Muslim Aid Microfinance Program Towards Economic Empowerment

Transcription

1 Annual MAP Microfinance Report Annual Muslim Aid Microfinance Program Towards Economic Empowerment Pakistan Field office House # 228, Street # 23, F-11/2, Islamabad Ph: , Fax: Page 1 of 22

2 Table of Contents Acknowledgments 3 Economic Empowerment Program (EEP) 5 Qarde Hasana 6 Enterprises Development Loan 7 Liberation Loan 7 Education Loan 7 Type of micro-enterprises supported 8 Murabaha (Cost-plus Sale) product 9 Basic rules of Murabaha Financing:- 9 Types of micro-enterprises 9 Disbursement methodology 10 Program status 12 Number of clients 13 Disbursement 14 Recovery 17 Outstanding 18 Income Generation Unit 19 gillon Pharmacy 19 Financial Highlights 19 Case Studies 20 Imtiaz Hussain 20 Wasim Sadiq Masee 20 Mazhar Hussain 21 Mohammad Imran 21 Page 2 of 22

3 Acknowledgments Muslim Aid Pakistan gratefully acknowledges the contribution of donors, especially Muslim Aid UK, for generously given funds, Individual local donors who have shown interest in our program and joined us for the cause of serving the poor.. We are thankful to the Microfinance Team in Head Quarter for their continuous support and guidance towards the achievement of set targets. We also thankful to Country Director Muslim Aid Pakistan, who has shown keen interest in the program and throughout the period, provide guidance and support to the team. We also acknowledge the efforts of Microfinance Field office Team who have ensure the success of the program and participated actively in the execution of the project activities with dedication and commitment, which have been instrumental in the fulfilment of activities mentioned in this report. Page 3 of 22

4 Background The first goal of UN Millennium Development Goals (MDGs) is to Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day. Though various steps were taken to achieve this target even today 25% of the world population is living below poverty line. 1 The Task Force on Food Security based on the World Bank estimates of poverty head count ratio of 29.2 % in estimated that poverty head count increased to 33.8 % in and 36.1 % in or about 62 million people in were below the poverty line in Pakistan. 2 In most of developing countries the tool that is being used today in order to alleviate poverty is micro finance. There is an increasingly large body of evidence which shows that microfinance (MF) can have an impact on poverty reduction and in reductions of vulnerability to poverty. In addition there is an emerging body of literature that MF can impact positively on health, nutritional status and primary school attendance 3 The main purpose of microfinance is to break the vicious circle of low income low investment-low profit by inserting capital from outside into the economic life of poor people. According to Adam Smith Money, says the proverb, makes money. When you have got a little, it is often easy to get more and the great difficulty is to get the little 4. Microfinance provides the little money where even there is total absence of capital or profit as living is based on subsistence only. Thus microfinance seeks to improve the condition of the poor by raising income and profit, thereby making people free from poverty and improving living standard. Currently in Pakistan, a variety of institutions ranging from NGOs to private and government sponsored rural support programs are delivering microfinance services to the poor. Two Commercial banks i.e. First Women Bank and Bank of Khyber are also providing lines of credit for the microfinance sector. Similarly large scale microfinance provider NGOs are now emerging as Microfinance Institutions (MFIs) with range of products and services as per the state bank regulations. In Pakistan, the poor usually acquire loans from informal sources. Lack of income and resources force them to take loans at high interest rate to meet basic necessities of life and the hurdle of collateral leave them at the mercy of the informal avenues. It is recognized that people living in poverty are innately capable of working their way out of poverty with dignity, and can demonstrate creative potentials to improve their situation when an enabling environment and the right opportunity exists. It has ) 3 Morduch, J. and Haley B. (2002), Analysis of the effect of Microfinance on Poverty Reductions NYU Wagner, Working Paper No. 1014, June 4 Smith, A. (1937). The wealth of nations, Pp. 93, Reference according to Russel, A.S. (2006). A social and financial assessment of micro finance for the extreme poor. Doctoral Dissertation. Lund University centre for East and South East Asian Studies. Page 4 of 22

5 been noted that in many countries of the world, micro-credit Programs, provide access to small capitals to people living in poverty, which enable them to initiate small enterprises for sustainable solution to their livelihood.. Economic Empowerment Program (EEP) To contribute towards poverty alleviation through Human Resource Development and provision of access to financial services, Muslim Aid initiated Economic Empowerment Program (EEP) in Pakistan in Under EEP we are implementing Micro-Enterprise Development Projects (MEDP) in Rawalpindi and Chakwal. Similarly, skills development centers with brand name of Muslim Aid Hunerkada in Karachi, Chakwal and Jared were established. In Hunerkada we are providing various sellable skills to young people especially women. After acquiring the skills they can either start some micro-enterprise or get some job. Under Micro-enterprises development program we distributed Rs 11,405,710 among 982 clients from June 2007 to Dec 2009 for establishment or enhancement of their micro-enterprises. Table 1: MEDP coverage by province, district and Tehsil Province District Union Councils Punjab Chakwal Union Council 1, 2, 3, 4 Rawalpindi Khana Kak, Dhoke Paracha, Muslim Town and Sadiqabad. Page 5 of 22

6 Goal of the program Figure 1: Project Area Overall goal of the program is to contribute towards poverty alleviation through Human Resource Development and channelizing the energies of the poor people towards entrepreneurship and Micro enterprise development by giving access to financial services through interest free microfinance. At the moment Muslim Aid Pakistan Microfinance program is comprised of two components 1. Qarde Hasana 2. Murabaha Qarde Hasana Qarde Hasana (Micro Enterprises Development product) was initiated in June, 2007as in an urban area of Rawalpindi. Main objective of the project was to provide interest free micro loans to the micro entrepreneurs to enhance their existing enterprises or establish new micro enterprises by utilizing their skills. Later on, keeping in view the need of the community, some other products were also introduced like Liberation and Education loans. In two and a half year (June 2007 to Dec 2009), we served 603 individuals by distributing interest free loans worth of Rs 57, 52,800. Recovery rate was 99%. At initial stage, 5% membership fee was being charged from the clients. Later on in Sep 2009 we abolished that fee too, to make it 100% interest free. For sustainability of the project following components were incorporated in 2009; i. Rs100 as fee for application form Page 6 of 22

7 ii. iii. Provide donation boxes to the clients to donate whatever they can on monthly basis. While submitting their monthly instalment they also submit their donations as a contribution towards the interest free microfinance program. Individual donation from local philanthropist for revolving fund and admin cost. Under Qarde Hasana we are offering following products Enterprises Development Loan This product is for establishment of a new micro enterprises or expansion of existing ones. Enterprise Development loan is the most common type of loan and comprises 97% of the total loan portfolio. Loan size varies in the range of Rs.10, 000 to Rs. 18,000; however, ceiling for the first loan is Rs.10, 000. The client has to come up with a viable business plan to become eligible for the loan. This product is also known as the family Enterprise loan because during the period of appraisal and lending, entire family is involved in the process with the view to make it a family venture instead of an individual effort. Liberation Loan This product is developed for those persons who borrowed money from moneylenders at very high interest rates to meet their emergency needs. The poor persons are unable to repay the principal amount at once; hence they have to pay the monthly interest for years, and majority of them paid more than the principal amount as interest, but the principal amount remains stands. Muslim Aid pays principle amount in one go for the client and then client pay back that amount in interest free installments. Range of this loan is up to Rs. 30,000. Education Loan It is utilized for paying dues or purchase of books and educational material of poor students. It provides assistance to bear education expenses in easy way. Range of education loan is up to Rs. 25,000. Page 7 of 22

8 Figure 2: Percentage of total clients per product Type of micro-enterprises supported Table-2 shows the type of enterprises we supported during the year 2009 in sadiqabad, Rawalpindi under Qarde Hasana project. The most common enterprises were of Karyana store (11%), followed by tailoring (10%), embroidery (8%) and Garments (8%). Table 2: Type of micro enterprises supported S. No Type of enterprise No Of Clients % 1 Others % 2 Keryana/Tuck Shop 36 11% 3 Tailoring Work 32 10% 4 Embroidery work 27 8% 5 Garments Shop 24 8% 6 Fruit & Vegetable Shop 16 5% 7 Taxi Repairing 11 3% 8 Barber Shop 10 3% 9 Furniture Work 9 3% 10 PCO/Mobile Shop 8 3% 11 Electronics/Repairing Shop 7 2% 12 Books Shop 6 2% 13 Beauty Parlor 6 2% 14 Carpenter Work 5 2% 15 Welding Shop 5 2% Total 319 Page 8 of 22

9 Figure 3: Types of Microenterprises supported under Qarde Hasana Murabaha (Cost plus Sale) product Murabaha is a particular kind of sale where the seller discloses its cost and profit charged thereon. It is a contract wherein the institution, upon request by the customer, purchases an asset from the third party usually a supplier/vendor and resells the same to the customer either against immediate payment or on a deferred payment basis. The Murabaha product Documentation is ensured as per the guidance of Shariah expert. Basic rules of Murabaha Financing:- Assets to be sold must exist. Sale price should be determined. Sale must be unconditional. Assets to be sold. i. Should not for un Islamic purpose. ii. Should be in owner ship of the seller at the time of sale, Physical or constructive. Renegotiations of price and rollover of murabaha are not permitted. Discounting of Murabaha instrument is not permitted. We are focusing micro-enterprises only under the Murabaha product in chakwal. Types of micro-enterprises Table shows list of enterprises supported under Murabaha project during the year Highest numbers of clients were running small keryana shops (18%), followed by Street hawkers (10%) and fruits and vegetable shops (9%). Page 9 of 22

10 Table 3: list of various enterprises supported S. No. Micro-enterprises supported No of % Client 1 Karyana Store goods 47 18% 2 Street hawkers 25 10% 3 Fruits & Vegetables shop 22 9% 4 Garments and Cloths Shops 17 7% 5 Tailor 15 6% 6 Cycle Spare parts and Rickshaw 13 5% 7 Mobile Shop 12 5% 8 Sanitary Store Goods 8 3% 9 Electronic Materials 6 2% 10 Carpenters Materials & Furniture 6 2% 11 Cobblers 5 2% 12 Barber Shops 5 2% 13 Others 76 30% Total 257 Figure 4: Types of Microenterprises supported under murabaha Disbursement methodology Muslim aid provides credit to individuals on provision of two personal guarantors. The credit is given mainly for establishment or enhancement of micro-enterprises. Most MFIs in Pakistan and other countries offer credit to women only. We offer credit to both men and women and does not target a specific community. Muslim aid offers a progressive lending product in that the credit amount increases with the successive loans. During the year the first loan ceiling remains Rs 10,000 and Rs Page 10 of 22

11 15000 for Qarde Hasana and Murabaha respectively, and the maximum amount for a repeat client limits Rs and Rs respectively. Unique feature of Muslim Aid credit is that it is 100% free from interest and mainly (97%) use for establishment or enhancement of microenterprises, which increases economic activity and hence income of the clients. Muslim aid makes every effort to increase the outreach of its microfinance services, so as to achieve the ultimate objectives of reducing poverty. Page 11 of 22

12 Program status Number of clients During the year 2009 total 576 clients were served. Out of the total, 319 clients were provided with Qarde Hasana, while items were purchased for 257 clients under Murabaha. Out of 576 clients, 18% (101) were female, while 82% (475) were male clients. Month Table 4: Month wise disbursement for the year 2009 No of Clients Murabaha Q.H. Total Male Female Male Female January February March April May June July August September October November December Total Sub Total Figure 5: male female client s ratio Page 12 of 22

13 Figure 6: month wise number of clients Number of clients has been significantly increased from 49 in 2007 to 982 in In two years total number of clients of Murabaha reached to 379, while Qarde Hasana clients reached to 603 in two and a half years. At the end of december 2009 two hundred and seventy nine cases of qarde hasana were closed while 324 clients were active. Two hundred and forty four clients of murabaha were active at on 31 st december About 61% increase in clientage has been reported in year 2009 over Main reason is that people are becoming aware of our program. Table 5: Year wise number of clients Year No of Clients Murabaha Qarde Hasana Total Total Page 13 of 22

14 Figure 7: year wise number of clients From June 2007 to Dec 2009 we have provided Qarde Hasana to 603 clients (477 male and 126 female). Two hundred and seventy nine (279) cases were closed while 324 remained active. Disbursement During the year 2009, Rs has been distributed. Out of the total disbursement 56% were under Murabaha while 44% were distributed under Qarde Hasana. As we are focusing on development of micro-enterprises, and we give cash in Qarde Hasana, we tried to filter out the clients in August-September, who were least interested in developing their enterprises but their need for cash was to acquire for consumable items on Eid. Such clients were screened out and were not entertained. Month Table 6: Month wise disbursement for the year 2009 Disbursement Murabaha Q.H. Total (Rs) Total ( ) January 238, , ,000 4,169 February 241, , ,000 4,900 March 221, , ,000 4,238 April 281, , ,000 4,046 May 335, , ,525 4,281 June 251, , ,300 3,825 July 311, , ,000 4,046 August 522, , ,000 5,515 September 339, , ,600 3,835 October 349, , ,000 4,438 November 485, , ,220 6,202 December 355, , ,615 4,512 Total 3,929,960 3,091,300 7,021,260 54,010 Grand Total 7,021,260 In Page 14 of 22

15 Figure 8: Product wise breakup of total disbursement Figure: month wise disbursement Twenty percent of total Murabaha amount was used for initiating new microentrprises while 79% funds utilised for enhancement of existing micro-entrprises. Figure 9: Support under Murabaha to micro-enterprises Page 15 of 22

16 From june 2007 till dec 2009 we have distributed Rs , among the clients. Out of total funds Rs (50%) were distributed under Murabaha while Rs (50%) were distributed under Qarde hasana project. Average loan size was Rs for Murabaha and Rs 9690 for Qarde Hasana. Figure 10: Annual disbursements Year Table 7: Year wise distribution Disbursement Murabaha Qarde Hasana Total , , ,188,500 3,911, ,091,300 7,021,260 Total ,752,800 11,405,710 Page 16 of 22

17 Recovery Total recovery during the year was Rs with 98.3% recovery rate. Table-8 shows month wise recovery. Month Table 8: month wise recovery during the year 2009 Recovery (Principal Amount) Murabaha Q.H. Total (Rs) Total ( ) January 152, , ,927 2,638 February 170, , ,847 2,783 March 198, , ,647 3,451 April 204, , ,467 3,327 May 226, , ,616 3,605 June 244, , ,605 3,835 July 244, , ,749 3,998 August 243, , ,908 3,807 September 270, , ,624 4,143 October 288, , ,159 4,278 November 278, , ,875 4,099 December 314, , ,636 4,359 Total 2,836,760 2,925,300 5,762,060 44,324 Grand Total 5,762,060 In Figure 11:Mmonth wise recovery during the year 2009 Page 17 of 22

18 Table-9 shows year wise recovery, with total recovery till December 2009 as Rs Recovery rate was 97%. Year Table 9: Yearly recovery Recovery Murabaha Qarde Hasana Total Total Figure 12: year wise recovery Outstanding Total outstanding amount at the end of year 2009 was Rs 40,67,851. Product Amount (Rs) Murabaha Qarde Hasana Total Page 18 of 22

19 Income Generation Unit gillon Pharmacy To make the project sustainable we have tried to incorporate a mechanism for funds generation. WAQF is an Islamic concept, and if we look into the history, especially of sub continent it was the basic component of any development and charity work. People were used to donate Agriculture land, part of their wealth, property to various institutes (educational, health etc), so that their running cost meet from the income of that property. We have invested Rs 3300, 000/- in two pharmacy outlets. In April 2008 we purchased two running units of pharmacy in Lahore, with the name of gillon Pharmacy on Musharaka with an individual experienced pharmacist Asad Imran. He is responsible for the management of business, under supervision of a Management Committee comprised of Mr Asad, Country Director Muslim Aid, Program Manager (Economic Empowerment), MA Accounts Officer, Pharmacy Accounts officer, MA Resource Mobilisation Executive and an expert of pharmacy business other than Mr Asad. The documentation of Musharaka agreement is made under the guidance of Shariah experts and top auditing firm Earnest and Young Ford Rod Sydat Hyder. We are utilising Muslim Aid share of income for meeting the admin cost of the project. Overall profit has been increased from Rs in 2008 to Rs in 2009 (33.8% increase). Muslim Aid share in net profit also increased from Rs in 2008 to Rs (33.8% increase) in Out of the total profit share we draw Rs from 2008 profit (till June 2009), and reinvested the remaining amount for increasing the stock. Financial Highlights Key Performance Indicators (2009) Sales Revenue PKR. 51,029,447 Net Profit PKR. 2,240,536 Page 19 of 22

20 Total Assets PKR. 8,052,453 Net Profit Ratio 4.39% Return on Investment (Overall) 37.34% Return on Investment (Muslim Aid) 23-34% Return on Assets 27.82% Case Studies Imtiaz Hussain One s life is not a coincidence it is in fact a reflection of what one earns. Mr. Imtaiz Hussain was working as an employee on a welding shop getting pay of Rs. 4000/- per month. With this little pay it wasn t possible for him to provide basic necessities of life to his spouse and two kids. He worked as employee for about 14 years, and became expert of making all iron products. Due to lack of financial resources it was not possible for him to start his own business and increase his income for improving living standard of his family. He has requested MAP Chakwal office to purchase basic welding items through Murabaha to start his own business. Muslim aid supported him in purchasing of desired equipments like welding plant, compressor machine, grinder & cutter amounting to Rs.15000/-. He worked hard with devotion and now running his own wielding shop earning about Rs. 12,000/- per month. He has also improved his living standard by purchasing washing machine and room cooler. His success lies in his dedication, honesty and day and night hard work, but most importantly, the help provided by MAP through shariah complied microfinance and enterprise development project played an important role to his sustainable livelihood. Wasim Sadiq Masee Wasim Sadiq Masee is expert in compressor repairing. From last 19 years he was working on a very small scale with total investment of about Rs. 10,000/-. From this small investment he was earning about 6000/- per month and it was difficult for him to manage his expenses. He had skills and wanted to expand his Page 20 of 22

21 business but due to lack of financial resources he was unable to do so. Once Muslim Aid staff visited his shop and introduced him about Microfinance and Enterprise development program. He liked the program and approached MAP office to support him in expanding his business. MAP purchased Compressor and gas cylinder amounting to Rs.15000/- and handed over that to him under Murabaha agreement. Now after lapse of one year total investment in his business has been increased to Rs. 40,000/- and his per month income has been increased to Rs. 11,000/- p.m. Previously he was not paying his utility bills well in time but due to increase his income he is now regularly paying his bills and also fulfilling his family obligations. Mazhar Hussain Mr. Mazhar Hussain is skilled cobbler expert in making female sandals, School shoes and Chapples. He was working on very small scale making 24 dozen shoes per month with monthly saving of Rs. 7200/-. He had skills but not sufficient financial resources to purchase raw material in bulk and expand his business. He said, I didn t have any financial solution other than to avail interest base financing, which, Due to my religious spirit I was not willing to avail. Once Muslim Aid team members visited my business and introduced Shariah compliant Microfinance program. I approached Muslim Aid chakwal office and applied for purchasing of Raw material amounting to Rs. 15,000/-, which I have received after fulfilling Muslim Aid requirements and necessary processing he said. Hussain further elaborated By using raw material my shoes production have been increased from 24 dozen per month to 48 dozen per month. Now my income has increased to almost double (Rs. 14,000/- per month) and I am thinking to hire one employee with Rs. 6000/- per month salary to meet orders of my clients. I would like to thank Muslim Aid for helping me to expand my business and for providing me Shariah compliant financial solution. Mohammad Imran Muhammad Imran lives in Rawalpindi with his 8 family members. By profession he is a barber and was an employee to another barber shop I was getting Rs 100 a day, and was always thinking of running my own shop, but i had no resources he said. He came to know about Muslim Aid Qarde Hasana project. He took Rs 10,000 loan for establishment of barber shop. I started my work with few basic items i purchased from loan he Page 21 of 22

22 elaborated. After successfully returning the first loan he got second loan of Rs 10,000 and with this he further enhanced his business by adding other items. Now not only his daily income increased to Rs 400, he also employed another person for his Rs 100 a day. Page 22 of 22