““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IsDB IsDB MicrofinanceMicrofinanceExperienceExperience
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Comprehensive
Human Development
Nafs (Self)
Maal (Wealth)
Aqal (Knowledge) Nasl (Posterity)
THE ISLAMIC VISION OF DEVELOPMENT
Maqasid Al-Shariah
Deen (Religion)
Islamic Financial Services Industry
Institutional Management of Wealth
Security & Basic Needs
PropertyHonourKnowledge
Higher Education
Science & Technology Education
Capacity Building
Nutrition & health
Fiduciary Duty
Sports
Environmental preservation
Means to an end
Research & Development
Moral Education
Transparency
Capacity Building
GovernanceProtection
JusticeValues
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Significant resources potential for Islamic Microfinance Industry
1. More than 300 Islamic Financial Institutions
2. In over 65 countries
3. Managing assets of approximately US$ 1.0 trillion in Shariah compatible manner
4. More than 15% annual growth
5. Worldwide recognition
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Need for an Islamic Microfinance Need for an Islamic Microfinance Development StrategyDevelopment Strategy
Over 3 billion people living on less than two dollars a day
Over 2/3 of world refugees are Muslims
Lowest Five among IDB member countries account for over half a billion (528 million) of the world’s poor (with incomes below $2 a day)
Lowest Ten account for over 600 million of the world’s poor
Among 500 million micro-entrepreneurs: currently Less than10%, i.e. 50 million, can access credit…
The informal sector represents over 60% of the active population of most developing countries
Over 7,000 Micro-Finance Institutions (MFIs) have difficulties to access the capital markets
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IDB’s µFinance Current Strategy
Poverty alleviation thru provision of suitable and sustainable access to financing.
Capacity building
Nurturing entrepreneurship support at grass roots level
Introduction of Islamic financing modes
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Main Features of IDB’s
Current µFinance Scheme
• Country eligibility: Low Income and LDMCs
• Mode of Financing: Loan – Service fee 0.75 to 2.5%
• Tenor: 25 to 30 years with 7 t0 10 grace period
• µproject investment: US$ 5,000 per project
• Maturity: 3-5 years
• Beneficiaries contribution: 10-20% of project cost
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IDB Government
Central Bank
US$ account in commercial local bank
Revolving fund + 65% of markup
35% of markup (operational cost of
NGOs)
Financial Intermediary/NGO
Micro-entrepreneurs (in local currency)
External auditorsExternal auditors
Key:
Physical transfer money
Reporting to/instructing
LDMC loan at 0.75% for 30 yrs incl 10 yrs grace
US
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24-30% pa (local
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20-22% pa (local currency)
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““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IDB µFinance Operations IDB µFinance ACHIEVEMENTS AND IMPACT
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Balance of
The Poor’s Professional skills
The poor request to start his assistance with a:
Promotional Social Safety Interventions Package : (i) Literacy & Awareness, Counseling(ii) Vocational training & Skills upgrading,, career guidance, Management, (iii)Entrepreneurship & Business linkages promotion (Subcontracting, Franchising and
Clusters and collaborative production networks), (iv)Community Development Basic skills, (v) Other Poverty alleviation interventions such as Grants to education, house extension
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
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Balance of
The Poor’s Professional skills
Counseling, Training Experiences Networking access to markets
The poor request mobilizing Package of Business Development Services
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
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““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
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The poor request mobilizing Package of Business Development Services
Balance of The Poor’s Professional skills
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
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The poor request mobilizing Package of Business Development Services
Balance of
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““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
The poor request mobilizing
Package of appropriate Financial Services
VISION / STRATEGY / APPROACH
Balance of Poor Self-Sufficiency
Continuing on Skills Upgrading assistance
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
The poor request mobilizing
Package of appropriate Financial Services
Balance of Poor Self-Sufficiency
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VISION / STRATEGY / APPROACH
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Role of Micro-grants in IDB Microfinance Operations
To Rebuild livelihoods Replace lost assets Overcome social isolation Gain productive skills Graduate to economic self-sufficiency
Helps groups: high-riskIn immediate Conflicts and Post conflicts environmentsIn severely disadvantaged rural areasIn intervention situation for the chronically destitute
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Microfinance Projects Design and implementation mechanism
IDB may adapt Ready-to-Use Microfinance Frame work Package approach adopted CGAP consortium of donors.
More IDB involvement in early phase of Projects/Programs formulation
Investment in long-term programs in support of a few policy objectives rather than in short-term stand-alone projects
FROM IDB µFINANCE EXPERIENCE
18““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IFS DEVELOPMENT PROGRAM : THE WAY FORWARD
Awqaf Sadaqa Zakat IDB Pov. All. Fund
Corporate Donations
Others
Comprehensive Human
Development
Community A Community B Community C
Individual
2
Individual
1
Individual
3
Individual
1
Individual
1
Individual
2
Individual
2
Individual
3
Individual
3
M I c r o f I n a n c e
IFS Development Fund
Other IFS
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Understanding Understanding the Poor the Poor Rights & Rights & NeedsNeeds Asset Building, Risk
Mitigating Products
• Voluntary savings• Health and life insurance
Variety of Products
• Housing loans• Education loans• Life cycle products
Flexible financing Products
• Small initial loan sizes• Larger loans over time• Longer terms
No Collateral
Special Services &treatment
• Respect, connection with pertinent stakeholders
• Rapid response, and access to services
• Group guarantee
Promotional Social Safety Net Interventions
• Information, Counseling • Training, skills upgrading • Marketing Assistance • Technology devmt, transfer • Business linkages
Zakat applicable
Waqf applicable
Zakat &Waqf applic
ZA WAWA
ZWA
WA
ZA
ZWA
ZWA
ZWA
Lessons to be learnt from IDB experience
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Making Economic Policies & Growth Pro-poor
Re-distributive policies (targeting the poor)• Providing Social Safety Nets to poor & marginalized groups
• Addressing Social barriers & issues facing women in economic development
Lessons to be learnt from IDB experience
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Making Economic Policies & Growth Pro-poor
Targeted programmes and projects to enable the poor to benefit from economic growth through :•Labour intensive projects, •Telecommunications, electricity, roads, infrastructure, •Food security projects, post-conflict/reconstruction projects, •Environment sustainability and renewable energy, micro-credit, cross-cutting projects, etc.
Continued
Lessons to be learnt from IDB experience
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Income of USD10 million Waqf @ 5% return, would provide average loans of $100 to 5000 Poor
“Zakat & Waqf Microfinance” efficiency
Appropriate risk management Mechanism should be established to protect the Waqf from decay.
Zakat, Takaful Funds may be the alternative,
.90,000 benefeciaries would be covered if
90% of the Waqf used in microfinancing.
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Promote Islamic Microfinance Houses (IMH)
• Objectives: to complement the Comprehensive Human Development model by providing access to integrated Islamic Microfinance financial services to the poor in our member countries
•The Microfinance Houses Development Programme would initially entail a pilot project in 5 member countries for creating and/or strengthening existing Microfinance institutions.
Continued
Lessons to be learnt from IDB experience
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
The IMH would also undertake other interventions which would strengthen the livelihood of the poor, such as;
• Investments in public infrastructure, including roads, communications and education which provide a foundation for self-employment activities.
• Community-level investments in commercial or productive infrastructure (such as market centers or small-scale irrigation infrastructure) to facilitate business activity.
Continued
Lessons to be learnt from IDB experience
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Lessons to be learnt from IDB experience
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Rural (esp. agricultural) finance Services like microinsurance, leasing, and remittances
Social performance measurement
Defining the lower limits of viable microfinance and
Employing other interventions, including grants
Replicable strategies for unlocking country-level capital markets for microfinance
Role of donors relative to international equity and loan funds
Cost-effective and sustainable ways to combine non-financial development services with financial services
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
ISLAMIC FINANCIAL SECTOR DEVELOPMENT AND QWICK WINS MICROFINANCE INITIATIVES
IDB POVERTY ALLEVIATION FUND
THE ISLAMIC MICROFINANCE DEVELOPMENT FRAMEWORK
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Model of an Ideal Islamic Bank Model of an Ideal Islamic Bank
A Universal Bank covering•Commercial Banking•Investment Banking•Advisory Services•Custodial Services•Asset Management•Zakat Management•Awqaf Development•Microfinance
This bank should be a vehicle for equitable distribution of wealth.
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
IDB’s Role in Islamic Financial Sector Development
IDB’s Role in Islamic Financial Sector Development
Recent Initiatives1. “Ten-Year Framework for Developing the IFSI”, Joint
Initiative 2. Establishment of a Policy Dialogue Working Group3. IFSI Development Technical support proposal4. IFSI Development Program
Previous Initiatives
Equity investments in IFIs Establishment of eight infrastructure institutions Research, training and technical assistance Development of financial products/funds (UIF, IBP) and Awqaf sector
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Macro Perspective: Policy & Regulatory Macro Perspective: Policy & Regulatory FrameworkFramework
1. Provide Supportive Legal, regulatory and tax framework
2. Ensure Macroeconomic Stability
3. Keep Inflation in Check
4. Curb Speculative Forces in Financial Markets
5. Integrate Awqaf and Zakah in National Policy
6. Support Civil Society Efforts
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
1. Should there be Prudential Regulation for Non-deposit-taking MFIs?
2. Should Non-registered Entities be Prohibited from Lending?
3. How should Islamic MF be Separated from Conventional MF in a Dual System?
Macro Perspective: Policy & Regulatory Macro Perspective: Policy & Regulatory FrameworkFramework
Resolves the Unresolved Issues in Banking Sector Regulation and Supervision that Affect
Microfinance
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
1. Basic financial infrastructure, Range of services required to reduce transaction costs, increase outreach, build skills, and foster transparency
2. Payment Systems: Only large Islamic FIs have access to electronic payment systems
3. MFIs working for the poor may work through the larger Islamic FIs by forging alliances with them
Meso Perspectives: Infrastructure, Networks, Technical Service Providers
4. Transparency and Information: High-quality auditors and rating agencies, credit bureaus, reliable information software - scarcely available to Islamic MFIs
5. Existing MF-specific Agencies expand scope to include Islamic MF; or Existing Agencies for Mainstream IFIs to absorb MF services
6. Proactive role of Donors in Development of Islamic MF Rating
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Diverse Organizational Structures: Informal MF Providers, Member-Based Organizations, Non-Government Organizations, Formal Financial Institutions, Commercial Banks
Micro Perspectives: Islamic Microfinance Providers
Diversity should be given due recognition in regulation
Need to Develop an Integrated Structure
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
Shariah Compliance
Shariah BoardsFiqhi IssuesDivergent PerceptionsConfidence of Users
Collective Resolution of Shariah Issues
Micro Perspectives: Islamic Microfinance Providers
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank
RECOMMENDATIONS
Cooperatives-NGOs Efficient Management of Community Assets, Combine Social and Economic Agenda Effectively,
Islamic Financial Institutions
Recognize MF with Distinct Risk-Returns, Undertake Direct and Indirect Financing, Linkage with Grass-root NGOs, Facilitate Capital Market Participation of MFIs
Awqaf & Zakah Funds
Preserve and Develop Community Assets, Undertake TA, Transform the Destitute into “Bankable” Clients
Government Agencies
Create Supportive Policy and Regulatory Environment for IMFIs
Concerted Efforts by ALL Stakeholders to Make Finance Work in Muslim Communities through
Islamic Finance
““Micro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulMicro-Credit Financing and Poverty Alleviation in OIC Member States” 9-10 July, 2007, IstanbulPresentation by A. Slaoui Microfinance Specialist , Islamic Development BankPresentation by A. Slaoui Microfinance Specialist , Islamic Development Bank