akhuwat redefining micro finance by prof. ather azeem

8/6/2019 Akhuwat Redefining Micro Finance by Prof. Ather Azeem

1/14


2/14

Ather Azim KhanProfessor of Finance

Universit y of Central Punjab


3/14

y Internationall y microfinance is considered a viable proposition to alleviate povert y but its sustainabilit y is related to high interest rates.

y It is said that for those poor people who have entre preneurial skills but the y do not have access to finance can come out of povert y b y using microfinance but microfinance should be provided to them at a ver y

high financial cost considering that micro businesses are more profitable than other commercial businesses.


4/14

y T he argument in favor of high financial cost is the importance of sustainabilit y of Microfinance Institutions, which is related to high costs charged to

the poor borro wers.y It is said that man y of micro credit borro wers fail in

their businesses and lose their mone y . T his results into high percentage of bad debts, which again needs to be

covered b y the high financial cost.


5/14

y Further, it is said that the experience of the world has proven that providing subsidized microfinance to poor does not work. Massive defaults are made and

microfinance funds eradicate sto pp ing the whole process.y Experiences of providing lost cost microfinance to

poor people have failed.y

T his has resulted into making of such policies b y fund providers, which require lending at high rates and pushing the poor to their limit.


6/14


7/14

y S ome of the important attributes of Akhu wat model are absolutel y opp osite the general practices of the

world.y

Akhu wat has not onl y implemented this model but has seen a phenomenal gro wth in a short span of time. y Akhu wat is also replicated this model with the help of

local communit y


8/14

y Akhu wat proves interest free financing, which on one hand is total negation of the philoso ph y that microfinance is not viable without high financial cost

and on the other hand is the true form of Islamic microfinance.

y Akhu wat is done it b y providing micro credit as Qarz-e-Hasna, which is an Islamic model and is cost free.

y

T he world sa y s that subsidized microfinance is not viable and Akhu wat gives extreme subsid y i.e. zero cost of financing.


9/14

y Akhu wat has revived the role of mosques in an Islamic societ y .

y Mosque was a center of man y activities in the Muslim

communities, which are unfortunatel y no w just used to offer obligator y pra y er.y Akhu wat holds its disbursement ceremonies of micro

loans in mosques to revive the role of mosques and to

inculcate the Islamic spirit in the societ y


10/14

y S tudents of man y universities and people from other walks of life work as volunteers for Akhu wat. T his spirit of volunteerism provides ne w blood to the whole

societ y .


11/14

y Another achievement of Akhu wat is converting borro wers into contributors of funds i.e. lenders of microfinance.

y

T hose borro wers who gre w but effectivel y utilizing the mone y are no w fund providers. S ome have contributed extremel y large sums of mone y to the Akhu wat fund.

y Another unique wa y of converting borro wers into

lenders is b y asking them to divert their tin y amounts of charit y to Akhu wat fund, which collectivel y becomes tens of millions.


12/14


13/14

y My interest in microfinance develo ped when I learnt about Akhu wat. Anal y zing the Akhu wat model I have come up with a ne w theor y .

y T he T heor y of Communal V iabilit y as the Akhu wat model is based on communit y partici pation. T hose who have mone y pa y , those who need mone y borro w, those who do not have mone y but want to partici pate work as volunteers, use that place for the pur pose which belongs to the whole communit y i.e. mosque.

y Funds are provided b y the rich people of societ y y Poor of the societ y are provided micro credity Mosques are used to provide microfinancey People of the societ y work as volunteers in the process


14/14

CENTER OF ISLAMIC BANKING & ECNOMICS

Head Office:

192- Ahmad Block, New Garden Town , Lahore, PakistanPh: +92-42-35913096-8, 35858990, 38407850Fax: +92 -42-35913056E-mail : [email protected]: http://www.alhudacibe.com

akhuwat redefining micro finance by prof. ather azeem

Documents