Annual Report 2009 - Microfinance Gateway · 2019-12-14 · MAP Microfinance Annual Report 2009 Page 3 of 22 Acknowledgments Muslim Aid Pakistan gratefully acknowledges the contribution

MAP Microfinance Annual Report 2009

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Annual Report 2009 Muslim Aid Microfinance Program Towards Economic Empowerment

Pakistan Field office House # 228, Street # 23, F-11/2, Islamabad

Ph: +92 51 210 2249, 210 2252. Fax: +92 51 2213542 www.muslimaid.org.pk


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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


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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.


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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 2004-05 estimated that poverty head count increased to 33.8 % in 2007-08 and 36.1 % in 2008-09 or about 62 million people in 2008-09 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 attendance3 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

1 http://www.dfid.gov.uk/Global-Issues/Millennium-Development-Goals/1-Eradicate-extreme-poverty-and-hunger/ 2 http://www.finance.gov.pk/admin/images/survey/chapters/13-Poverty09.pdf ) 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, 1937. 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.


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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 2007. . 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.


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Figure 1: Project Area Goal of the program 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


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ii. 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.

iii. 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.


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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 117 37%

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


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Figure 3: Types of Microenterprises supported under Qarde Hasana

Murabaha (Costplus 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 2009. Highest numbers of clients were running small keryana shops (18%), followed by Street hawkers (10%) and fruits and vegetable shops (9%).


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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


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15000 for Qarde Hasana and Murabaha respectively, and the maximum amount for a repeat client limits Rs 15000 and Rs 30000 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.


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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.

Table 4: Month wise disbursement for the year 2009

Figure 5: male female client’s ratio

Month No of Clients

Murabaha Q.H. Total Male Female Male Female January 17 0 22 9 48 February 16 2 35 5 58 March 17 1 25 11 54 April 18 1 14 11 44 May 17 4 19 4 44 June 15 2 21 6 44 July 13 3 19 4 39 August 28 4 18 3 53 September 23 2 16 1 42 October 21 1 17 6 45 November 27 2 23 7 59 December 20 3 14 9 46 Total 232 25 243 76 576 Sub Total 257 319 576


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Figure 6: month wise number of clients

Number of clients has been significantly increased from 49 in 2007 to 982 in 2009. 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 31st december 2009. About 61% increase in clientage has been reported in year 2009 over 2008. Main reason is that people are becoming aware of our program.

Table 5: Year wise number of clients 2007-2009

Year No of Clients

Murabaha Qarde Hasana Total

2007 0 49 49

2008 122 235 357

2009 257 319 576

Total 379 603 982


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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 7021260 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.

Table 6: Month wise disbursement for the year 2009 Month Disbursement

Murabaha Q.H. Total (Rs) Total (£) January 238,000 304,000 542,000 4,169 February 241,000 396,000 637,000 4,900 March 221,000 330,000 551,000 4,238 April 281,000 245,000 526,000 4,046 May 335,525 221,000 556,525 4,281 June 251,000 246,300 497,300 3,825 July 311,000 215,000 526,000 4,046 August 522,000 195,000 717,000 5,515 September 339,600 159,000 498,600 3,835 October 349,000 228,000 577,000 4,438 November 485,220 321,000 806,220 6,202 December 355,615 231,000 586,615 4,512 Total 3,929,960 3,091,300 7,021,260 54,010 Grand Total 7,021,260

In £ 54010


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Figure 8: Product wise breakup of total disbursement

Figure: month wise disbursement

Twenty percent of total Murabaha amount was used for initiating new micro-entrprises while 79% funds utilised for enhancement of existing micro-entrprises.

Figure 9: Support under Murabaha to micro-enterprises


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From june 2007 till dec 2009 we have distributed Rs 11405710, among the clients. Out of total funds Rs 5652910 (50%) were distributed under Murabaha while Rs 5752800 (50%) were distributed under Qarde hasana project. Average loan size was Rs 15291 for Murabaha and Rs 9690 for Qarde Hasana.

Figure 10: Annual disbursements 2007-2009

Table 7: Year wise distribution 2007-2009

Year Disbursement


2007 0 473,000 473,000

2008 1722950 2,188,500 3,911,450

2009 3929960 3,091,300 7,021,260

Total 5652910 5,752,800 11,405,710


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Recovery Total recovery during the year was Rs 5762060 with 98.3% recovery rate. Table-8 shows month wise recovery.

Table 8: month wise recovery during the year 2009 Month Recovery (Principal Amount)

Murabaha Q.H. Total (Rs) Total (£) January 152,127 190,800 342,927 2,638 February 170,347 191,500 361,847 2,783 March 198,847 249,800 448,647 3,451 April 204,917 227,550 432,467 3,327 May 226,116 242,500 468,616 3,605 June 244,455 254,150 498,605 3,835 July 244,699 275,050 519,749 3,998 August 243,008 251,900 494,908 3,807 September 270,924 267,700 538,624 4,143 October 288,809 267,350 556,159 4,278 November 278,325 254,550 532,875 4,099 December 314,186 252,450 566,636 4,359 Total 2,836,760 2,925,300 5,762,060 44,324 Grand Total 5,762,060

In £ 44324

Figure 11:Mmonth wise recovery during the year 2009


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Table-9 shows year wise recovery, with total recovery till December 2009 as Rs 8067515. Recovery rate was 97%.

Table 9: Yearly recovery 2007-2009 Year Recovery


2007 0 107025 107025

2008 625040 1223625 1848665

2009 3184925 2926900 6111825

Total 3809965 4257550 8067515

Figure 12: year wise recovery 2007-2009

Outstanding Total outstanding amount at the end of year 2009 was Rs 40,67,851.

Product Amount (Rs)

Murabaha 2571001

Qarde Hasana 1496850

Total 4067851


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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 1674516 in 2008 to Rs 2240536 in 2009 (33.8% increase). Muslim Aid share in net profit also increased from Rs 837258 in 2008 to Rs 1120268 (33.8% increase) in 2009. Out of the total profit share we draw Rs 375000 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


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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


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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


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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 shop @ Rs 100 a day.

Documents

Annual Report 2009 - Microfinance Gateway · 2019-12-14 · MAP Microfinance Annual Report 2009 Page 3 of 22 Acknowledgments Muslim Aid Pakistan gratefully acknowledges the contribution