Islamic Micro financing

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Islamic Micro financing

In spite of high demand for Islamic microfinance product and, the expansion of the sector has been sleepy. The funds are mainly served by the NGOs. They have not posses the sufficient technical experience or funding to ensure the perfect execute and sustainability the needy people. The Islamic commercial banking sector provides facilities only to the rich man at high rate in the previous (approximately 30 years). They has not share their technical knowledge with Islamic MFIs. In order to lift unprivileged people, it is necessary for national and local governments to introduce policies, encourage and provides incentive to Islamic commercial institution. The people republic of Bangladesh is a burning instand in this respect they have lunched a microcredit scheme for unprivileged people now more than six lacks people are enjoying facilities sixty one out of sixty four districts.

(1)Misshape Information: The principal aim of targeting needy woman as provides of loans is to empower and engage them in income generating activities. But they can not use the funds. It has been reported that the male members enjoy the credit which is sanctioned to his wife ,sister or daughter. Once the credit are obtained by the female members are responsible for the repayment. The male member has utilized the fund on non- income generating  acts. The MFIs are constantly being pressured the poor woman to repay the loan installments’ . But they have no capacity to repayment. As a result the list defaulter has been increased day by day.

(2). Steady of MFIs: It is reported that the administrative of five MFIs in South Asia range from 24% to more than 400% per $ due to the lack of resource mobilization and the high administrative costs. According to source in Bangladesh the Grameen Bank has increased their rate of interest by addition 21% for operate at a loss without grants any subsidies.

(3). Debt trap: The woman Brower has got into trap as they managed another loan for payment the previous loan installments and further into poverty and spiraling debt cycle. Otherwise they have choice Susie.

(4) High Drop- out rate and Non graduation from Poverty: It is reported that the MFIS do not serve the needy people. Some studies reported that the MFIs do not necessarily enhance the income level of the needy people. They are not much effective in improving life –style of the needy people they have noted that financial services alone do not lift the poor out of poverty. The poor people’s human, social and natural capitals are need to be combined with services that add to the accumulation.

                    Why in Bangladesh is need for Islamic Microfinance?

The answer is very simple.  Bangladesh is the third largest Muslim country in the world,90% of the population belong to the Muslim faith. Moreover Islam is the official religion in Bangladesh. From 1995 some Islamic finance, a few Islamic NGOs and co-operative are doing their function in this country. It is observed that the nationalized Bank has opened their Islamic banking wings in the branches. According to source it is reported that 43.3% of the people living in Bangladesh live below the property line and more than 11%live in absolute poverty. The number increased to 80.46 million from78.2 million in 2009 and 1970.

 BANGLADESH is an agricultural country most people live in the village. Due to lack of education access to land and natural capitals, vocational training the vast human resources have remained underutilized. The village woman passing their time without doing any work. Abroad- based approach to poverty alleviation by putting more emphasis ,NGOs and the private sector by the government of Bangladesh. Thus these programme became a much favored intervention for poverty alleviation and was seen as an approach to alleviate rural poverty. Since the  indedepndence of Bangladesh in 1971 over 20,000 NGOs and MFIs are registered with the Bangladeshi Department of Social Affairs and have been working in poverty alleviation. It is observed that the MFIs and the NGOs has failed to achieve their target. The future of microcredit of NGOs and MFIs mainly depends on government and on foreign grants. The NGOs, MFIs and Grammen Bank has  charged high interest rates, ranging from 20-35 percent. They was compelled to do this due to funding fluctuation, high administrative and operational costs. They forcing the poor to dispose any assets they may have in order to repay their loans. As the NGOs and the MFIs has failed to archive their target the Government of Bangladesh tried to introduce microfinance initiatives through its nationalized Commercial Banks(NCBs) Due to weaknesses in design planning and management of such programmes combined with political interferences, luck experience in microfiancing, insufficient accountability and administration of the credit delivery system. The truly needy people could not qualify for credit under such programmes.

The principal aim of targeting needy woman as provides of loans is to empower and engage them in income generating activities. But they can not use the funds. It has been reported that the male members enjoy the credit which is sanctioned to his wife ,sister or daughter. Once the credit are obtained by the female members are responsible for the repayment. The male member has utilized the fund on non- income generating  acts. The MFIs are constantly being pressured the poor woman to repay the loan installments’ . But they have no capacity to repayment. As a result the list defaulter has been increased day by day.

The woman Brower has got into trap as they managed another loan for payment the previous loan installments and further into poverty and spiraling debt cycle. Otherwise they have choice Susie.

It is reported that the administrative of five MFIs in South Asia range from 24% to more than 400% per $ due to the lack of resource mobilization and the high administrative costs. According to source in Bangladesh the Grameen Bank has increased their rate of interest by addition 21% for operate at a loss without grants any subsidies.

They allowed many rich and businessman to such credits on low interest rates. The poor counterparts has failed for getting credit as they have no political power . the special Agri credit Programme in Bangladesh has failed. That programme lanced for the poor farmer but that attempt to make use of conventional banks credit the poor but it has been unsuccessful. The scheme was not profitable so they were discouraged from participating in such programmes. At last a huge amount loans has been classified as bad loan. Now the banks authority has not agree to distribute the loan without collateral. The programme has waived due to lack of an appropriate and transparent credit delivery mechanism. The bank officer was not interested to serve the poor as there was no incentive for this credit and they deport the labour to work with rich man who were profitable and less difficult to service. This was another reason such scheme were failed.  Appropriation of the population were further excluded from having accept credit as commercial banks and MFIs and NGOs did not provide Islamic micro credit to the majority Muslim poor in Bangladesh. THE ONLY SOURCE OF  Islamic financing available to the poor from very few rural setting in Bangladesh, Islamic leaders and spontaneous local charities and initiatives were the only source but it were not operating within the country’s financial regulatory as such marginally small initiatives were limited, insufficient.

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