Distinguish between operational and financial risks and explain the concept of risk governance.

Module 5: Risk Management in Islamic Microfinance Institutions

Previous lessonIdentify the efficacy of financing management techniques within an Islamic economic framework, including different approaches to collateralization, monitoring, and the handling of delinquency. Next lessonExamine different operational risks and identify appropriate mitigation strategies including internal controls.

CourseProfessional Certificate in Islamic Microfinance (PCIMF)

Module 1: Overview of Islamic Economics & Microfinance System

Examine the principles and history of Islamic economics and finance, evaluate the concepts of Sharia-based and Sharia-compliant finance, and reflect on its critiques
Distinguish between conventional debt financing and the key Islamic financing mechanisms.
Recognize the fundamentals of Islamic Commercial/Contract Law
Identify the key Islamic Financial Products
Explain the strengths and weaknesses of the Islamic finance industry, its key actors, stakeholders, and the role of the Islamic microfinance sector

Module 2: The Microfinance Contracts & Transaction Agreements (Part 1)

Assess the difference between Islamic loans, trade, lease-based transactions, and interest-bearing instruments.
Examine the Sharia rules for Qard Hassan, Murabaha, Salam, Istisna’a, and Ijarah based on the standards set by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
Evaluate and apply the key contractual elements for a valid transaction as microfinancing tools.
Recognize the practicalities and limitations of application within the sector.

Module 3: The Microfinance Contracts & Transaction Agreements (Part 2)

This module will demonstrate how profit and loss sharing, equity investments, and venture capital instruments are used in the Islamic microfinance sector.
Explain the concept of Musharaka in Islamic transactions and understand the different types of Partnership.
Examine the Sharia rules for Musharaka & Mudaraba based on the standards set by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
Explain the use of Musharaka contracts in modern corporations.
Explain how Musharaka & Mudaraba are used in modern Islamic banking.
Evaluate and apply the key contractual elements for a valid transaction as microfinancing tools.
Recognize the practicalities and limitations of application within the sector.

Module 4: Managing Islamic Microfinancing

Analyze the difference between individual and group financing models and identify the operational and Sharia challenges.
Explain the financing cycle from appraisal and disbursement to recovery.
Apply key client appraisal techniques, carry out critical client financial analysis, and calculate repayment/profit sharing ratios and schedules.
Identify key characteristics of and employ best practice processes for financing decision-making.
Identify the efficacy of financing management techniques within an Islamic economic framework, including different approaches to collateralization, monitoring, and the handling of delinquency.

Module 5: Risk Management in Islamic Microfinance Institutions

Distinguish between operational and financial risks and explain the concept of risk governance.
Examine different operational risks and identify appropriate mitigation strategies including internal controls.
Examine different financial risks and identify appropriate mitigation strategies.
Appraise portfolio risks and calculate metrics for risk measurement.
Identify appropriate portfolio risk mitigation strategies including loan loss provisioning.

Module 6: Regulatory, Governance and Sharia Compliance Framework for Islamic Microfinance

Differentiate between different corporate governance requirements for the different types of Islamic MFIs
Identify the regulatory dimensions of relevance to Islamic MFIs (subject to in-country jurisdiction) and recognize their implications for corporate governance.
Outline the role and importance of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB).
Identify Shariah non-compliance risks, the pillars of Shariah Governance, and technicalities of Shariah audit in the Islamic microfinance arena.
Differentiate between various types of Shariah audits, reviews, and compliance tests with the aim of enabling participants to gain a better understanding of the nature and the operations of how Shariah non-compliance risks can be managed.

Module 7: Financial and Social Performance Management

Examine institutional financial reports such as balance sheets and income statements and apply financial ratios to measure various financial performance indicators.
Examine portfolio reports and evaluate the efficacy of certain indicators to measure financial performance.
Identify key social performance indicators and appraise some of the key social performance standards.
Describe the salient features of ethical, and social responsibility and impact investment and its potential for the Islamic microfinance sector.
Apply tools to manage financial and social performance.

Module 8: Case Studies in Islamic Microfinance

MFIs that are operating in Bangladesh.
MFIs that are operating in other countries in the world.

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