Innovation in Islamic M&SMEs banking

Dr Atef El Shabrawy CEO of family bank, kingdom of Bahrain

a.elshabrawy@familybankbh.com
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Challenges in Muslim Societies

1. Explosion of demand for Islamic finance (Micro & small):
1. Increasing number of unemployed & fresh graduated 2. Exclusion of poor, (youth and women) from financial services 3. Financial services gap of small & micro finance

2. Threats facing MFIs

1. Weight of microfinance Central Banks rules & regulations on MFIs 2. Lack of governance & capabilities of MFIs

3. Weak capabilities & competitiveness of micro entrepreneurs

1. Low skills and absence of proper training 2. Low value-added businesses (farmers, handcrafts, homemade, ).
Copyright Atef El Shabrawy 2013 : elshabrawy@yahoo.com
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Example of M&SMEs finance in Bahrain

Current situation
> BD 20,000

Opportunities
Increasing welfare recipients High unemployed women % Large informal sector No specialized finance Need to have Islamic finance

Commercial Banks

> BD >7000 SME Loans Bahrain Development Bank BD 5,000

Microfinance
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Innovation in the creation of the model

1- Shareholders composition
The partnership between government, NGOs & private sector..

Paid-up capital: BB5m & allowed BD15m

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Innovation in the creation of the in model

2- The financial institution type
Shk Issam Ishaq

A specialized Islamic microfinance bank licensed by Central Bank of Bahrain

Dr Osama Bahr

Dr Mohamden Golam

Sharia Advisory Board

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Innovation in the creation of the instution

3- The Target group
1. First time in business 1. Individuals receiving Government aid 2. Productive Families (home-based business) 3. Women/Unemployed youth & Handicapped 2. Small & Micro businesses (Startups) 3. NGOs & Charity funds
Major challenges Fear of start Lack of incentives Lack of support Rigid services

Copyright Atef El Shabrawy 2013 : elshabrawy@yahoo.com

Innovation in the creation of the instution

4- The Guiding principles Islamic finance only Collateral Free finance No legal or formal entity required Low cots finance Target the Financially Disadvantaged Bank will go to the Poor Provide Non-financial services

Major challenges Lack of Collateral Lack of legal form Lack of guarantee Lack of experience

Copyright Atef El Shabrawy 2013 : elshabrawy@yahoo.com

Innovation in the creation of the instution

5- The operational innovation

Partnership Tamkeen to subsidy the profit rate Partner with Remittance co. to use branches Partner with ministries to use their centers Partnership with NGOs to deliver Partnership with collection company Partnership with BCCI to use business center facilities Partnership with a legal firm as CS

Major challenges Delivery cost Credit behavior Cost of collection Geographic coverage

Copyright Atef El Shabrawy 2013 : elshabrawy@yahoo.com

Innovation in the creation of the instution

6- The Non-financial services innovation
1. 2. 3. 4. 5. 6. Pre-disbursement induction training Obligatory entrepreneurship training Monthly meetings, counseling Extensive marketing & sales supports Monthly awards for good customers Incubators and ministerial services links

Major challenges Low skills absence of training Low value-added businesses

Copyright Atef El Shabrawy 2013 : elshabrawy@yahoo.com

Innovation in the creation of the instution

7- The Social Innovation
Establish of Idea Factory to introduce creative business ideas Organization of Social Business Weeks Collaboration with Universities students to train clients Collaboration with CocaCola to establish Kiosks for disabled
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Major challenges Lack of ideas Social role Impact on the bank

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Partners

NGOs
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Islamic Developed Products

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Achievements since March 2010

About 1700 members Grameen 1350 & MEF 350 active members

Financed business sectors

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Achievements since March 2010

No of clients
1200 1000 4000 3500 3000 2500 600 400 200 0 2000 1500 1000 500

Number of created jobs

800

2010

2011

2012

2010

2011

2012

2013 (Upto April)

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Activities & participation..

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Sample of supported businesses

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Copyright Atef El Shabrawy 2013 : elshabrawy@yahoo.com

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!Thank you for your attention

( ) 105 : www.familybankbh.com
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