Enhancing Financial Inclusion through Islamic Finance, Volume II PDF
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PALGRAVE STUDIES IN ISLAMIC BANKING, FINANCE, AND ECONOMICS Enhancing Financial Inclusion through Islamic Finance, Volume II Edited by Abdelrahman Elzahi Saaid Ali Khalifa Mohamed Ali Mohamed Hassan Azrag Palgrave Studies in Islamic Banking, Finance, and Economics Series Editors Mehmet Asutay Business School Durham University Durham, UK Zamir Iqbal Islamic Development Bank Jeddah, Saudi Arabia Jahangir Sultan Bentley University Boston, MA, USA The aim of this series is to explore the various disciplines and sub-d isciplines of Islamic banking, finance and economics through the lens of theoretical, practical, and empirical research. Monographs and edited collections in this series will focus on key developments in the Islamic financial industry as well as relevant contributions made to moral economy, innovations in instruments, regulatory and supervisory issues, risk management, insur- ance, and asset management. The scope of these books will set this series apart from the competition by offering in-depth critical analyses of con- ceptual, institutional, operational, and instrumental aspects of this emerg- ing field. This series is expected to attract focused theoretical studies, in-depth surveys of current practices, trends, and standards, and cutting- edge empirical research. More information about this series at http://www.palgrave.com/gp/series/14618 Abdelrahman Elzahi Saaid Ali Khalifa Mohamed Ali Mohamed Hassan Azrag Editors Enhancing Financial Inclusion through Islamic Finance, Volume II Editors Abdelrahman Elzahi Saaid Ali Khalifa Mohamed Ali Islamic Research and Training Institute Islamic Research and Training Institute Islamic Development Bank Islamic Development Bank Jeddah, Saudi Arabia Jeddah, Saudi Arabia Mohamed Hassan Azrag Ibn Sina University Khartoum, Sudan ISSN 2662-5121 ISSN 2662-513X (electronic) Palgrave Studies in Islamic Banking, Finance, and Economics ISBN 978-3-030-39938-2 ISBN 978-3-030-39939-9 (eBook) https://doi.org/10.1007/978-3-030-39939-9 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland P reface We are extremely pleased at the release of the second volume in this series that is the first in the market to address Islamic financial inclusion and to provide empirical evidence and modeling. The main messages embedded in Part I of this volume include topics related to Islamic Financial Inclusion for Sustained Growth and Poverty Alleviation, while Part II revolves around Islamic Finance for Financial Inclusion: Countries Diagnostics. This volume focuses on financial inter- mediation, the impact of microfinance on women and the role of Qard Hassan. It also covers the enhancement of financial inclusion through par- ticipatory products’ development, mobile microfinance and Fintech. The volume is designed to be a comprehensive, accessible, practical oriented follow-up to Volume I. Jeddah, Saudi Arabia Abdelrahman Elzahi Saaid Ali Jeddah, Saudi Arabia Khalifa Mohamed Ali Khartoum, Sudan Mohamed Hassan Azrag v a cknowledgments The two volumes of Enhancing Financial Inclusion through Islamic Finance result from two international workshops on Enhancing the Poor’s Capability and Financial Inclusion, 11–12 December, 2017, and The Role of Islamic Financial Inclusion in Achieving Sustained Economic Growth and Poverty Alleviation in IsDB Member Countries 25–26 November, 2018, organized under the auspices of the Islamic Research and Training Institute (IRTI), Jeddah, the International Islamic University, Islamabad, Pakistan, and Ibn Sina University, Khartoum, Sudan. We want to thank all workshop paper presenters, participants, session chairs, and paper reviewers for their timely and valuable contribution toward the realization of this international workshops. The inspiring engagement of scholars in the two international workshops generated ground-breaking ideas for enhancing the capability of the poor to achieve sustained economic growth and to reduce poverty. The workshops were planned when Professor Dr. Azmi Omar was the Director General (DG) of IRTI. The book publishing was approved with Palgrave Macmillan by Dr. Sami Al Suwailem the acting DG of IRTI. We want to thank the Honorable Chancellor of Ibn Sina University Professor, Prof. Nasr El-Din Ahmed Mahmoud, His Excellency President, International Islamic University Islamabad (IIUI), Prof. Dr. Ahmad Yousif A. Al-Draiweesh and his excellency Dr. Masoom Yasinzai, Rector, IIUI. We also want to thank Prof. Dr. Mohamed Hassan Azrag and Prof. Dr. Muhammad Khaleequzzaman for contributing to the success of the two international workshops and for providing logistical support for the two international workshops. vii viii ACKNOWLEDGMENTS We want to thank two anonymous independent experts’ referees for providing constructive comments that enhanced the two volumes. We want to thank Wahida Mohamed Ali of IRTI for the excellent editorial and formatting assistance. We thank Prof. Dr. Anis Ahmad, Prof. Dr. Muhammad Tahir Mansoori, Prof. Dr. Sayyid Tahir, Mr. Ser Jehan, Dr.Mohamed Hasan Adam, Dr. Bushara Musa Bushara, Dr. Suad Elfatih and Dr. Mohammed Hasan Adam for chairing different sessions of the workshops. We also thank Dr. Khalifa Mohamed Ali and Dr. Abd Elrahman Elzahi Saaid Ali of IRTI, Dr. Mohamed Hassan Azrag and Dr. Muhammad Khaleequzzaman for reviewing papers for the workshops. We acknowledge and thank Dr. Asad Zaman, Dr. Anwar Shah and Dr. Shahid Qureshi, Prof. Badr Edin Ibrahim, Dr. Adnan Aziz, Shariah Head of Noor Islamic Bank, Dubai, Mr. Fahad Liaquat, CEO of AZM Foundation Pakistan, and Agha Ali Javad, General Manager, National Rural Support Program, Islamabad, Pakistan for providing various types of help and discussions in the process of preparing some of the draft chap- ters for workshop sessions. Finally, we thank Tula Weis, Senior Editor of Palgrave Macmillan for her gracious support in publishing this book and Jacqueline Young for helping us through the production process for the books. Abdelrahman Elzahi Saaid Ali Khalifa Mohamed Ali Mohamed Hassan Azrag c ontents Part I Islamic Financial Inclusion for Sustained Growth and Poverty Alleviation 1 1 Introduction 3 Abdelrahman Elzahi Saaid Ali, Khalifa Mohamed Ali, and Mohamed Hassan Azrag References 15 2 Financial Inclusion for Poverty Alleviation: The Role of Islamic Finance in Bangladesh 17 M. Mizanur Rahman 2.1 Introduction 17 2.2 Literature Review 19 2.3 Objective of the Study 22 2.4 Theoretical Underpinning of Financial Inclusion 22 2.4.1 Defining Financial Inclusion 22 2.4.2 Islamic Concept of Financial Inclusion 23 2.5 Where Do We Stand Globally? 24 2.6 Access to Financial Services in Bangladesh 25 2.7 Methodology 25 2.8 Financial Sector in Bangladesh 25 2.8.1 Banking Sector of Bangladesh 25 2.8.2 Non-bank Financial Institutions 26 2.8.3 Microfinance Institutions 26 ix x CONTENTS 2.9 Role of Agriculture in Achieving Financial Inclusions in Bangladesh 26 2.9.1 Agricultural Credit Program Banks in Bangladesh in FY2017 27 2.9.2 Credit Disbursement to Agriculture 28 2.9.3 Bangladesh Bank’s Refinance Against Agricultural Loans 29 2.10 Role of Microfinance Institutes (MFIs) in Achieving Financial Inclusion in Bangladesh 30 2.10.1 Area Covered by MFIs 31 2.10.2 Members of MFIs 31 2.10.3 Allocation of Microcredit by Economic Activities 32 2.10.4 Micro-enterprise Program of MFIs 33 2.10.5 MFIs Loan to Micro-enterprises 35 2.10.6 Micro-insurance for Clients of MFIs 35 2.10.7 Employment Generation by MFIs 36 2.10.8 Social Services by MFIs 36 2.11 Role of the SME Sector in Achieving Financial Inclusion in Bangladesh 37 2.11.1 Bangladesh Bank Refinance for SMEs 39 2.11.2 Refinance Scheme for Agro-based Product Processing Industries 39 2.11.3 R efinance Fund for New Entrepreneurs Under Cottage, Micro, and Small Categories 39 2.11.4 I slamic Shariah-Based Refinance Scheme 39 2.11.5 R efinance for Women Entrepreneurs 40 2.11.6 U rban Building Safety Project (UBSP) 40 2.11.7 F inancial Inclusion of Garment Workers 41 2.12 C orporate Social Responsibility in Achieving Financial Inclusion in Bangladesh 41 2.12.1 C SR Activities of Banks and NBFIs 42 2.12.2 C SR activities of Islami Bank Bangladesh Limited 43 2.12.3 ‘ No Poverty’ and ‘Zero Hunger’ for Financial Inclusion 43 2.12.4 N o-Frill Accounts (NFAs) for Farmers and the Underprivileged Group of the Society 45 2.12.5 S chool Banking 46
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