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Akhuwat Foundation – pioneers in providing interest-free microfinance

Akhuwat Foundation is a non-profit company established in 2001 and registered with SECP. Akhuwat aims to alleviate poverty by creating a bond of solidarity between the affluent and the marginalized. Their goal is to develop and sustain a social system based on mutual support. They extend a helping hand to the poverty-stricken by providing interest-free loans so they can start a business and become self-reliant. Other than having more than 700 branches in almost all cities of Pakistan to conduct its operations of distributing Qarz-e-Hasna – interest-free loans – Akhuwat also uses places of worships, like mosques and churches to disburse credit.

The primary tool being used by Akhuwat Foundation is micro-credit in a Shariah-compliant manner, that is they give interest-free small loans to the unbanked, underprivileged families. Since 2001, they have disbursed more than USD 500 million among 2.5 million families through their network of 770+ branches all across Pakistan. It is important to mention that the recovery rate is an astounding 99.93%, something unheard of in conventional banking.

Akhuwat’s vision is to create a poverty-free society, a society that is embedded in a strong bond of solidarity between the affluent and the marginalized. A society where all have an equal socio-economic opportunity to sustain and grow. Akhuwat has ventured into education services as well. They have adopted more than 300 schools of the Punjab government that are providing free education to above 50,000 students. Akhuwat has established a free residential college for boys in Lahore and a bio-tech research facility in Faisalabad. Akhuwat University is also planned to be launched soon.

Their donor-base is very wide and encompasses people from various backgrounds. It definitely transcends geographic boundaries as they are supported by individuals from all across Pakistan and the world over, including Canada, the US, Europe, the UK, the Nordic Region, and the Middle-East. Not only people from even the most marginalized financial segment are supporting them but on n the other end of the spectrum, some of the leading members of the business sector have been ardent supporters since initial days.


Akhuwat has also ventured into agriculture financing. For rural clients, Salam is a useful mode, and it has been recognized that the targeted class contains a significant portion of clients that are in need of short-term financing only. Since 2009, farmers in Punjab are availing Salam which seeks to give them a bigger role in the decision-making. Salam contracts reflect Islamic principles because they are investing in a productive activity, and the funder is taking a risk in the business. Salam products are particularly relevant for the rural poor, one of the largest segments of the unserved. Salam is essentially a sales contract with deferred delivery of goods often used in agriculture as advance payment against future delivery of a crop yield, allowing farmers to finance the advance purchase of inputs to be used in crop production. The type of crop, amount, and delivery date of the expected crop yield is agreed to in advance. The benefits of Salam financing are sufficient to allow farmers to build assets and sustain themselves above the poverty line within five financing cycles, or roughly three years. For now, Salam is only offered for wheat and rice, because of their relatively predictable price and easy storage.

Microfinance cannot be separated from Islamic finance if targeting the ultimate objective of social welfare enhancement by promoting inclusive growth and encouraging wealth distribution. Structures of Islamic microfinance have got inherent checks, and ability to deal with varying levels of poverty while providing foundations for the sustainability of institutions. However, the presence of Islamic microfinance is still very low and is concentrated only in few countries depicting a huge potential market for Islamic financial institutions as well as microfinance institutions to capture the faith sensitive microfinance clients.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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