Thoughts on Economics

Vol. 25, No. 03 & 04

Women’s Empowerment under Islamic Microfinance: A Case Study on RDS of IBBL

Dr. Mahmood Ahmed*

Abstract: It is generally agreed that Microfinance Institutions have the potential to empower women in rural areas through microfinance and related financial services. This case study identified five issues required for women’s empowerment. It also discusses how Rural Development Scheme of Islami Bank Bangladesh Limited, an Islamic microfinance programme, addressed the issues. It suggests three modes of Islamic microfinance for improvement of the potential of the Scheme to empower women. Thus the study is an example for others who are interested to meet the demand for Islamic microfinance products in the potential markets of Muslim countries by establishing Islamic microfinance institutions as well as to achieve the sustainable development goals (SDGs) through women’s empowerment and poverty alleviation.

Key words: Potential, Financial Services, issues, modes, example, demand

Views expressed in the article are those of the author and do not necessarily reflect the organization in which he is employed.

1. Introduction1.1. Statement of the problem:In the case of women’s empowerment through Microfinance Institutions (MFIs), the key institutions are households, MFIs, banks and Non-government Organisations (NGOs) (Hoffman, 2003). Islami Bank Bangladesh Limited (IBBL), a private sector Islamic bank, runs the Rural Development Scheme (RDS), an innovative Islamic microfinance programme, to meet the demand of the rural poor in Bangladesh. The programme was launched in 1995. In the first year, 84 percent were women of the beneficiaries. As of February 2012 women makes up 94 percent beneficiaries of which 41 percent are between the age of 18 and 30 (Banihani, 2012).

Previously, before joining the programme, men were the main decision makers within their households in relations to crop production, employment, housing, raising children, child education, community meetings, and rural activities. A study (Jinan, 2008) revealed that women, who joined the RDS programme and

* Executive Vice President, Islami Bank Bangladesh Ltd.

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participated in income generating activities, dramatically increased women’s participation in the decision making process within their households and community.

The impact of RDS on women’s empowerment provoked the interest of the researcher to know: (i) what are the required issues for women’s empowerment through Islamic microfinance? (ii) How the RDS addressed those required issues? (iii) And how the potential of RDS can be improved? These research questions helped setting the following objectives of the study.

1.2. Objectives, scope and method of the study:The main objective of the study is: to focus the RDS as a strategy capable of empowering women through Islamic microfinance. There are four specific objectives of the study. These are to:

(i) Identify the required issues for women’s empowerment through Islamic microfinance;

(ii) Analyse the potential of RDS of IBBL to address the required issues for women empowerment;

(iii) Understand the relationship between the RDS and women’s empowerment; and

(iv) Suggest improvement of the potential of RDS.

The study is divided into four sections. After the introductory section, the second section delineates the required issues for women’s empowerment through Islamic microfinance; while the third section analyses the potential of RDS of IBBL to address those issues required for women empowerment; and the fourth section draws conclusion and makes suggestions for improvement of the potential of RDS.

This case study is a desk research. Review of literature helped identification of the knowledge gap. Study of books, journals and papers helped designing and completion of the study.

1.3. Review of the literature and development of hypothesis:To identify the knowledge gap and to develop the hypothesis of the study, following literature has been reviewed. Banihani (2012): analysed the key enablers that facilitated the expansion of RDS, from a pilot project to a widely recognized model in poverty alleviation. It also provides some of the challenges that are currently hindering the scaling up of Islamic microfinance

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programmes in many Muslim majority countries. Costa, Valentina and et.al (2010): aimed to present the Islamic microfinance, focusing on the positive impact on Egyptian women. In order to meet this objective the paper has been divided in two parts. The first part explains women’s empowerment in Egypt in informal areas focusing on social and economic aspects. The second part explains the theoretical base of the Islamic microfinance, going through religious and ethical principles and financial contracts related to these principles, such as mudaraba, musharaka and murabaha. Their argument aims to give some key ideas to demonstrate why microfinance is the answer for women’s social and economic empowerment in general. Hashemi and Riley (1996): postulated eight different dimensions of empowerment and find from their empirical study that credit leads to empowerment in most of these dimensions. After constructing a composite score of empowerment, they find that women who had access to credit had a significantly higher score than those who did not. Hassan and Shahzad (2012): focused on to lay emphasis on microfinance sector and to examine its challenges in eradicating poverty and empowering women. Though microfinance includes a broad range of services but this paper specifically discuss the role of microcredit services and its impact. Jinan (2008): assessed the impact of micro credit program under Rural Development Scheme (RDS) of Islamic Bank Bangladesh Limited (IBBL) on the basis of using data collected from 25 respondents of each of group of investors,( i.e. agriculture group and business group) of the five selected villages in Sadar Upazila of Mymensingh district. The findings of the present study is that recovery rate of the current credit was 100 percent. But the clients suggest that the monitoring mechanism should be improved so that clients do not utilize their invested money to any unproductive activities. Kabeer (2001): examined the evidence closely and tried to discern the reasons for conflicting views. Perhaps the most important reasons for disagreement is that since empowerment is a multidimensional concept, with the possibility that different dimensions can change in divergent ways, it is entirely possible to reach conflicting conclusions depending on the dimensions being examined. Secondly, since women are not homogeneous group, access to credit may not have the same empowering effect on all groups of women. As a result different conclusion may be reached depending on which particular groups of women are being studied. Thirdly, since any empowering effect of credit will take root only with the passage of time, studies may reach different conclusions depending on whether they take a short or a long view. Kulkarni (2011): found that while there is a shared understanding and general conscious on the functions of microfinance institutions, their potential for the empowerment of women has been much debated. His paper focuses on the nature of this debate. Studies have indicated both the promise of MFIs and the

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challenges they present for women’s empowerment. In this context, various factors-economic, organizational, political and cultural-have been emphasized. The present study, while acknowledging all these factors, make a case for a more sophisticated and nuanced analysis of culture for a deeper understanding of the linkages between MFIs and women’s empowerment, and suggests areas of enquiery for informed policymaking. Mahmud(2005): looked into the future to identify the challenges that women face in moving up the economic and social ladder and to recommend measures that must accompany and complement microcredit if those challenges are to be overcome. Osmani (2007): argued that the degree of women’s empowerment can be discerned from the extent of their bargaining power within the household and uses a theoretical model of intra-household bargaining to identify certain indicators of bargaining power. The presumption is that if access to credit is found to have positive impact on those indicators, then women’s bargaining power, and hence their empowerment, can be said to have increased. She reached the conclusion that access to credit led to empowerment in terms of at least some of the indicators. Rahman (2007): assessed the potentials of Islamic financing schemes for micro financing purposes. He argues that Islamic finance has an important role for furthering socio-economic development of the poor and small (micro) entrepreneurs without charging interest (riba’). Furthermore, Islamic financing schemes have moral and ethical attributes that can effectively motivate micro entrepreneurs to thrive. He also argues that there is a nexus between Islamic banking and microfinance as many elements of microfinance could be considered consistent with the broader goals of Islamic banking. He first, introduces the concepts of microfinance, and presents a case for Islamic microfinance to become one of the components of Islamic banking. He then discusses, the potentials of various Islamic financing schemes that can be advanced and adapted from microfinance purposes including techniques to mitigate the inherent risks. Finally, he concludes with the proposals to accommodate the Islamic microfinance within the present Islamic banking structure.

The review of literature indicates that no author has studied how an Islamic microfinance programme addressed the required issues for women’s empowerment. So the study is a new addition to the existing literature of Islamic microfinance. However, the following hypothesis has been developed.

The hypothesis: The RDS of IBBL has the potential to empower women through Islamic microfinance.

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1.4. Significance of the study:Women’s empowerment can make best use of the available resources. This is more important for achieving the corporate goals. The crisis-prone or crisis-hit North America has shown us that the female CEO-led organisations are doing better than the others during the crisis period (Rashid 2013).

Driven by the motivation to involve women in the development process in order to achieve the sustainable development goals (SDGs) – recognizing that women are the poorest of the world’s poor population and that they spend their earnings more on family welfare – has led governments, development practitioners and donor agencies to focus on microfinance as a strategy capable of reaching and empowering women (Kulkarni, 2011).

Recent developments indicate that Islamic microfinance has gained some traction in the number of institutions offering Islamic compliant products. There are currently 300 Islamic microfinance institutions (IMFIs) operating in 32 countries across all six continents. The IMFIs have recently emerged in Bahrain, Jordan, Kosovo, Lebanon, Mali, Pakistan, occupied Palestinian territories, Saudi Arabia, Sudan, Syria and Yemen. UNDP assisted in the implementation of those programmes in Syria, Yemen, and the occupied Palestinian territories and is currently in the planning phase of establishing a similar programme in Somalia (Banihani, 2012). This provides a clear indication that the demand of Islamic microfinance is high given that there are currently 1.3 billion people who belong to the Muslim faith. Islamic microfinance has a positive role in poverty alleviation with a huge untapped potential as an effective socioeconomic development tool. Islamic microfinance advocates economic empowerment through entrepreneurship, risk sharing and financial inclusion. Thus, Islamic microfinance has a great potential in accelerating the achievement of the MDGs and SDGs as well.

Islamic finance has expanded in terms of products and geographical outreach, but the numbers of Islamic finance institutions offering Sharia’h compliant microfinance products and serving the un-bankable poor continue to lag behind. Islamic microfinance accounts for less than 1 percent of the global microfinance outreach which are mainly concentrated in several countries. Even in Bangladesh, which has the largest outreach, it still accounts for less than 1 percent of the total microfinance market share. It is estimated that approximately 1.2 billion people live below the poverty line of which 44 percent reside in Muslim majority countries (IDB, 2008). According to a study by the World Bank, Asia Pacific has the highest proportion of people living in poverty whereby around 60 percent of the world’s Muslim live in the region. The establishment of IMFIs in the Asia Pacific region could have the potential

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of eradicating poverty among many Muslims and non-Muslims as well. And since the vast majority of the unbanked are Muslims, expanding the outreach of Sharia’h compliant products has the potential to elevate the Islamic microfinance industry on a global scale. This clearly indicates the huge untapped potential for Islamic microfinance to respond to the unmet demand of this segment of society who demands products that are consistent and compatible with Islamic principles (Banihani, 2012). It was mentioned earlier that the RDS is an innovative and successful Islamic microfinance programme of IBBL. According to the Bangladesh Microfinance Statistics in 2010, the RDS programme has experienced the highest growth rate in comparison with other microfinance institutions. Therefore, the lessons from this case study may encourage others who are interested to meet the demand for Islamic microfinance products in the potential markets of the Muslim countries by establishing IMFIs as well as to achieve the MDGs through women’s empowerment and poverty alleviation. Again, the case study attempts to promote learning and knowledge exchange by highlighting the lessons learned from RDS which can serve as an example for countries to emulate it in terms of its potential to empower women.

2. Identification of the Issues Required for Women’s Empowerment through Islamic Microfinance

To identify the issues required for women’s empowerment, it is imperative to get assistance from a theoretical background of the notion of women’s empowerment as well as from social survey report. In the social sciences, empowerment is defined as the process of obtaining or giving power in such a society where certain sections are more powerful than others. This notion asserts that the people who are in power have control on maximum number of resources and the weaker ones are exploited by the so-called superiors. Robbins, Chatterjee, & Canda, (1998) defined empowerment as a “Process by which individuals and groups gain power, get access to resources and acquire control over their own lives. This is how they could gain the ability to achieve their highest personal and collective aspirations”. Kieffer (1984) offers the definition of empowerment, “In becoming empowered, individuals not only acquire new practical skills; but they also reconstruct and reorient their deeply engrained personal/ traditional systems of social relations.” Kabeer, (2001) focused on women empowerment and defined it as the “Process by which women should be allowed to lead their own lives through expansion of choices. They are permitted to take their strategic life choices and fully aware of their rights and self-esteem.” Haque and Yamao (2011) conducted a survey and found that in Bangladesh 80 percent of the Muslim respondents claimed a

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preference for Islamic products over conventional products. The survey also indicated that 85 percent of the current borrowers from conventional MFIs admitted that they will not apply for another conventional loan and will switch over to Islamic products once such products become available.

It appears therefore the issues required for women’s empowerment through Islamic microfinance are as follows:

(i) Islamic faith;

(ii) Access to resources;

(iii) Reconstruction of deeply engrained personal/traditional systems of social relations;

(iv) Acquisition of new practical skills; and

(v). Expansion of choice.

3. Discussion on the potential of RDSIt has been observed in the previous section that there are five issues required for women’s empowerment. This section discusses how the issues have been addressed by the RDS of IBBL. It indicates the potential of the RDS to empower women.

3.1. Islamic faithIslamic finance is founded on the prohibition of riba which is prohibited in all forms and intentions (Al-Qur’an, 2: 275-281). Thus, the main aim of Islamic finance and banking is to provide the Muslim society with an Islamic alternative to the conventional banking system that was based on riba (Ziauddin, 1991). As an alternative to riba’, the profit and loss sharing arrangements are held as an ideal mode of financing in Islamic finance. [Siddiqui 2001]. Islam is the official religion in Bangladesh, and it is the third largest Muslim country in the world in which 90 percent of the population belongs to the Muslim faith. A survey (Haque and Yamao, 2011) revealed that many of the Muslim rural women had the perception that conventional MFIs may exclude them from wearing the Purdah (The practice of Muslim women wearing a headscarf ‘hijab). For this reason, these women did not participate in conventional MFIS. These reasons of exclusion provide anecdotal evidence that there is a strong religious and cultural demand for Islamic microfinance products in many Muslim countries. IBBL was able to identify such cultural obstacles and introduced RDS as an intervention to address the high rural poverty rates in Bangladesh. This cultural and religious enabler assisted RDS

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to expand and reach many poor in Bangladesh (Banihani 2012). The IBBL uses following three Islamic modes for investment financing of the RDS group members (IBBL, 2011). Under these modes, the bank does not issue the agreed upon loan amounts to customers in cash, but rather delivered goods to the customers ensuring that lending is invested in income generating activities.

3.1.1. Bai-Muajjal and Bai-Murabaha

The word ‘Ajjal’ means ‘to defer’ i.e. to delay the payment. Bai-Muajjal means sales on deferred payments. Under this mode, the bank buys the goods required by the clients, adds profit on mutual consultation and hands over the goods to them. The clients, according to the agreement reached, repay the price of the goods either by installments or at a time after certain date. The mode is called Bai-Muajjal or Bai-Murabaha (i.e., sale at cost plus profit) depending upon whether the bank is under obligation to inform the clients the purchase price of the goods and the amount of profit ( or Mark-up) added. If the bank lets the clients know both the price of goods and the margin added, the method is called Bai-Murabaha, if not, the method is called Bai-Muajjal.

3.1.2. Hire-Purchase Shirkatul Melk (HPSM)

Under this mode bank may supply implements/equipments on rental basis. The ownership of the equipment remains with the Bank but the client is authorized to posses the equipment for certain period.

But there are three other Islamic financial modes modes like wakala, mudarabah and musharakah which are equally applicable in the Islamic microfinance programme like RDS. IBBL may think to use these modes in its microfinance programme. Those are discussed below:

3.1.3 Wakala:

The proposal made by Wilson [2007] for microfinance institution to adopt and adapt the wakalah model as widely used in Islamic takaful operations, should be seriously considered. Even though he did not propose the model to be adopted by an Islamic bank specifically, it is worthy to examine the model (Rahman, 2007). Under this wakalah model, microfinance institution will act as an agent whereby microfinance fund could be provided from zakat fund or NGO donor agency. The microfinance institution will be paid management fee for their work in managing the fund. The micro-entrepreneur, as participants, will be disbursed the fund by the microfinance institution, and repay the fund by installments with the element of tabarru (donation).

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According to Wilson [2007], an advantage of the wakalah model is that it combines some of the features of a credit union with professional financial management, but ensures the interests of the participants by the management as there is a potential for a conflict of interest, with participants losing out if management remuneration is excessive and not transparent. Hence, with the wakalah model, the management is remunerated by a fixed fee, and they do not share in the wakalah fund, the sole beneficiaries from which are the participants. The latter make a donation to the fund, which can be regarded as a tabarru, a term implies solidarity and stewardship.

The paper argues that the wakalah model can still be adopted by the RDS of IBBL. Here, rather than the fund is coming from shareholders and depositors, it will be contributed by the government or zakat fund, and it will consequently reduce the inherent risks of the IBBL. As with credit union, participants are entitled to draw disbursements from the fund, which can exceed their contributions at any given date. Obviously not all participants can withdraw funds in excess of their contributions at the same time as there would be insufficient funds to meet the demand. This implies a rationing mechanism is necessary. With the tabarru’ principle, the motivation is not a price incentive such as interest payment, but rather to help participants among the micro entrepreneurs and the poor meet their financial requirements while at the same time building up entitlements to similar help [Wilson 2007].

3.1.4 Mudaraba

Trustee partnership based on mudaraba is a mode of financing through which the IBBL may provide finance for a specific business indicated by the customer (Group member). The IBBL, called rabb-al-mal shall be the owner of the capital and the customer-entrepreneur, called mudarib, shall be responsible for the management of the business and shall provide professional, managerial and technical expertise for initiating and operating the business enterprise or project. Profit shall be shared according to a pre-agreed ratio. Losses, if any, shall be entirely absorbed by the IBBL.

Mudaraba may be of two types – restricted or unrestricted. In a restricted mudaraba (mudaraba al-muqayyada) the IBBL officials may specify a particular business in which investments may be undertaken. Mudaraba may also be an unrestricted one (mudaraba al-mutlaqa); in which case the mudarib may invest the capital provided in any business she/he deems fit. Issues in Product Management have been discussed below:

3.1.4.1. In a mudaraba, profit is unknown but well expected and be calculated provisionally, subject to final adjustment at the end of the

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mudaraba business, with conservative approach based on asymmetric information that is available among the field officials and the micro entrepreneurs of the RDS. The adjustment of the mudaraba account shall be done under the discretion of the IBBL which shall declare a final rate keeping pace with its other modes.

3.1.4.2. Micro finance is collateral free group finance. It required issues weekly repayment, personal savings of the group members, participatory management and group discipline (Interlocking). Generally micro entrepreneurial activities are less risky but high rewarding because small is beautiful and practical also. Moreover, the ‘law of diminishing return’ does not work in case of productivity of the micro finance. Therefore, the RDS can take "equity" in the micro enterprise through mudaraba financing. It shall facilitate supply of cash to the micro entrepreneurs.

3.1.4.3. Initially, the RDS shall own 100 percent of the shares and hence is entitled to its predetermined share of all the profit. But as each weekly installment is repaid, the micro entrepreneur "Buys" the share. As a result - the RDS earns expected profit with each weekly repayment received.

For example, where the micro entrepreneur is a small trader and makes a weekly profit of Tk.1, 500. The IBBL provides a finance of 15,000 to be repaid in 45 weekly installments. With each weekly repayment the entrepreneur buys a share of Tk.333. Profit per share is Tk.33 (1,500/45). The RDS and the entrepreneur agree that the IBBL will receive 10 percent of the weekly profit, and the entrepreneur will receive 90 percent. In the first week the IMFI owns 100 percent of the shares and is entitled to 10 percent of the weekly profit of Tk.1, 500; thus it receives Tk.150. The entrepreneur receives 90 percent of the weekly profit, or Tk.1350. The entrepreneur spends Tk.333 of this T.1350 to buy one share.

In the second week the IBBL is entitled to 10 percent of 44/45 of the weekly profit of 1,500, since it now owns only 44 of the 45 shares. Thus the RDS is entitled to Tk.147. The entrepreneur gets the rest (1,500-147) = 1353. Put another way, the entrepreneur receives (0.90 x 1467 + 33). The Tk.1467 is the profit to be shared with the RDS: the Tk.33 is the profit per share. (Remember that the entrepreneur owns the share he "bought" the previous week for Tk.333; he does not have to share the profit made on his own share.) Again, the entrepreneur uses Tk.333 of his profit to buy a second share. This process would continue for the 45 weeks of the mudaraba agreement, with the RDS earning total income of Tk.3,450 and the entrepreneur earning Tk.64,050 (Table–1).The entrepreneur's repayment schedule is shown in

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table 2.

Actual profit may not be less than the provisional profit to make the weekly repayment. As a result, there is almost no risk in implementation of the mudraba principle in the RDS. If actual profit is higher than the provisional one, the RDS as an institution remains happy with the profit earned through weekly repayment. So, weekly profit is determined to arrange the ‘Buy of Shares’ of the RDS of IBBL to adapt the mudaraba in Islamic micro finance model.

3.1.4.4. The unequal repayment installments may not confuse the micro entrepreneurs and the RDS officials if the ‘Entrepreneurs Repayment Schedule under the Mudaraba’ is attached with the pass book and Register Book and if these books are handled separately.

The product shall be competitive because it will solve the problem of providing cash finance under the most popular modes Bai-Murabaha and Bai-Muajjal (IDB, 2008).

3.1.5. Musharaka

A joint venture based on musharaka involves a partnership in which both the RDS and its customer-client contribute to entrepreneurship and capital. It is an agreement whereby the customer and the bank agree to combine financial resources to undertake any type of business venture, and agree to manage the same according to the terms of the agreement. Profits are shared between the bank and the customer in the pre-agreed ratio. Losses are shared strictly in proportion to their respective capital contributions.

All arguments in favour of the mudaraba mode are equally applicable in case of musharaka mode of finance. Musharaka is more secured to RDS due to participation in the capital by the micro entrepreneur as well as the RDS takes part in the management (IDB, 2008).

3.2. Access to Resources The core function of a microfinance programme is to provide financial services, to reach poor women and men and to give them access to savings and credit (Kulkarni, 2011). Providing women with access to and control over resources have significantly improved the stability and financial means of participating households (Banihani, 2012). Microfinance is collateral free but cost of debt is considerable factor for access to resources. Both entrepreneurship and risk sharing hinge upon it.

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The RDS provides microfinance at the low fixed rate of return at 10 percent of his or her profit to the bank. This rate of return makes it lower than any rate offered by any other MFIs that usually charge interest rate anywhere between 20-30 percent (Banihani, 2012). RDS members have been provided with collateral-free microfinance in different farm and off-farm activities up to the maximum amount of BDT.70,000 (Approx US$898) per client. To meet up higher financing need of the graduated members as well as other small entrepreneurs, “Micro Enterprise Investment Scheme (MEIS)” has been introduced under RDS in the year 2005 with a maximum limit of BDT 3,00,000 (Approx US$3,529). Then the limit has been increased to BDT 500,000 (Approx US$ 6,410). Total outstanding amount is BDT 20,798 (Approx US$267) million in the year 2015. A comparative position of investment under the Scheme, in the last five years, is shown in table 3.

The scheme provided investment funding toward many sectors which included crops cultivation, agro machineries, nursery, livestock, poultry, fisheries, rural transport, rural housing and off-farm activities. Non-farming investments toward MEIs made up 33 percent of the total investments.

3.3. Reconstruction of deeply engrained personal/traditional systems of social relations Empowerment can exist at an individual level, where it is about having an agency, increased autonomy, choice, self-confidence and self-esteem. It can also exist at a collective level that would include collective mobilization of women, and when possible men, for the purpose of questioning and changing the subordination connected with gender. Personal and collective empowerment are intrinsically linked because without the latter, the former becomes circumscribed (Sen 1990). The experiences of empowerment and disempowerment are related not just to materialise means and interventions, but also to social relationships (Kabeer and Haq 2010; Sardenberg 2010a). To be empowered, the traditional social relations have been reconstructed in group lending methodology of microfinance. Stiglitz [1990] explains that under group lending methodology, group members agree to shoulder a monetary penalty in the case of default by a peer, the group members have incentives to monitor each other, and can potentially threaten to impose “social sanctions” when risky projects are chosen.

The activities of RDS are organized in groups with the following features:

3.3.1. Each group must consist of five members living in the same village.

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3.3.2. A centre is formed with a least of two to eight groups. The group leaders appoint the centre leader and deputy leader from among themselves to organize the centre activities.

3.3.3. All groups must attend the weekly centre meetings in order to be considered a dependable client.

3.3.4. In terms of loan guarantee requirement, each member of the group must provide a personal guarantee from the other members in same group and the members are jointly and severally liable and responsible for payment of investment. Moreover, husband should be the guarantor of his wife’s investment facility provided by the RDS.

3.3.5. The centre meetings are facilitated by the bank’s field officers. Their role is to inform the centre members about the moral values, social rights and responsibilities of investment repayment; collection of investment installments, personal savings and centre funds; and review and approve investment proposals (IBBL 2008).

It appears therefore RDS helps reconstruction of deeply engrained personal/traditional systems of social relations.

3.4. Acquisition of new practical skillsWomen empowerment through microfinance requires core competence or required training or background to participate in poverty alleviation activities. One must deserve first and only then he/she desire to get empowered (Rashid 2013). One wonders how women could be considered empowered if they are not being equipped with the basics of reading, writing, calculating and speaking. Their deficiency in terms of bookkeeping, marketing, cost accounting, stock management, production scheduling and quality control undermine their performance. Furthermore owner’s traditional style of management results in low economic efficiencies which restrict their ability to repay micro credit (Hassan & Shahzad 2012). In this sense, the NGO Alashanek Ya Balady for Sustainable Development (AYB-SD) in Egypt holds the “training and life coaching program” which includes career guidance (literacy skills, soft and customised skills) and vocational skills (crafts) (Costa, Makhlouf and Mazaud 2010).

In RDS, investment financing starts after eight weeks of observing the group members in terms of regular attendance to the weekly group meetings and centre meetings. At the group and centre meetings, members are offered support services such as skill training, environment awareness and entrepreneurship development to ensure the success of the potential small and

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medium entrepreneurs in starting and managing their new investment (Banihani 2012).

3.5. Expansion of choiceEmpowerment is also related to the process of internal change (Mayoux 1998) and to the capacity and right to make decisions (Kabeer 2001). It consists of change, choice and power. It is a process of change by which individuals or groups with little or no power gain the ability to make choices that affect their lives. The structures of power (i.e. who has it, what its sources are, and how it is exercised) directly affect the choices that women are able to make in their lives (Mayoux 2001). On its Poverty Net, the World Bank (2001) defines empowerment as “The process of increasing the capacity of individuals or groups to make choices, and to transform those choices into desired actions and outcomes. Central to this process is actions that build both individual and collective assets, and improve the efficiency and fairness of the organizational and institutional context which govern the use of these assets.” According to UNIFEM (2000), women’s empowerment consists of “gaining the ability to generate choices and exercise bargaining power … developing a sense of self-worth, a belief in one’s ability to secure desired changes, and the right to control one’s life.”

As shown in table 4, before women’s involvement in the RDS programme, 98 percent of the decisions made in relation to crop production were made by men within the household, and only 2 percent consulted with their wives, however after joining the programme, women’s participation increased by 44 percent. Moreover, before women’s involvement in the programme, 98 percent of the decisions conducted during community group meetings were made by men, after joining the RDS programme women’s participation and involvement increased by 82 percent. Thus it is evident that women’s involvement in the programme expanded their choice within the household and within the community.

The above discussion reveals that all the identified issues required for women’s empowerment have been addressed by the RDS of IBBL successfully. It indicates the potential of the RDS to empower women.

4. Conclusion and SuggestionThe RDS of IBBL has shown an immense potential to empower women. It is generally agreed that women’s empowerment is necessary for poverty alleviation. Both the women’s empowerment and the poverty alleviation are included in the MDGs and SDGs as well. There are some issues required for

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women’s empowerment. The study identified five such issues and found that RDS of IBBL have successfully addressed those issues, which reveals the potential of the RDS to empower women. To improve the potential, three Islamic modes of finance namely, wakala, mudrabah and musharakah may be implemented through the RDS programme. There is a demand for Islamic microfinance in the Muslim world. So there is a scope for further development of the IMFIs in Muslim countries. The lessons of this study may encourage others to establish IMFIs for women’s empowerment and poverty alleviation in the rural areas.

The conflicting issues of women’s empowerment through Islamic microfinance programme, like RDS, may be studied in future.

References:Banihani, Shams (2012), Scaling up Islamic Microfinance in Bangladesh through the Private Sector: Experience of Islami Bank Bangladesh Limited (IBBL), UNDP, pp.10-18.

Costa, Valentina, Makhlouf, Hala, and Mazaud, Perrine (2010), “Womens Empowerment through Islamic Microfinance in Egypt,” MESCI 2009-2010, 4 February 2010, pp. 1-14.

Credit and Development Forum (CDF) and Institute of Microfinance (InM) (2010), Bangladesh Microfinance Statistics 2010: Development of Microfinance Sector in Bangladesh. Available from www.tinyurl.com/cdf-inm-2010.

Hashemi, Syed M., Schuler, Sidney Ruth and Riley, Ann P. (1996), “Rural Credit Programs and Women’s Empowerment in Bangladesh,” World Development, I24(4): pp.635-53.

Hassan, Syed Shabib ul and Shahzad, Bushra (2012), “The Real Efficacy of Microfinance Sector in Addressing Women Empowerment & Poverty Alleviation Issues in Pakistan” International Journal ofEconomic Research, Jul-Aug, 2012,v3, n4, 174-182.

Hoffman, N, (2003), Introduction. In: N. Hoffman, ed. Women’s ‘true’ profession: Voices from the history of teaching, 2nd ed., pp. 1-22. Cambridge, MA, USA: Harvard Education Press., mentioned in Women’s empowerment and microfinance, IFAD Occasional Papers 13, p.25.

IBBL (2008), Manual on RDS, pp. 10-12.

IBBL, Annual Report 2016, pp.98-99.

22 Women’s Empowerment under ……

IDB (2008), Feasibility Study on Microfinance Development Programme in Bangladesh: Whole Sale Model, Dhaka: Maxwell Stamp Bangladesh Limited, pp. 90-98 (Mimeo).

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Haque, Muhammad Sayeedul and Masahiro Yamao (2011), “Prospects and Challanges of Islamic Microfinance Programmes: a Case Study in Bangladesh,” International Journal of Economic Policy in Emerging Economies, vol.4, no. 1:95-111. available frm www.tinyurl.com/MSHaque2011.

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Thoughts on Economics 23

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24 Women’s Empowerment under ……

Table 1. Sharing of Profit between RDS and Micro-entrepreneurs under the Mudaraba Mode

Week Profit to be Shared Income of RDS Income of Entrepreneur

1 45/45x1500=1500 1500x10%=150 1500 x90%+0=1350

2 44/45x1500=1467 1467x10%=147 1467 x90%+33=1353

3 43/45x1500=1433 1433x10%=143 1433 x90%+67=1357

4 42/45x1500=1400 1400x10%=140 1400 x90%+100=1360

5 41/45x1500=1367 1367 x10%=137 1367 x 90%+133=1363

6 40/45x1500=1333 1333 x10%=133 1333 x90%+167=1367

7 39/45x1500=1300 1300 x10%=130 1300 x90%+200=1370

8 38/45x1500=1267 1267 x10%=127 1267 x90%+233=1373

9 37/45x1500=1233 1233 x10%=123 1233 x90%+267=1377

10 36/45x1500=1200 1200 x10%=120 1200 x90%+300=1380

11 35/45x1500=1167 1167 x10%=117 1167 x90%+333=1383

12 34/45x1500=1133 1133 x10%=113 1133 x90%+367=1387

13 33/45x1500=1100 1100 x10%=110 1100 x90%+400=1390

14 32/45x1500=1067 1067 x10%=107 1067 x90%+433=1393

15 31/45x1500=1033 1033 x10%=103 1033 x90%+467=1397

16 30/45x1500=1000 1000 x10%=100 1000 x90%+500=1400

17 29/45x1500=967 967x10%=97 967 x 90%+533=1403

18 28/45x1500=933 933 x10%=93 933 x 90%+567=1407

19 27/45x1500=900 900 x10%=90 900 x 90%+600=1410

20 26/45x1500=867 867 x10%=87 867 x 90%+633=1413

21 25/45x1500=833 833 x10%=83 833 x90%+667=1417

22 24/45x1500=800 800 x10%=80 800 x90%+700=1420

23 23/45x1500=767 767 x10%=77 767 x90%+733=1423

24 22/45x1500=733 733 x10%=73 733 x90%+767=1427

25 21/45x1500=700 700 x10%=70 700 x90%+800=1430

26 20/45x1500=667 667 x10%=67 667 x90%+833=1433

27 19/45x1500=633 633 x10%=63 633 x90%+867=1437

Thoughts on Economics 25

28 18/45x1500=600 600 x10%=60 600 x90%+900=1440

29 17/45x1500=567 567 x10%=57 567 x90%+933=1443

30 16/45x1500=533 533 x10%=53 533 x90%+967=1447

31 15/45x1500=500 500 x10%=50 500 x90%+1000=1450

32 14/45x1500=467 467 x10%=47 467 x90%+1033=1453

33 13/45x1500=433 433 x10%=43 433 x90%+1067=1457

34 12/45x1500=400 400 x10%=40 400 x90%+1100=1460

35 11/45x1500=367 367 x10%=37 367 x90%+1133=1463

36 10/45x1500=333 333 x10%=33 333 x90%+1167=1467

37 9/45x1500=300 300 x10%=30 300 x90%+1200=1470

38 8/45x1500=267 267 x10%=27 267 x90%+1233=1473

39 7/45x1500=233 233 x10%=23 233 x90%+1267=1477

40 6/45x1500=200 200 x10%=20 200 x90%+1300=1480

41 5/45x1500=167 167 x10%=17 167 x90%+1333=1483

42 4/45x1500=133 133 x10%=13 133 x90%+1367=1487

43 3/45x1500=100 100 x10%=10 100 x90%+1400=1490

44 2/45x1500=67 67x10%=7 67 x90%+1433=1493

45

Total

1/45x1500=34 33 x10%=4

3,450

33 x90%+1467=1496

64,050

Source: IDB (2008)

Table 2: The Micro-entrepreneur’s Repayment Schedule Under the Mudaraba Example

Week Buy Share Profit Distribution Total Payment1 333 150 4832 333 147 4793 333 143 4764 333 140 4735 333 137 4696 333 133 4667 333 130 4638 333 127 459

26 Women’s Empowerment under ……

9 333 123 45610 333 120 45311 333 117 45012 333 113 44613 333 110 44314 333 107 44015 333 103 43616 333 100 43317 333 97 43018 333 93 42619 333 90 42320 333 87 42021 333 84 41722 333 80 41323 333 77 41024 333 73 40625 333 70 40326 333 67 40027 333 63 39628 333 60 39329 333 57 39030 333 53 38631 333 50 38332 333 47 38033 333 43 37634 333 40 37335 333 37 37036 333 33 36637 333 30 36338 333 27 36039 333 23 35640 333 20 35341 333 17 35042 333 13 34643 333 10 34344 333 7 340

Thoughts on Economics 27

45 348 43,500

35218,500

Source: IDB (2008).

Table 3: Growth of Investment under RDS in 2015 (Base year 2012)Figure in million BDT

Particular 2012 2013 2014 2015 Growth

RDS client 421703 472146 501559 553098 31%

MEIS client 53063 60089 57985 69327 30%

Total client 474766 532235 559544 622425 31%

RDS Investment 6036 7956 10254 12050 99%

ME Investment 4353 5774 7125 8747 101%

Total Outstanding 10390 13730 17379 20798 100%

Source: IBBL, Annual Report 2016, pp.98-99.

Table 4: Participation of Woman in household Decision Making

Decision Making Areas

Investment in Agriculture and Business ActivitiesBefore Taking Investment After Taking Investment

Man only

Woman only (%)

Men in consultation with women

(%)

Man only (%)

Woman only (%)

Men in consultation with women

(%)Crop Production

98 - 2 54 - 46

Labour Employment

100

- - 14 2 84

Housing 60 26 14 2 2 96Take Care of Children

- 82 18 - 66 34

Child Education

80 2 18 2 2 96

Village Group Meeting

98 2 - 14 84 2

Child Marriage Ceremony

66 - 34 - - 100

Rural Activities

88 - 12 44 - 56

Source: Field study by Tasnimum Jinan (2008)