Thursday, February 05, 2015
interest free loan new frontier of social development
“The loans are of particular assistance to those poor families who end-up having to pay interest to loan sharks. They work all their lives simply paying back the interest.
“We help is by paying off the initial debt and then settle the interest owed with the creditor.
“Many people’s lives have been ruined by these huge interest payments. They find no way out.”
Akhuwat derives its name from ‘mwakhaat’ or brotherhood. It has sought to base its movement on the principles of ‘Qarz-e-Hassn’ found in the Islamic tradition which entails helping someone in need with interest free loans, a practice favoured over charity.
Syed Rehan Hussain added, “Over the past ten years we have supported over 500,000 people and presently have 215,000 active clients.
“We have enterprise loans, education loans, marriage loans and emergency loans among others.”
“A total of 7.5 billion rupees has been lent. An average loan is 18,000 rupees and it can be paid back within 12-18 months.”
The recovery rate for the loans is remarkably 99.82% - an astounding figure for a nation like Pakistan.
“The loan is essentially given out on trust and paid back through trust.”
“We do not have overheads in terms of local offices because mosques, churches and temples are used as places where the initial meetings take place.”
The loan process starts with the submission of applications
by persons interested in getting financial assistance. The Unit Manager (Loan
Officer) then evaluates that whether the applicant deserves the loan or not
i.e. lives below the poverty line, has a reliable social capital,
is not involved in any illegal business and possesses entrepreneurial
abilities.
Audit System
The organizational structure is well defined and the hierarchies provide various checks briefly indicated here below:
The organizational structure is well defined and the hierarchies provide various checks briefly indicated here below:
- The Area Managers spend one day every week in the branches under his control.
- The Credit Operations Manager visits the branches ones in a month.
- The Finance Manager monitors the funds inflows and outflows, he also visits the branches every month.
- The Internal Auditor carries out audit of the branches quarterly.
- An External Auditor carries out an appraisal of the branches annually.
- Every year social audit is also conducted in which 80% credit cases are physically verified during field visits.
- External Audit is conducted by a reputed Chartered Accountant Firm annually.
GUIDING PRINCIPLES OF AKHUWAT
·
Interest-free microcredit:
Akhuwat provides the economically poor with interest free loans so that they may acquire a self-sustaining livelihood. It also provides the skills and support they need to actualize their full potential and abilities.
Linkages with Religious Places:
An important and novel idea associated with individual loans is the use of the local mosque/church infrastructure as the center for loan disbursement and as an avenue for community participation.
Spirit of volunteerism:
The spirit of volunteerism that Akhuwat’s management and its team members exhibit is indicative of the success Akhuwat achieved within a short span of time.
Akhuwat provides the economically poor with interest free loans so that they may acquire a self-sustaining livelihood. It also provides the skills and support they need to actualize their full potential and abilities.
Linkages with Religious Places:
An important and novel idea associated with individual loans is the use of the local mosque/church infrastructure as the center for loan disbursement and as an avenue for community participation.
Spirit of volunteerism:
The spirit of volunteerism that Akhuwat’s management and its team members exhibit is indicative of the success Akhuwat achieved within a short span of time.
·
Transforming borrowers into donors:
Akhuwat encourages its borrowers to donate to Akhuwat’s program and so help their brethren once the borrowers themselves have gained enough economic stability. However these donations are neither compulsory nor have any bearing on the borrower’s credit profile.
Akhuwat encourages its borrowers to donate to Akhuwat’s program and so help their brethren once the borrowers themselves have gained enough economic stability. However these donations are neither compulsory nor have any bearing on the borrower’s credit profile.
However, before receiving the
loan the applicant has to become a member of the
organization
and that requires paying a membership fee equivalent to 5
percent of the loan amount. In addition, the applicant also has to pay 1
percent of the loan amount to buy insurance, which covers
the risk
of death or becoming handicapped. In case of death the
loan is
written off and the family is provided Rs.5,000 for
funeral
expenses. If the client was the only earning member of
the
household then the family is provided with Rs.1,000 a
month for
three months to meet basic expenditures. If the client
becomes
handicapped then again the loan is written off and he is
provided a
wheelchair.
The organization’s performance on profitability and
sustainability
has been steadily improving. However, as Akhuwat does not
charge any interest on its loans, and only charges a
membership
fee of 5 percent, it is unable to cover its costs which
stand at 7
percent
http://www.asianimage.co.uk/news/11181571.Pakistani_charity____Akhuwat____tackles_poverty_through_interest_free_loans/?ref=rss
Labels: islamic
# posted by Abu Rashid @ 9:38 AM 
