Shariah approved modes.
Transfer Mechanism to Eradicate Poverty
Corrective Measures
Islamic perspective of philanthropy

19. Renowned Charities in the World
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1. Abdur Rahman Al-Sumait (Africa)
2. Missionaries of Charity – Mother Teressa
3. Sir Garnesh Dutt (British Minister)
4. Tarek Ben Halim (Arabian)
5. Prince Karim Aga Khan
6. Waren Buffet
7. Muslim Aid
8. Red Cross/Red Cresent

20. Thanks for your
Co-operaTion
Allah Hafez