Deck 9: Islamic Microfinance

Question 1

The concept of wadi'ah safekeeping. in Islamic finance is the underlying concept of savings account deposits. in the formal banking system.

Answer 1

True

Question 2

Microfinance aims to empower the low income entrepreneurs by providing them with credit facilities that would enable them to fulfil their consumption wants.

Answer 2

False

Question 3

The principal objective of the Islamic microfinance is to provide sustainable micro-credit facilities to the poor who may be excluded from the formal financial services.

Answer 3

True

Question 4

The main reason for the prohibition of riba is to avoid financial exploitation and oppression by the few rich.

Question 5

The debt-creating modes of Islamic microfinance include mudarabah trust partnership., musharakah joint venture partnership., and musaqah share-cropping..

Question 6

Salam is the main Islamic finance product for the deferred delivery mechanism is also regarded as the most viable tool for agricultural microfinance.

Question 7

Micro-credit schemes are also called micro-takaful agreements.

Question 8

Salam is regarded as the most viable tool for financing house purchasing.

Question 9

An Islamic microfinance institution adopts debt or equity modes of finance for its financing requirements.

Question 10

Early initiatives to alleviate poverty in Islam include the institution of zakat, waqf, and the praiseworthy qard hasan.

Question 11

Early initiatives to alleviate poverty in Islam include the institution of zakat, waqf, and the praiseworthy qard hasan were called microfinance.

Question 12

The three components of Islamic microfinance are: micro-lending, micro-saving, and micro-credit.

Question 13

The two terms, microfinance and micro-credit, are the same in terms of meaning, scope, and application.

Question 14

It is likely high interest rates will have productive impact on microfinance schemes.

Question 15

One major difference between conventional microfinance and the Islamic microfinance framework is the prohibition of interest-bearing credit facilities and interest-yielding deposits.

Question 16

Conventional microfinance has developed multiple sources of income through partnership and entrepreneurial commercial activities between the financial institution and the clients.

Question 17

High interest rates violate the fundamental basis of Islamic commercial law while low rates are tolerable since they do not exploit the borrowers.

Question 18

Modern microfinance schemes, even in some Muslim countries, dominated by interest-based products, originally meant to provide access to credit for the poor, may end up further impoverishing them.

Question 19

Islamic microfinance could be defined as "the process of providing small scale financial services based on Sharī'ah concepts to the poor or low-income individuals who have been excluded from the formal financial services".

Question 20

The history of modern Islamic finance started with a microfinance in the remote village of Mit Ghamr in Egypt back in 1960s.

Question 21

The interest-free Islamic microfinance framework satisfies the need to establish sustainable microfinance institutions that are user-friendly.

Question 22

Parallel salam is a separate contract distinct from the initial bai salam where the Islamic bank is the seller of the commodity based on deferred payment.

Question 23

A primary objective of the zakat institution is to realize absolute equality in income distribution amongst Muslims so that everyone has the same amount of income.

Question 24

It is permissible for the parties to stipulate that the salam contract will be affected on the produce of a particular field of farm or fruits from a particular tree.

Question 25

Under the terms of the musharakah mutanaqisah diminishing partnership. contract, the client buys a number of specified units every month out of the shares of the Islamic MFI which automatically decreases the capital ownership of the MFI.

Question 26

Mudarabah al-mutlaqah unrestricted trust financing. is the case where the bank or Islamic microfinance institution the capital provider. specifies or restricts the business in which the capital finance may be invested.

Question 27

Profit realised under mudarabah microfinance model is distributed between the Islamic MFI as the capital provider and the client as the entrepreneur based on predetermined ration as contained in the underlying contract.

Question 28

Salam is a contract where the Islamic bank is the buyer of the commodity and the farmer is the seller who undertakes to embark on future delivery.

Question 29

Bai muajjal-murabahah is one of the least commonly used microfinance products by the Islamic MFIs.

Question 30

'Diminishing Partnership' mode of microfinance entails that the share of one of parties microfinance institution. diminishes until it finally ceases to exist while complete ownership is conferred on the other party the poor client..

Question 31

Mudarabah as a mode of Islamic microfinance does not only give jobs to the unemployed but it is also a means of creating jobs.

Question 32

Micro-takaful is put in place in order to minimise the business risks while implementing the mudarabah microfinance contract.

Question 33

Mudarabah trust financing may be utilised in housing microfinance.

Question 34

The pro-interest advocates argue that the microfinance institutions must rely on high interest rates to be able to carry out their objectives.

Question 35

Both bai salam and parallel salam contracts are contingent upon the other.

Question 36

The pro-interest advocates putting a cap on interest rates interest rate ceilings. in microfinance schemes as a solution to combat the rising interest rates.

Question 37

Islamic finance products are structured in such away to suit the requirements of the modern microenterprises and microcredit schemes.

Question 38

If the exact specification of the goods cannot be specified such as precious stone, it cannot be a subject matter of a salam contract.

Question 39

The operational and functional differences between the Islamic microfinance institutions IMFIs. and the conventional microfinance institutions justify making a case for the consideration of the IMFIs as alternative microfinance institutional model.

Question 40

Musharakah mutanaqisah diminishing partnership. is an Islamic finance product structured exclusively to provide the poorest in the society who lack shelter to own a property for their personal use.

Question 41

The majority of the clients of MFIs are women.

Question 42

The Islamic MFIs consider women seeking microcredit as a means of women empowerment to raise their income level and earn them more respect in the society..

Question 43

While the conventional MFIs utilise interest-based modes of financing, the Islamic MFIs utilise Islamic financial instruments which are exclusively equity-based.

Question 44

The frameworks of the conventional MFIs as well as the Islamic MFIs ensure that no segment of the population is excluded from the microfinance net.

Question 45

In the Islamic MFIs, group guarantee in the repayment of the loans take the form of kafalah.

Question 46

The mechanism of zakat and sadaqah may be combined with the microfinance activities in order to manage the default of repayment that might be occasioned by extreme poverty.

Question 47

The conventional MFIs may go as far as threatening the defaulting party and the sale of assets to deal with defaults and settle the outstanding balance.

Question 48

Both schools of thought regarding the financing of microenterprises by Islamic banks consider financing microenterprises as part of the CSR role of the Islamic banks and financial institutions.

Question 49

The social function of Islamic banking is an aspect that relates to modern corporate social responsibility CSR. roles.

Question 50

The Islamic MFIs put in place a social development programme where the ethical, social, and behavioural aspects of Islamic ideals are brought to the fore.

Question 51

The target group in both Islamic and conventional microfinance instructions MFIs. is the family.

Question 52

Recent research suggests that within the conventional microfinancing context. men spend the borrowed money while the women are held responsible for the repayment of the instalments since they got the credit facilities.

Question 53

In-practice, the institutional sources of credit exclude the microenterpreneurs from formal financial services

Question 54

The functions of Islamic banks and financial institutions are limited to accepting deposits, managing savings and current accounts for their customers and engaging in partnership financing.

Question 55

The concept of fair dealing and justice in financial matters does not prevent the Islamic banks from excluding a low-income class from its services.

Question 56

The work incentive of the staff of both the conventional and Islamic MFIs is mainly monetary gains from salary.

Question 57

In both conventional and Islamic MFIs, the repayment of the loan remains the sole responsibility of the borrower.

Question 58

In addition to earning a living, the staffs of Islamic MFIs also perform a socio-religious duty of alleviating poverty within the society.

Question 59

Although the social development programme of the conventional MFIs is secular, it always goes along with the ideals of Islam.

Question 60

The institutional sources of credit facilities include the banks and other financial institutions, money lenders, friends, and family members.

Question 61

____________________ increased the awareness in the Muslim-populated countries of the need to establish inclusive financial institutions that would cater for the low-income individuals in the Muslim world and beyond:

A) the financial initiatives undertaken in the remote village of Mit Ghamr in Egypt back in 1960s
B) the pioneering efforts of the Grameen Bank
C) the establishment of Dubai Islamic bank
D) the joint partnership initiative of Grameen-Jameel

Question 62

The early initiatives to alleviate poverty and promote security in the Muslim communities include:

A) the institution of zakat compulsory alms.
B) waqf charitable endowment.
C) the benevolent loans qard hasan.
D) all of the above

Question 63

It is recommended that a department or division of the Islamic bank should be dedicated to Islamic microfinance. Alternatively, a separate Islamic bank for the poor should be established to cater for their needs.

Question 64

Which of the following attributes is NOT a feature of micro-lending?

A) micro-lending involves the provision of credit facilities based on the institutions of waqf and zakat
B) flexibility in terms of repayment of the loan
C) micro-lending is provided for the entrepreneurial poor in order to assist them to grow their income with the expectation of greater return
D) micro-lending is provided for the low-income individuals in order to assist them to grow their physical asset base such as housing loans to generate income through leasing such houses to third part

Question 65

Micro and small enterprises in the majority of Muslim countries are by and large excluded from the formal financial services industry because:

A) Small enterprises do not qualify to get financing from traditional sources
B) Religious beliefs of entrepreneurs prevent them from seeking interest-bearing loans
C) Banks usually prefer to extend their services to large and well-established businesses
D) All of the above

Question 66

While banks require borrowers to have physical collateral to secure funding, microfinance institutions emphasis are on social collateral through groups and centre formation

Question 67

_________________ modes of Islamic microfinance include mudarabah trust partnership., musharakah joint venture partnership., musaqah share-cropping., etc.

A) the equity financing
B) the debt-creating
C) the credit-creating
D) none of the above

Question 68

Islamic microfinance is an umbrella concept that consists of the following components EXCEPT:

A) micro-lending
B) micro-saving
C) micro- enterprising
D) micro-insurance preferably known as micro-takaful. sadaqah

Question 69

_____________is a contract where the seller undertakes to supply specific goods to the buyer at a future date in exchange of advance price which is fully paid on the spot.

A) salam
B) parallel salam
C) bai salam
D) istisna

Question 70

Micro-savings is based on the concept of:

A) wadi'ah safekeeping
B) waqf charitable endowment
C) zakat compulsory alms
D) sadaqah charitable alms

Question 71

Entrepreneurial poor are:

A) the people who do not have the ability to work and carry out legitimate business activities and lack the means to undertake such activities
B) the people who have the ability to work and carry out legitimate business activities but lack the means to undertake such activities
C) the people who do not have the ability to work and carry out legitimate business activities but have the means to undertake such activities
D) the people who have the ability to work and carry out legitimate business activities and also have the means to undertake such activities

Question 72

The Islamic management of micro-credit schemes stipulates that:

A) clients who are not able to redeem their loans within the contractual period be given additional time
B) a penalty not exceeding 10 percent of the loan value should be imposed
C) in some extreme cases, the loans may be written off completely
D) a and c

Question 73

_____________________ is the small loans or financial assistance extended to the poor families who are practically excluded from the formal financial services:

A) microfinance
B) micro-credit
C) micro saving
D) none of the above

Question 74

Unique features of Islamic microfinance include all the following EXCEPT:

A) equal opportunity, entrepreneurship, risk sharing and participation of the low income individuals
B) interest-free micro-credit schemes where equity financing or debt financing modes are used
C) excluding the poor from the participation in the housing market
D) kind treatment of poor borrowers and in some cases debt cancellation

Question 75

Salam contract is used in Islamic commercial transactions:

A) to create employment opportunities
B) to meet the financial needs of small farmers who require liquidity to cultivate their land and grow their crops until harvest time
C) to provide working capital for the entrepreneurs
D) all of the above

Question 76

Among the differences between banks and MFIs in the provision of credit facilities is that clients come to the microfinance institution while bank goes to the clients.

Question 77

The most commonly used modes of Islamic microfinance include:

A) salam
B) mudarabah
C) diminishing partnership
D) all of the above

Question 78

Grameen Bank's credit facilities do not involve any interest.

Question 79

__________________is an Islamic finance product regarded as the most viable tool for financing agriculture.

A) mudarabah
B) salam
C) diminishing partnership
D) bai muajjal

Question 80

It is imperative that Islamic banks establish, manage and consolidate the microfinance institutions in order for them to fulfil their social role.