Interview with Mr. Mohammed Al-Lai about the coming Islamic Conference in Turkey Mohammed Al-Lai speaks to Amy Miller on the upcoming Islamic Microfinance Summit, 31st January 1st February 2012 Istanbul Turkey. Could you tell me about the work that Al-Amal Bank is doing in Islamic Microfinance? Al-Amal Bank is the first Islamic Microfinance Bank providing diversified financial products to Islamic population delivered in compliance to Islamic Legislations, 1 / 5
supervised by the Central Bank of Yemen. We provide solely Islamic products and when it comes to lending, this can be split in two areas. Firstly, Murabahah, and secondly, Ejarah (Islamic Leasing), which is the leading one. We also provide savings products, investment funds, fixed deposits, current accounts plus savings. With regard to our products, there is no fixed percentage declared to the client and he pays on outcome and activities at the end of the year. We also provide household and life insurance. In Yemen, whilst we were establishing the bank, we conducted a survey that showed that the population were really very interested in Islamic microfinance. As we are living in a very conservative society, this target market consisting predominantly of young females, are generally seeking Islamic finance. There is much more interest in Islamic Microfinance products now than there was 5 or 10 years ago. Why do you think this is? I think that 5-10 years ago, finance providers were very limited in terms of numbers and outreach. However, those people who were very eager and in huge need of finance would still seek them out. Since then the Microfinance industry has grown greatly and the concept of Islamic finance was broached. If you go by sector from the formal to the informal, you'll find an increasing trend towards Islamic products. In my opinion the main reason behind the high demand of Islamic finance is that the Microfinance and financial institutions have started to expand and to target segments that were totally neglected. 2 / 5
What do you think is the biggest challenge in expansion into this segment? There are many things but firstly the legal framework needs to be in place. One of the main challenges facing Microfinance in targeting these segments is the legal framework. For example, the legal framework in Al-Amal Bank has to go through the supervision of the Central Bank. However the Central Bank is still not at the stage where it can differentiate between an Islamic bank as a Microfinance bank and other banks. Therefore I'm still required to fulfill the same requirements. For example, the requirement to ask for I.D. cards can make banking very difficult. In a conservative country like Yemen, women are often not allowed to share their name, let alone carry an I.D. card and we therefore struggle with this requirement. Secondly, the high cost of applying Islamic methodologies is that we cannot deal with cash. We have to deal with merchandise and this means you have to operate through a third party, which results in more staff to ensure that the end client actually receives their merchandise in kind. During the foundation of Microfinance, a lot of donors came up with technical assistance. However Islamic microfinance cannot be established without this kind of support in the future. 3 / 5
In traditional Microfinance there is a lot of interest from investors. With the high cost associated with applying Islamic methodologies, investment is clearly important; how much investment is there and how do you think that it can be improved? Investment is still limited. In an Islamic system there is no sustainable source of finance like Banks, for example. We have a shortage of funds and what we usually do is explore individual businessmen to invest in Islamic microfinance. It takes a lot of time and effort to convince these people. It will take time to move from this philanthropy based model to larger scale business. However the largest Islamic provider now is not an Islamic Bank but HSBC, so now there is a momentum to move to Islamic finance and this is demand driven. Why do you believe that now is the right time to attend a conference on Islamic Microfinance and what are you hoping to achieve by attending? I think that this conference will bring together those individuals that are interested in Microfinance, either practitioners or donors to expand their portfolio into Islamic finance. Also it will enable individuals in the sector to share experiences; we are coming from the front line and we encounter many challenges on a practical day-to-day basis that the opportunity to discuss these with others is very valuable. The attendance and chance to talk with regulators, those working in Central Banks, is vital to drive the industry forward 4 / 5
and ensure the ambitious growth plans that we have. Mohammed Al-Lai will be sharing his experiences in Microfinance at the Islamic Microfinance conference which is taking place in Istanbul, Turkey between 31 st January and 1 st February 2012. Download the Interview 5 / 5