Islamic Research & Training Institute
Member of the Islamic Development Bank Group
Social Finance: What It Implies
Conventionally, social finance is defined as provision of
financial services to
Achieve social protection of the poor; reduction in their
vulnerability (ILO) and
Includes:
community investing, microfinance, social enterprise
finance, outcome-based philanthropic grant-making and
program-related investments
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Islamic Social Finance (ISF) Report: Objectives
Study on Zakah, Awqaf, Islamic Mutual and Not-forProfit Microfinance Sectors with the following key
objectives:
 Estimate trends in flow of funds
 Undertake comparative analysis of enabling
environment, e.g. regulations
 Document good practices of key players
 Present stylized facts for further empirical research
 Contribute to policy dialogue for development of the
sector & facilitate reverse-linkage strategy of IDBG
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Islamic Social Finance (ISF) Report: Structure
Region under Focus: key economic and poverty-related
indicators, potential of Islamic social funds in meeting
resource gaps for poverty alleviation
Zakah Sector: Trends in zakah mobilization and distribution;
comparison of enabling environment; good practices at
micro and meso levels
Awqaf Sector: Estimates of existing awqaf; comparison of
enabling environment; good practices at micro and meso
levels
Islamic Mutual and Non-Profit Microfinance Sector: Trends in
the sector; comparison of enabling environment; good
practices at micro and meso levels
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Islamic Social Finance (ISF) Report:
Revolving Focus
Focus on Mainstreaming
and Reverse-Linkage
SE &
South
Asia
SubSaharan
Africa
ISF Sector in IDB MCs &
Muslim Communities in NonMCs
GCC
Maghreb
CIS,
Russia
& Europe
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Trends in Zakah Collection in Indonesia
(in billion IDR)
2500
2000
1500
Total Zakat Collected
1000
500
0
2002
2003
2004
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
2005
2006
2007
2008
2009
2010
2011
2012
Trends in Zakah Collection in Malaysia
(in million RM)
1800
1600
1400
1200
1000
Total Zakat Collected
800
600
400
200
0
1991
2005
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
2006
2007
2008
2009
2010
2011
Trends in Zakah Collection in Singapore
(in million S$)
30
25
20
15
Total Zakat Collected
10
5
0
2009
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
2010
2011
2012
Trends in Zakah Collection in Brunei
Darussalam (in million BND$)
25.00
20.00
15.00
Total Zakat Collected
10.00
5.00
0.00
2001
2002
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
2003
2004
2005
2006
2007
2008
2009
2010
Trends in Zakah Collection
 Indonesia: 231.6 mill USD in 2012 (Increased by over 32 times over






10 years)
Pakistan: 105 mill USD (by state) in 2011 (Increased by 40 percent
over 3 years); 2 billion USD (state plus private)
Singapore: 20.4 mill USD in 2012 (Increased by 20.2 percent over 3
years)
Brunei Darussalam: 13.8 mill USD in 2010 (Increased by 55 percent
over 10 years)
Malaysia: 547 mill USD in 2011 (Increased by 26.9 times over 20
years)
India: 1.5 billion USD (sample-based estimate, 2007)
Bangladesh: 1.4 billion USD in 2010 (estimate)
*Estimates include p2p zakat; official agency in B’desh collected Tk14 million out of Tk110 million
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Trends in Zakah Distribution
Distribution Pattern in Indonesia (2012)
Economic Program
12%
Education Program
16%
Health Program
31%
Humanitarian Aid
41%
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Trends in Zakah Distribution
Distribution Pattern in Malaysia (2010)
Ibnus Sabil
1%
Poor
Fi Sabilillah
42%
38%
Amil
10%
Gharmin
4%
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Riqab
1%
Mu’allaf
4%
Trends in Zakah Distribution
Distribution Pattern in Singapore (2012)
Ibnus Sabil
0%
Fi Sabilillah
Fuqara & Masakin
40%
37%
Amil
Riqab
7%
14%
Gharmin
1%
Mu’allaf
1%
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Trends in Zakah Distribution
Distribution Pattern in Brunei Darussalam (2010)
Musafir
Mu’allaf
Amil 5%
0%
0%
Gharimin
12%
Poor
83%
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Trends in Zakah Distribution
Distribution Pattern in Pakistan (2010)
Admin
9%
Healthcare
17%
Social Safety Net
43%
Education
31%
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Trends in Zakah Distribution
Distribution Pattern in India (Sample Survey, 2006)
Economic need
Poor relatives
8%
5%
Others
7%
Secular Education
Orphanage
23%
10%
Religious
education
19%
Health care
17%
Direct help to
poor and
needy
11%
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Trends in Zakah Distribution
Indonesia, India, Pakistan, Bangladesh: Classification on
the basis of sectors assuming zakat are primarily for
the poor; Within the poor category, education, health,
social safety nets receive priority; around ten percent
for economic empowerment programs in Indonesia
Malaysia & Singapore: Poor account for 35-40 percent;
Fi-Sabilillah accounts for about 40 percent
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Trends in Zakah Distribution
 Proportion of zakat distributed to zakat collected
shows reversion to unity over intervals for Malaysia,
Singapore; in Brunei Darussalam it varies widely
between 50-500 percent showing symptoms of zakat
“holding” or accumulation of surplus.
 Proportion of admin costs to zakat collected varies
between 0-10 percent for most countries; except in
India where anecdotal evidence shows the
percentage to be as high as over 30 percent.
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment for Zakah
 Indonesia: Zakat Act 2011
 Pakistan: Zakat Ordinance, 1980
 India: No formal institutional or regulatory framework
 Bangladesh: Zakat Fund Ordinance, 1982
 Malaysia: Administration of the Religion of Islam
(Federal Territories) Act 1993 and similar Acts for
individual provinces
 Singapore: Administration of Muslim Law Act, 1999
 Brunei Darussalam: Laws of Brunei, 1/1984, Religious
Council and Kadi Courts,
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Institutional Structure for Zakah Management
Indonesia: Dual system with state and private institutional actors
President
Minister of Religious Affairs
BAZNAS
LAZ
UPZ
UPZ
Muzakki and Mustahiq
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
LAZ
Institutional Structure for Zakah Management
India: Private actors (individual and institutional) with no role for
state
Private Collectors (Individual & Institutions)
Muzakki and Mustahiq
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Institutional Structure for Zakah Management
Pakistan and Bangladesh: Dual system with state and private actors
(individual and institutional)
Minister of Religious Affairs
Department of Zakat
NGOs
Individuals
Muzakki and Mustahiq
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Institutional Structure for Zakah Management
Malaysia, Singapore & Brunei Darussalam: State agency as the sole
entity responsible for zakah management
Sultan/President
Minister of Religious Affairs
Islamic Religious Council/ Majlis
Zakat Office
Agent
Muzakki and Mustahiq
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Agent
s
Zakat Collection: What the Laws Say
Zakat payment is
 Mandatory: Malaysia, Singapore
 Partially Mandatory (for specific financial assets):
Pakistan
Reasons for weak enforcement: Absence of muzakki database,
Unwillingness of zakat officer to list down those who fail to pay
zakat, Shortage of staff and Inadequate authority to zakat officer
to investigate any failure
 Voluntary: Indonesia, Brunei Darussalam, India,
Bangladesh
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Zakat Collection: What the Laws Say
 Defining of Zakatable Assets: Indonesia, Pakistan
 Defining Zakat Rates: Pakistan
Provides for exclusion of a Muslim from zakat liability
based on declaration that he follows a different
school of fiqh
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Zakat Distribution: What the Laws Say
Allocation of zakat among Asnaf:
 Priority in Distribution: Indonesia (productive activities
only after the basic needs of mustahiq are fulfilled)
 Definition of mustahiq with emphasis on tamleek:
Pakistan
 A decision of Majlis: Malaysia, Singapore & Brunei
Absorption of operational expenditure:
 Entirely by zakat mobilized without limit (Indonesia)
 Partially by govt budget and by zakat mobilized (Brunei
Darussalam & Pakistan)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Accountability & Governance of ZIs: What the
Laws Say
 Collection and distribution by “authorized” amil:
Indonesia, Malaysia, Singapore, Brunei Darussalam
 Utilization of such funds is in conformity with Shariah
as also with the intention of the donor(s): Indonesia
 No Commingling of zakat funds with other charity
funds: Indonesia
 Mandatory reporting requirements to apex body:
Indonesia
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Accountability & Governance of ZIs: What the
Laws Say
 Elaborate administrative sanctions, revocation of amil
license for violations of provisions: Indonesia
 Financial & physical punishment for fraudulent
practices: Malaysia, Brunei Darussalam, Indonesia
 Penalty to be decided by Majlis: Singapore
 Removal of erring member: Pakistan, Bangladesh
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment: Fiscal & Other
Incentives
 Tax Rebate: Zakat paid is a deduction from tax payable:




Malaysia
Tax Relief: Zakat paid is a deduction from taxable income:
Indonesia, Pakistan, India* (Tax is reduced by “zakat paid”
times the tax rate.)
Allowance for corporates: Malaysia
Assets for which zakat has been deducted at source shall
be excluded from taxable wealth: Pakistan
No land revenue on land on the produce of which zakat has
been charged: Pakistan
*zakat to Non-profits treated as donations and qualify for tax benefit
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Corporatization & Use of Technology
Major contributor to growth in zakat mobilization in
Malaysia
Collection mechanism in no. of states in Malaysia*
Office /
Counter
Branch
14
Amil
Salary Kiosk Credit
Deduct
Card
Corp Mosque
6
* Source: JAWHAR
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
14
Agent
Post
Bank
MATA
Office Counter Internet ATM Phone
Bank
14
2
10
14
14
13
4
6
2
Good Practices in Zakat Management:
Micro View
 Dompet Dhuafa Republica, Indonesia
Good Practices under Focus: Sustained growth in zakat
mobilization with focus on transparency, modern fund-raising
techniques; Economic empowerment program for poor
communities
 SKM Cancer Hospital, Pakistan
Good Practices under Focus: Sustained growth in zakat mobilization
with focus on transparency, accountability; Affordable healthcare to
the poor
 Akhuwat, Pakistan
Good Practices under Focus: Innovative and sustainable ways to
provide microfinance in a cost-less manner by leveraging
philanthropy
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Zakat Collection by DD
 Out of Rp1.7 trillion total zakat & infaq collected in
Indonesia* in 2011, Dompet Dhuafa and Rumah Zakat
collected Rp 150 billion and Rp 146 billion respectively while
the apex government agency BAZNAS collected Rp 44.16
billion.
 In 2011 and 2012 DD collected zakat amounting to Rp 97.6
billion and Rp31.4 billion respectively. In 2013 till July, DD
collected Rp43.7 billion
* http://www.thejakartapost.com/news/2012/10/29/groups-challenge-govt-attempt-control-collecting-alms.html
ECONOMIC EMPOWERMENT MODEL OF DD
(1)
Inception &
Growth Stage
(2)
Consolidation
Stage
(3)
Self-Reliance
Stage
ISM is organized as
Legal Regulated Cooperative or
Other Institutional Structure
ISM
Self-Reliance & Sustainability
Workshop
Socialization
Strengthening Business
Feasibility Study:
Beneficiaries
Mandatory Group
Exercise
Group Formation
ISM
Strengthening Group-Based
and Institutional Business
Process Evaluation of
Independence
ISM
Network & Business Development
Strengthening Efforts
Induk Induk
Induk Induk
Strengthening Organization
Financing Productive
Business
KM
KM
KM
KM
Independent Admin System
Business Mentoring
Strengthening Financial
Reporting and Transparency
Cadre Development
Strengthening Mgt System
of Local Institutions
Completion Systems
Management of Asset Reform
Other Required Reinforcement
KM
KM
KM
KM
Intellectual
Autonomy
Material
Strengthening of Capacities
Managerial
Strengthening Stakeholders
Network at Local Level
Mentoring
Time mentoring
Zakat Utilization by DD
(Economic Programs: 2008-2012)
No. Program
Program
Funds
(Rp Billion)
Beneficiaries
1.
Organic Farming
15
4.6
2611
2.
Livestock
9
6
997
3.
Fisheries
52
11.1
6175
6
4.3
2186
150
5.6
5164*
232
31.7
17133
4. For-profit Microfinance
5.
Research, In House &
Public Training
TOTAL
* Participants
Zakat Collection by SKMCH
In 2011 zakat collection by SKMCH was 12.9 percent of total
collections by government; growing by 29 times over 17 years.
PKR millions
Year
Hospital
Zakat
Donations
Services
Other
Total
Income
Revenue
2011*
1,976
1,343
908
63
4,290
2010
1,546
813
614
37
3,010
2009
1,281
865
620
47
2,813
2008
1,125
646
460
37
2,268
2007
954
535
486
33
2,008
2006
750
438
273
34
1,495
2005
573
265
320
29
1,186
2004
424
397
368
33
1,222
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Zakat Utlization by SKMCH
Financially supported patients
Philanthropic spending
Facilities
Staff
New registrations
Outpatient visits
Chemotherapy
Radiation treatments
Admissions
Surgical procedures
Pathology tests
Imaging studies
Pharmacy Dispensing
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
75% (since 1994)
Rs. 9.94 billion (US$ 148 million)
176 beds
1,524 (59 Physicians & Surgeons)
9,542 (2012)
156,766 (2012)
31,198 (2012)
51,865(2012)
8,613 (2012)
6,990 (2012)
3,740,838 (2012)
160,574 (2012)
1,092,480 (2012)
SKMCH Good Practices
Systematic procedure to address the issue of commingling of zakat with other
donations & revenues:
• Zakat exclusively utilized for providing direct patient care to the poor patients;
• Revenue from diagnostic services utilized for expansion projects/equipment and
cover other hospital expenses (including salaries)
Of a total hospital budget of Rs. 5.2 billion for the year 2012, the amount required for
providing direct patient care for the poor cancer patients was about Rs. 2.1 billion,
while the zakat collections are about Rs. 1.6 billion.
Ministry of Religious Affairs, Zakat and Ushr of the Government of Pakistan disburses
Rs.12 million from its Zakat Fund for the treatment of poor cancer patients each year,
and has a permanent representative for monitoring the disbursement at the Hospital.
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Summary of Good Practices for Zakah Sector
 Government may be responsible solely for regulation




and leave mobilization to private bodies
Where state is sole collector with agency agreement
with private corporate entities, there should be no
competition between the two
Zakah regulations should be dynamic with scope for
continuous reforms
Zakah payment should be made compulsory with
effective deterrents against evasion
Zakah payment should be allowed as a deduction to
income tax payable and not just to taxable income
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Summary of Good Practices for Zakah Sector
 Corporatization is desirable as it enhances
convenience for Muzakki; improves transparency
 Accountability and good governance are key to
sustainability and growth in zakah mobilization;
require ensuring separation of zakah funds from other
forms of charity; flow of zakah funds to designated
beneficiaries by Shariah and by the Muzakki
 Effective deterrents against misuse of zakah proceeds
and violation of Shariah mandates relating to
application of zakah funds must be in place
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Summary of Good Practices for Zakah Sector
 Effectiveness in zakah management requires ensuring
that zakah payment does not encourage dependence
and leads to economic empowerment
 Priority rules of distribution require fulfillment of basic
needs (relief and rehabilitation) of ultra-poor first and
avoidance of carrying or investing any surplus
 Efficiency in zakah management requires ensuring
that cost of zakah mobilization is pegged below oneeighth of funds mobilized.
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Key Findings on Awqaf Sector
 Enabling Environment
 Examples of Good Practices
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment for Awqaf Sector
 Indonesia: Act of Republic of Indonesia No.41 on






Waqf, 2004
Pakistan: Provisional Waqf Ordinances 1979
India: Wakaf Act, 1995
Bangladesh: Waqf’s Ordinance 1962
Malaysia: Administration of the Religion of Islam
(Federal Territories) Act 1993 and similar Acts for
individual provinces
Singapore: Administration of Muslim Law Act, 1999
Brunei Darussalam: Laws of Brunei, 1/1984, Religious
Council and Kadi Courts,
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Institutional Structure for Waqf
Indonesia
President
Ministry of Religious Affairs
Ulema Council
BADAN WAKAF
Waqif (Endower)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Nazir (Manager)
(Endower)
Mawquf Alaihi (Beneficiary)
Institutional Structure for Waqf
India
Ministry of Minorities Affairs
Central Waqf Council
State Waqf Board(s)
Waqf Administration
Waqif (Endower)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Mutawalli (Manager)
(Endower)
Mawquf Alaihi (Beneficiary)
Institutional Structure for Waqf
Pakistan
Minister of Religious Affairs
Chief Waqf Administrator (Province)
Waqf Administration (Province)
Waqif (Endower)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Mutawalli (Manager)
(Endower)
Mawquf Alaihi (Beneficiary)
Institutional Structure for Waqf
Bangladesh
Ministry of Religious Affairs
Waqf Administrator
Waqf Committee
Waqf Administration
Waqif (Endower)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Mutawalli (Manager)
(Endower)
Mawquf Alaihi (Beneficiary)
Institutional Structure for Waqf
Malaysia and Brunei Darussalam
Sultan
Minister of Religious Affairs
Islamic Religious Council(s)/ Majlis
Waqif (Endower)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Mawquf Alaihi (Beneficiary)
Institutional Structure for Waqf
Singapore
President
Minister of Religious Affairs
Islamic Religious Council/ Majlis
Mutawalli (Manager)
Waqif (Endower)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Mawquf Alaihi (Beneficiary)
Enabling Environment for Awqaf Sector
India, Pakistan and Bangladesh:
 Shared history
 Permit private management by mutawallis but
concentration of authority in state agency (absolute in
case of Pakistan)
 Emphasize preservation
 Neglect or rule out developmental possibility (e.g. cap
on leasing period of 2 years in India; exclude cash
waqf); Perceived as obsolete, inefficient and costly
 Outcome: development of existing waqf rare; no new
social waqf; philanthropic projects in secular domain
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment for Awqaf Sector
Malaysia, Singapore and Brunei Darussalam:
 Shared history
 State religious council as the sole entity responsible
for waqf management
 Static and obsolete laws with severe restrictions on
new waqf
 State control may not necessarily hamper creativity
and innovation and awqaf development:
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment for Awqaf Sector
Indonesia:
 Continuous reform in laws
 State regulator with private mutawallis responsible
for waqf management
 Emphasize preservation as well as development
 Explicitly encourage cash waqf
 Remove uncertainties through comprehensive
coverage of relevant issues
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices for Awqaf Sector (Macro)
 Proactive regulations ensure continuous reforms
 Individual as well as institutional role in making and
managing waqf encourage new waqf creation
 Private financing of waqf development should be
permitted for finite and limited period ensuring the
perpetual character of waqf, thus balancing the
apparently conflicting concerns of preservation and
development
 Additional financial as well as non-financial costs with
waqf (as compared to trusts and foundations) must
be avoided to provide a level playing field
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices for Awqaf Sector (Macro)
 Issues relating to remuneration and accountability of
mutawallis should be explicitly addressed with
effective deterrents against misuse of waqf assets
 Expressed and documented Intention of waqif
regarding intended application of waqf proceeds must
be respected and complied with
 Emphasis on cash waqf encourages new waqf
creation; investment of waqf funds should be
permitted in financial as well as real portfolios while
avoiding highly speculative investments
 Waqf was always meant to be in voluntary sector and
should be allowed to remain so.
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices for Awqaf Sector (Micro/ Meso)
Corporate waqf and cash waqf in Malaysia (Johor Corp)
Large-scale development of existing awqaf with sukuk in
Singapore (Majlis Ugama Islam Singapora)
Wakaf Syed Omar Ali Aljunied (Bencoolen)
Investors
Sukuk
Funds
MUIS (Baitul Mal)
WAREES
Funds
Management
WAQF
Land
MUSHARAKAH
Ascott International
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Ijara
Residential
Apartments
Commercial
Apartments &
MOSQUE
Key Findings on IsMF Sector
 Enabling Environment
 Examples of Good Practices
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment IsMF Sector
Islamic microfinance institutions in cooperative and notfor-profit sector in Indonesia, India, Pakistan and
Bangladesh governed by multitude of laws
Baitul Maal wat Tamweels (BMTs) in Indonesia governed
by Cooperative Act
Islamic financial cooperatives in India governed by
Cooperative Act
Zakah-financed IsMFIs in Pakistan governed by secular
laws applicable to not-for-profits, e.g. Societies Act,
Trust Act
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Enabling Environment IsMF Sector
The Rush to Regulate:
 How much regulation is right for the Islamic micro
finance sector? Do stringent laws and over-regulation
stifle the sector?
 How do we harmonize the different regulatory
frameworks governing institutions based on
philanthropy, co-operation, not-for-profit and forprofit finance?
 How do we enhance transparency, accountability and
governance in the sector?
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices for IsMf Sector
 Emphasize access by ultra-poor
 Encourage alternative models of microfinance: seek to
retain strengths of replications of conventional models and
avoid their weaknesses
 Strengths of replications: simplicity; transparency;
standardized procedures & documentation; higher staff
efficiency and professionalism
 Weaknesses of replications: Overwhelming concentration of
murabaha; less emphasis on project viability; high cost of
finance; “women only” approach; perpetuation of debt
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices for IsMf Sector
 Integrate zakah, awqaf with microfinance for
• Provision of safety nets, relief and rehabilitation (DD,
Indonesia)
• Lowering of cost of finance to ensure affordability (RDS,
Bangladesh; Akhuwat, Pakistan)
• Economic empowerment through skill enhancement and
provision of business development services (DD, Indonesia)
 Provision of micro-takaful (BMTT, Indonesia)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Microfinance by Akhuwat
Indicators
2008-09
2009-10
2010-11
No. of loans
44577
65650
Loan disbursed (Rs. million)
488
Percentage of recovery
Cities
No. of branches
No. of employees
99.50
15
21
90
Year
2008
2009
2010
2011
2012
2013*
Donation Received
Amount (in Rs. million)
23.2
36.1
108
127
95
54
99844
Dec.
2011
125,646
Dec.
2012
230,000
739
1157
1500
3200
99.86
20
33
181
99.85
34
53
358
99.82
45
62
419
99.83
105
153
785
Zakat Received
Amount (in Rs. million)
1.8
7.1
8.1
* Up to February, 2013
**Loans in 2011-12 include those funded by PKR 2 billion zakat placed by Dept of Zakat, Government of
Pakistan
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices by Akhuwat
 Donations by Borrowers (Progress out of Poverty)
Year
Donation from Growth Rate
borrowers
(Rs Million)
Operating
Expenses
(Rs Million)
8.3
10.4
17.83
Donations from
borrowers as
%age of OE
0.25
0.10
34.3
2008
2009
2010
0.021
0.010
6.1
(50)
59078
2011
12.3
200
36.7
33.4
2012
23.9
195
68.2
35
2013*
29.8
125
*Till Feb 2013
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices by Akhuwat
 Minimize operational cost through creative strategies:
 Volunteers in staff (one-third)
 Use of masjids and churches
Year
2008
2009
2010
2011
2012
No. of Loans
Disbursed
11,388
13,821
21,073
34,194
67,683
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Amount of Loan
Disbursed
Operating
Expenses
(Rs. Million)
(Rs. Million)
122.45
164.23
251.81
418.21
1,137.68
8.29
10.38
17.82
36.67
68.16
OE as %age
of Loan
6.75
6.32
7.08
8.77
5.99
Good Practices for IsMf Sector
 Institutionalize charity and good giving; encouraging past
beneficiaries to donate (35 percent of operational costs for
Akhuwat Pakistan is absorbed by donations from past
borrowers growing by 5 times during last 3 years)
 Institutionalize voluntarism (one-third of workforce for
Akhuwat Pakistan are voluntary)
 Use innovative ways to reduce operational costs, e.g. use of
masjids and churches for loan delivery and ensure zero
default
(For Akhuwat, operating cost as percentage of loan amount
pushed below 6 percent per annum)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices for IsMf Sector
 Encourage cooperation & solidarity (most indigenous IsMF
experiments follow cooperation-structure)
 Avoid debt, especially for ultra-poor; make use of multitude
of Shariah-compliant modes (Wasil Pakistan uses 8 not-forprofit and for-profit debt-based and participatory modes)
 Encourage family cohesion by treating family as a whole unit
(avoiding women-only” models, e.g. RDS Bangladesh)
 Ensure Shariah compliance of contracts (Some IsMFIs still
depend on interest-based government finance)
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
Good Practices for IsMf Sector
 Ensure one-member-one-vote rule or consensus-building as
the basis for decision-making for cooperation-based
institutions (e,g, BMTs)
 Ensure transparency, establish standard operating
procedures and self-regulatory mechanisms
 Underscore inclusiveness and integration of microfinance
with the formal financial system
Islamic Research and Training Institute
Member of the Islamic Development Bank Group
THANK YOU
Islamic Research and Training Institute
Member of the Islamic Development Bank Group