Islamic Microfinance Challenge 2013: Beyond Murabaha More About the Challenge; Application Instructions About the Challenge CGAP (Consultative Group to Assist the Poor), the Islamic Development Bank, Al Baraka Banking Group, and Triple Jump are pleased to announce “Islamic Microfinance Challenge 2013: Beyond Murabaha.” The Challenge is also supported by the German Ministry of International Cooperation and Development, through the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. Through a $100,000 grant award, the Islamic Microfinance Challenge is designed to spur Sharia-compliant product innovation as well as to help scale up application of these products by financial institutions serving large numbers of poor. The 2013 Challenge seeks to spark innovation in an Islamic microfinance market marked by growing demand and an as-yet-narrow product offering—much of it anchored in the “cost-plus-markup” product murabaha. This stands to reason: Alternatives to the straightforward murabaha transaction, including the profit- and loss-sharing products musharaka and mudaraba, are costly to administer and require risky equity financing of microenterprises whose proprietors often lack collateral or even a steady income. For those potential Islamic microfinance clients who are already engaged in income-generating activity (e.g. farmers), other products such as salam financing, which essentially provides advance payment against future delivery, may be more viable. So too with istisna’, a product that defers delivery of mainly manufacturing supplies until clients have paid off these assets in fixed installments. In all cases, however, more evidence of these non-murabaha products’ viability and reach is needed to help the Islamic microfinance industry grow—an imperative equal to the vast numbers of Muslim poor who may otherwise shy away from conventional microfinance products. Addressing the Challenge Given the costs and risks associated with Sharia-compliant products—and the ways in which these costs could be amplified when dealing with microfinance clients—the 2013 Islamic Microfinance Challenge seeks to support existing innovative models that demonstrate potential for sustainability and scale. In all cases, these models must have at their core a demonstrated ability to meet the financial needs of poor and economically vulnerable populations. How to Apply The 2013 Islamic Microfinance Challenge welcomes applications from all geographic locations by institutions with existing non-murabaha Sharia-compliant products. Applicants will be short-listed by a panel of judges representing Challenge sponsors as well as other microfinance

experts. Short-listed applicants will then be invited to submit responses to more detailed questions from the panel.

- Deadline for submission is January 31, 2014. - Short-listed applicants will be notified by March 15, 2014. - Final award will be announced by May 15, 2014.

For more information on the Challenge or to submit questions or concerns, please email islamicmfchallenge@cgap.org.

APPLICATION

Islamic Microfinance Challenge 2013: Beyond Murabaha Deadline for submission is January 31, 2014. Please scan and email the form with accompanying attachments to islamicmfchallenge@cgap.org.

Section A: About Your Institution Please do not leave any field blank. Write 'N/A' where not applicable. 1. Person Completing Application: __________________________________________ ________________________________ Name Title 2. Institutional Mailing Address: _____________________________________________________________________________ _____________________________________________________________________________ 3. Telephone: _________________________________________________________________ 4. Email: _____________________________________________________________________ 5. Website: ___________________________________________________________________ 6. Registration Number: ________________________________________________________ 7. Registered As: ______________________________________________________________ (e.g. nongovernmental organization, microfinance institution, commercial bank, etc.)

8. Registered On: ______________________________________________________________ (DD / MM / YYYY)

9. Date your existing non-murabaha product was launched: __________________ 10. Summary of Institutional Mission: _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 11. Summary of Institutional Activities: _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________

Section B: About Your Non-Murabaha Product Answer the following on separate pages. Please label each answer clearly. 1. Overview Describe your existing product. What percentage of your current portfolio does this Sharia-compliant product represent? 2. Demand What market research did your institution conduct to understand demand for this product? What were the main findings of this market research and how was the product designed to take these findings into account? What is the estimated size of the market for this product? 3. Specifications Provide as much detail as possible on how your existing non-murabaha product is structured. What are the standard terms for your product? 4. Challenges What have been the biggest challenges to the success of your existing non-murabaha product? 5. Proposed Solutions How do you propose to address the challenges your institution has faced with its existing product? Proposed solutions should illustrate clearly how your institution aims to ensure the product’s sustainability as well as scalability. 6. Proposed Budget Provide a budget for implementing the solutions described above, including (i) level of investment to date for product launch (and source of funding) and (ii) variable costs (such as cost of delivery, administration costs, and capital expenses) as well as fixed costs (such as rent, salaries, and insurance). Expected income and expenditure streams should be separately identified. The budget should cover a period of five years. Please include any supporting spreadsheets. 7. Compliance Provide a brief summary of how your product will meet standards for Sharia compliance. For example, is there a local or national Sharia board that will certify the proposed products? Are the standards for compliance clear and attainable? How will such certification be communicated to potential customers?