Eid Mubarak | Celebrations & Charity from Pakistan

© Akhuwat 2014

عيد مبارك, Eid Mubarak and blessed celebration to all of Lendwithcare’s entrepreneurs, partners and lenders across the world this Eid al-Fitr. For those of you who didn’t know Eid al-Fitr, the festival of the breaking of the fast, occurred on Monday (or yesterday for some countries) and marked the end of the Islamic holy month of Ramadan with a day of celebrations held across the Muslim world. The festival, which is viewed much like Christmas for Christians or Holi for Hindus, is one of the largest in the Islamic calendar and comes as the culmination to a month spent fasting, praying and giving gifts to fellow Muslims and non-Muslims alike. This year’s Eid al-Fitr is also of special significance to those of us here at Lendwithcare as it marks the end of our first year offering Islamic loans to entrepreneurs in Pakistan through our partner Akhuwat. To commemorate this year’s Eid al-Fitr and the amazing work Akhuwat preforms across Pakistan we asked their Chief Credit Officer Shahzad Akram to tell us how our entrepreneurs in Pakistan normally spend Eid al-Fitr and just what Akhuwat will be doing themselves to celebrate the day.
Shahzad told us that “Eid al-Fitr is celebrated in Pakistan with great religious harmony and enthusiastically and is treated as the second biggest event for all Muslims around the world. In Pakistan many days before Eid, people start to think and buy special dresses for the occasion as everybody wants to be look nice, beautiful and handsome on Eid day (Especially my wife who looks very awesome & pretty on Eid day)”. After attending morning prayers alongside their family people will greet “each other with embraces just to share their happiness” as well as give gifts of money to children and share sweet noodles in milk, a traditional Eid dish, with their neighbours, friends & relatives. Later in the day the children will spend the money they have been given in market stalls on sweets and ice creams while others will visit the graves of loved ones or go to the cinema or carnival with friends.

Shahzad also tells us that one of the most interesting dimensions of the day is the acts of charity that are incorporated into the Eid festivities and the Month of Ramadan as a whole. Many people will commemorate the occasion by donating a great deal towards helping the poor in their communities, either by arranging lunches and dinners, providing grocery items or simply in the form of money so that they too can afford new clothes for their families at Eid. Shahzad explains that for people in Pakistan “a special occasion [like Eid] is an opportunity to try to share their happiness with others rather than just celebrating it within [their immediate] family”. Indeed the Eid celebrations are especially important for entrepreneurs like Fozia Fatima, a mother of four from Lahore who received an interest-free loan from Akhuwat to start a beauticians business to help pay for her children’s education after her husband was injured at work. The desire of people in her local area to look their best on Eid means increased demand for Fozia’s beauty treatments and provides a great opportunity for entrepreneurs like her to gain new customers and grow their businesses. The small loan (£102) Fozia requested to adequately stock her beauty parlour was covered by Lendwithcare lenders, enabling our partner in Pakistan, Akhuwat, to issue more loans to small business owners like Fozia.

In the spirit of the occasion Akhuwat also distributed around 500 family clothes gift packs to their entrepreneurs and other needy people ensuring the poor also celebrate Eid even if they don’t have the capacity to buy clothes. In addition Akhuwat and a full team of volunteers arranged a carnival and a meal for their entrepreneur’s families in recognition of the hard work and achievements they have made in the past year. On behalf of Akhuwat and all of our partners and entrepreneurs across the world we would like to wish all our lenders a blessed celebration Eid al-Fitr and thank them for their continued generosity in allowing people like Fozia Fatima to take advantage of opportunities to improve their lives for the better.

© Akhuwat 2014

Does faith matter? A blogpost by Dr. Ajaz Ahmed Khan

Does an association with faith encourage more prompt repayment of microloans and are the staff of faith-inspired microfinance institutions more motivated?

After recently returning from a visit to Pakistan, where I was analysing the operations of an Islamic microfinance institution, I am tempted to answer yes to both questions. The microfinance institution in question is Akhuwat, a lendwithcare partner. The organisation derives its name from the Arabic word Mwakhwaat or brotherhood and was established in 2001 by Dr Amjad Saqib. It has grown quickly to become one of the largest specialist providers of microloans in Pakistan – it now has almost two hundred thousand active clients, including many non-Muslims, served by more than 250 branches located throughout the country.

Akhuwat provides interest free, referred to as Qard Hasan, loans to the working poor. Qard Hasan loans are promoted in Islamic teachings as one of the mechanisms to assist poor people; indeed they are preferred to providing the poor with outright charity. With an average loan size the equivalent of just US$144, Akhuwat lends to some of the poorest people in Pakistan without any formal collateral and has a remarkable on-time repayment rate of 99.33%.  This can partly be explained by the fact that loans are made to small groups of friends and neighbours who appraise each other’s loans. While most of Akhuwat’s loans are to help low income people start or develop their businesses, they also provide ‘liberation’ loans to those people who have taken loans at high rates of interest from moneylenders and the debt has spiralled beyond control. The organisation repays the whole amount owing to the moneylender in the presence of the borrower and then requests the borrower to repay Akhuwat in interest free instalments.

Through speaking directly with Akhuwat’s clients in and around the city of Lahore it was noticeable how many stressed that it was precisely the fact that the loans conformed to Islamic teachings, particularly regarding the prohibition on charging or receiving interest, that most attracted them to Akhuwat and the fact that the funds may be from others fulfilling their religious obligations that motivated them to repay. Some borrowers confessed that it was the first time that they had ever received a loan from a microfinance institution – they had in the past refrained from accessing interest-based microfinance because of their religious beliefs.

No doubt borrowers were also attracted to Akhuwat’s loans because they were much cheaper than the alternatives available since borrowers paid no interest and Akhuwat’s loan officers would even visit borrowers at their homes or places of work to collect repayment instalments making their service very convenient. However, there did seem to be a genuine desire from clients to see the organisation develop and succeed. All the clients that I spoke with or observed visiting the organisation voluntarily made donations to Akhuwat - the organisation covers its operating costs through donations from borrowers and well-wishers – and the ubiquitous donation boxes in the branch offices were stuffed full with small denomination rupee notes.

It also became apparent that Akhuwat’s staff were also extremely committed and routinely worked extra hours. While this is common in many social development organisations, some had come to the institution from better paid jobs elsewhere and others had continued to work for Akhuwat for many years eschewing opportunities elsewhere. Many confessed that they were motivated by spiritual reasons and a sense of fulfilling a duty – something that I have also observed with staff working with faith-based microfinance institutions in Africa and Latin America.

I am certain that faith does have some influence on the way borrowers perceive Akhuwat and also on their behaviour and it has a motivational impact on programme staff. No doubt this has partly contributed to Akhuwat’s success but, as Dr Amjad Saqib emphasised to me, it is not a substitute for a conducive macroeconomic environment, qualified and experienced staff, and proper policies and procedures.

Loans can be given as a gift voucher to a friend or family member, who can choose which entrepreneur they would like to support. The entrepreneur uses the loan to help grow their business, and later pays the lender back. The lender can either withdraw the money and keep it, or lend the same money to another entrepreneur.

By Ajaz Ahmed Khan, Microfinance Advisor at CARE International