Religiosity and threshold effect in social and financial performance of microfinance institutions

Mohammad Ashraful Mobin

Akhuwat Interest Free MicrofinanceA Journey of Hope

Junaid Farid

Director, Strategic Planning & International Marketing

An attempt to resolve poverty and social development issues through innovation

Akhuwat

History

• Akhuwat was established in 2001 with the objective of

providing interest free micro-credit to the poor so as to

start a business, come out of poverty and enhance their

standard of living. Subsequently it added education, health,

clothing and some other services in its mandate

• ‘Akhuwat’ means solidarity with the poor and less

advantaged.

VisionA poverty free society built on the principles of compassionand equity.

MissionTo alleviate poverty by empowering socially andeconomically marginalized families through interest freemicrofinance, quality education, better health-harnessingentrepreneurial potential and building capacity byimparting knowledge, skills and social guidance.

Akhuwat

Objectives

• To provide interest free microfinance services to poor families enabling them to become self-reliant

• To promote interest-free loans (Qarz-e-Hasna) as a viable model and a broad-based solution for poverty alleviation

• To provide social guidance, capacity building and entrepreneurial training

Objectives

• To institutionalize the spirit of brotherhood, compassion, and volunteerism

• To transform Akhuwat borrowers into donors

• To make Akhuwat a sustainable, growth-oriented and replicable organization

Core Principles

• Interest-free loans – Qard e Hasan

• Use of Religious places like mosque & church

• Spirit of Volunteerism

• Transforming Borrowers into Donors

Products

• Enterprise Loan• Liberations Loan•Agricultural Loan• Education Loan•Marriage Loan• Emergency Loan•Housing Loan• Establishment of School Loan

Range of Loans

Usage of Loan

Map of Pakistan

Cost structure of Loans

Loan Structure

• Interest on Loan = 0

• Loan Processing fee = 0

• Profit on Loan = 0

• Application Fee = $2

• Insurance = 1%

Performance Overview

• Started in 2001 with 100 USD

• Credit pool has now grown to USD 90 Million

• The credit pool is a revolving fund

• The amount is regularly disbursed andrecovered

• Cumulative disbursement is USD 300 Million

Performance Overview

• Total Benefiting Families = 1.6 Million

• Total Amount Disbursed = USD 300 Million

• Active Loans = 600,000+

• Number of branches = 508

• Number of cities & towns = 300

• Number of staff = 3000+

• Recovery Rate = 99.8%

Progress Overview

Progress Overview

192 282 832 3,124 6,264 8,674 11,388 13,821 21,07334,194

67,683

159,138

234,883

367,798

496,458

0

100000

200000

300000

400000

500000

600000

No of Loans

Progress Overview

2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

No. of Branches 1 2 4 7 11 18 20 22 36 77 153 254 289 356 508

No. of Staff 3 3 12 32 50 75 76 90 181 358 505 858 1600 2007 2964

1 2 4 7 11 18 20 22 36 77153

254 289356

508

3 3 12 32 50 75 76 90181

358

505

858

1600

2007

2964

0

500

1000

1500

2000

2500

3000

3500

GROWTH

No. of Branches No. of Staff

Progress Overview

10.34

6.41 6.8 6.387.61

9.54

13.3612.82 13.25

18.3

15.49

12.68

15.11

9.79

14.2

0

2

4

6

8

10

12

14

16

18

20

% of Cost per Loan

Progress Overview

Repeat Loan Analysis

Replication

How to replicate

• Introduction of Akhuwat model

•Website and promotional material

• Training manuals and operational material

• Staff training

• Visit Akhuwat premises

• Continuous technical support

Issues in Replication

• Strong Commitment

• Financial Resources

• Operating at optimum level

• Simplicity and keeping costs low

• Local conditions

• Human Resource

Akhuwat Projects

• Akhuwat Institute of Social Enterprise & Management • Akhuwat University• Akhuwat College• Akhuwat Schools• Akhuwat Health Services• Akhuwat Cloth Bank• Akhuwat Make a Dream• Khwajasira Rehabilitation Program

OUR BELEIEF

• Poverty alleviation is the joint responsibility of the state and the civil society

• Equitable distribution of wealth is a pre-requisite

• Charity alone is not the answer

• Solidarity with the poor is the way forward

• Availability of credit/financial inclusion is a must for all

•We derive our inspiration from Islam but our message is universal for all

Discussion

Question and Answer Session

AlHuda CIBE FZ LLE - U.A.E

P: + 971 56 9286664, + 971 55 938 99 00

AlHuda Center of Islamic Banking & Economics - Pakistan

Ph: (92-42) 35913096 - 98, Fax: (92-42) 35913056

Email: info@alhudacibe.com Website: www.alhudacibe.com