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Religiosity and threshold effect in social and financial performance of microfinance


Mohammad Ashraful Mobin

Integrating Mobile Banking

and Mobile Money with
Islamic Micro Credit.
A product structure to consider.

Khalfan Abdallah-MBA, AFIIBI, CIFE.

Manager Product Development and Shariah
Compliance Gulf African Bank.

Mobile Banking and Mobile Money-An Outlook.

Fundamentals of the Structure.

Sources of Funding.

Challenges and Way Forward.

Mobile Banking and Mobile Money-An Outlook.

Mobile Banking
Mobile is already the largest banking
Mobile banking functionality is quite
The mid- to late-thirties is currently
the key demographic for mobile
Banks are increasingly shifting to a
'mobile first' approach.
Sound mobile strategies, with effective
execution, leads to significant financial
benefits for those banks.
Global mobile banking user base of
some 1.8 billion people by 2019
(source: Juniper Research, KPMG

are using mobile money

more than everin December 2015,

there 411 million mobile money
accounts globally.
At least in 19 markets have more
mobile money accounts than bank
The industry is expanding to serve the
needs of cross-border trade and
regional economies. In 2015, by
volume, international remittances was
the fasting growing product.
A limited number of products. More
products and services should be
launched and driven to make mobile
money more sustainable, profitable,
and relevant to customers in the long

Future Forecast
Micro-finance services will keep on growing with mobile money operators
increasing their focus on micro-loans, micro-insurance and group savings.
The other significant area will be merchant payments. Mobile
money providers will liaise with MasterCard and Visa to issue companion
cards facilitating merchant payments.
We will see mobile money operators, in neighboring countries, come
together on a common platform for facilitating international direct money

Bank and Mobile Money Interoperability.

Bank and mobile money interoperability is increasingly important. For
deployments with functionality already in place, bank-to-mobile (B2M)
transactions represent 4.5% of the total value entering the ecosystem.
Good trend on offering B2M and M2B (mobile-to-bank) capabilities. The
number of banks connected to mobile money schemes increased by 66%
between 2013 and 2015, growing to more than 520 banks in 2015.

Fundamentals of the Structure.

Ujrah Based Islamic Microfinance Facility.
Ujrah is a fee charged to customer in consideration of services rendered
by one party. Under this concept, the bank shall provide micro credit
facility on the basis of Qardh (interest free loan).
The fee shall be charged in consideration of actual services offered by
the bank in relation to the credit facility such as:
Application fee-lump sum fee for using the mobile banking platform to apply
for loan (This might be grounded with monthly fee for mobile banking
Credit risk insurance fee at fixed amount.
Cash out-fee to M-Pesa agent.
Transfer fee B2M, P2P or Bill payments.

The Shariah rules on fees to be charged are:

Fees can be charged to recover actual cost.
Fee must be a fixed amount which is not tiered with credit amount applied.
Fee charged must be based on Shariah compliant services, benefits and
privileges only that is offered to client
No fee for extension or delaying loan payments.

Operation steps-with Bank Account

Step 1. A customer with bank account makes loan
application via Mobile banking platform menu together
with acceptance of terms and conditions.
Step 2. Bank receives application and approve the loan
Step 3. Bank disburse the loan to his Mobile money
account (B2M) to be repaid in certain number of days.
Step 4. Customer use cash such as cash out at agent,
make purchases or transfer to another person.

Operation steps-with Mobile Money Account

Step 1. A customer with mobile money account activate loan
application via telecom platform menu together with
acceptance of terms and conditions. GAB-Mobile.
Step 2. The customer virtual account is created to start saving
via the account before he makes loan application.
Step 3. Customer makes an application and based on the
virtual account conduct, the loan limit is set.
Step 4. Bank disburse the loan to his Mobile money account
(B2M) to be repaid in certain number of days.
Step 5. Customer use cash such as cash out at agent, make
purchases or transfer to another person.

Since main source of income is customers fees-the bank

and mobile operator should agree fee sharing formula.

Sources of Funding.
Cash Waqf Am-The funds are invested by the bank
and proceeds derived are distributed to the general
public based on the waqf deed which shall allows the
FI to offer it as guaranteed loans. In consideration for
the fee income that the bank shall get from the ujrah
microfinance facility, the bank as mutawwali
(manager) shall waive service fee for the services
rendered to the fund.
Shareholders funds- a portion of shareholders funds
can be marked for this product.
Restricted Mudharaba capital- who shall invest the
funds to the bank for the purpose. The fee income
shared between the bank and the investor.

Challenges and Way Forward.


Operational efficiency risk.

Default risk.
Competition with lower fees.
Consumer literacy.

Mitigants and Way Forward

Partner with Telcom which has

invested in state of art
Group credit risk insurance for
death and default.
Capitalize on Shariah
compliance and efficiency
Consumer awareness

Questions and Answers.

Thank you.


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