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ISLAMIC FINANCIAL CO-OPERATIVES

TO MEET THE FINANCIAL NEEDS OF


THE COMMUNITY
Case Study Of:
Al Barakah Multi-purpose Co-operative society Limited
Mauritius

Mr. Mamode Raffick Nabee


Mohomed
Founder/Secretary
Al Barakah MCSL
Post Event workshop on Islamic Microfinance and shariah Standards at
3rd and 4th November 2010,Royal Palm Club Lahore, Pakistan

Mr. Mamode Raffick NABEE MOHOMED


Founder and Secretary of Al Barakah Multi-purpose
Cooperative Society Limited, Mauritius.
Mr. Nabee Mohomed holds a Bachelor of Commerce, a Post
Graduate Certificate in Education and a Post Graduate
Diploma in Islamic Banking & Insurance (IIBI-London). He is a
student at IIIBF for the PG Dip. in Islamic Finance. He is an
Educator, also lectures on Islamic Banking & Finance and is an
Associate Fellow of the Institute of Islamic Banking and
Insurance which is based in London.
Mr. Nabee Mohomed has also done a thesis on An empirical
study of the Muslim Family in a rural set up.
He has acted as panelist and speaker at International
Conferences and seminars on Islamic Finance and presented
the case study of Al Barakah MCSL in Trinidad &Tobago,
India, Pakistan, Malaysia and South Africa. He has also
attended several short courses and training.

Muslim Credit Union (Trinidad & Tobago)


- Training in Islamic Finance at M.C.U (3rd Feb. to 21 Feb.
1999)

National Cooperative Training Centre, Mauritius


- Management & Leadership for Leaders of Cooperative
Credit Unions, (24 & 25 Oct.2001)

Cooperative College of Malaysia


- Project Preparation and Appraisal (23-27 February 2004)
- Corporate Governance (23-26 May 2005)

Association of Asian Confederation of Credit Unions (ACCU)


- Modern Management of Cooperative Credit Unions (02-03
July 2008)

International Islamic University, Islamabad (Pakistan)


- Attended the 22nd International Programme for Human
Resource Development from 14/11/2005 to 14/12/05 at
Dawah Academy, Islamabad.

Cooperative Muslimine Malaysia Berhad (Malaysia)


- Internship in Islamic Finance & Islamic Accounting for
Islamic Co-operative Societies (15 December 2008-02
January 2009)

Islamic Finance & Islamic Financial Institutions


Concept of Co-operatives
Islamic Financial Co-operatives
Financing intruments of IFC
Reserves & Funds
Case Study of Al Barakah Multi-purpose Co-op Society Ltd.Mauritius
Geographical background & Muslims in Mauritius
Islamic Banking & Finance & Muslims in Mauritius
Integrating Islamic Finance in Cooperatives
Organisation of Al Barakah
Legal Framework
Products & Services
Other activities
Challenges
Conclusion
Opportunities with Al Barakah for Islamic Banking &
Finance in Mauritius

Islam is a practical way of life with its own system


Inheritance in the economic sphere & scholars at
work
Initiatives-No working model & since 1960s IBF
startedMit Ghamr 1963
Emergence of IFI & growth
Satisfaction/Criticism
Types of Islamic Financial Institutions (IFI)
Dominance & neglected areas & Evolution

According to Professor Rodney Wilson Formal Islamic banking first


emerged in the early 1960s through credit unions of Muslim landowners in
Egypt and Pakistan who simply pooled their resources and could then in turn
draw out funds for agricultural improvements on a non-interest basis. (The
evolution of Islamic banking and emerging trends in Islamic Finance)

Interest Free Financial institutions (IFFI) of India are the forerunners in the
history of global Islamic financial movement. Tracing the history of growth of
interest free financial institutions in India, it is reported that such organized
credit society had shown its presence as early as 1890. According to the
directory of Islamic banks in India, such efforts in the organized sector in the
style of the Patni Cooperative Credit Society Ltd. was established in
1942
A recent study conducted by Bagsiraj (2003) shows that there are
institutions that have grown to a size of 14 Islamic Cooperative Credit Society
(ICCS) in India. It may be noted that these institutions primarily fulfill the
casual social needs of the people at a very small scale.
(Dr Rahmatullah-IFFI of India in crisis/Bagsiraj-IFII,published by KAU, Jeddah
in 2003)

The history of Islamic Financial system in Thailand started with the


establishment of a cooperative society, Pattani Islamic Saving Cooperative
that operates based on shariah in 1987.. These Islamic cooperative
societies have successfully established themselves as viable financial
institutions in managing and mobilizing Muslims in this region. ( Islamic
banking in Thailand: prospects and challenges (Sudin Haron & Kumajdi
Yamirudeng)

Concept of cooperative:
- From the beginning of human society, cooperation has
always been a vital factor in human development.
- As a social creature, it is the natural urge of man to
cooperate with each other.
- Cooperation conveys the idea of helping each other
and making joint efforts to achieve a common goal.

The Cooperative movement emerged in the middle of


the 19th century by the Rochdale Pioneers. On the 24th
October 1844, in Rochdale, Lancashire England, a group
of people faced with economic exploitation and
deprivation set up a cooperative store, based on the
principles of self-help and mutual help. They defined a
set of principles which became the basis for the
cooperative ideology which has spread all over the world
be it a capitalist, socialist or Muslim society.

A cooperative is an autonomous association of


persons united voluntarily to meet their common
economic, social and cultural needs and
aspirations through a jointly owned and
democratically controlled enterprise. (www.ica.coop
)

7 principles of cooperatives:

1. Voluntary and open membership (VoM)


2. Democratic member control (DmC)
3. Member economic control (MeC)
4. Autonomy and independence (A&I)
5. Education, training and information (EtI)
6. Co-operation among co-operatives (CaC)
7. Concern for community (CfC)

Sectors of the economy-PMT

Class of Co-op societies/Multi-purpose Co-operatives


- Consumer Co-op, Producers, Marketing, Housing,
Catering, Financial Co-operatives/Credit unions etc.

What is a Credit union?


- A credit union is a financial cooperative that may
accept savings, deposits, provide credit and other
financial services to its members.
- Credit Unions are financial cooperatives which are in
effect community banks.
- Membership: people from all walks of life,
- Common bond
- Owned & controlled by shareholders/members
- Capital: mobilising from shares ,savings & deposits
from members
- Financing/not for profit maximisation
- Surplus-back to shareholders

Generally Conventional co-operatives/credit unions


are interest-based
Credit unions called by different names:
- In Africa-Savings And Credit Cooperative Societies
(SACCOS) which emphasise on savings before credit.
- In Afghanistan-(IIFC) Islamic Investment and
Finance Cooperatives which comply with sharia.
IFC are institutions based on the principles of Islamic
Finance.
Efforts over the past 30 years to set up IFC
Community-based and providing Islamic financial
services to the community
Islamic Financial Co-operatives around the globe
(T&T, Canada, Malaysia, Thailand, Indonesia,
USA, Australia, India, Singapore,
Afghanistan)

Why IFC?
1. Conceptual framework
Cooperate with all in what is good and pious and do
not cooperate in what is sinful and wicked. (Q-5:2)
2. Legal framework is less regulated than the corporate
sector (Cooperative Societies Act ,CU Act) Shariahcompliant
3. Values - Islamic Financebased on Islamic ethics:
justice, sharing, cooperation.
- Cooperatives based on values: honesty, equity,
equality, solidarity, self-help, etc.
4. Easy formation & more elastic
5. Small capital requirement
6. Community based & more people-oriented( IEViews..)
7. Spread ownership of business and reduce
concentration of wealth
8. Different purposes - open to any type of economic
activity
9. Incentives & Benefits Tax
10. Democratic

Murabahah
Ijarah
Mudarabah
Musharakah
Diminishing Musharaka
Istisna
Qard-ul-hasanah/IFL

Statutory Reserve according to Coop Act


Dividend equalization Fund
Social Takaful Fund
Profit Equalisation Reserve
Zakat Fund

Al
Barakah
Multipurpose Cooperative
Society
Limited

Mauritius

Mauritius-gateway to Africa, South Asia & Asia


Multi-religious society:
Population-1.3 M
Hindu :51%, Christians:28%,
Muslims
:18%, Chinese :3%
Muslims presence in all walks of life: Islamic
schools, professionals, orphanage, business,
etc.
Muslims have contributed enormously in the
dvp. of the economy
Business operated as family business
But as a community, little has been done to
establish the financial system of Islam.

Keen

desire by Muslims to re-establish


their identity.
Establishing an Islamic bank in Mauritius
in 1990s was a manifestation of this
desire.
To become part of the Islamic banking
phenomena.
Preliminary work carried out.
Formation of a Credit Union in the
Cooperative sector (AL BARAKAH)!

Islamic Finance through


Cooperatives
Why Al Barakah?
To provide an alternative to the
interest-based financial institutions
for the community. (Communitybased)
2. To provide halal investment
opportunities and returns.
3. To contribute in a halal way to the
overall development of the economy.
1.

4.

Formation of Al Barakah
(Registered on 10th June 1998)

Operates:
Within the Co-operative Societies Act
2005
Within the framework of its rules and
regulations
In accordance with Islamic Financial
Laws.

Advisors Dr. Monzer Kahf (USA)


Dr. Ashyraf Dusuki(Malaysia)
Br. Imtiaz Ali (T&T)

VISION

To be a leading Cooperative Society in the field of


Islamic Finance for a fair and just society.

MISSION

To operate as a financial institution based


on Islamic cooperative principles and
providing a wide range of services on an
interest-free basis

GOALS

To present a practical model of Islamic


Finance through the co-operative sector.
To lay the foundation for an alternative
financial system to the Mauritian
population at large.

Objectives
1.

2.
3.

4.

To create a source of credit for its


members for provident and
productive purposes.
To provide savings facilities to
members
To create the framework to enable
members to manage their financial
resources for their mutual benefit.
To promote the welfare and economic
interest of its members.

Tailor-made schemes based on


Murabahah:
1. Household General Financing
2. Computer Financing
3. Traders Financing
4. Home Financing
5. Air Ticket Financing
6. Motor Vehicle/Cycle Financing
7. Land & Property Financing

Istisnaa Financing (Manufacture-Sale)


Partnership with shareholders (M&M)
Interest-Free Loan (Qard-al-Hasan)
Hajj Savings Account

Statutory Reserve
Profit Equalisation Reserve
Dividend Equalisation Fund
Social Takaful Fund
Creating awareness about Islamic Finance.
Organizing lectures, seminars,
conferences and workshop.
Organizing mini trade fair, socio-cultural
programme.

1.

2.
3.
4.
5.
6.
7.

Individual/organisational/government
level
Legal framework
Public acceptance
Economic potential
Human Resource
Mass Education
Competition

Mauritius wants to connect to this sophisticated


and growing global phenomenon that spans
banking, non-banking financial services, microfinance, insurance and capital markets.

We will also set the regulatory framework for


leasing companies to market products which are
shariah compliant. (60)

And to level the playing field appropriate


amendments will be made to the legislation to
make normal banking and Islamic banking tax
neutral.(62)
Budget speech 2008/2009 - Minister of Finance

Legal

& Regulatory Framework


* The Banking Act 2004-Amendments 2007
* The FSDA 2001-(Non-banking activities)
* The Cooperative Societies Act 2005
Membership for corporate bodies
Projects/Joint ventures etc.

1.
2.
3.
4.

10 years of operation
An eye-opener
Islamic finance at different levels
Well-being of all citizens

Mamode Raffick Nabee Mohomed


Founder/Secretary Al Barakah M.C.S.L
E-mail: albarakahcoop@yahoo.com
www.albarakahcoop.org
Tel: (230) 6275766, 7781738