We should uphold the True Spirit of Islamic Finance

This blog was written by Dr Ajaz Ahmed Khan, Senior Microfinance Advisor at Lendwithcare, CARE International UK. It was first published in the True Banking online magazine, and has been reproduced here with their permission.

Pakistan blog series: Learning more about Akhuwat

In February 2017 I was lucky enough to visit our microfinance partner in Pakistan, Akhuwat. Please read my series of blogs to share my experience and insights into this inspiring organisation.

If you are interested in reading more about Islamic microfinance, my colleague Dr Ajaz Ahmed Khan and renowned microfinance experience Dr Malcolm Harper will soon publish a book on Islamic microfinance, which contains a chapter on Akhuwat.

Building resilience among microentrepreneurs in the Philippines

This blog was written by Dr Ajaz Ahmed Khan, senior microfinance advisor at Lendwithcare. It was first published on the Virgin Unite website for Global Entrepreneurship week and has been reproduced here with their permission.

This year for Global Entrepreneurship Week we will be sharing inspirational stories of how entrepreneurs can provide a shining light of hope in even the darkest of situations.

The Philippines ranks third in the list of countries in the world where a natural disaster is most likely to occur, after the Pacific islands of Vanuatu and Tonga. Although it is also prone to earthquakes, flooding and droughts, it is typhoons that strike the Philippines most frequently. The state weather bureau PAGASA estimates that, on average, eight or nine typhoons or tropical storms make landfall in the Philippines each year, with another nine or ten entering Philippine waters.

Photo ©Peter Caton

Better evidence means less poverty

The primary purpose of Lendwithcare is to help poor people to improve their lives through supporting them to access loans for their businesses. Do we actually have any evidence that this is happening? Certainly, we have a great deal of anecdotal evidence – in addition to the periodic updates that we receive from some of the microentrepreneurs that we have funded, each year my colleagues and I also visit and speak with hundreds of individuals and groups who Lendwithcare supports in 11 countries in Africa, Asia and Latin America. Although we do come across some persons for whom nothing much seems to have changed, more often than not they explain to us how access to loans over an extended period of time has enabled them to develop their businesses, stabilise or increase their incomes, increased their self-confidence, self-esteem and economic independence, make improvements to their homes, and sometimes as a result even spend more money in areas such as their children’s education and the health of their families.

However, this approach is not particularly scientific – there are often other important reasons aside from improved access to loans why their lives have improved, it might be that we are simply meeting the more ‘successful’ microentrepreneurs, people are simply being polite, or they are telling us what they think we want to hear.

Ghulam Raza interviewing an entrepreneur at Akhuvat

Tackling gender inequality in Pakistan | The Akhuwat clothes bank initiative

Following his recent trip to Pakistan, Dr Ajaz Ahmed Khan tells us about a very interesting project implemented by our MFI partner AKHUWAT.

Guriya, who works in the Clothes Bank

Transgender persons, or khwaja siras as they are often referred to in Pakistan, routinely face a high level of discrimination in access to health, housing, education and employment as well as ridicule, intimidation and the threat of physical violence. Most khwaja siras are forced to live at the margins of society and earn an income by dancing at ceremonies such as weddings and births, and most commonly from begging. In an almost unprecedented example of positive discrimination Dr Amjad Saqib, the founder and executive director of Akhuwat, Lendwithcare’s partner in Pakistan, decided when he established a clothes bank in May of last year to only employ khwaja siras to sort, repair, clean and pack the clothes. Such regular employment opportunities are almost unheard of for transgender persons. Akhuwat now employs six full-time khwaja siras, namely Naghma, Naina, Guriya, Faisal, Moshin Deedar and Guru Taj, in the clothes bank which is based in Akhuwat’s head office in Lahore.

More than just microfinance - How Pakistan’s largest Islamic Microfinance Institution supports one of the country’s most stigmatized communities

© Akhuwat 2014

Despite positive measures such as the landmark legal judgement in 2009 that granted transgender people  their own gender category on national identification cards and the Supreme Court recommending that they benefit from affirmative action for civil service jobs, transgender people remain among the most disadvantaged groups in Pakistan.  Often referred to as hijras or khwaja siras (the latter is the term used to describe the transgender courtesans who danced in the courts of the Mughal Emperors during the seventeenth and eighteenth centuries) they routinely face discrimination in health, housing, education and employment as well as ridicule, intimidation and the threat of physical violence. Most khwaja siras are forced to live at the margins of society and earn an income from performing at ceremonies such as weddings and births; extorting payment by disrupting people’s work and most commonly begging - they are, for example, a relatively common sight at traffic lights in many large Pakistani cities such as Karachi and Lahore.

"Liberation loans" offered by our partner in Pakistan to free poor people from spiralling debt

After the 2014 Oscars ceremony, Steve McQueen's film “12 Years A Slave” deservedly took home the big prize of best picture. However, it is important to remind ourselves that the barbaric practice of slavery is not something we can consign to the history books. It is still a contemporary issue in many countries around the world.

The epic 1957 Bollywood film ‘Mother India’ movingly portrays the story of a family struggling to survive against the machinations of a local moneylender. Many decades later this is still one of the rare examples of Indian cinema vividly reflecting the reality faced by millions on the Indian sub-continent, and instances of local moneylenders charging usurious rates of interest remain as prevalent as ever throughout much of South Asia.

As well as providing loans to people wanting to establish or develop their microenterprises, lendwithcare’s partner in Pakistan, Akhuwat, provides ‘liberation loans’ to people who are struggling to repay debt that has been taken from local moneylenders. In most instances, borrowers took out small loans at interest rates of up to 20% per month and the debt has spiralled out of control. Sometimes borrowers have already sold what few assets they own, yet still struggle to keep up with repayments. Shahzad Akram, Akhuwat’s Chief Credit Officer, recalls instances where young borrowers have even committed suicide and some moneylenders demanded that borrowers sell their daughters to repay the debt. In parts of southern Punjab and Sindh it is not uncommon to find borrowers and their children who have been forced to become indentured labourers for feudal landlords as they struggle to repay debts that were often taken out many years ago.

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.