Experience of Sudan Economic Empowerment Approach OR Traditional Microfinance May 2016 أنس الحسناوي

Microfinance In Sudan » » Field Approaches. Field Example of each approach. Outcomes & Readings on Sudan Practice. Economic Empowerment Approaches Contents

Four Types of Projects for Economy Empowerment : 1.Individual Finance: : Single Person or Family is the beneficiaries. 2.Solidarity Individual Finance:: Beneficiaries are solidarity group with special relation ( number of them might exceed thousands) and each one has his private business/project 3.Group Solidarity Groups: Beneficiaries are one Solidarity group cooperated at one project. 4.Sustainable Development Villages: Proposed Solutions for inclusive development for the village Camps, Crisis): Business Method Differs from one to other type Economic Empowerment Approaches Sudan Practice Different Approach According to Project’s Type

Economic Empowerment Approaches Sudan Practice innovations in Projects & Organizing Beneficiaries Individual- Solidarity Groups Beneficiary is a group of individual with a certain mutuality ( Similar business, Same education.. Individual Finance Beneficiary is the individual or the family Community Sustainable development Proposed solution for comprehensive development Groups Solidarity Beneficiaries are one solidarity group in the same business

Name: Aziza Suliman Business: Sewing & Business Decoration Finance Amount: USD 1500 Finance Period: One Year Pre-finance accounts: Net Profits (Linens sales) SDG 10 for the Linen by total of 100 Linens. Post-Finance Accounts: Net Profit (Linens sales) SDG 25 for the Linen by total of 100 Linens. Except the seasons where net profit can reach SDG 7000 on monthly bases. Economic Empowerment Approaches- Sudan Practice 1. Individual Finance field Example

Contracts Used: Muzaraa (Venture capital in Agriculture production), Lease and Leasing financial Products: Ijarah (Lease), Leasing, Mozaraa : contract in farming where the financier can provide land or funds in return for a share of the harvest. Murabaha: is essentially a form of trade credit, in terms of which the lender(s) actually purchases and becomes the legal owner of the goods ordered by the client, and then resells them to the client on delivery, at a previously agreed on price higher than the initial cost of the goods. However, the client has no legal obligation to buy what the lender has purchased on his/her behalf. [The repayment pattern and other terms of finance should be agreed upon by both parties (Seller(s) and Buyer) in a Murabaha Contract. Economic Empowerment Approaches- Sudan Practice 2. Group- Individual Finance field Example

ABU-HALIMA MUDARABA GREENHOUSES PROJECT Beneficiaries125 families headed by their graduates in agriculture formulated in one Co-operative Business TypeGreenhouses for vegetable production/ 1400 ton annually Finance ModuleMudarbah (Capital Management) Finance AmountUSD 4,000,000 for the co-operative/ USD 30,000 for one family PartnersOne Technical consultant & two private hypermarkets for marketing LocationRuler community in North Khartoum the capital Economic Empowerment Approaches- Sudan Practice 3. Solidarity Group Finance field Example

8 The Bank Beneficiary Association 125 Families = 625 B. Mudaraba Contract Abu-Halima ProjectTechnical Support Profits 28.5% 71.5% Capital Owner Mudarib Ministry Of Finance Finance Partner Social Contribution Consultant A chain of Hypermarket Marketing Production Un- Seasonal Crops USD 700 M/B Yield Mapping Production quality & control ABU-HALIMA MUDARABA GREENHOUSES PROJECT Economic Empowerment Approaches- Sudan Practice 3. Solidarity Group Finance field Example

Project Location Abuhalima Productive Center Project Location

Business Opportunity Development for MF

Business Partnership: Technical Support (Agronomist Expert)

Smart Partnerships: Latest Technology ( Specialized Supplier)

Supportive Investments & Assets Required/Appropriate Financing

DIMINISHING MUSHARAKA & MURABAHA MODULE: CATTLE FATTENING PROJECT DIMINISHING MUSHARAKA & MURABAHA MODULE: CATTLE FATTENING PROJECT Beneficiaries100 families formulated in one Co-operative, supported by their community rural company (leaders) Business TypeCentral Cattle fattening facility (livestock), to produced 7000 fattened cattle annually Finance ModuleDiminishing Musharaka for Assets & Murabaha ( sell in advance) Finance AmountUSD 1,680,000 for all families / USD 16,800 for one family. PartnersOne Private Sector for export LocationRuler community Al-Jazeera State north to Khartoum The capital

The Rural Company The Association/100 families The Cattle Fattening Community Productive Project Ijara/Leasing 1000 Cattle Finance The Facility The Bank Rest of Cattle Revenue Leasing Revenue (%) Diminishing Musharaha Murabaha Fund Overall MOU Revenue 94% 6% MR Meat Selling (Slaughtered) Animal Waste & leathers Fattened Cattle Selling Savings Barns & Infrastructure Feeders & Ops Exp. Vet. & Technical Supervision & Training Marketing Income CATTLE FATTENING PROJECT: Business & Finance Structure

4. Sustainable Village Finance/ Economic Empowerment Approaches- Sudan Practice

4. Sustainable Village Finance/ WAD Balal Community Field Example Economic Empowerment Approaches- Sudan Practice A resident compound with appropriate secured durable cost houses, governed by sustain development program./Not Yet Inclusive infra-structure for healthy living standards and according to substitute pure economy technologies/Small Clinic Center/Small Kinder garden /Small Primary School/Petrol Station Public Landscapes & areas for incubating Productive, social & culture activities./Possess 500 Feddan. Rehabilitation and beneficiaries support program for job opportunities creation & small, micro firms / Organize Business Trips to UAE/ Small Technology Service Center village executive firms program support Village Development Fund Actual interaction of population in community building & development. Cattle fattening project for 100 families/ Poultry Project / Poultry Slaughterhouse

Persuasion in solution of poverty not only by financial inclusion but in economic and social inclusion The large number of poor force us to work with them as SME and unified groups and not individual finances for micro activities. The existing environment force us to think on economic basis and not only financial basis. Absence of collaterals push us to innovate new financial tools. Moving ahead to economic empowerment instead of microfinance activity. Economic Empowerment Approaches- Sudan Practice 2. Readings on Microfinance Situation in Sudan

Islamic finance purposes Conventional Finance Purposes Economic Empotement Islamic finance tools Financial Empotement Buy and SellMurabaha for Example Qard Hassan-Sell Amount Economic Process Financial Process Fundamental Change in finance culture  Finance tools developed from mono tools to group tools, (i.e Sallam, Ijara  Pure economic tools without financing (Muzaraa)  Profit in the economic operation and not finance operation  Client needs the collateral not the institution. Problems in Islamic finance products Economic Empowerment Approaches- Sudan Practice

Reforming un-performed lands Financial & Organization Strucure of the Project Business Modules “ Development Waqf “ Musharaka & Mudaraba Society Contribution Diminishing Musharaka Followship & Training Economic Empowerment Institution Strategic Partner الفقراء المستفيدين

Ideological Concept : Poor Do produce generally for Poor or for limited Market Poor Rich Poor MarketMarket of Rich Economy Empowerment Approach Sudan Practice in Economic Empowerment Introduction

Public Capital Private Capital Waqfi Funds Zakat Fund ZAKAT – Sudan Chamber Sudan Practice in Economic Empowerment ALAMAN Syndicate Involvement in BOP

A strategic innovative financial partnership created between the Zakat Chamber and Sudanese banks using the zakat allocated to the economically active poor (Bank of the poor) to their social development and taking them out of the circle of poverty. (The first portfolio of its kind in Sudan) Capital portfolio of 200 million Sudanese pounds, the contribution of Zakat Chamber is 50 million and the contribution of other banks is 150 million Bank of Khartoum was selected and is the leading bank (executive and speculator) Targeting the productive sectors in all states of Sudan Funding reached 173million and targeted about 92 thousand beneficiaries Sudan Practice in Economic Empowerment Innovation in Fund Creation- ALAMAN Syndicate

The legal, political and management aspects, did not reach the level where the field aspect is reached. Regulation pushes to implement 12% of CBs financial resources and not 12% of economic resources ( financial direction only) Absence of Solidarity unified group regulation. Absence of regulation for financing without credits. Set ceilings despite feasibility Financial MIS and not Economical Empowerment MIS. Absence of feasibility studies Absence of economic and social indicators Absence of project follow up and focus only on repayment follow up Greatness of needs call to diverse the resources and start to depend on capitals 97.5% and not only 2.5% charity resources. It is necessary to revise/upgrade the environment of microfinance in Sudan to match with the field practices in Sudan. Economic Empowerment Approaches- Sudan Practice 2. Readings on Microfinance Situation in Sudan