International Conference onIslamic Microfinance in Mauritius

CENTER OF ISLAMIC BANKING & ECNOMICS

Organized By :

Mr. Mamode Raffick Nabee MohomedFounder/SecretaryAl Barakah MCSL

ISLAMIC FINANCIAL CO-OPERATIVES TO MEET THE FINANCIAL NEEDS OF THE COMMUNITY

Case Study Of:

Al Barakah Multi-purpose Co-operative society Limited Mauritius

International Conference on Islamic Banking & Finance05-06 April 2011, Mauritius

Islamic Finance & Islamic Financial Institutions Concept of Co-operatives Islamic Financial Co-operatives Financing intruments of IFC Reserves & Funds Case Study of Al Barakah Multi-purpose Co-op Society Ltd.-

Mauritius Geographical background & Muslims in Mauritius Islamic Banking & Finance & Muslims in Mauritius Integrating Islamic Finance in Cooperatives Organisation of Al Barakah Legal Framework Products & Services Other activities Challenges Conclusion Opportunities with Al Barakah for Islamic Banking &

Finance in Mauritius

AGENDA

Islam is a practical way of life with its own system Inheritance in the economic sphere & scholars at

work Initiatives-No working model & since 1960’s IBF

started–Mit Ghamr 1963 Emergence of IFI & growth Satisfaction/Criticism Types of Islamic Financial Institutions (IFI) Dominance & neglected areas & Evolution

Islamic Finance &

Islamic Financial Institutions

According to Professor Rodney Wilson “Formal Islamic banking first emerged in the early 1960’s through credit unions of Muslim landowners in Egypt and Pakistan who simply pooled their resources and could then in turn draw out funds for agricultural improvements on a non-interest basis.” (The evolution of Islamic banking and emerging trends in Islamic Finance)

Interest Free Financial institutions (IFFI) of India are the forerunners in the history of global Islamic financial movement. Tracing the history of growth of interest free financial institutions in India, it is reported that such organized credit society had shown its presence as early as 1890. According to the directory of Islamic banks in India, such efforts in the organized sector in the style of the Patni Cooperative Credit Society Ltd. was established in 1942…

A recent study conducted by Bagsiraj (2003) shows that there are institutions that have grown to a size of 14 Islamic Cooperative Credit Society (ICCS) in India. It may be noted that these institutions primarily fulfill the casual social needs of the people at a very small scale.

(Dr Rahmatullah-IFFI of India in crisis/Bagsiraj-IFII,published by KAU, Jeddah in 2003)

“The history of Islamic Financial system in Thailand started with the establishment of a cooperative society, Pattani Islamic Saving Cooperative that operates based on shariah in 1987….. These Islamic cooperative societies have successfully established themselves as viable financial institutions in managing and mobilizing Muslims in this region.” ( Islamic banking in Thailand: prospects and challenges (Sudin Haron & Kumajdi Yamirudeng)

Evolution of Islamic Banking &Finance

Concept of cooperative: - From the beginning of human society, cooperation has

always been a vital factor in human development. - As a social creature, it is the natural urge of man to

cooperate with each other. - Cooperation conveys the idea of helping each other

and making joint efforts to achieve a common goal.

The Cooperative movement emerged in the middle of the 19th century by the Rochdale Pioneers. On the 24th October 1844, in Rochdale, Lancashire England, a group of people faced with economic exploitation and deprivation set up a cooperative store, based on the principles of self-help and mutual help. They defined a set of principles which became the basis for the cooperative ideology which has spread all over the world be it a capitalist, socialist or Muslim society.

The Cooperative Ideology Movement and Credit Union

A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. (www.ica.coop)

7 principles of cooperatives:1. Voluntary and open membership (VoM) 2. Democratic member control (DmC)3. Member economic control (MeC)4. Autonomy and independence (A&I)5. Education, training and information (EtI)6. Co-operation among co-operatives (CaC)7. Concern for community (CfC)

What is a Co-operative ?

Sectors of the economy-PMT

Class of Co-op societies/Multi-purpose Co-operatives - Consumer Co-op, Producers, Marketing, Housing,

Catering, Financial Co-operatives/Credit unions etc.

What is a Credit union? - A credit union is a financial cooperative that may

accept savings, deposits, provide credit and other financial services to its members.

- Credit Unions are financial cooperatives which are in effect community banks.

- Membership: people from all walks of life, - Common bond - Owned & controlled by shareholders/members - Capital: mobilising from shares ,savings & deposits

from members - Financing/not for profit maximisation - Surplus-back to shareholders

Class of co-operative societies

Generally Conventional co-operatives/credit unions are interest-based

Credit unions called by different names: - In Africa-Savings And Credit Cooperative Societies

(SACCOS) which emphasise on savings before credit. - In Afghanistan-(IIFC) Islamic Investment and

Finance Cooperatives which comply with sharia. IFC are institutions based on the principles of Islamic

Finance. Efforts over the past 30 years to set up IFC Community-based and providing Islamic financial

services to the community Islamic Financial Co-operatives around the globe (T&T, Canada, Malaysia, Thailand, Indonesia,

USA, Australia, India, Singapore, Afghanistan…)

Islamic Financial Co-operatives

Why IFC?1. Conceptual framework “Cooperate with all in what is good and pious and

do not cooperate in what is sinful and wicked….” (Q-5:2)

2. Legal framework is less regulated than the corporate sector (Cooperative Societies Act ,CU Act) – Shariah-compliant

3. Values - Islamic Finance–based on Islamic ethics: justice, sharing, cooperation. - Cooperatives based on values: honesty,

equity, equality, solidarity, self-help, etc.4. Easy formation & more elastic5. Small capital requirement6. Community –based & more people-

oriented( IEViews..)7. Spread ownership of business and reduce

concentration of wealth8. Different purposes - open to any type of economic

activity9. Incentives & Benefits –Tax10. Democratic

Islamic Financial Cooperatives

Murabahah Ijarah Mudarabah Musharakah Diminishing Musharaka Istisna Qard-ul-hasanah/IFL

Financing instruments of IFC

Statutory Reserve – according to Coop Act Dividend equalization Fund Social Takaful Fund Profit Equalisation Reserve Zakat Fund

Reserves & Funds

Al Barakah

Multi-purpose Co-operative Society Limited

Mauritius

CASE STUDY

Mauritius-gateway to Africa, South Asia & Asia Multi-religious society:

Population-1.3 MHindu :51%, Christians:28%,

Muslims :18%, Chinese :3% Muslims presence in all walks of life: Islamic

schools, professionals, orphanage, business, etc.

Muslims have contributed enormously in the dvp. of the economy

Business operated as family business But as a community, little has been done to

establish the financial system of Islam.

Geographical Background & Muslims in Mauritius

Keen desire by Muslims to re-establish their identity.

Establishing an Islamic bank in Mauritius in 1990’s was a manifestation of this desire.

To become part of the Islamic banking phenomena.

Preliminary work carried out.Formation of a Credit Union in the

Cooperative sector (AL BARAKAH)!

Islamic Banking & Finance & Muslims in Mauritius

Why Al Barakah?1. To provide an alternative to the

interest-based financial institutions for the community. (Community-based)

2. To provide halal investment opportunities and returns.

3. To contribute in a halal way to the overall development of the economy.

4. Formation of Al Barakah (Registered on 10th June 1998)

Islamic Finance through Cooperatives

LEGAL FRAMEWORK

Operates: Within the Co-operative Societies Act

2005 Within the framework of its rules and

regulations In accordance with Islamic Financial

Laws.

Advisors– Dr. Monzer Kahf (USA) Dr. Ashyraf Dusuki(Malaysia) Br. Imtiaz Ali (T&T)

Organisation Structure

Individuals become members/shareholders

Shareholders elect B.O.D, Internal Controller & Auditor at AGM

B.O.D nominates sub-committees & advisors

To operate as a financial institution based on Islamic cooperative principles and providing a wide range of services on an interest-free basis

To be a leading Cooperative Society in the field of Islamic Finance for a fair and just society.

VISION

MISSION

GOALS To present a practical model of Islamic

Finance through the co-operative sector. To lay the foundation for an alternative

financial system to the Mauritian population at large.

1. To create a source of credit for its members for provident and productive purposes.

2. To provide savings facilities to members

3. To create the framework to enable members to manage their financial resources for their mutual benefit.

4. To promote the welfare and economic interest of its members.

Objectives

Tailor-made schemes based on Murabahah:

1. Household General Financing 2. Computer Financing 3. Traders Financing 4. Home Financing 5. Air Ticket Financing 6. Motor Vehicle/Cycle Financing 7. Land & Property Financing Istisnaa Financing (Manufacture-Sale) Partnership /JV with shareholders

(M&M) Interest-Free Loan (Qard-al-Hasan) Hajj Savings Account

PRODUCTS & SERVICES BASED ON ISLAMIC FINANCIAL

TECHNIQUES

Statutory Reserve Profit Equalisation Reserve Dividend Equalisation FundSocial Takaful Fund

Reserves & Funds

OTHER ACTIVITIESCreating awareness about Islamic Finance.Organizing lectures, seminars, conferences and workshop.Organizing mini trade fair, socio-cultural programme.

1. Individual/organisational/government level

2. Legal Framework3. Public acceptance4. Economic potential5. Human Resource6. Mass Education7. Competition

CHALLENGES

Legal & Regulatory Framework * The Banking Act 2004-Amendments 2007 * The FSDA 2001-(Non-banking activities) * The Cooperative Societies Act 2005 Membership for corporate bodies Projects/Joint ventures etc.

Opportunities with Al Barakah for

Islamic Finance Projects in Mauritius

1. 12 years of operation2. An eye-opener3. Islamic finance at different levels4. Well-being of all citizens

CONCLUSION

Mamode Raffick Nabee MohomedFounder/Secretary Al Barakah M.C.S.LE-mail: albarakahcoop@yahoo.com www.albarakahcoop.orgTel: (230) 6275766,

Thank YouJazak Allah

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