Shari’ah Foundation and
Application of Islamic
Microfinance
Presented at
Global Islamic Microfinance Forum - Dubai
Presented on 06 October, 2013
By: Mufti Aziz Ur Rehman
mufti.aziz.89@gmail.com
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Outline
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Islam / Shari’ah and Faqeir
Treatment of Financially Distressed in Islam
Protection of Freedom
MENA Region and poverty
Main issue with Muslim Traders
IFIs and awareness
Recommendations
Final Words
Mufti Aziz Ur Rehman
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Islam and Faqeir
Islam treats Faqeir according to his need and
extent of poverty Faqeir is subjected to.
Three types of Faqeir;
1. Incapable of Earning )‫(عاجز‬
A Social Security System of
Islam. Baitul Mall, Zakat.etc.
2. Financially Distressed )‫(كارثة مالية‬
3. Capable of Earning )‫(قويـًا مكتس ًبا‬
Mufti Aziz Ur Rehman
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F. Distressed & Cap. of Earning
 Man born with some inalienable (absolute)
rights.
 That are recognized by majority of the
nations but are enjoyed by very few people
around the globe.
 A set of these rights give rise to development,
which everyone should ideally have access to.
Mufti Aziz Ur Rehman
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Excess to no. 2 & 3 by Islam
Financially Distressed )‫(كارثة مالية‬
 Support and provision of funds to meet one’s
needs enabling the distress to be eased. I mean;
Give him Freedom from such situation
Freeing captives or slaves, those in debts and to
pay Diyyat money etc.
Imam Abu Yousuf RA said;
‫يدفع للعاجز عن زراعة أرضه الخراجية لفقره كفايته من بيت المال قرضا‬
)‫ليعمل و يستغل أرضه (ابن عابدين‬
Mufti Aziz Ur Rehman
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Islamic Economic prosperity
 Islam postulates the concept of welfare state
to work for the economic prosperity.
 Economic Prosperity connotes betterment of
standard of life through;
 Enhanced capabilities
 Reduced vulnerability (Liabilities) and
 Protect Freedoms
 lowness of income is a means for capability
deprivation only
Mufti Aziz Ur Rehman
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Protection of freedoms
There are five kinds of Freedoms
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2.
3.
4.
5.
Freedom of social opportunities,
Freedom of transparency guarantees,
Freedom of protective security,
Freedom of political and civil rights, and
Economic freedom including opportunities to
get credit.
Since without freedom people cannot make the choices that allow
them to help themselves and others.
Mufti Aziz Ur Rehman
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Economic Freedom
To get credit;
Are begging, being dependant on charity and / or
being under debts supported and encouraged ?
No
but taking the Fifth Freedom “Economic freedom
including opportunities to get credit”
Now; how Islamic finance can enhance access,
reduce vulnerability, augment capability and so
reduce poverty? Of course Faqeir is to come near.
Mufti Aziz Ur Rehman
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Faqeir in MENA Region
 About 70 million;
< US$ 2 per day and
 20 million;
< US$1.25 per day.
• 95% of the adults residing in MENA define
themselves as religiously observant. Gallup survey
• > 19 m avoided interactions with FFIs for religious
reasons. (Reba)
• A mere 18 % of adults (above 15) have accounts in
FFIs, the lowest in the world.
• 27% of adults in Tunisia and Morocco having no
account at a FFI and 3 % of respondents in Kuwait
& UAE (for only religious reason) Global Findex, 2011
Mufti Aziz Ur Rehman
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Main Issue with Muslim Traders
• The main issue here is that many Muslimheaded households and micro, small, and
medium enterprises may voluntarily exclude
themselves from Formal Financial markets
because of religious requirements. Freedom?
• The combination of above facts has produced
a growing interest in IF as a possible tool for
reducing poverty through financial inclusion
among the religiously conscious Muslim
population.
Mufti Aziz Ur Rehman
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Faqeir in MENA Region
• Increasing access to Shari’ah compliant
or Islamic law, and the use of various
financial services can reduce poverty
and its severity (harshness)
• With no access to Islamic Financial
Services, many of the poor in MENA will
continue to be trapped in poverty with
little to no chance of escaping it in the
foreseeable future.
Mufti Aziz Ur Rehman
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Islamic Legal System
The Islamic legal system has guidelines and regulations
pertaining to the financial transactions of Muslim believers.
 The prohibition of pre-defined interest-bearing loans.
 Loss-Sharing Profit-Sharing of the business activities.
 Islamic microfinance instruments, such as;
 Musharakah
 Murabaha
could be particularly attractive tools for reaching and
providing vital credit to the region’s poor, who represent
about 17% of the total population of the MENA countries.
Mufti Aziz Ur Rehman
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Final Word
As repeatedly mentioned in such gathering:
‘If you give a man a fish you feed him for one
day’ But ‘if you teach him how to fish you feed
him for a life time’.
We have to fix the meaning of
KYC >>> Kidnap Your Customer
KYC >>> Kick Your Customer
Mufti Aziz Ur Rehman
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