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Presentation by Dr. shabbir hussain

The document provides a comprehensive analysis of microfinance models, highlighting the distinction between 'credit plus' and 'credit only' approaches, along with an overview of Islamic microfinance methods. It examines outreach analysis details from various microfinance institutions (MFIs) in countries like Bangladesh and Pakistan, showcasing the percentage of women borrowers and cost-effectiveness of different models. Furthermore, it outlines the operational strategies of Helping Hand Relief and Development (HHRD) in implementing Islamic microfinance programs aimed at poverty alleviation and community support.

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An overview of Microfinance Models :Outreach analysis and a case study of Islamic Microfinance Presentation By : Dr Shabbir Hussain 4th International ---November 2010 Conference
PLAN OF PRESENTATION PART I : MICROFINANCE MODELS : AN OVERVIEW PART II : OUTREACH ANALYSIS OF MICROFINANCE PART III : AN OVERVIEW OF HHRD’s PROGRAMS PART IV : ISLAMIC MICROFINANCE PROGRAM OF HHRD AND CHALLENGED
PART I MICROFINANCE MODELS : AN OVERVIEW
“ Credit Plus” includes development and social services in comparison with “Credit Only” approach FINANCIAL INTERMEDIATION  Working Capital Minimalist  Fixed Asset Loans Integrated  Savings Approach Approach SOCIAL INTERMEDIATION  Community Mobilization Group Formation  Social Collateral  Insurance EDEVELOPMENT SERVICES Credit Only Entrepreneurship Training Credit + Production/Skills Training Marketing (Financial & Non SOCIAL SERVICES Financial) Education Health & Nutrition Literacy Training
MF Models of Outreach based upon the integration level of supply chain Three- Pronged Approach Promotion of MED, training & helping NGOs as NGOs linkage with banks Facilitators V/WOs Specialized Banks NGOs Promotion of NGOs as MED, training V/WOs Financial & providing Intermediaries Specialized Credit Support Banks Promotion of V/WOs Banks as MFIs Specialized MED, training & Banks providing Credit
OUTREACH ANALYSIS OF SELECTED INTERNATIONAL MODEL OF MFIs
MFI # of Borrowers % Cost per Self Women Borrower Sufficiency Ratio Grameen Bank 6,707,000 96 10 98.80 Bangladesh BRAC Bangladesh 6,397,635 96 12 106.65 ASA Bangladesh 5,422,787 96 7 187.17 Spondana India 1,188,861 96 8 159.07 Bandhan India 896,698 100 9 133.14 Cashpor India 303,243 100 15 102.00 AML India 565,806 100 14 111.53 Kash Pakistan 295,396 95 23 164.10 Khushali Bank 405,111 48 15 79.70 Pakistan FMBF Pakistan 229,443 42 23 90.43 WDB Sri Lanka 146,808 100 10 162.44 (Source: www.micromarket.org, BRAC Sri Lanka 34,550 100 25 48.80
Microfinance is fast emerging viable tool to reduce Poverty Poverty Transition Microfinance % Burrowers Very Poor to Moderately Poor 48 38.4 Very Poor to Non Poor 22 17.6 Moderately Poor to Non Poor 26 20.8 No Change 27 21.6 Non Poor to Moderately Poor 1 0.8 Moderately Poor to Very Poor 1 0.8 Totals 125 100 (Source: www.micromarket.org.
ISLAMIC MICROFINANCE
SOME MODES OF ISLAMIC FINANCE PARTNERSHIP TRADE BASED RENTAL BASED BASED Mudarba Murabaha Ijara Musharka Sal‟m Diminishin g Musharka Istisna
Some Islamic Mode of Microfinance Qard hasan provides cash to borrowers who may use for consumption as well as productive purposes. The capital is riba-free but not cost-free. A Sale based and hiring modes (murabahah, salam, ijarah) B Profit-sharing modes (Musharakah and mudarabah) Murabaha implies a sale on a cost-plus basis. It is most popular product among (IsMFI). Ijara implies leasing or hiring of a physical asset including all kinds of income-generating equipment or physical asset, such as, tools and machines to manufacture commodities, rickshaws and taxis to transport people, carts to sell merchandize, low-cost houses may be financed through this mode for the poor. Salam is a deferred delivery contract where delivery occurs at a future date in exchange for spot payment of price. Under a salam agreement, a farmer or a trader in need of short-term funds sells its output or merchandize to the IsMFI on a deferred delivery basis Partnerships • Mudaraba : a combination of entrepreneurship and capital • Musharaka : a joint venture in entrepreneurship and capital.
Islamic MFIs-Features (1) Islamic MFI retains the basic operational format of MFIs • Banking with the poor at door steps • Weekly/Monthly Repayments • A Social/Development Program (to fulfill the social role of Islamic finance) IMFIs have some distinguishing features: Sources of Funds • Other than external sources, can also use funds from zakah, awqaf, and other forms of charities Use of funds (Mode of Financing) • Sale based and hiring modes ( murabahah, salam, ijarah) • Profit-sharing modes (Musharakah and mudarabah) Amount transferred to the poorest • Islamic modes are sale based, the price of the asset is paid
Islamic MFIs-Features (2) Group Dynamics • Islamic values of brother/sister-hood improves cooperation among the group members Financing the poorest • Zakat and other charities can supplement MFI activities (non-diversion of funds) Social Development Program • behavioral, ethical, and social aspects in light of Islamic teachings Targeting the family through women • Spouse co-signs the contract dealing with women more efficient and convenient • Women disseminate knowledge to children Dealing with Arrears/Default Less aggressive and use Islamic teachings to recover
Egypt Mit Ghamar Project : Modern Islamic banking  Sanadiq project , Jabal Al-Hoss : Village Banks which can be Syria replicated. The model is based on : (i) Musharka structure owned and managed by the poor (ii) financing based on Murabaha which provides high profit rates shared among members (iii) good governance through committees with sound election and voting procedures (iv) project management team responsible training of committee members (v) Financial management based on standardized bylaws,”fair “ credit decisions and low transaction costs (vi) Financially viable operations with 100 % repayment rate (vii) equal access to both men and women (viii) UNDP provides matching grant equal to minimum share capital of village fund  Mu‟assat Bayat Al-Mal : Affliate of Hezbollah comprises qard Lebanon Al-Hasan financing on profit loss sharing mode. It is run by volunteers Yeman  Hodeidah Microfinance Program : Group methodology like Grameen but it uses Murabaha mode for financing
Bangladesh  Islamic Bank Bangladesh  Social and Investment Bank  Al-Fallah and Rescue Pakistan  Akhuwat : Mosque based model re capital of village fund Qard hasan (Interest free loan) India  AICMEU Afghanistan  Bait –un Nasr FINCA (Qard Hasan) Village Banking methodology with solidarity Azerbaijan groups __________  Islamic Banking : Govt agencies „s organizations finances small Malaysia and medium scale enterprises  Three Categories : (1) Microfinance Divisions of Islamic banks Indonesia (Islamic Rural Banks) (2) Islamic Financial Cooperatives referred as bait Maal wat Tamwil (BMT) ; BMTs are large network of over 2000 institutions serving millions of poor Indonesian Muslims. These are backed and supported by Zakat, Nahadatul Ulema and Muhamadiyah that currently have over hundred million members The products are based on Mudaraba, Murabaha, Musharaka, Ijara and qard Hasan
PART II OUTREACH ANALYSIS OF MICROFINANCE IN PAKISTAN
Roughly 80% of the current borrowing is from the non-formal sector in Pakistan However, the cost of borrowing from the non-formal sector is 4% higher Borrowings by sources Borrowing Pattern in 22% Pakistan Formal Non Formal 78% Interest Rates (in %) Formal vs. Non Formal Interest Rate 30 20 10 0 Formal Non Formal
Approximately 60% of the non-institutional lending is through money lenders, Shopkeepers, and agriculture input dealers Informal Lenders Feed Commission Dealers Others Agents 12% 2% 12% Agra Input c Dealerds Money 22% Lenders Shopkeeper 37% 15%
PPAF Phase I & II : PPAF begins US$ 300 Million disbursing PPAF Phase III microfinance funds Microfinance Sector US$ 150 Million Development Programme (ADB) 1.4 million 40 + MFPs 1999 2000 2001 2005 5 Microfinance Banks 2006 2009 PIR: PMN starts Khushhali FMFBL,TM collecting and Bank FBL,RMFBL publishing becomes , POMFBL, NMFB. member MFIs’ operational BRAC-PAK NRSP, ASA performance Microfinance indicator report Ordinance Kashf Bank
MFIs  Akhuwat  Asasah  Orangi Pilot Project  Sindh Agriculture & Forestry Workers Cooperative Orgn (SAFWCO)  Community Support Concern  Development Action for Mobilization and Emancipation Network (DAMEN)  Center for Women Cooperative Development (CWCD)  Kashf Foundation MFB  Khushhali Bank Ltd  Network Microfinance Bank Ltd  Pak Oman Microfinance Bank Ltd  Rozgar Microfinance Bank Ltd  Tameer Microfinance Bank Ltd  First Microfinance Bank Ltd  Kashf Microfinance Bank Ltd RSP  NRSP  PRSP  SRSP  TRDP  Lachi Poverty Reduction Project  Sungi Development Foundation  Orix Pakistan Others  Sindh Rural Support Program  Taraqi Foundation  Save the Poor  Human Development Foundation
Only 5 to 10 % of the poor population in need of micro credit is currently covered Current Outreach Estimated Demand 1.83 million borrowers 27.7 million borrowers Access Access Quality Quality Products Products Funding Funding Sustainability Sustainability
Outreach of Microfinance Providers in Pakistan (Geographic Coverage/Number of districts) 20 Distt 9% 25 Distt KB 11% 93 Districts 39% NRSP 46 Districts 19% FMFBL Kashf 53 Districts 22% PRSP Data Source: Microwatch, PMN, Sep 2009
NRSP is leading in Market Share of Microfinance Providers (Active Borrowers, Gross Loan Portfolio, Active Savers PRSP FMFBL Savers Kashf Loan portfolio Borrowers KB NRSP 0 10 20 30 40 50 60 market share % Data Source: Microwatch, PMN, Sep 2009
Part III An Overview of HHRD’s Programs Presentation By : Dr Shabbir Hussain,
Vision: A world without poverty and injustice in which every person enjoys life with dignity Mission: To work with poor and excluded people to eradicate poverty and injustice. To strengthen the bond of humanity by serving all those in need anywhere all over the world 26
 Helping Hand works all over Pakistan and implements projects in the following sectors: ◦ Health ◦ Physical Rehabilitation ◦ Emergency Response Program ◦ Microfinance Program ◦ Sustainable Livelihood Program ◦ Orphan Support Program ◦ Water, Sanitation and Hygiene ◦ Skill Development Program ◦ Reconstruction and Rehabilitation ◦ Education ◦ Seasonal Program 27
28
Activities Clinics Mobile Clinics Ambulances Medical Equipments Awareness Campaigns Health Screening for Orphans Health Services at Government Facilities Prevention of Blindness No. of More than 400,000 Beneficiaries Budget $ 2,449,528 29
Activities Clinical Services •Physiotherapy •Occupational Therapy •Orthotics •Prosthesis Educational Services •Education & Trainings •Institute of Rehabilitation Sciences in Mansehra Development of Physical Structure •Rehabilitation Centre in Muzaffarabad •Rehabilitation Centre in Swat Beneficiaries 78,916 Budget $ 1.8 Million 30
Activities •Food •Shelter •Camps •Health Services •Ambulance •Transportation •Funeral •Civilian Victim Fund e.g. Food, Orphans, wedding box etc •Emergency Preparedness i.e. Warehouse, Tents, Utensils, CGI Sheets, Sheet Bars, Rescue Kits etc. Beneficiaries • More than 500,000 Budget $ 676,797 31
Activities Microfinance & Economic Empowerment Skills Development Industrial Homes Agriculture Development Livestock Development Beneficiaries More than 1,000 families benefited Budget $ 562,065 32
Activities •Provide long term financial support to the orphan children •Career Building and Emotional Uplift •Reduce poverty from lives of orphan children families by providing education Beneficiaries More than 3,000 children sponsored Budget $ 271,140 33
Activities •Construction of Water Wells •Construction of Tube Wells •Installation of Hand Pumps •Installation of Water Tanks •Construction, rehabilitation & extension of Water Supply Schemes •Health and Hygiene Sessions •Health & Hygiene Kits distribution Beneficiaries More than 15,000 individuals Budget $ 165,000 34
Activitie •Construction of Shelters & s Houses •Construction of Schools/ Youth Hostel •Pedestal ways i.e. bridges, retaining walls, roads etc •Provision of Construction Materials e.g. Crusher plant, saw mills etc Benefici More than 250 families aries Budget $ 330,708 35
Activities •To provide standard educational facilities to the poor and most deserved students •To improve and strengthen education system by adopting schools, facilitate them by providing supplies for both schools and students Beneficiaries More than 12,000 Students benefited Budget $ 573,125 36
Activities Ramadhan Program Zabiha Program Distribution of Eid Gifts Beneficiaries More than 700,000 Budget $ 404,742 37
July – September 2010
Food Tent Medical Camp Distribution Distribution 39
Province # of # of # of Para # of camps doctors Medics patients treated KPK 301 701 1,272 54,134 Punjab 75 87 161 16,519 Sindh 43 67 68 4,279 Total 419 855 1,501 74,932 40
Province No. of Beneficiaries Food Tent Dist. H&H Kits H&H Dist. Sessions KPK 87,192 1,400 Punjab 30,268 700 AJK 13,440 - Sindh 10,500 - 3,500 350 Gilgit Baltistan 1,400 - Total 142,800 2,100 3,500 350 41
Part IV ISLAMIC MICROFINANCE PROGRAM OF HHRD and CHALLENGES Presentation By : Dr Shabbir Hussain,
To facilitate and support livelihood opportunities and microenterprise development for poverty alleviation through provision of Islamic Microfinance and related support services compliant with Sharia principles and transparency
(i) To select, organize ,facilitate and manage Qard hasan for consumption and Murabah /Mudarba for livelihood and Microenterprise development to potential beneficiaries in the selected areas. (ii) To facilitate vertical development for SME and maximize outreach with horizontal expansion nationally and internationally (iii) To develop and upload profiles of potential entrepreneurs on HHRD Website connecting international community for sponsorship of Islamic Microfinance
Specific Objectives 1) To identify, organize and mobilize beneficiaries for individual, family and group based loans (Qard Hasan) ranging from Rs 15,000 to 30,000 to the selected beneficiaries in the target communities of earthquake areas (District Mansehra, AJK) and IDPs (Swat and Waziristan) over a period of THREE years 2010 to 2013 ; 2) To provide in kind support with required inputs and technical assistance for productive (livelihood and small & microenterprise development) and Consumption (health, education, housing and social events like girls marriages); 3) To increase consistent outreach with vertical development through multiple/ incremental successive loans and expand horizontally with replication of HHRD models in new areas to maximize outreach to the disadvantaged beneficiaries and communities at large which will have multidimensional socio-economic impact in the targeted under privileged areas Presentation By : Dr Shabbir Hussain,
MODES OF ISLAMIC MICROFINANCE BEING IMPLEMENTED BY HHRD Qard Murabaha Mudarba Hasan Partnership Trade Based Based Consumption & Social Needs
The effectiveness of HHRD approaches varies across different levels of poverty Classification Objective Approaches Growth At the Poverty Line MED HHRD Mudarba Livelihood Below the IGAs HHRD Poverty Line Murabah Safety Net Abject Poor Consu HHRD mption Credit Qard Hasn Presentation By : Dr Shabbir Hussain,
HHRD Models of Outreach based upon the integration level of supply chain Three- Pronged Approach Mobilization , Borrowers Identification /Appraisal HHRD as HHRD Facilitation and Coordination Facilitator Loanee Sponsors Country Selection HHRD as Office Appraisal Financial Credit Loanee Intermediary HHRD management USA Promotion of HHRD as MFI Country MED, training & Loanee Level providing Credit Presentation By : Dr Shabbir Hussain,
 Marginalized, poor and vulnerable communities i.e. elders, women & children  People affected from natural or manmade disasters  Female headed households, widows  Persons with Disabilities  Needy & unskilled Individual  Orphan children 49
HHRD Implementation Strategy Expanding Outreach Sustainable Institutional Mechanism Disbursement and Repayment Group dynamics Community Mobilization Credit Facilitation Committee Selection of Beneficiaries Baseline Survey Presentation By : Dr Shabbir Hussain,
STAFF TRAINING  Islamic Mode of Financing  Enterprise Development  Financial Management  Microcredit Methodology  Communication Skills & Leadership  Community Mobilization  Financial Information System  Social Mobilization  Monitoring & Evaluation  Product Development
Objectives KPIs Activities/ Assumptions/ Remarks Objective #1 - 3 products - Model development Necessary support/ To alleviate poverty through of Islamic --Validation from collaboration from developing and implementing Islamic Microfinance Sharia Advisors stakeholders Microfinance products - 11 staff - Appointed/ re- Active and effective Objective #2 trained in 6 oriented a core team participation and To build capacity in HHRD by related in HHRD’s Hq 2 + 9 support. developing dedicated team in Head training staff in 3 branches office and Branch offices courses - Organize /conduct training for staff & other clients -Forms -Design forms Implementation with Objective #3 &formats, &formats To develop procedures and systems Agreements -Develop related approval of IMF for implementation of Islamic Modes - SoPs and Manuals of Microfinance Manuals Committee of HHRD Objective # 4 -Select sites To establish and operationalize 3 Branches - Establish offices Availability of office at
Objectives KPIs Activities/ Assumptions/ Remarks Objective # 5 500 loans - Baseline surveys Prevails enabling To identify/select Beneficiaries for: disbursed for - Loan appraisals environment Qard-e-Hasana for social needs QH,Murabarb & - Screening approvals Murabah for Livelihood Mudarbah and disbursements Stable political and activities/IGAs and Mudarbah for security situation scaling up micro entrepreneurs - Every Branch is - Collect updated Positive feed back Objective # 6 visited once a info on monthly basis from Branches To ensure 100 % repayment month from Head on specific formats facilitating/ monitoring field office and critical review activities and loanees performance - # of meetings - Attend /hold Supportive culture Objective #7 with IMFIs, SBP , seminars, meetings To uphold Islamic Microfinance IDB and other - Develop/implement from stakeholders and as a flagship program of HHRD MFIs national collaborative projects and international - Organize/ IMFIs -Demonstration of participate in model at HHRD International
Budget for establishment and operation of One Cluster of 500 Loanees ( in US $) Loan portfolio 105,882 89% HR(Field staff) 4,753 4% Admin,Ops 1,882 2% Set up cost 882 1% Program support 5,150 4% Head office 100 Total $ 118,550 54
Budget for Establishment & Operation of ONE Area Clusters with 500 Loanees (2010-11) Prg set up cost support Admin,Ops 1% H/O 2% 4% HR(Field) 4% Loan portfolio 89% 55
TIME LINE (Phase I) 2011 Acc Ben: 2000 Disb : Rs 23.4 00,000 2010 Acc Ben: 1100 Disb : RS 15,600,000 2009 Target Ben: 201 areas: Disb : Rs 931,000 Earthquake Lamia,Shohal, and IDPS Shamli,Kewai
Ongoing Qard Hasan Program HHRD Initiatives in Earthquake Area Lamia Khangiri Kewai Shamali Partner Total Hatian (Manehra) (Mansehra) (Batgram) (RHD) (AJK) Started Feb Nov 2008 Nov 2008 Nov 2008 2010 Acc.Loans 33 51 27 17 75 203 Active 13 17 12 16 50 108 Loans Jul 10 Acc. Disb. 540,000 1,415,000 502,000 410,000 1,800,00 4,667,00 0 0 Outstanding 210,000 105,300 212,000 98,000 100,000 635,300 LP (Rs) # of Market 9 1 5 1 2 18 Committees 57 Economic Development Department
Pilot Project Summary Project Title : Increasing Income through Live stock Farming in Rural Bhawalpur Donor : HHRD USA Mode of Islamic Microfinance : Mudarabah # of Borrowers/Families : 50 Purpose of Loan : Livestock Calf Rearing (25), Goat Rearing (15) and Quail Farming (10) Target Area : UCs : Goth Mehrab, Sanjjarpur and Jajja Abbasia (Tehsil Bhawalpur) Requested Budget : US $ 26,750 Project Duration Start Date 01/10/2010 End Date 30/09/2011
Expansion & Global & Pilot Project Replication Sustainable (Year 1 & 2) (Year 4,5 (Year 3) onwards) • IDPs; Earthquake • + Pakistan • + International Outreach Areas Nationwide/MFB • HHRD program Best practice Countries • Worldwide – Livelihood – Livelihood Livelihood Packages – Consumption – Consumption – Consumption – MSEs – MSEs + Overseas + Funding – HHRD Seed Money Sponsors through – CGAP, IDB,ADB Source – New Initiatives Web – CSR (MNCs) – CSR (National) – Donors Projects – web – CSR (International) – International – SBP Pilot Project – Fund Raising projects Funding –Qard Hasan + Sale based & + Profit Sharing: Mode Hiring : Murabahah, Musharakah and salam, ijarah) mudarabah)
Expansion & Global & Pilot Project Replication Sustainable (Year 1 & 2) (Year 3,4,5 (Year 2 &3) onwards) • Project Design (LFA) ; • New initiatives • Developing innovative • HR • Expansion in Punjab model: Branchless • Office /infrastructure and Sindh and banking • Surveys/baseline Balochistan • HHRD : IMBank Major • Local Networking • Developing new • Sharing to promote packages Islamic mode of Activities • Development of MIS • Registration with microfinance &Manuals/SOPs • Capacity Building PPAF/SECP • Pilot projects on • Exposure to other • Linkages with Mudarba , Murabah models Sponsors from USA and Musharka • Focus on Earthquake through web • MED and IDPs areas • Projects with SBP, PMN • Collaboration with • Developing and other forums CGAP and other Institutional mechanism • Exploring funding reputed MFIs/Banks : Credit Facilitation through CSR • Assuring financial, Loan disbursement/ • Collaboration with and operational recovery SBP/NGOs/CBOs, sustainability Donors,UN and International agencies
CHALLENGES Scale Sustainability 90% Market Unreached Only few sustainable MFI Scaling Up Islamic Microfinance Capacity Collaboration Funds MFIs, Field Staff MFIs, SBP Commercial Donations Funds Depth Competition/Others Bottom Rural Uniformity and Standards Gender Poor Access
 TJAZAK ALLAH  Thank You! Dr Shabbir Hussain Cell : 03005558307 92-51-8438800 Email : dr.shabbir@hhrd.org drshabbir@gmail.com Presentation By : Dr Shabbir Hussain,

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Presentation by Dr. shabbir hussain

  • 1.
    An overview ofMicrofinance Models :Outreach analysis and a case study of Islamic Microfinance Presentation By : Dr Shabbir Hussain 4th International ---November 2010 Conference
  • 2.
    PLAN OF PRESENTATION PARTI : MICROFINANCE MODELS : AN OVERVIEW PART II : OUTREACH ANALYSIS OF MICROFINANCE PART III : AN OVERVIEW OF HHRD’s PROGRAMS PART IV : ISLAMIC MICROFINANCE PROGRAM OF HHRD AND CHALLENGED
  • 3.
  • 4.
    “ Credit Plus”includes development and social services in comparison with “Credit Only” approach FINANCIAL INTERMEDIATION  Working Capital Minimalist  Fixed Asset Loans Integrated  Savings Approach Approach SOCIAL INTERMEDIATION  Community Mobilization Group Formation  Social Collateral  Insurance EDEVELOPMENT SERVICES Credit Only Entrepreneurship Training Credit + Production/Skills Training Marketing (Financial & Non SOCIAL SERVICES Financial) Education Health & Nutrition Literacy Training
  • 5.
    MF Models ofOutreach based upon the integration level of supply chain Three- Pronged Approach Promotion of MED, training & helping NGOs as NGOs linkage with banks Facilitators V/WOs Specialized Banks NGOs Promotion of NGOs as MED, training V/WOs Financial & providing Intermediaries Specialized Credit Support Banks Promotion of V/WOs Banks as MFIs Specialized MED, training & Banks providing Credit
  • 6.
    OUTREACH ANALYSIS OFSELECTED INTERNATIONAL MODEL OF MFIs
  • 7.
    MFI # of Borrowers % Cost per Self Women Borrower Sufficiency Ratio Grameen Bank 6,707,000 96 10 98.80 Bangladesh BRAC Bangladesh 6,397,635 96 12 106.65 ASA Bangladesh 5,422,787 96 7 187.17 Spondana India 1,188,861 96 8 159.07 Bandhan India 896,698 100 9 133.14 Cashpor India 303,243 100 15 102.00 AML India 565,806 100 14 111.53 Kash Pakistan 295,396 95 23 164.10 Khushali Bank 405,111 48 15 79.70 Pakistan FMBF Pakistan 229,443 42 23 90.43 WDB Sri Lanka 146,808 100 10 162.44 (Source: www.micromarket.org, BRAC Sri Lanka 34,550 100 25 48.80
  • 8.
    Microfinance is fastemerging viable tool to reduce Poverty Poverty Transition Microfinance % Burrowers Very Poor to Moderately Poor 48 38.4 Very Poor to Non Poor 22 17.6 Moderately Poor to Non Poor 26 20.8 No Change 27 21.6 Non Poor to Moderately Poor 1 0.8 Moderately Poor to Very Poor 1 0.8 Totals 125 100 (Source: www.micromarket.org.
  • 9.
  • 10.
    SOME MODES OFISLAMIC FINANCE PARTNERSHIP TRADE BASED RENTAL BASED BASED Mudarba Murabaha Ijara Musharka Sal‟m Diminishin g Musharka Istisna
  • 11.
    Some Islamic Modeof Microfinance Qard hasan provides cash to borrowers who may use for consumption as well as productive purposes. The capital is riba-free but not cost-free. A Sale based and hiring modes (murabahah, salam, ijarah) B Profit-sharing modes (Musharakah and mudarabah) Murabaha implies a sale on a cost-plus basis. It is most popular product among (IsMFI). Ijara implies leasing or hiring of a physical asset including all kinds of income-generating equipment or physical asset, such as, tools and machines to manufacture commodities, rickshaws and taxis to transport people, carts to sell merchandize, low-cost houses may be financed through this mode for the poor. Salam is a deferred delivery contract where delivery occurs at a future date in exchange for spot payment of price. Under a salam agreement, a farmer or a trader in need of short-term funds sells its output or merchandize to the IsMFI on a deferred delivery basis Partnerships • Mudaraba : a combination of entrepreneurship and capital • Musharaka : a joint venture in entrepreneurship and capital.
  • 12.
    Islamic MFIs-Features (1) IslamicMFI retains the basic operational format of MFIs • Banking with the poor at door steps • Weekly/Monthly Repayments • A Social/Development Program (to fulfill the social role of Islamic finance) IMFIs have some distinguishing features: Sources of Funds • Other than external sources, can also use funds from zakah, awqaf, and other forms of charities Use of funds (Mode of Financing) • Sale based and hiring modes ( murabahah, salam, ijarah) • Profit-sharing modes (Musharakah and mudarabah) Amount transferred to the poorest • Islamic modes are sale based, the price of the asset is paid
  • 13.
    Islamic MFIs-Features (2) GroupDynamics • Islamic values of brother/sister-hood improves cooperation among the group members Financing the poorest • Zakat and other charities can supplement MFI activities (non-diversion of funds) Social Development Program • behavioral, ethical, and social aspects in light of Islamic teachings Targeting the family through women • Spouse co-signs the contract dealing with women more efficient and convenient • Women disseminate knowledge to children Dealing with Arrears/Default Less aggressive and use Islamic teachings to recover
  • 14.
    Egypt Mit Ghamar Project : Modern Islamic banking  Sanadiq project , Jabal Al-Hoss : Village Banks which can be Syria replicated. The model is based on : (i) Musharka structure owned and managed by the poor (ii) financing based on Murabaha which provides high profit rates shared among members (iii) good governance through committees with sound election and voting procedures (iv) project management team responsible training of committee members (v) Financial management based on standardized bylaws,”fair “ credit decisions and low transaction costs (vi) Financially viable operations with 100 % repayment rate (vii) equal access to both men and women (viii) UNDP provides matching grant equal to minimum share capital of village fund  Mu‟assat Bayat Al-Mal : Affliate of Hezbollah comprises qard Lebanon Al-Hasan financing on profit loss sharing mode. It is run by volunteers Yeman  Hodeidah Microfinance Program : Group methodology like Grameen but it uses Murabaha mode for financing
  • 15.
    Bangladesh  Islamic Bank Bangladesh  Social and Investment Bank  Al-Fallah and Rescue Pakistan  Akhuwat : Mosque based model re capital of village fund Qard hasan (Interest free loan) India  AICMEU Afghanistan  Bait –un Nasr FINCA (Qard Hasan) Village Banking methodology with solidarity Azerbaijan groups __________  Islamic Banking : Govt agencies „s organizations finances small Malaysia and medium scale enterprises  Three Categories : (1) Microfinance Divisions of Islamic banks Indonesia (Islamic Rural Banks) (2) Islamic Financial Cooperatives referred as bait Maal wat Tamwil (BMT) ; BMTs are large network of over 2000 institutions serving millions of poor Indonesian Muslims. These are backed and supported by Zakat, Nahadatul Ulema and Muhamadiyah that currently have over hundred million members The products are based on Mudaraba, Murabaha, Musharaka, Ijara and qard Hasan
  • 16.
    PART II OUTREACHANALYSIS OF MICROFINANCE IN PAKISTAN
  • 17.
    Roughly 80% ofthe current borrowing is from the non-formal sector in Pakistan However, the cost of borrowing from the non-formal sector is 4% higher Borrowings by sources Borrowing Pattern in 22% Pakistan Formal Non Formal 78% Interest Rates (in %) Formal vs. Non Formal Interest Rate 30 20 10 0 Formal Non Formal
  • 18.
    Approximately 60% ofthe non-institutional lending is through money lenders, Shopkeepers, and agriculture input dealers Informal Lenders Feed Commission Dealers Others Agents 12% 2% 12% Agra Input c Dealerds Money 22% Lenders Shopkeeper 37% 15%
  • 19.
    PPAF Phase I& II : PPAF begins US$ 300 Million disbursing PPAF Phase III microfinance funds Microfinance Sector US$ 150 Million Development Programme (ADB) 1.4 million 40 + MFPs 1999 2000 2001 2005 5 Microfinance Banks 2006 2009 PIR: PMN starts Khushhali FMFBL,TM collecting and Bank FBL,RMFBL publishing becomes , POMFBL, NMFB. member MFIs’ operational BRAC-PAK NRSP, ASA performance Microfinance indicator report Ordinance Kashf Bank
  • 20.
    MFIs  Akhuwat  Asasah  Orangi Pilot Project  Sindh Agriculture & Forestry Workers Cooperative Orgn (SAFWCO)  Community Support Concern  Development Action for Mobilization and Emancipation Network (DAMEN)  Center for Women Cooperative Development (CWCD)  Kashf Foundation MFB  Khushhali Bank Ltd  Network Microfinance Bank Ltd  Pak Oman Microfinance Bank Ltd  Rozgar Microfinance Bank Ltd  Tameer Microfinance Bank Ltd  First Microfinance Bank Ltd  Kashf Microfinance Bank Ltd RSP  NRSP  PRSP  SRSP  TRDP  Lachi Poverty Reduction Project  Sungi Development Foundation  Orix Pakistan Others  Sindh Rural Support Program  Taraqi Foundation  Save the Poor  Human Development Foundation
  • 22.
    Only 5 to10 % of the poor population in need of micro credit is currently covered Current Outreach Estimated Demand 1.83 million borrowers 27.7 million borrowers Access Access Quality Quality Products Products Funding Funding Sustainability Sustainability
  • 23.
    Outreach of MicrofinanceProviders in Pakistan (Geographic Coverage/Number of districts) 20 Distt 9% 25 Distt KB 11% 93 Districts 39% NRSP 46 Districts 19% FMFBL Kashf 53 Districts 22% PRSP Data Source: Microwatch, PMN, Sep 2009
  • 24.
    NRSP is leadingin Market Share of Microfinance Providers (Active Borrowers, Gross Loan Portfolio, Active Savers PRSP FMFBL Savers Kashf Loan portfolio Borrowers KB NRSP 0 10 20 30 40 50 60 market share % Data Source: Microwatch, PMN, Sep 2009
  • 25.
    Part III An Overview of HHRD’s Programs Presentation By : Dr Shabbir Hussain,
  • 26.
    Vision: A world withoutpoverty and injustice in which every person enjoys life with dignity Mission: To work with poor and excluded people to eradicate poverty and injustice. To strengthen the bond of humanity by serving all those in need anywhere all over the world 26
  • 27.
    Helping Hand works all over Pakistan and implements projects in the following sectors: ◦ Health ◦ Physical Rehabilitation ◦ Emergency Response Program ◦ Microfinance Program ◦ Sustainable Livelihood Program ◦ Orphan Support Program ◦ Water, Sanitation and Hygiene ◦ Skill Development Program ◦ Reconstruction and Rehabilitation ◦ Education ◦ Seasonal Program 27
  • 28.
  • 29.
    Activities Clinics Mobile Clinics Ambulances Medical Equipments Awareness Campaigns Health Screening for Orphans Health Services at Government Facilities Prevention of Blindness No. of More than 400,000 Beneficiaries Budget $ 2,449,528 29
  • 30.
    Activities Clinical Services •Physiotherapy •Occupational Therapy •Orthotics •Prosthesis Educational Services •Education & Trainings •Institute of Rehabilitation Sciences in Mansehra Development of Physical Structure •Rehabilitation Centre in Muzaffarabad •Rehabilitation Centre in Swat Beneficiaries 78,916 Budget $ 1.8 Million 30
  • 31.
    Activities •Food •Shelter •Camps •Health Services •Ambulance •Transportation •Funeral •Civilian Victim Fund e.g. Food, Orphans, wedding box etc •Emergency Preparedness i.e. Warehouse, Tents, Utensils, CGI Sheets, Sheet Bars, Rescue Kits etc. Beneficiaries • More than 500,000 Budget $ 676,797 31
  • 32.
    Activities Microfinance & Economic Empowerment Skills Development Industrial Homes Agriculture Development Livestock Development Beneficiaries More than 1,000 families benefited Budget $ 562,065 32
  • 33.
    Activities •Provide long term financial support to the orphan children •Career Building and Emotional Uplift •Reduce poverty from lives of orphan children families by providing education Beneficiaries More than 3,000 children sponsored Budget $ 271,140 33
  • 34.
    Activities •Construction of Water Wells •Construction of Tube Wells •Installation of Hand Pumps •Installation of Water Tanks •Construction, rehabilitation & extension of Water Supply Schemes •Health and Hygiene Sessions •Health & Hygiene Kits distribution Beneficiaries More than 15,000 individuals Budget $ 165,000 34
  • 35.
    Activitie •Construction ofShelters & s Houses •Construction of Schools/ Youth Hostel •Pedestal ways i.e. bridges, retaining walls, roads etc •Provision of Construction Materials e.g. Crusher plant, saw mills etc Benefici More than 250 families aries Budget $ 330,708 35
  • 36.
    Activities •To provide standard educational facilities to the poor and most deserved students •To improve and strengthen education system by adopting schools, facilitate them by providing supplies for both schools and students Beneficiaries More than 12,000 Students benefited Budget $ 573,125 36
  • 37.
    Activities Ramadhan Program Zabiha Program Distribution of Eid Gifts Beneficiaries More than 700,000 Budget $ 404,742 37
  • 38.
  • 39.
    Food Tent Medical Camp Distribution Distribution 39
  • 40.
    Province # of # of # of Para # of camps doctors Medics patients treated KPK 301 701 1,272 54,134 Punjab 75 87 161 16,519 Sindh 43 67 68 4,279 Total 419 855 1,501 74,932 40
  • 41.
    Province No. of Beneficiaries Food Tent Dist. H&H Kits H&H Dist. Sessions KPK 87,192 1,400 Punjab 30,268 700 AJK 13,440 - Sindh 10,500 - 3,500 350 Gilgit Baltistan 1,400 - Total 142,800 2,100 3,500 350 41
  • 42.
    Part IV ISLAMIC MICROFINANCE PROGRAM OF HHRD and CHALLENGES Presentation By : Dr Shabbir Hussain,
  • 43.
    To facilitate andsupport livelihood opportunities and microenterprise development for poverty alleviation through provision of Islamic Microfinance and related support services compliant with Sharia principles and transparency
  • 44.
    (i) To select,organize ,facilitate and manage Qard hasan for consumption and Murabah /Mudarba for livelihood and Microenterprise development to potential beneficiaries in the selected areas. (ii) To facilitate vertical development for SME and maximize outreach with horizontal expansion nationally and internationally (iii) To develop and upload profiles of potential entrepreneurs on HHRD Website connecting international community for sponsorship of Islamic Microfinance
  • 45.
    Specific Objectives 1) Toidentify, organize and mobilize beneficiaries for individual, family and group based loans (Qard Hasan) ranging from Rs 15,000 to 30,000 to the selected beneficiaries in the target communities of earthquake areas (District Mansehra, AJK) and IDPs (Swat and Waziristan) over a period of THREE years 2010 to 2013 ; 2) To provide in kind support with required inputs and technical assistance for productive (livelihood and small & microenterprise development) and Consumption (health, education, housing and social events like girls marriages); 3) To increase consistent outreach with vertical development through multiple/ incremental successive loans and expand horizontally with replication of HHRD models in new areas to maximize outreach to the disadvantaged beneficiaries and communities at large which will have multidimensional socio-economic impact in the targeted under privileged areas Presentation By : Dr Shabbir Hussain,
  • 46.
    MODES OF ISLAMICMICROFINANCE BEING IMPLEMENTED BY HHRD Qard Murabaha Mudarba Hasan Partnership Trade Based Based Consumption & Social Needs
  • 47.
    The effectiveness ofHHRD approaches varies across different levels of poverty Classification Objective Approaches Growth At the Poverty Line MED HHRD Mudarba Livelihood Below the IGAs HHRD Poverty Line Murabah Safety Net Abject Poor Consu HHRD mption Credit Qard Hasn Presentation By : Dr Shabbir Hussain,
  • 48.
    HHRD Models ofOutreach based upon the integration level of supply chain Three- Pronged Approach Mobilization , Borrowers Identification /Appraisal HHRD as HHRD Facilitation and Coordination Facilitator Loanee Sponsors Country Selection HHRD as Office Appraisal Financial Credit Loanee Intermediary HHRD management USA Promotion of HHRD as MFI Country MED, training & Loanee Level providing Credit Presentation By : Dr Shabbir Hussain,
  • 49.
    Marginalized, poor and vulnerable communities i.e. elders, women & children  People affected from natural or manmade disasters  Female headed households, widows  Persons with Disabilities  Needy & unskilled Individual  Orphan children 49
  • 50.
    HHRD Implementation Strategy Expanding Outreach Sustainable Institutional Mechanism Disbursement and Repayment Group dynamics Community Mobilization Credit Facilitation Committee Selection of Beneficiaries Baseline Survey Presentation By : Dr Shabbir Hussain,
  • 51.
    STAFF TRAINING  Islamic Mode of Financing  Enterprise Development  Financial Management  Microcredit Methodology  Communication Skills & Leadership  Community Mobilization  Financial Information System  Social Mobilization  Monitoring & Evaluation  Product Development
  • 52.
    Objectives KPIs Activities/ Assumptions/ Remarks Objective #1 - 3 products - Model development Necessary support/ To alleviate poverty through of Islamic --Validation from collaboration from developing and implementing Islamic Microfinance Sharia Advisors stakeholders Microfinance products - 11 staff - Appointed/ re- Active and effective Objective #2 trained in 6 oriented a core team participation and To build capacity in HHRD by related in HHRD’s Hq 2 + 9 support. developing dedicated team in Head training staff in 3 branches office and Branch offices courses - Organize /conduct training for staff & other clients -Forms -Design forms Implementation with Objective #3 &formats, &formats To develop procedures and systems Agreements -Develop related approval of IMF for implementation of Islamic Modes - SoPs and Manuals of Microfinance Manuals Committee of HHRD Objective # 4 -Select sites To establish and operationalize 3 Branches - Establish offices Availability of office at
  • 53.
    Objectives KPIs Activities/ Assumptions/ Remarks Objective # 5 500 loans - Baseline surveys Prevails enabling To identify/select Beneficiaries for: disbursed for - Loan appraisals environment Qard-e-Hasana for social needs QH,Murabarb & - Screening approvals Murabah for Livelihood Mudarbah and disbursements Stable political and activities/IGAs and Mudarbah for security situation scaling up micro entrepreneurs - Every Branch is - Collect updated Positive feed back Objective # 6 visited once a info on monthly basis from Branches To ensure 100 % repayment month from Head on specific formats facilitating/ monitoring field office and critical review activities and loanees performance - # of meetings - Attend /hold Supportive culture Objective #7 with IMFIs, SBP , seminars, meetings To uphold Islamic Microfinance IDB and other - Develop/implement from stakeholders and as a flagship program of HHRD MFIs national collaborative projects and international - Organize/ IMFIs -Demonstration of participate in model at HHRD International
  • 54.
    Budget for establishmentand operation of One Cluster of 500 Loanees ( in US $) Loan portfolio 105,882 89% HR(Field staff) 4,753 4% Admin,Ops 1,882 2% Set up cost 882 1% Program support 5,150 4% Head office 100 Total $ 118,550 54
  • 55.
    Budget for Establishment& Operation of ONE Area Clusters with 500 Loanees (2010-11) Prg set up cost support Admin,Ops 1% H/O 2% 4% HR(Field) 4% Loan portfolio 89% 55
  • 56.
    TIME LINE (Phase I) 2011 Acc Ben: 2000 Disb : Rs 23.4 00,000 2010 Acc Ben: 1100 Disb : RS 15,600,000 2009 Target Ben: 201 areas: Disb : Rs 931,000 Earthquake Lamia,Shohal, and IDPS Shamli,Kewai
  • 57.
    Ongoing Qard HasanProgram HHRD Initiatives in Earthquake Area Lamia Khangiri Kewai Shamali Partner Total Hatian (Manehra) (Mansehra) (Batgram) (RHD) (AJK) Started Feb Nov 2008 Nov 2008 Nov 2008 2010 Acc.Loans 33 51 27 17 75 203 Active 13 17 12 16 50 108 Loans Jul 10 Acc. Disb. 540,000 1,415,000 502,000 410,000 1,800,00 4,667,00 0 0 Outstanding 210,000 105,300 212,000 98,000 100,000 635,300 LP (Rs) # of Market 9 1 5 1 2 18 Committees 57 Economic Development Department
  • 58.
    Pilot Project Summary Project Title : Increasing Income through Live stock Farming in Rural Bhawalpur Donor : HHRD USA Mode of Islamic Microfinance : Mudarabah # of Borrowers/Families : 50 Purpose of Loan : Livestock Calf Rearing (25), Goat Rearing (15) and Quail Farming (10) Target Area : UCs : Goth Mehrab, Sanjjarpur and Jajja Abbasia (Tehsil Bhawalpur) Requested Budget : US $ 26,750 Project Duration Start Date 01/10/2010 End Date 30/09/2011
  • 59.
    Expansion & Global & Pilot Project Replication Sustainable (Year 1 & 2) (Year 4,5 (Year 3) onwards) • IDPs; Earthquake • + Pakistan • + International Outreach Areas Nationwide/MFB • HHRD program Best practice Countries • Worldwide – Livelihood – Livelihood Livelihood Packages – Consumption – Consumption – Consumption – MSEs – MSEs + Overseas + Funding – HHRD Seed Money Sponsors through – CGAP, IDB,ADB Source – New Initiatives Web – CSR (MNCs) – CSR (National) – Donors Projects – web – CSR (International) – International – SBP Pilot Project – Fund Raising projects Funding –Qard Hasan + Sale based & + Profit Sharing: Mode Hiring : Murabahah, Musharakah and salam, ijarah) mudarabah)
  • 60.
    Expansion & Global & Pilot Project Replication Sustainable (Year 1 & 2) (Year 3,4,5 (Year 2 &3) onwards) • Project Design (LFA) ; • New initiatives • Developing innovative • HR • Expansion in Punjab model: Branchless • Office /infrastructure and Sindh and banking • Surveys/baseline Balochistan • HHRD : IMBank Major • Local Networking • Developing new • Sharing to promote packages Islamic mode of Activities • Development of MIS • Registration with microfinance &Manuals/SOPs • Capacity Building PPAF/SECP • Pilot projects on • Exposure to other • Linkages with Mudarba , Murabah models Sponsors from USA and Musharka • Focus on Earthquake through web • MED and IDPs areas • Projects with SBP, PMN • Collaboration with • Developing and other forums CGAP and other Institutional mechanism • Exploring funding reputed MFIs/Banks : Credit Facilitation through CSR • Assuring financial, Loan disbursement/ • Collaboration with and operational recovery SBP/NGOs/CBOs, sustainability Donors,UN and International agencies
  • 61.
    CHALLENGES Scale Sustainability 90% Market Unreached Only few sustainable MFI Scaling Up Islamic Microfinance Capacity Collaboration Funds MFIs, Field Staff MFIs, SBP Commercial Donations Funds Depth Competition/Others Bottom Rural Uniformity and Standards Gender Poor Access
  • 62.
     TJAZAK ALLAH  Thank You! Dr Shabbir Hussain Cell : 03005558307 92-51-8438800 Email : dr.shabbir@hhrd.org drshabbir@gmail.com Presentation By : Dr Shabbir Hussain,