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Press Release: AlHuda CIBE to Organize Workshop on Rural Finance

This press release was submitted by Zubair Mughal.

AlHuda Centre of Islamic Banking and Economics is organizing a two days specialized Research workshop on Islamic Agricultural and Rural Finance in Islamabad

(Lahore) In the wake of the current financial crisis coupled with the global food shortage, the need for improving the global village economy through enhanced output has become a challenge for planners and other stakeholders. The importance of livestock and allied sectors cannot be compromised for agricultural growth and Islamic agricultural and rural finance can bring a genuine green revolution to an economy. As Islamic finance has made a lot of progressive research in agricultural finance, bringing a number of pragmatic and useful choices which, if implemented, can bring revolutionary development to the economy.

This intention was declared by Muhammad Zubair Mughal, Chief Executive Officer, AlHuda Centre of Islamic Banking and Economics (CIBE), while explaining the objectives of a specialized training workshop on Islamic Agricultural and Rural Finance being organized by AlHuda-CIBE on 28th & 29th November 2011 in Islamabad. The workshop will be attended by officials from banks and financial institutions, agricultural research development and planning institutions with an interest in Islamic finance.

He further emphasized the role of Islamic finance in the agriculture and rural sector, saying that it brings new avenues not only for business for Islamic financial institutions by using innovative products, but also for small farmers and other agro based businesses.

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Micro-financing: Helping To Develop Developing Countries

Many in the developed world aren’t very familiar with micro-financing. One of the only parallels would be something like cash advances, but they work a little differently. There’s a lot of debate on whether or not micro-financing is positive or just predatory. Either way, it has shown to be a powerful tool in helping developing countries build up their private sector and finally get out of poverty.

You don’t really need to be an expert economist in order to understand the concept behind micro-financing. It’s a basic premise that’s all based around helping poor people get out of oppressive poverty. These individuals are able to apply for small, low-interest loans so they can either improve their current situation and look for a better job, get an education, or start and operate their own business. In the end, the people borrowing this money are able to pay it back over a long period of time. These programs have become very popular in the developing world and have shown to empower poor people to get out of their current economic situation and improve their status.
Some have argued that these types of practices equate only to predatory lending, but as many other countries have shown, it’s more effective than other types of aid that are given to developing countries by non-profit organizations. As is often the case, when large organizations like the International Monetary Fund or the United Nations give large amounts of money to the government, the money rarely makes any real impact to the average citizen. This is because much of the money given to governments is largely spent on developing infrastructure, education, and other aid programs. It really doesn’t help people improve their status and acts much more like a trickle-down-effect.
Many have argued that these lending organizations are making money off of these lending programs but that’s only because so many people view them as a viable way to make the most impact in their life. Through these programs people are able to pull themselves out of debt and finally pay off their bills through access to larger lines of credit, or larger disposable incomes, and even prepaid cards (including perhaps, prepaid phone cards) and start their own business. Either way, it’s changing lives and even though some minor changes could be made to these lending programs, it’s much better than letting someone remain in poverty.

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Importance of Mobile Banking Interoperability – CGAP

Mobile banking interoperability is a far-reaching vision that promises to improve financial inclusion by leaps and bounds. Clients cannot transfer funds between money wallets associated with different telecom companies, which reduces liquidity in the financial system. Despite this, mobile banking providers are reluctant to collaborate with competitors fearing a decline in market share.

A recent article by Ignacio Mas at the CGAP Blog discusses the importance of interoperability in this context and suggests a few suggestions for mobile phone operators who are currently unwilling to let other carriers tap into their mobile banking solutions.

Mas highlight two types of players in the mobile banking ecosystem who stand to benefit from such a shift in industry dynamics:

  • Mobile banking customers, both individuals and corporations, who may currently deal with the lack of mobile banking interoperability by signing up for different service providers themselves. Inconvenience and high costs are two hurdles in this regard, and
  • Merchants who play the role of mobile banking agents, often servicing subscribers of different telecom companies under one roof.

Apart from these, the mobile money carriers can leverage such a partnership strategically by viewing it as an investment in their distribution channel, which will ultimately ‘maximize the total size of the pie’.

Click here to read the article.

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Indicators of Good Human Resource Environment for Microfinance Institutions

 

World Bank

Image via Wikipedia

 

Last year I blogged about the strategic importance of human capital in the microfinance sector and some ways this asset can be developed to benefit the microfinance institution. This blog post goes a step further and mentions indicators of a strong human resource environment that helps drive the organization to success. This checklist has been excerpted from the Microfinance Handbook: An Institutional and Financial Perspective.

  • Training materials are thorough and well-designed, covering philosophy and client service concepts as well as technical skills. A period of coaching/mentioning built into the training. Training period screens out inappropriate candidates. Length and cost of training minimized.
  • Compensation policies are set to attract the right caliber of staff.
  • Incentives schemes are designed to reward portfolio quality as well as volume, and incentive amounts are set relative to the extra income earned through enhanced performance.
  • Employees who express a high level of satisfaction with their work. Low employee turnover. No antagonistic employee unions or associations.
  • Dynamic use of employee newsletter, with contributions from employees. Strong internal communications and transparency. A team spirit evident in all activities. (Read about the right organizational culture in microfinance).
  • Appraisal systems, promotion policies, and other policies are perceived as fair.

Reference:

Ledgerwood, J. (1998). Microfinance Handbook: An Institutional and Financial Perspective. Washington, D.C.: The World Bank. 121.

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Making Mobile Financial Services Available to Everyone

The following video is a beautiful depiction of the need for maximizing the use of mobile financial services. The video takes a look at people individuals from across the world and shares their journey with mobile banking services – the challenges they faced, the benefits they enjoyed when using ATM SIMs (i.e. financial services through mobile SIM cards). Some benefits mentioned are as follows:

  • 24/7 availability of mobile banking services as opposed to strict bank timings in the case of conventional finance
  • Time efficiency of mobile banking services (no need to stand in queue or visit the nearest bank branch)
  • Better financial discipline in terms of saving money
  • Improved security of funds as money is stored in electronic form, and lastly,
  • The ability to perform all basic financial services (mobile money transfer, mobile banking and mobile payments) through the mobile phone’s SIM card (no need for additional magnetic cards).

Source: Gemalto

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The Future of Mobile Banking Services For the Poor

EyeLast year I blogged about the evolution of mobile banking services for the poor. This post goes a step further and talks about possible changes in the future.

Mobile money has quickly evolved into a full range of mobile banking services that have the potential to improve livelihoods of the poor.

Financial Applications for the Unbanked Masses

The future may bring innovations in the areas of mobile banking applications and following this drift, the IMTFI (Institute for Money, Technology and Financial Inclusion) has released a comprehensive set of design principles for financial services for the poor.

Nokia and Google are also exploring this arena, leveraging their technological muscle to develop applications for mobile devices that help achieve financial inclusion. There have been talks about instilling a social element in financial applications, (perhaps something similar to the SmartyPig service) since social media has taken the world by storm..

Credit Histories for the Unbanked Through Mobile Banking

Each mobile banking transaction is recorded in the MNO’s database, and the history and frequency of payments and receipts can be used to calculate credit histories of users who typically do not have credit ratings. In order to help clients access financial services at low interest rates, credit histories may be developed using this data. The idea was introduced and explored in a report by microLINKS.

Integration of Mobile Banking with Multiple MFIs

While some influential mobile network operators currently offer mobile banking to clients of a variety of banks (such as AT&T), MNOs in the developing world have yet to form such an inclusive alliance. This form of collaboration, which has been dubbed the Application Service Provider (ASP) Model, has the potential to offer economies of scale, data security, allow scalability and lower infrastructure development costs (read more).

It is possible that MNOs in developing countries will look to form alliances with a variety of microfinance institutions, instead of just one, as is the case in M-Kesho (Safaricome partered with Equity Bank) and EasyPaisa (Telenor purchased a majority stake in Tameer Microfinance Bank).

Certainly, if MNOs and MFIs collaborate instead of competing for market share and profits, the poor will be better off (provided monopolistic behavior is not ensued).

What are your personal thoughts about the future of mobile banking for the unbanked population? I’d love to hear your thoughts.

Related Articles:

Evolution of mobile banking services for the poor.

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