INCLUSIVE FINANCE & Muakhat Paradigm Dr. Muhammad Amjad Saqib 06-10-2013

Financial Inclusion Financial inclusion refers to a process that ensures the ease of access, availability and usage of the formal financial services including savings, loans, insurance and leasing for all members of the society. Major hurdle in achieving financial inclusion is the diversity of the clientele Similar or uniform financial instruments cannot meet the needs of the entire population Market principles alone are insufficient to achieve financial inclusion

Akhuwat’s Model of Financial Inclusion The underlying aim of the model is to alleviate poverty through an equitable distribution of resources. In doing so, the model addresses both the needs and reciprocal responsibilities of each member of the society. To achieve this, the model has been closely aligned with the spirit of volunteerism, moral principles and the Sharia. The model derives inspiration from Muakhat-a-Medina.

Begins with the story of a poor widow Story of Akhuwat Begins with the story of a poor widow

Rest is history

Fundamental Principles Creation of a Credit Pool Interest free loans from this pool to the poor and needy Use of mosque and church for social and financial intermediation Resource generation through philanthropy and donations Spirit of volunteerism Converting borrowers into donors

Progress PROGRESS INDICATOR TOTAL Total Benefiting Families 380,000 Loans Utilized by Males Entrepreneurs 240,000 Loans Utilized by Females Entrepreneurs 140,000 Amount Disbursed PKR 5.8Billion Percentage Recovery 99.87% Active Loans 190,844 Outstanding Loan Portfolio PKR 2,174,695,023 Number of Branches 255 Number of Cities and Towns 140

Salient Features of Akhuwat’s Model of Inclusive Finance Moral Principles complementing Financial Logic as dictated in the Sharia Extensive and wide spread use of Qarz-e-Hassan; interest free loans which will be used to support the poor to become self-reliant Institutionalizing the circulation of wealth Reliance on philanthropy for social investment and primary sources of funds  Transforming borrowers into donors through the promotion of a spirit of self-reliance, volunteerism and a system based on mutual support

Salient Features of Akhuwat’s Model of Inclusive Finance Eradication of interest from the financial system State to play a proactive part in facilitating and complementing the resources of the society Sharia complaint microfinance to be used to support those who are above the poverty line Promotion of Islamic Banking services amongst those who are already being catered by conventional and Islamic banks

Classification of Groups Financial Services Reasons  Poorest and Destitute Zakat and Sadqat These individuals are unable to support themselves or their families due to circumstances or ailments which prevent them from being economically active thus can only be supported directly through Zakat and Sadqa   Poor Qarz-e-Hassan This group must be empowered through Qarz-e-Hassan as they have the potential and ability to become self- reliant and contribute to the local economy as opposed to burdening it Vulnerable Poor Sharia Compliant Microfinance To diffuse the effects of shocks which may push these individuals further down the economic ladder and to enable them to enhance their potential and livelihood, a host of sharia compliant microfinance services will be offered. Average, Well-to-do, Rich Islamic Banking As the members are already economically secure, they will be catered through Islamic Banks. Revenue may be generated from the provision of financial services. The nature, mode and delivery for each financial instrument will differ depending on the needs and capacities of the clientele they are intended to serve. Consequently the Akhuwat Model draws four broad categories within society and identifies corresponding financial instruments they may require.

The 30% at the top to support the 30% at the bottom Average, Well-to-do, Rich 40% Vulnerable Poor 25% Poor 5% Poorest & Destitute Overview of Resource Allocation Islamic Banking Sharia Compliant Microfinance Qarz-e-Hassan Zakat and Sadqat Group IV provides resources to support Group I and II. The 30% at the top to support the 30% at the bottom Group I and II supported through philanthropy and generosity

Role Of State Poverty Alleviation is joint responsibility of Civil Society, Private Sector and State Experience of Pakistan Government of Punjab Government of Gilgit-Baltistan Government of Pakistan

International Agencies Sources of Funds FUNDS Philanthropy Public Authorities International Agencies Commercial Funding

Conclusion Inclusive Finance Segmentation Separate need for every segment Sharia Compliant solutions Collaboration between State, Private Sector and Civil Society Developing a sustainable mechanism by converting borrows into partners and donors

LOAN DISBURSEMENT METHODOLGY

A Loan Disbursement Event in a Mosque

A Loan Disbursement Event in a Mosque

Akhuwat Event in a Mosque (Chiniot)

Akhuwat Event in a Mosque (Lahore)

Akhuwat Event in a Mosque (Lahore)

Akhuwat Event in a Mosque (Mithan Kot)

Akhuwat Event in a Mosque (Rajan Pur)

Akhuwat Event in a Mosque (Choti – D.G Khan)

Awareness Event in a Mosque

A Loan Disbursement Event in a Mosque

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