Interest-Free Micro-Finance Is Possible …. A Lesson From Pakistan

While most of yous were shocked to acquire that the micro-finance insitutions (MFIs) are on a ‘looting’ spree, extracting their pound of flesh inward the hollo of development, at that topographic point were some (ostensibly involved inward micro-finance business) who were angry with me for ‘not understanding’ the compulsions of their concern model.

They experience they are doing a smashing service to mankind for lending minor amounts to poorerst of the miserable at an exorbitant involvement charge per unit of measurement of 24 to 26 per cent. And they have got stories to percentage nigh the positive alter the minor loans have got brought to the lives of the poor. After all, how tin I move hence savage to them (by them, I don’t hateful the poor, only the existent beneficiaries — the people earning their livelihood from lending through micro-finance).

I am glad my track of what I reckon every bit the micro-finance swindle has brought into focus a lot of hitherto piffling known facts. I have got learnt a lot from the exchanges that followed, in addition to without exception I have got posted all the comments that I received. Meanwhile, hither is a missive of the alphabet that I received from Islamic Republic of Pakistan that I am non solely going to percentage with you, only I experience is the model of micro-finance that Republic of Republic of India needs to urgently adopt.

I hope the Reserve Bank of Republic of Republic of India (RBI) is listening, in addition to hence are our gear upwards of immature leaders. Please esnure that those who are unable to follow, in addition to have got problems shifting to this model, should move asked to quit the MFI sector. There should be no ambit for entertaining whatever apology. After all, nosotros are playing with human lives.

Dr Amjad Saqib provided a loan of Islamic Republic of Pakistan Rupee 10,000 to a widow for buying a sewing car inward 2001. She eventually laid upwards a minor home-based boutique in addition to returned the entire total inward the given time. Her success in addition to render of the entire total inside the promised time-frame led to the creation of a puddle of coin for the miserable – hence recovering it hence to recycle indefinitely. The arrangement presently gained credibility in addition to gradually people offered to a greater extent than donations in addition to lent to a greater extent than coin to to a greater extent than groups on a guarantee reason with monitoring in addition to evaluation at regular intervals, ensuring accountability in addition to back upwards to the borrowers.

This was the showtime of a unique in addition to truthful concept of micro-finance. “Akhuwat” — every bit the micro-finance organisation is called — has since hence successfully opened 28 branches inward xvi cities of the country. Its cumulative disbursement has exceeded PKR 600 1000000 in addition to the lay out of beneficiaries has exceeded 50,000 inward the past times 8 years with a phenomenal recovery charge per unit of measurement of 99.8% which adds to its tremendous achievements. You tin know to a greater extent than from www.akhuwat.org.pk

Imagine, the poorest beingness supply interest-free minor loans !

Sehyr Anis, a volunteer with “Akhuwat,” has sent me this moving letter. I am posting relevant extracts:

Dear Mr. Sharma

This is inward reply to your missive of the alphabet dated Jan 05, 2010. addressed to Mr. Lokesh Singh. Let me foremost accept this chance to appreciate your vision of a depression terms or interst-free micro-credit scheme for the miserable in addition to needy, which shall pave a revolutionary path towards an economically in addition to socially prosperous society.

It is highly unfortunate that micro-finance organizations all over the reason have got choke a victim of capitalist practices where marketplace principles dictate the objectives rather than principles of social welfare. Sky-rocketing involvement rates, necessitated past times the high transaction costs incurred inward micro-finance, solely hurl the miserable inward the vicious wheel of poverty rather than improving their minimum living standard. I believe, earlier the province of affairs worsens, it is the correct fourth dimension to reverberate if micro-finance every bit a concern enterprise rather than a philanthropic get tin sustain for long. The solely survival for micro-finance is to choke far into an extremely low-cost or interest-free practise for all times to come upwards in addition to emancipate the miserable from the clutches of exorbitant interest-rates.

I myself am associated every bit a volunteer at an interest-free micro-finance arrangement “Akhuwat”, based inward Pakistan, whose mission is inward consonance with your ideals of micro-finance. Akhuwat provides an alternative, out-of-box solution to the on-going struggle of exorbitant interest-rates instantly synonymous with MFIs some the reason in addition to has been able to successfully give what its critics have got deemed every bit impossible. “Akhuwat” is the foremost of its sort in addition to teh solely interst-free micro-finance NGO, successfully operating in addition to growing enviably in addition to nearing sustainability.

It was formed inward the twelvemonth 2001 past times physician Amjad Saqib, its founder in addition to Executive Director (amjadsaqib1@gmail.com), in addition to till instantly has successfully opened 28 branches inward xvi cities of the country. Its cumulative disbursement has exceeded PKR 600 1000000 in addition to the lay out of beneficiaries has exceeded 50,000 inward the past times 8 years with a phenomenal recovery charge per unit of measurement of 99.8% which adds to its tremendous achievements.

The premise of Akhuwat is interest-free loans (qarz-e-hasna) in addition to its vision has been to foster a feel of mutual ownership in addition to community amid the borrowers in addition to donors. It is the spirit of philanthropy in addition to volunteerism in addition to non profit-making that is the raison d’etre of its growing success.

It all began with an interest-free loan (qarz-e-hasana) of Rs. 10,000 provided to a widowed adult woman who did non believe inward charity in addition to wanted to purchase a sewing car to laid about a minor home-based boutique. Her success in addition to render of the entire total inside the promised time-frame led to the creation of a puddle of coin for the miserable – hence recovering it hence to recycle indefinitely. The arrangement presently gained credibility in addition to gradually people offered to a greater extent than donations in addition to lent to a greater extent than coin to to a greater extent than groups on a guarantee reason with monitoring in addition to evaluation at regular intervals, ensuring accountability in addition to back upwards to the borrowers.

Akhuwat offers a various loan portfolio which reflects the economical needs of the community. All transactions accept identify at the local mosque or church building where loans are promoted to the community later prayers, given out in addition to collected. However, it is of import to advert hither that Akhuwat is non a religious organization. Having a mosque or church-centered construction provides an avenue for community participation in addition to awareness in addition to likewise creates a feel of good-will alongside people. Most importantly, this cuts organizational costs.

I believe if Akhuwat tin give its mission to sustain in addition to expand an interest-free micro-finance organization, this model tin likewise move replicated some the reason to help the poorest of the miserable to realize their dreams.

I would similar yous to catch Akhuwat’s website or contact me or physician Amjad Saqib (copied inward this mail) for to a greater extent than details.

With Best Regards
Sehyr Anis