CIBAFI discusses profound structural issues in MSME Market in Jeddah

The delegates were welcomed by the opening remarks of H.E. Dr. Ahmed Mohamed Ali, President, IDB; Mr. Abdulrazzak M. Elkhraijy,Executive Vice President & Head of Shariah Group, the National Commercial Bank & Member of CIBAFI BOD; Mr. Abdelilah Belatik, Secretary General, CIBAFI, as well as Mr. Ahmed Fayed, Director, IFS Department, IDB. The Meeting gathered more than 60 senior executives of Islamic Financial Institutions (IFIs) from 17 jurisdictions to explore and share viable market practices to ‘build robust technical capabilities’ in providing Islamic MSME finance.

The Meeting was inaugurated by a speech of Mr. Firaz Hamdan, Islamic Banking Regulatory Committee of the Central Bank of Lebanon who shed light on some of the key areas in creating enabling environment and policy framework to support the penetration of Shariah-compliant financial services into the MSME market.

The first session highlighted key issues on regulatory and market infrastructures for MSME finance with respect to important regulations to boost Islamic MSME finance market. The session covered some of the main areas of the industry, such as secured transaction laws, regulations, prudential standards, taxation, insolvency framework and reporting.

In addition, the Meeting focused on addressing challenges in information infrastructure for Islamic MSME finance emanated from the importance of credit bureau, scoring, and credit registry, that fits to the characteristics of MSME and Islamic finance. The session also discussed the emerging issues in developing Shariah-compliant guarantee schemes, mainly related to the appropriate structure, eligibility criteria, and coverage ratio. Some of the innovative ideas on the potential to develop market infrastructures for Islamic MSME finance included SME capital market, Islamic syndicated finance, SMEs securitization through Sukuk, and crowdfunding platform for SME etc. A comprehensive tool to promote sustainable Islamic MSME finance was discussed to align Islamic MSME finance with micro-Takaful, and Waqf and facilitate a broad-based business environment for MSMEs.

The second session shed light on areas of leveraging from advanced technologies to reach competitive edges in Islamic MSME Finance. The discussion focused on building ‘distinctive’ capacities in e-banking and social media for Islamic MSME, as well as exploring issues in payment infrastructures for MSME businesses. Developing technical infrastructure for digitization and aligning it to the robust technological infrastructure were also revealed in the discussion as the core theme to be at the forefront in the industry.

The following sessions began with IDB-Microfinance Development Programme (MDP), and key case studies from Sudan, Tunisia, and Malaysia, which served as a demonstration of best practices of Islamic MSME finance across different jurisdictions. The session also covered the showcase of financing projects in IDB member countries by Agriculture and Rural Development Department.

On the second day, the Meeting is expected to kick off with a session by the IDB Awqaf Properties Investment Fund (Awqaf FUND), which will present  a case study by the Islamic Financial Services Department of IDB. Other sessions will cover topics such as the risk management and technical infrastructure for Islamic MSME Finance to generating sustainable business; The intersection between MSME and the concept of risk sharing of Islamic finance; and The core process required with respect to Islamic financial products and services development and innovation.

This Meeting has been well supported by the participation of CIBAFI members from around the globe from a wide spectrum of the Islamic finance industry ranging from Islamic banks to regulators, policy makers and professional firms.  

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