MITGHAMR MODEL

Most of the Muslim Countries of the world are under developed. Currently they are engaged in instituting socio-economic development programmes. But almost in all Muslim Countries success in this field is very much insignificant. This is due to top-down nature of the programmes and inconsistency with the cultural values and beliefs of the people. Mitghamr Islami Bank, the first of its kind in 20th century was established at Mitghamr, a village of Nile delta in 1963 with a view to bring some development in socio-economic field in the process of Islam.

CONSIDERATIONS:

Institutions designed for development must reflect the needs and aspirations of the people concerned and must be consistent with the beliefs and spiritual values of the society in which it operate. Failure to take this into account will result in the failure of the institution to achieve its objectives. Top-down development programmes often do not coincide with the requirements, beliefs and spiritual values of the society. So the people do not feel encouraged in participating in implementation of these types of programmes. Bottom up programme may reverse the situation. Effective contribution of the masses in the development process is less important in no way. Mobilization of local savings and other resources, specially human resources are essential for development. Communication gap should be considered between the intellectuals & the general working people.

PRINCIPLES OF OPERATION:

1.  Participation-Islam strongly opposes the system of banking based on interest. Its alternative is the system of participation that Islam permits. This means that the bank participates with the borrowers of investment loans in their losses as well as profit. The participation principle enables the bank to mobilize and motivate the people to borrow money for investment since Islam does not oppose it. On the other hand when the bank participates with the borrowers in their productive enterprises, it necessitates the mobilization of the banks technical expertise in the quest for fields of investment and rational methods to invest in such fields.

2.   Decentralization- Socio-economic development is to a great extent dependent on the decentralized management of the institutions, which form part of development plan. This principle constitutes an essentials ingredient of success. Consideration behind decentralization are (a) difference of circumstances of one area to another (b) minimization of distance between the leaders of development and the general masses, (c) constant follow up of the investments.
3.   Consistence and integrity of Bank Accounts- Different types of A/C. of the bank were designed in a way that was consistent with and integrated into, for achievement of its aim of development. The accounts were diversified to cover a wide spectrum of Saving and investment types.

To enable the Bank to achieve its principles and objectives, the management of the bank considered it important to provide the simplest possible facilities in the operation of its dealings with the depositors. Accordingly they initiated three types of accounts:

1.   Savings and loan fund:

The fund guaranteed care for the small savers on particular to accumulate sufficient funds to safeguard his & his family’s future. The minimum deposit in this fund was 5 piaster (5 pence). Such a small deposit that the vast majority of the population have the opportunity to Co-operate with the bank and become accustomed to free and regular savings. Freedom of deposit and withdrawal at any time was guaranteed in order to provide complete flexibility for savers. No maximum limit was imposed.

Regular savers were entitled to short term loans for productive purposes on profit & loss basis. The bank used to provide the clients with all necessary technical consultations free of charge.

2. Investment fund:

This fund used to accept the deposit of individuals who wished to increase their savings by capital investment in profitable enterprises. These deposits were channeled either directly to investment projects or indirectly to finance local projects. The yield of these investments was distributed among the depositors in proportion to the amount and duration.

Freedom to draw from the sum deposited in this fund was restricted in accordance with the nature of investment operations and liquidity requirements.

3.  The Social Service Fund:

This fund was created from money provided by Zakat and the subscriptions of individual and public bodies. They were distributed in the form of financial assistance to savers who were in financial difficulty as a result of sudden misfortune.

SOCIAL & ECONOMIC EVALUATION:

The National Institute for Management development examined the results of the experiment. The results of the examination are shown against the items given below:

SOCIAL EVALUATION:

Mitghamr Bank brought into a positive change in the attitude of the villagers, of the sample interviewed by the NIMD 64% had a strongly favourable attitude towards savings and 60% of them favoured the local saving bank project. It prevented the villagers from migration to industrial areas and big cities. It created healthy atmosphere for inter-action between the intellectuals and the Masses.

ECONOMIC EVALUATION:

1.   Number of saving depositors, not ever touched by other banks increased from none in 1963 to 357 in 1967 and deposit from none to 9,53,538 (Egyptian).

2.   Small industries established and job opportunities created in 53 affiliated villages. Ninety nine percent (99%) of the NIMD sample indicated that the city of Mitghamr has in the recent years changed for the better, 47% of the sample opined that the credit of this change goes to Mitghamr Bank.

3.   In 1967, 4 more branches were opened & 8 new banks added to the Mitghamr.

4.   Many local governments requested the Authority concerned for establishment of such banks in their areas.

Ref: A Model & the Challenge, Dr. Ahmed Naggar