Wednesday 16th Jan 2019
Radiance Views Weekly
You are here: Home »  Report
Text size: A | A

New Scheme of Cost Collection on Interest-Free Microfinance Proposed

Report

, by By OUR STAFF REPORTER

A new scheme for absorption of administrative overhead of interest-free cash loan arrangement was presented by Dr. Waquar Anwar, who is basically a Cost Accountant and renders his services as Finance Advisor at headquarters Jamaat-e-Islami Hind, at a programme organised by Forum for Discussion on Economic Issues, a joint forum of Sahulat and Radiance Viewsweekly, in the capital on 26 April.  

The scheme has been formulated for interest-free microfinance under a co-operative society. A co-operative society facilitates arrangement of cash loan for non-productive purposes to members of the society. Membership of the society will make sure that the beneficiaries are participants in its other activities as well, for pure charity is not covered under this scheme.   

For smooth functioning of the cooperative society, the administrative overhead is required to be charged from the beneficiaries and the collection can be best done through allocation and apportionment of total administrative overhead to cost centre. The process of collection of cost is based on historical or predetermined system. Unlike the present system of yearly review, this scheme suggests periodical review of the actual cost so recovered in order to ensure that it is neither a source of profit nor a burden to the society.

The basic aim of this scheme is to follow the basis of absorption based on the number of persons taking the loan as against existing process of recovery of cost absorption on the basis of period or the amount of loan or on a product of the two. This form of recovery of loan based on period or amount of loan or both is likely to fall under Riba but the basic idea proposed to follow the number of persons is to get rid of interest.

Under this new scheme, the service charge that had to be accrued from the defaulters will be shared by rest of the members in an allocated manner. The learned speaker elucidated the scheme with a supposed administrative overhead of Rs. 20,000 and 500 members of the society, 2% of whom viz. 10 members expected to be falling under the defaulter category.

Here, as allocated, the number of bad debt is 10 out of 500 members. But, if in actual cost collection, the number of defaulters decreases, say 5 instead of the allocated 10, the society will get surplus amount, more than the cost actually incurred on the administrative overhead. In this case, the surplus amount will be kept as reserve amount, which can be used to meet some extra administrative expense but can in no way be distributed among the members.

Thus, the more the number of members the lesser will be the administrative overhead.

After the presentation of the scheme, some questions were raised by the members of the audience. They include why other people should bear the burden of the defaulters and how to convince the members that the service cost charged is not interest. This requires further discussion on the proposed scheme. The scheme is in its embryonic stage and needs to be explored further by experts of Islamic Finance in order to make it a functional and workable idea within the framework of Islam, which is against any kind of interest.



Top
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
Vol. LI No.5, 2013-05-05
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
ISLAMISTS UNDER FIRE 
From Egypt to Bangladesh
Vol. LI No.20, 2013-08-18
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
Political Implications of Ban on Bangladesh Jamaat-e-Islami
Vol. LI No.19, 2013-08-11
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
Egypt's Al-Sisi Dragged the Country into Civil War
Vol. LI No.18, 2013-08-04
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
The Scourge of Alcoholism and Drug Abuse
Vol. L No.43, 2013-01-20
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
Arab Spring: Promises and Challenges
Vol. L No.21, 2012-08-19
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
Just World Order
Vol. XLIX No.43, 2012-01-29
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
Let Us Refuse to Be Provoked
Vol. L No.27, 2012-09-30
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
The Islamists and Western Blinkers
Vol. L No.15, 2012-07-08
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
Death, Disappearance and Despair in India
Vol. L No.13, 2012-06-24
HUMAN RIGHTS IN BANGLADESH Forced Disappearances, Arbitrary Arrests, Detentions, Custodial Deaths Order of the Day
Subscribe 
 
Focus Issue
 Enter your Email:
Submit