M. DOSSA,

1. M. DOSSA, • ROUNDTABLE DISCUSSION ON ADVISORY AND SUPERVISORY FRAMEWORK ON ISLAMIC MICROFINANCE • CROWDFUNDING : • HOW AFRICAN DIASPORA CAN IMPACT THE DEVELOPMENT OF ISLAMIC MICROFINANCE KHARTOUM March, 18-19 2014

2. M. DOSSA, • DOSSA MAXIME • Islamic Finance Consultant : DM Consulting, ACI • Executive Master in Islamic Finance, Paris Dauphine University KHARTOUM March, 18-19 2014

3. The state of the art: WAEMU The micro finance framework The challenges and why an alternative model Crowdfunding platforms as a solution Reducing the funding costs Suitable framework Model of a crowdfunding platform African diaspora for the development of Islamic microfinance Table of content M. DOSSA, March, 18-19 2014 2/14

4. WAEMU(1/1) :THE STATE OF THE ART - WAEMU • The West African Economic and Monetary Union • 95 millions peoples • The population in this area is mainly muslims with 60% muslims on an average and more than 90 % in some of the countries… • A strategy to build a regional integration in economics and unique currency, CFA M. DOSSA, March, 18-19 2014 3/14

5. WAEMU (1/2) / THE STATE OF THE ART : LEGAL ISSUE • The lack of an effective Islamic microfinance framework in WAEMU • Article 56 of the Banking Law in WAEMU • “Central bank can decide particular rules in favor of companies with special status, namely companies which don’t use interest rate and apply the principle of sharing of profits and losses.” • This is the only one reference on non-conventional activities whithout interest. • In consideration on this article of the financial system law, Islamic banking or financial activities are possible in WAEMU area but needs to be strenghtenSource:Portion of Article 56 of the Banking Law in WAEMU M. DOSSA, March, 18-19 2014 4/14

6. WAEMU (1/2) / LE STATE OF THE ART: LEGAL ISSUE • Legalframework in microfinance ( Loi sur les SFD ) and islamic finance • Collection of deposits • Are considered as deposits, funds, other than participations and compulsory • contributions collected by the decentralized financial system from its members or • clients with the right to use it with the obligation to give back the money when needed • by the clients in regard of the contract. • Lendingoperations • A loan operation is any action undertaken by which a decentralized financial system gives funds for value to a member or a client with obligation for him to pay the money back at maturity. • Gurantees (by signature) • This refers to any legal act by which a decentralized financial system takes some guarantees on behalf of a member or a client. • Article 56 de la loi bancaire dans l’espace UEMOA M. DOSSA, March, 18-19 2014 4/14

7. WAEMU(1/3) / STATE OF THE ART: CHALLENGES • Challenges to overcome in WAEMU • Weak banking rates • Transactions and refunding costs are still high • Legal framework has to be build • Lack of human capital M. DOSSA, March, 18-19 2014 5/14

8. WAEMU (1/3) WHY AN ALTERNATIVE MODEL OF FUNDING IMFI • A lack of funds and non interest based funds • in WAEMU the MFI are fund by: 75% financing by conventional banks and only 25% from specialized funds and international organizations. • All are interest based funding mechanisms • A lack of deposits from customers • The CGAP Cross-Border Funding Survey, 2010 shows that the loan granted by MFI comes mainly from deposits of their clients. • But these deposits are very low and limited. So MFI have to face banks high interest rates. • There is always a gap between the demand (entrepreneur) side and the supply side (financial institutions) and this fact create difficulties especially to small enterprises and more for micro entrepreneurs. • Cost of funding per type of lender M. DOSSA, March, 18-19 2014 6/14

9. CROWDFUNDING (2/1) AN ALTERNATIVE SOLUTION • The cost of fund is low by using IT processes • According to Babyloan, crowdfunding platforms represent in 2012 only 0.15% of the overall micro credit which is worldwide standing at USD 65 billions. But as a new market, the platforms increase this niche market by 400% in 2012. • The development of new technology for communication and services create new opportunities for micro finance sectors. • Possibility to target muslims funders with crowdfunding mechanisms • The whole public is going to become a major player in financing micro projects by using the crowdfunding mechanism in the word in general and particularly for developing countries projects. • One of the main target group to focus on as lender is the diaspora of the countries who participate in the development of their country. • By using crowdfunding principles on Islamic way, the ethical principle meets a low cost of funding to contribute to reduce poverty. M. DOSSA, March, 18-19 2014 7/14

10. CROWDFUNDING (2/2) PROVISION OF LEGAL FRAMEWORK • Crowdfunding operators may provide • Micro investment services • Providing micro financial titles • Banking operations • Payments services • The types of Islamic crowdfunding platforms for funding micro finance activities • We may consider the following 3 categories of crowdfunding platforms • Those collecting Zakat • This will be granted for a micro project selected on the platform • Those collecting Quard Hassan • This will be reserved for investors who want to support a project without any need of return in the project • Those facilitating loss and profit sharing : Mudharaba, Musharaka.. • These types of investors are risk takers.   March, 18-19 2014 8/14

11. CROWDFUNDING (2/2) SOME TRACKS FOR LEGAL FRAMEWORK • The protection and security of the investors • The legal framework has to take account the protection and security of the investors and consider also that some or most of the investors and donators and country diaspora members can grant a huge amount of money. • The crowdfunding operators as facilitators • They should not be considered as banks, or investment companies because most of time they just create link between donators: investors and financial operators. • The prudential rules to respects by crowdfunding platforms • The minimum capital requirement to operators • A maximum amount of investment or donation per person • A maximum amount leveraged by the platform • The size of projects funded in regard of micro finance sector • A specific status has to be developed for crowdfunding activities • Collection of money, keep and transfer funds for the purpose of micro enterprises • They should not use the money for their one activity by any means. • Provision of minimum reporting and statistics to the financial authority • Some of financial prudential rules (money laundering, protection of investors, etc.) M. DOSSA, 9/14

12. CROWDFUNDING ( 2/3) : A MODEL FOR ISLAMIC MICRO FINANCE POTENTIAL INVESTOR 10/14 March, 18-19 2014 M. DOSSA,

13. CROWDFUNDING ( 2/3) : A MODEL FOR ISLAMIC MICRO FINANCE The projects are published in the platform after selection by the IMFI The platform operator deploys the community management strategies to attract investors but also contact it’s potential investors so that they can invest in the projects. The investor supports a part of infrastructures and the platform fees The IMFI also support a part of the platform fees The micro enterprise profit is shared between the micro entrepreneur, the IMFI and the investor through differentsmudaraba and/or musharakacontrats Differents types of contracts Wakala contract: The platforms way of earning money Between the investor and the platform Between the platform and the IMFI Mudharaba contracts Between the Investor and the IMFI Between the IMFI and the Recipients/ microentrepreneur M. DOSSA, March, 18-19 2014 11/14

14. AFRICAN DIASPORA ( 3/1) Why to focus on them ? • Their purchase power in developped countries • According to Word Bank report « Migration and Remittances 2011 » money sent by migrants in developing countries is estimated to USD 325 billion, including USD 56,9 billion sent in Africa and Middle East. • Remittances received in WAEMU countries M. DOSSA, March, 18-19 2014 12/14

15. AFRICAN DIASPORA ( 3/1) Why to focus on them ? • The leverage from their resident countries • Muslims even non-Muslims who can be sensitive of the projects and contracts suggested by the model. • A market study has to be realized and community management principles can lead to identify this segment of investors. • A success of crowdfunding comes when the investors have a kind of emotional link with the recipient. • With marketing, this link can be created between the recipients and those of investors who are sensitive to the local development, to the ethical approach, to Muslim communities, to local council inter cooperation… • Most of the African diaspora are involved in migrants associations, have social development link with their resident countries and locals councils. • In France for example, the government grant fund to these migrants associations so that they impact their countries. • This example can be generalized to attract other funds in rich muslims countries for the development of Islamic micro fiance in Africa. M. DOSSA, March, 18-19 2014 13/14

16. THE TRIPTYCH State – Diaspora – IDB • Collect Zakat for social projects • Invest the diaspora funds on an ethical basis • Enhance the participation of african diaspora in the development of islamic micro finance in Africa with the support of IDB Diaspora Investors PLATEFORM Countries of diaspora IDB Investmentsfacilities Business opportunities Selection of projects Monitoring Financial assistance Institutional assistance Training Partenership Regulatoryframework March, 18-19 2014 14/14 M. DOSSA,

17. THANK YOUdossamaximes@gmail.com March, 18-19 2014