ESAAR MICROFINANCE A Community Based Model Arshad Mehmood Head of Program Helping Hand for Relief & Development “4 th Global Islamic Microfinance Forum”

ESAAR MICROFINANCEA Community Based Model

Arshad MehmoodHead of Program

Helping Hand for Relief & Development

“4th Global Islamic Microfinance Forum” 1-2 November 2014, Dubai UAE

Foundation of Esaar MicrofinanceThose who spend (in the cause of Allah) privately or publicly, by night and day, have their reward with their Lord. And (on the Day

of Resurrection) they shall neither fear nor grieve. (Al-

Baqarah 2:274)

Abu Musa reported Allah’s Messenger (May peace be upon him) as saying: A believer is like a building for another, the one

part supporting the other. (Sahih Bokhari Sharif Vol.3, Pg 440)

Whereas Allah has permitted trading and forbidden Riba (usury). (Al-Baqarah 2:275)

Charity

Prohibition of Riba Brotherhood & Scarify

Cont.

Charity

Prohibition of Riba

Brotherhood & Sacrifice

Source of funding

Riba is not just Haram, harmful for economy

Social networking: mobilization &

organization lead to social collateral

Mission Statement

•To facilitate and support livelihood opportunities and microenterprise development for poverty alleviation on brotherhood and solidarity bases through provision of Islamic Microfinance

Working Model

Donation

DisbursementRecovery

Recycle

Poverty Level & Esaar MF’s Approach

At the Poverty

Line

Below the Poverty

Line

Abject Poor

Growth

Livelihood

Safety Net

Mudarbah

Murabah

Qarad e Hasan

MED

IGAs

Survival

Classification Objective ApproachMode of

Financing

Modes of Financing

Qarad e Hasan Murabah Mudarbah

Murabah & Mudarbah Model: Background

• In Pakistan, 63% population living in Rural areas• High Poverty Ratio in Rural areas as of Urban• Agriculture is major sector of Rural Economy• Agriculture contributes 21.4% of GDP• Livestock contributes 55.4% and Crops 37.6% of

Agricultural Production• Crops sector is, mostly, financed through Murabah• Livestock sector is financed through Mudarbah

Murabah Model

• Conventional Practice• Money lender or Arti system• Delivery of Seed & Fertilizer on

delay payment• Price not declared at delivery

time (not permissible in Shariah)• Quality of delivered goods not

up to mark• Farmers are bounded to sale

out their crop to same Arti • Exploitation of farmers

• Esaar’s Murabah Model• Sharia based Murabah• Participatory approach• Price and profit declared at

delivery time• Quality up to mark, purchase by

producer/importer• Low rates compared to market• Farmers are free to sale out their

crop in open market• Farmers has extra income – due

to low cost inputs and relatively high price of crop in open market.

Mudarbah Model

• Conventional Practice• Livestock rearing on partnership

bases• Owner purchased and handed

over to shepherd/herdsmen• Purchasing price not declared• Shepherd/herdsmen

responsible for fodder, medicines etc.

• No written contract • At the time of selling profit

sharing 50-50 • No proper mechanism of loss

sharing

• Esaar’s Mudarbah Model• Livestock rearing on partnership

bases• Purchasing is done in presence of

Mudarib and handed over• Written contract as per Shariah

rules• Fodder and medicines are

responsibility of Rub-ul-Mal (Esaar MF)

• Sale is done in presence of Mudarib

• 60% profit goes to Mudarib• Loss sharing as per Shariah rules

◘ Mansehra

◘ Rawalpindi◘ Mianwali

◘ Muzaffargarh

◘ Rajanpur

◘ Dir

◘ Bahawalpur

◘ Ziarat

◘ Jaffarabad◘ Jacobabad

◘ Kashmoor◘ Shikarpur

◘ Chitral

◘ Kotli◘ Rawalakot◘ Hattianbala

◘ Gilgit

◘ Thatta

◘ Swat

◘ MalakandCharsada ◘Nowshera ◘

◘ Benazir Abad◘ Matiari

◘ Tando Allah Yar

Our Coverage

◘ Mirpur Khas

Implementation Strategy

Area Identification

HR Selection & Facilitation

Base Line Survey

Target Group Identification

Community Mobilization & Organization

Disbursement

Recovery & Follow up

Esaar MF

Interest Free:

Shariah Compliant

Cluster & Community

Based Approach

Online System

Capacity Building

Component

Sustainable &

Universally Replicable

Integrated Approach

Esaar Microfinance Model

Summary

No. of Clusters 26Geographic Coverage (District and Union Councils - UCs)

24 Districts, 26 UCs

Accumulative Beneficiaries 13,968Accumulative Disbursement USD 3.86 MillionOperating Cost Ratio 15%Recovery Ratio 99.5%Upper limit of Financing USD 600

Targeted Income Generating Activities

Fertilizer, Seeds & Pesticides

Agriculture

Calves, Goats, Fodder, Hens

Livestock & Poultry

Motor Cycles, Fridges etc.

Household Items

Sugar, Flour, Medicines,

Stationery, Keryana Store Items etc.

Small Enterprise

Sewing Machines, Tools, Raw Material

etc.

Services

Practice Issues• Qualified and Trained Human Resource• Community Awareness• Local Religious Leaders• Tax Procedures• Natural disasters• Shariah based funding source

Abdul Majid from Batakundi, Naran Valley – earthquake affected area and Pea farmer

Received seed and fertilizer from money lender.

The price was very high.

Delivery not timely.

Bounded to sale out the production to same money lender.

Sale price low compared to market price.

Problem

Financial assistance with out exploitation

Got seed and fertilizer from Esaar Microfinance on Murabah bases having amount USD 550

Solution

Got required inputs at low price and timely

Sale out the production in open market

Got USD 700 additional benefit

Purchased some household items

Result

A Case Study

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