Issues raised and discussed at length during “International Workshop on Zakat, Waqf and Islamic Microfinance” and the idea of “Strengthening Islamic Social Finance Sector” during 29-30 April at Bogor in Indonesia were presented by Arshad Ajmal, Vice President, Sahulat Microfinance Society at a programme organised by Forum for Discussion on Economic Issues, a joint forum of Sahulat and Radiance Viewsweekly in the national capital on 26 May.
Mr. Ajmal, who was the only person invited from India as a resource person on Islamic Microfinance, shared his experience which he gathered and the points he raised during the workshop which was jointly organised by the Bogor Agricultural University (IPB), Islamic Research and Training Institute (IRTI), and Islamic Development Bank (IDB). He raised the issue of clubbing Zakat, Wakf and Awqaf under Islamic Social Finance which may be considered in the days to come. Another notable point discussed was whether an Islamic Microfinance institution should and can be treated as a banking institution. Mr. Ajmal, while replying to a question, said Islamic Microfinance is a concept which is about seven years old and the possibility of Islamic microfinance addressing the issue of poverty is likely to become a reality in the next 15 years or so.
In order to ensure the growth and viability of Islamic Microfinance, it has to be divided into Conceptual Development of Fiqh, Economics and Finance Regulatory Framework, Supervision, Risk Management and Governance. Another pertinent issue that came up and requires a second thought is whether Baitul Maal wat Tamweel (BMT), a typical Indonesian concept, and other financial institutions can be merged with Microfinance Institutions with a single regulatory framework. The idea put forward has got advantage and disadvantage and therefore some are against its merger or to be regulated as a single unit. A majority of thinkers are of the view that there should be separate regulations for for-profit and not for-profit MFIs. There is one view that Islamic finance has so far failed to meet social obligations. Moreover, Islamic finance places itself heavily on debt instruments and less on equity instruments.
The basic concern with the institutional or legal framework of microfinance is that of raising deposits. NBFCs or other forms of MFIs are normally not allowed to raise deposits since safety of deposits remains a major issue. So far the MFIs have been financed by Banks or other financial institutions. This dependency factor affects the self-sustainability of MFIs. During the question session, Dr. Waquar Anwar emphasised that service charges should be often revisited and cannot be fixed as far as Islamic Microfinance is concerned.
Presiding over the programme, Dr Ausaf Ahmed cautioned the audience against n using Baitul Maal and Tamweel in the same capacity and stressed not to merge it because historically they have different connotations.