The Case for Islamic Microfinance under Shariah

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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 Islam
2. Islam and Faqeir
3. Treatment of Incapable of Earning in Islam
4. Treatment of Financially Distressed in Islam
5. Treatment of Capable of Earning in Islam
6. Recommendations
7. Final Word

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Poverty and Islam

• Poverty in Islam-
• Quraan Sunnah
• Financial Classification of Society
• Rich (Ghani) and Poor (Faqeir) gtgtgt 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 / Quraan
• Ghani Shakir and Faqeir Sabir
• Ashara Mubashshara gtgtgtgt 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
• Incapable of Earning(????)
• Financially Distressed (????? ?????)
• Capable of Earning(?????? ???????)

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Treatment of Incapable of Earning in Islam

• Incapable of Earning (????)
• 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

• Financially Distressed (????? ?????)
• Support and provision of funds to meet ones
  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 ???? ?????? ?? ?????
  ???? ???????? ????? ?????? ?? ??? ????? ????
  ????? ? ????? ???? (??? ??????)

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Other Solutions for Incapable of earning and
Financially Distressed

1. Kaffarat gtgtgtgt Yamin, Dhehar, Iftar
2. Fidya Sadaqat Fitr
3. Nozoor
4. Hadye
5. Udhiya
6. Aqeeqa
7. Khums
8. Faya
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
• Capable of Earning(?????? ???????)
• The Holy Quraan says
• ?????? ???????? ?????????? ???????????? ???
  ????????? ??????????? ??? ?????? ???????? And
  when the prayer has been concluded, disperse
  within the land and seek from the bounty of
  Allah,
• ???????? ??????? ??????? ?????? ?????????
  ?????????? ????????? ????? ??????????
  ?????????????? ??? ???????? It is Allah 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
• ????? ???????? ????????? ??????? ????????
  ????????? ???????? In this Hadith Prophet SAW
  mentioned two words ?? ???? ? ????
• Striving and Movement
• ?? ??? ??? ?????? ?? ????? ?? ?? ????? ?? ???
  ???? the best food is what gained from hand
  crafts.

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Why not Support Capable of Earning from Zakat /
Sadaqaat?

• ??? ?? ?????? ????? ??? on the condition that
  you serve me for eight years
• Why ? Because he was ??? ????
• Prophet SAW encouraged work / crafts. He said
  ?????? ???? ???? and said ???? ?????? ??? ??
  ???? ?????? a giving hand is better than a
  taking one
• Prophet SAW said, ?? ??? ?????? ???? ? ?? ???
  ?????? ?????? ?? ????? ???? ???????
• Do not solve the charity to rich one and
  strong intact

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Recommendations

• Are begging, being dependant on charity and / or
  being under debts supported and encouraged NO
• We MUST avoid the following
• Making poor habitual of begging
• Profiting at the expense of poor being exploited
• Tackling of poverty by Qard Hasan/Murabaha alone
  (a limited use is fine)
• Tackling of poverty through charitable act alone

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Recommendations

• Quraan said
• ???? ?? ???? ????? ?? ???? ???? And
• ?????? ?? ??????? ? ???? ?? ???? And
• ?? ????? ????? ??? ??? ????? ???? ? ?? ??? ?????.
  
• ? ??? ????? ???? ????? ???? ? ?????.
• 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, Istisnaa, Musharaka, Mudaraba etc.

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Final Word

• As 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 gtgtgt Know your customer
• KYC gtgtgt Kill your customer