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Microfinance and Islamic Banking

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Microfinance and Islamic Banking
Assignment On Microfinance and Islamic Banking

Submitted to:
Dr. Mohammed Nurual Islam
Department of Business Administration
International Islamic University Chittagong
Dhaka Campus

Submitted by:
Rabiul Hossain
ID: B092070
Batch no: FIN-5

Date of Submission: 22/02/2013

Microfinance
1. Introduction:

Micro financing is not a new concept. Small microcredit operations have existed since the mid 1700s. Although most modern microfinance institutions operate in developing countries, the rate of payment default for loans is surprisingly low - more than 90% of loans are repaid.

Like conventional banking operations, microfinance institutions must charge their lenders interests on loans. While these interest rates are generally lower than those offered by normal banks, some opponents of this concept condemn microfinance operations for making profits off of the poor.

The World Bank estimates that there are more than 500 million people who have directly or indirectly benefited from microfinance-related operations.

2. Definition of Microfinance:

A type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services. Ultimately, the goal of microfinance is to give low income people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance.

Microfinance, according to Otero (1999, p.8) is “the provision of financial services to low income poor and very poor self-employed people”. These financial services according to Ledger wood (1999) generally include savings and credit but can also include other financial services such as insurance and payment services.

3. History of Microfinance:
Microfinance is not a completely new concept of

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