IDB seeks govt permission to set up IMFI in BD

Syful Islam Jeddah-based Islamic Development Bank (IDB) has sought government permission to establish an Islamic Microfinance Institution (IMFI) in Bangladesh, officials said Monday. "We have received a proposal from IDB president Ahmad Mohammed Ali. We are examining the documents," a senior banking division official told the FE. "If approved, the institution will be the first of its kind which will run the basis of on Islamic shariah," he said. According to the proposal the IMFI will have Tk 1 billion capital of which Tk 200 million will be provided by the IDB. Four local banks including the Islami Bank Bangladesh Ltd (IBBL) will provide Tk 700 million for the microfinance institution. Officials said the IDB has initiated microfinance development programme (MDP) in a bid to expedite the progress of Islamic financial services industry. "The IDB has embarked upon its MDP which has three objectives-- poverty reduction, providing access to Islamic finance for the poor and development of Islamic financial services industry," IDB president Ahmad Mohammed Ali wrote to finance minister. The IDB is also planning to develop such institutions in Indonesia, Sudan and Senegal. Referring to success by the majormicro finance institutions like Bangladesh Rural Advancement Committee (BRAC) and Grameen Bank, Mr Ali said the project is viable and likely to achieve self sufficiency in 3 to 4 years. According to project summary "the entity would be unique as currently there are no other full scale Islamic microfinance institutions in the country capable to offer integrated financial and social development services under one umbrella". "The operational model will be shariah complaint adaptation of the hugely successful Grameen model," it said. The microfinance institution will work on children education, health care programme, subsidised financing to the ultra poor and accomplish higher level of financing. The microfinance institution aims to provide access to financial services to the poor and ultra-poor for income generating activities, encourage the private sector to establish appropriate-technology based industries for sustained employment and income, and Islamic microfinance lines to institutions engaged in the industry. It also plans to participate in the equity capital of MFIs, arrange issue of local currency bonds to raise funds for MFIs', mobilisation of charitable funds and channelling these funds to the poorest of the poor, and internal and external capacity building in the area of Islamic microfinance. At present not more than 20 local microfinance institutions having more than Tk 1 billion capital are working in Bangladesh. Bangladesh's first microfinance institution BRAC, the world's largest non-governmental development organisation, started journey in 1972 soon after the independence of the country. Grameen Bank, another leading microfinance institution has become a model across the world for its fight against poverty.