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The Case for Islamic Microfinance under Shariah

Presented at Global Islamic Microfinance Forum in Dubai

Presented on 08 December, 2012

By Mufti Aziz Ur Rehman

Manager Shariah, Mawarid Finance, Dubai

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Outline

1) Poverty and Islam2) Islam and Faqeir3) Treatment of Incapable of Earning in Islam4) Treatment of Financially Distressed in Islam5) Treatment of Capable of Earning in Islam6) Recommendations7) Final Word

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Poverty and Islam Poverty in Islam:-

Qura’an & Sunnah Financial Classification of Society

Rich (Ghani) and Poor (Faqeir) >>> Why?? Where can Poverty lead the poor to?

And do not kill your children out of poverty And do not kill your children for fear of poverty.

Concept of wealth in Islam / Qura’an Ghani Shakir and Faqeir Sabir Ashara Mubashshara >>>> 6/10

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Islam and Faqeir

Islam treats Faqeir according to his need and extent of poverty Faqeir is subjected to. Faqeir may be individual or a family.

Three types of Faqeir;1. Incapable of Earning(عاجز) 2. Financially Distressed ( مالية (كارثة3. Capable of Earning( مكتسبا (قويـا

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Treatment of Incapable of Earning in Islam

1. Incapable of Earning (عاجز) Compensated / remitted from Zakat fund If not sufficient; from Sadaqat and then Support from Baitul Mal (Islamic treasury)

A Social Security System of Islam Omar Bin Abdul Aziz and the victorious

commander Khalid Bin Waleid. Hairah

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Treatment of Financially Distressed in Islam

2. Financially Distressed ( مالية (كارثة Support and provision of funds to meet

one’s needs enabling the distress to be eased.

Freeing captives or slaves, those in debt and to pay Diyyat money etc. Imam Abu Yousuf RA said; عن للعاجز يدفع

المال بيت من كفايته لفقره الخراجية أرضه زراعةأرضه سيتغل و ليعمل (قرضا عابدين) ابن

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Other Solutions for Incapable of earning and Financially Distressed1) Kaffarat >>>> Yamin, Dhehar, Iftar2) Fidya Sadaqat Fitr3) Nozoor 4) Hadye5) Udhiya 6) Aqeeqa7) Khums 8) Fay’a 9) Kharaj and Jizyah 10)Darayeb and Others

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Treatment of Capable of Earning in Islam

The real focus of Islamic microfinance;3. Capable of Earning( مكتسبا (قويـا The Holy Qura’an says; فضل من وابتغوا األرض في فانتشروا الصالة قضيت فإذا

ه ـ And when the prayer has been اللconcluded, disperse within the land and seek from the bounty of Allah,

ه� ه� ض� ف� هن غ�وا ف� ض� ف� ه� ف� ه� ه� ض ف�� ه� ه� ه�ي غ� ض� غ� ض� ا ف� ه� ض� ف� ه� ف� �ض ف� ض� ا �غ �غ ف� ف� ف � ف! ه"� ف � ا غ� ف �ـ It is Allah ا�who subjected to you the sea so that ships may sail upon it by His command and that you may seek of His bounty;.

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Treatment of Capable of Earning in Islam

Prophet Mohammad SAW says;ف� ضي ف $ ا� غ% غ& ض� ف' ف)� د�وف( غ� ف� ت� ص*� ف)� د�ه, دو ص-� ت� ف$� ه� In this Hadith Prophet

SAW mentioned two words; حركة و سعيا ايStriving and Movement

غ(ل �� ' �ان ن صا ,ي� قط ص� طع� �احد �ا(ل ي�يه � عمل من the best food is what gained from hand crafts.

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Why not Support ‘Capable of Earning’ from Zakat / Sadaqaat?

.I حجج ثماني تأجرني أن on [the condition] that علىyou serve me for eight years;

Why ? Because he was أمين قويII. Prophet SAW encouraged work / crafts. He

said; الله حبيب من and said الكاسب خير العليا اليدالسفلى a giving hand is better than a“ اليد

taking one”III. Prophet SAW said, مرة لذي ال و لغني الصدقة تحل ال

األعضاء سليم القوي اي سوي “Do not solve the charity to rich one and strong intact”

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RecommendationsAre begging, being dependant on charity and / or being under debts supported and encouraged: NOWe MUST avoid the following;a) Making poor habitual of beggingb) Profiting at the expense of poor being

exploitedc) Tackling of poverty by Qard Hasan/Murabaha

alone (a limited use is fine)d) Tackling of poverty through charitable act

alone

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RecommendationsQura’an said ;

; ��ن ت�اض عن ت��رة ت�ون �ان Andهالارزقه من كلوا و مناكبها في Andفامشوا

. ���ر �يع (ل � �يد� ا��جل ع)ل ق�ل ا��ل؟ ا��سب �ا� . '�صد% � -�س� �ين�ع �يد� �يع)ل ق�ل �

Donations/ Qard Hasan / Charities are not permanent, Trading is medium and long term.

Combine Ebadat and Trade (Reward + Profit) In Waqf, best os to adopt to Ijarah model Salam, Istisna’a, Musharaka, Mudaraba etc.

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Final WordAs 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’.A short story:Fix the meaning of KYC >>> Know your customerKYC >>> Kill your customer