Answer: 1

The way Hodeidah Micro Finance Program (HMFP) work is, they have a cycle of loans that they
have to go through but each level cycle has a wide scope. First the loan can be up to 50000 YR
($300 US). The maximum loan for the final level is 250,000 YR ($1500 US). HMFP uses a
group based methodology. Group members are not confined to the same loan amounts or the
same activities, but the loan amounts need to be within the range of the cycle set by HMFP.
There is also a small percentage of individual loans (10%). As the credit officer upon receives
the receipt of the loan application then he proceeds to investigate the group and does a feasibility
study for their activities. From the study, the officer can estimate the precise loan amount. If the
feasibility study is positive, the client should identify items for example commodities or
equipment needed from the wholesaler and negotiate a price. Then the credit officer purchases
items from that source and resells them immediately at that price to the client.

Answer: 2

For clients, the economic benefits of the local Islamic microfinance program were more
important than the Sunnah principle of Riba free financing because the economic benefits were
seen as expressions of Islamic compassion toward the poor. Many elements of microfinance
could be considered with the broader goals of Islamic banking. Both systems advocate
entrepreneurship and risk sharing and believe the poor should take part in such activities. This
close relationship would not only provide obvious benefits for poor entrepreneurs who would
otherwise be left out of credit markets, but investing in microenterprises would also give
investors in Islamic banks an opportunity to diversify their investments.

Answer: 3

For alternative of Micro financing mode, Mudaraba mode can be used on this program. As in
Mudaraba, the program as the investor will supply the entire capital of the business. Thus, a
relationship is formed in which program will act as the supplier of capital. The entrepreneur will
act as the manager of capital. When the venture ends, the manager of capital pays the entire
capital back to the program, along with an agreed proportion of profit. If there is any loss, it will
be borne by the program. In this situation, the program can help the clients who need the money
most and give them an opportunity to start of their own business and reduce the rate of
unemployment and poverty. The Program will carry all the risk along with the client to expand
the business further more.

Answer: 4

The concept of financial inclusion in Islam is well integrated in the core objectives of Islamic
Shariah which focuses on promoting welfare of each member of the community. Islam
emphasizes financial inclusion with social inclusion by meeting minimum requirements for life
of each and every member of the society. The two distinct features of Islamic finance, the risk
sharing and redistribution of wealth. As for Bangladesh, Small and medium enterprises (SMEs)
and agro based microfinance were integrated into the programme to build entrepreneurship at
local level. Micro and SME financing have been playing important role in poverty reduction by
creation a gainful employment opportunities. The Islamic banks and the Islamic windows of
conventional banks in Bangladesh should pursue promotion of Islamic micro and medium scale
enterprise (SME) finance, in terms for the country's concerted efforts for faster poverty
eradication with deeper, wider financial inclusion. Islamic microfinance and its principles could
raise poverty reduction and economic development in the country.