Islamic Microfinance

An Inclusive Approach with Special Reference to Pakistan

Prepared by:
Muhammad Khaleeu!!aman "Principal Author#
Associate Professor
School of Islamic $ankin% and &inance
International Islamic 'niversity Islamabad Pakistan
And
(r) *asim Shah Shira!i "+o,Author#
Professor of -conomics
International Islamic 'niversity Malaysia
&or
Second -uropean Research +onference on Microfinance
.une /0 /12 3ronin%en2 the *etherlands
Page 1 of 23
Islamic Microfinance An Inclusive Approach with Special Reference to Pakistan
This paper reviews demand and experience of Islamic microfinance, as well as,
limitations of mainstreaming. An effort has been made to integrate Islamic
microfinance with prime objective of enhancing inclusion. The paper suggests
extending scope of Islamic microfinance in Pakistan through product
diversification, innovation and linking microfinance institutions with Islamic
banks, particularly for fund sourcing, sharia advisory, and technology transfer.
ata set of Pakistan Poverty Alleviation !und has been used to assess impact of
conventional microfinance, which suggests that poverty status of poorest of the
poor has marginally been changed, rather the change was even smaller than the
one achieved without microfinance. The "uestion of inclusion therefore needs to
be addressed through tools of Islamic poverty alleviation process.
Introduction:
Although various reports stipulate different magnitudes of population characteri#ed as
poor, there is firm understanding that si#able proportion lives in poverty in Pakistan
$
. It is
also recogni#ed that magnitude of poverty is much greater in rural than urban areas.
%icrofinancial services have been recogni#ed vital to enhance capacity of the poor to
utili#e human effort for income generation and empowerment. &owever, access to
financial services is as low as $$' while ()' are financially excluded, the rest having
resort to informal sector. The women have even lower access *+', than men *$-',
$
. .uch
state calls for to carryout situational analysis of poverty alleviation effort in Pakistan to
see the impact of microfinance programs, if any, and to make a case for Islamic
microfinance in view of inclusion and just effort to develop poor.
/ver +0 institutions *microfinance institutions, rural support programs, microfinance
banks, and microfinance units of commercial banks and leasing corporations, represented
through Pakistan %icrofinance 1etwork *P%1, provide bulk of microfinance in the
country. The Pakistan Poverty Alleviation !und *PPA!,
2
is entrusted to provide whole sale
funds to microfinance institutions *%!Is, and multi3sectoral organi#ations for a variety of
development interventions including microfinance. According to 4conomic .urvey
*2005,
6
, microfinance institutions were estimated to have provided 7s. ).) billion to $.0
million active borrowers by 200(30) which worked out to less than 6' of total population
$
According to Poverty 7eduction .trategy Paper *8oP, 4conomic .urvey 200)305,, 62.$' of total population was
living below poverty line in 200$. %ore recently, the 4conomic .urvey 200930- reports incidence of poverty as 2+.('
estimated by Planning :ommission and 6).$ ' by Task !orce on !ood .ecurity. These estimates, however, exclude the
transitory vulnerable poor. /n the other hand, ;1P measures &PI3$ value of 6).2' for Pakistan, ranking 55
th
among
$09 developing countries.
2
<ith a view to enhance access of the low3income communities to socio3economic and financial services, an
independent professionally managed entity, PPA! was established in 2000 as a private, not3for3profit organi#ation.
PPA! aim to reach the poor through 1on38overnmental /rgani#ations *18/s, and :ommunity =ased /rgani#ations
*:=/s,, focusing institutional and capacity building measures to enhance their outreach and effectiveness of social
infrastructure and microcredit programs. /ver the last $0 years *as of >une 200-,, PPA! has disbursed funds worth
7s. )$.$) billion on account of various programs. To assess the efficiency of PPA! programs
6
8oP, ?4conomic .urvey 200)305@, !inance division, 8overnment of Pakistan, Islamabad, 2005
Page 2 of 23
living under poverty line. /n the other hand, P%1 records microfinance outreach to $9'
+
of the estimated potential 9.6 million households in Pakistan. %icrowatch
(
indicates
coverage to the extent of $6'. isregarding difference in estimates, it can safely be
concluded that substantial efforts are re"uired to extend the current achievement in terms
of funds, outreach, scale and commerciali#ation P%1 has forwarded an estimate re"uiring
;.A )00 B 500 million i.e. 7s. +- B (5 billion to be invested in debt, deposit, and e"uity to
reach 6.0 million target.
Appreciating short age of microfinance sector in Pakistan, some issues need attention.
Although sustainability is crucial for the success of microfinance programs and their
ability to alleviate poverty, evidence depicts that many programs do not fulfill this
criterion, and cannot reveal operational and financial self sufficiency *P%1 2005,
)
. %any
institutions remain un3regulated, not allowed to collect and recycle savings, hence rely on
donorsC funds. A recent study
5
based on survey findings of 5+ countries, including
Pakistan, highlights factors adversely influencing effectiveness of microfinance programs
like mission drift, poor management "uality D governance, and lack of transparency.
The paper, with specific reference to Pakistan, attempts to bring out some issues of
conventional microfinance leading to exclusion and suggests alternative mechanism of
Islamic microfinance to serve the cause of poverty alleviation in sustainable manner.
Issues of Microfinance
Typically, social collateral of microfinance groups is considered much stronger
commitment than collaterali#ed transactions where the local groups provide cost effective
peer monitoring and screening to ensure repayment and overcome enforcement problems.
=ut, it is failing to deliver in many cases. The trust is breaking and microfinance
institutions are experiencing multiple borrowing by their clients. These conclusions are
true in both national and international context. 4ven the loans have been diverted to the
people not targeted by the programs
9
and the very sense of such collateral has been
violated by the lenders themselves
-
. The conclusion is further strengthened by a recent
study which discusses the dynamics of microfinance in Eahore *Pakistan, and concludes
that commission agents arranged applicantCs access to loan at a fee ranging from 23$0' of
the loan amount, possibly with connivance of the field staff of the %!Is, later being
+
Pakistan %icrofinance 7eview 2005, Pakistan %icrofinance 1etwork, Islamabad
(
MicroWatch (October-December 2008), Pakistan Microfinance Netork, !s"amaba#
)
ibid
5
:entre for the .tudy of !inancial Innovation, ?%icrofinance =anana .kins 2009F 7isk in a =looming Industry@,
.ponsored by :8AP and :iti %icrofinance. Gthe study is based on a survey of 5+ countries including PakistanH
9
=aker, >. E, 2000. p.$063$0+ 3 An impact study of flagship programs *8rameen =ank, =7A:, and =7=, in
=angladesh concludes loan mis3targeting where the program officers bent the rules in an unobservable way and leaving
conflicting conclusions about reducing income and consumption variation between program participants and non3
participants. 7ather the impact on education was reverse after correcting for selection bias.
-
=astelaer, T. I., ?oes .ocial :apital !acilitate the PoorCs Access to :reditJ A 7eview of the %icroeconomic
Eiterature@, .ocial :apital Initiative <orking Paper 1o. 9, The <orld =ank .ocial evelopment epartment,
<ashington, ;.A. B GThe paper records that the joint liability and contingent renewals were often enforced imperfectly
by lenders, hence damaging the credibility of the system with the borrowersH.
Page 3 of 23
interested to increase their market share
$0
. The rent seekers were responsible to raise
effective cost of loan to the customers. Therefore, there is need to evaluate the joint
liability bond and formation of social collateral keeping in view these limitations. !urther,
the general practice of microfinance does not include the poorest and destitute rather
enterprising clients. A significant proportion of poor in %uslim communities, otherwise
too, demonstrate self exclusion owing to .hariah prohibition of interest based transactions
of conventional microfinance.
-ffectiveness of conventional microfinance:
/ne of the most interesting generali#ations emerges that poorest of the poor *the hardcore
poor, borrow essentially for protection purposes, given lower and irregular nature of their
income. This group, it is suggested, will also be risk averse to borrow for promotional
purposes *that is, for investment in future, and will, therefore, be only a very limited
beneficiary of microfinance schemes *&ulme and %osley $--),
$$
. <orld evelopment
7eport on poverty *<orld =ank, 2000,
$2
has also expressed the view that it is the poorest
is less likely to benefit from microfinance.
The evidence to the impact of microfinance on poverty alleviation is mixed. A few studies
have also "uantified the impact of microfinance on poverty alleviation. &ulme and %osley
*$--),
$6
, employing counter factual combined approach, analy#ed the impact of
microfinance on poverty alleviation for Indonesia, India, =angladesh and .ri Eanka and
found that growth of income of borrowers always exceeded that of control group and that
increase in borrowers income was larger for better3off borrowers. Khandker *$--9,
$+
,
based on double difference comparison between eligible and ineligible households and
between program and control villages in respect of 8rameen and =angaldesh 7ural
Advancement :ommittee *=7A:, =angladesh, found that microcredit alleviated poverty
up to ( percent annually. !or Thailand village banks, :oleman *$---,
$(
, using the same
approach, found no evidence of any impact of micro finance. Another study by :oleman
*200+,
$)
, found that programs were not reaching the poor as much as they reached
relatively wealthy people. 8allup Pakistan *200(,, using counter factual combined
approach, found positive impact of PPA! microfinance program on the consumption,
income and assets of the borrowers. &owever, the study did not explore the impact of the
PPA! microfinance on poverty.
$0
=arki, &usna =ano and .hah, %ehr, ?The ynamics of %icrofinance 4xpansion in Eahore@, Pakistan %icrofinance
1etwork, Islamabad and .hore=ank International Etd. Islamabad, Pakistan, 2005
$$
&ulme, . and %osley, P. *$--),, !inance Against Poverty, Iol. $ and 2, 7utledgeF Eondon
$2
<orld =ank, World Development Report 2000-2001. 1ew LorkF /xford ;niversity Press, 200$
$6
&ulme, . and %osley, P. *$--),, !inance Against Poverty, Iol. $ and 2, 7outledgeF Eondon
$+
Khandker, .. *$--9, !ighting poverty with microcreditF experience from =angladesh, 1ew LorkF /xford ;niversity
Press for the <orld =ank.
$(
:oleman, =.4 *$---, ?The Impact of group lending in 1ortheast Thailand,@ >ournal of evelopment 4conomics, vol.
)0, pp.$0(3$+$.
$)
:oleman, =.4 *200+, ?%icrofinance in 1ortheast ThailandF who benefits and how muchJ@ <orld evelopment.
Page $ of 23
4uantification of the impact of microfinance on poverty alleviation: To "uantify the
impact of microfinance on poverty alleviation in Pakistan, .hira#i and Amanullah
$5
have
used counter3factual combined approach to study the impact of PPA! micro credit on
poverty status of the households. This method combines 5with3without@ and the ?before3
after@ approaches. The former provides information on the poverty status of borrowers
*target group, and compares it with the poverty status of nonBborrowers *control group,
while the later compares the change in the poverty level of both groups ex3antae and ex3
post for the time period in which the borrowers benefited. The methodology used for the
study enabled to capture the net impact of micro credit and to isolate the influence of other
factors on the income level and thus on the poverty status of the households who
borrowed. The net impact was assessed using following formulaF
PMN *Pbt$3 Pbt0, B *Pnbt$3 Pnbto,
<here
PMF 1et impact of micro credit on poverty status of borrower households
Pbt/ is the poverty status of the borrower households with current income level,
Pbt6 is the poverty status of the borrower households with previous income level,
Pnbt/ is the poverty status of the 1on3 borrower household with current income
level and
Pnbto is the poverty status of the non3borrower household with previous income
level,
Ot$C represents the duration from >an 200+ to >an 200( and Ot0C stands for the
duration from >an 2006 to >an 200+.

The authors have used the official poverty line of 7s.959.)+ per adult e"uivalent per
month for the year 200+30( and the same poverty line has been deflated by consumer
price index *:PI, published by the !ederal =ureau of .tatistics Pakistan, to get the
poverty line of 7s.969.22 for the year 200630+. The data collected by 8allup Pakistan
*200(, of a sample of more than 6000 households *including $(00 borrowers who had
taken at least one loan from PPA!, has been used. The other half of the sample comprised
of non3borrowers, having more or less the same socio3economic profile as that of the
borrowers. The poverty levels have been estimated in respect of both borrowers and non3
borrowers for the years under consideration. The overall poverty level was further
decomposed in different poverty bands and groups vi#. extremely poor, ultra poor, poor,
vulnerable, "uasi non3poor and non3poor
$9
. The results are given in Annexure $.
The extremely poor households showed improvement in both groups but the improvement
in respect of non3borrowers was more *$.9(', as compared to borrowers *$.22',.
.imilarly, non3borrowing vulnerable poor could improve their status by 2.-2' as
compared to the borrowers *$.$(',. The ultra poor among borrowers, however, improved
the maximum *+.)0', as compared to non3borrowers *6.$(',. The most impact could
therefore be observed in case of poor band while the least in case of extremely poor and
vulnerable poor.
$5
.hira#i, 1asim .. and Khan Amanullah, ?7ole of Pakistan Poverty Alleviation !undCs %icro :redit In Poverty
AlleviationF A :ase of Pakistan@, 3333333333333333333333333333333
$9
:ategori#ations of the households into different poverty bands is based on the definitions given in The 4conomic
.urvey *200)32005,.
Page % of 23
The net impact has been computed by taking difference of the change in poverty status of
the borrowers and non3borrowers. The results reveal that PPA! micro credit enabled to
reduce the overall poverty level by 6.05' and the household shifted to higher income
groups during the reported period. The status of the extremely poor and ultra poor
borrowers was marginally improved by 0.)6 and $.+(' respectively. There was marginal
net impact on extremely poor households. The results are consistent with the
generali#ation that emerged from the literature that poorest of the poor households borrow
essentially for protection purposes. The aforementioned studies clearly indicate that
microfinance is benefiting more the better off poor while the destitute are neglected owing
not to be credit worthy and entrepreneurial.
Inclusive Role of Islamic Microfinance: The characteristics of Islamic modes of finance
are common to the best practices of microfinance
$-
. &owever, the microfinance
institutions could not diversify into Islamic financial instruments and those %uslim
populations remained self excluded which rejected interest based financial services. The
following will help understand more the inclusive role of Islamic microfinanceF
The "uestion of inclusion becomes more significant when demand for Islamic finance is
considered. Although no such estimates have yet been arrived at in Pakistan, :8AP
20
cited
that varying proportions of population *203)0', in various %uslim countries
demonstrated potential demand to access Islamic finance. The respondents were even
ready to pay higher price for Islamic products than conventional counterparts. Preference
of Islamic microfinance vide various studies has been summari#ed at Annexure 2. A
survey with limited scope of product development in A#ad Kashmir, territory annexed to
Pakistan *200-,, indicated this demand to the extent of -9'. .=P .trategic Plan for
Islamic =anking Industry in Pakistan *2009, expects that +3(' of the microfinance
clientele would prefer Islamic products by 20$0
2$
.
7ehabilitation of the poorest can be achieved by providing social safety net through Pakat
where capacity can be developed to undertake business and sustain livelihood by the
destitute. It is evident that inclusion is emphasi#ed more in Islamic framework as the poor
who do not possess re"uired entrepreneurial skills are generally excluded from
conventional microfinance. A systematic approach, meeting consumption re"uirements
first and production re"uirements thereafter, through grant and finance respectively, can
enhance inclusion of this segment. Pakat and sada"at, the divine tools of poverty
alleviation, can be used to achieve the objective. %icrofinance institutions, following
business model, can arrange such grants enabling clients to become bankable.
$-
=oth conventional and Islamic microfinance target poverty alleviation, do not re"uire physical collateral, and promote
self3esteem and entrepreneurship.
20
Karim 1, Tara#i %. and 7eille Q., ?Islamic %icrofinanceF An 4merging %arket 1iche@, !ocus 1ote 1o. +-, :8AP,
<ashington :, ;.A, 2009. :ited from &onohon, Patrick.. ?:ross3:ountry Iariations in &ousehold Access to
!inancial .ervices@ Presented at the <orld =ank :onference on Access to !inance, <ashington, .:. $( %arch. 2005
2$
?.trategic Plan for Islamic =anking Industry in PakistanF 2009@, Islamic =anking epartment, .tate =ank of
Pakistan, Karachi, 2009
Page & of 23
ebt is not preferred by Islam as usual practice to finance growing needs of clients
22
. In
present day practice, the possibility cannot be ruled out that amount of loan finds its way
in a purpose other than targeted one or clients manage to pay previous loan with a fresh
issue from same or other sources. .uch state turns harmful to the economic goals of
society. That is why Islamic finance favours asset creation and promotes entrepreneurship.
7isk sharing principle helps improving efficiency and sustainability of micro enterpri#es.
/therwise, too, partnership modes of Islamic finance prove advantageous for institution
over conventional finance in economies with high rates of inflation where real worth of
capital is maintained.
Islamic social capital
26
, establishing trust between Institution and clients, can become
instrumental in organi#ing coherent actions of all social and economic agents. ;nity and
solidarity can be cultivated among members and institution to understand better the
principle of risk sharing instead of binding the clients only into a joint liability bond in
case of conventional microfinance. .uch a confidence building measure would help
disclosing full information, respecting transparency, and excluding agency problem and
asymmetric information. :ooperation would be the binding force among these agents, at
the same time, the clients watch necessity of re3payment as a sacred duty while institution
extends respite in genuine cases. Fard al kafaya, falah and Ihsan become the motivating
forces for all those *donors, institutions, clients, etc., providing resources which may or
may not entail return. /nce these values are properly instituted, the negative social capital
*deceit, selection bias, inefficiency, willful default, mistrust, etc, takes exit.
Review of Islamic Microfinance -7perience
The experience of Islamic microfinance ranges from 18/ operation to speciali#ed
development finance institutions, cooperatives and formal banking. The first formally
known effort in this direction was %it 8hamar savings project of 4gypt established in late
sixties. Islamic microfinance remained underdeveloped in Arab <orld for "uite some
time. Eater, ;A4 achieved the position of financing centre for %iddle 4ast and 1orth
Africa *%41A, region.
2+
The microfinance network for Arab countries is represented
through .anabel having )+ institutions including Islamic programs of $2 Arab countries as
members serving over 90' of the total microfinance clients in region. In %alaysia,
22
/baidullah, %ohammed, ?Introduction to Islamic %icrofinance@, I=! 1et, The Islamic =usiness and !inance
1etwork
26
Khalee"u##aman, %, ?Islamic %icrofinanceF /utreach and .ustainability@, A paper presented at II;% International
:onference on Islamic =anking and !inance, 26 B 2( April 2005, Kuala Eumpur, %alaysia
2+
.egrado, :hiara, ?:ase studyF Islamic microfinance and socially responsible investments@, %icrofinance at the
;niversity of Torino, 200(
Page ' of 23
experiences include Amanah Ikhtiar %alaysia *AI%, and Islamic Pawn =roking *Al
Rahnu,. Islamic rural banks and Islamic financial cooperatives *known as =aitul %aal wal
Tamwil B =%T, are the major players in Indonesia
2(
. Islamic 7elief ;K has launched
Islamic microfinance programs in various countries ie. ?!irst Islamic@ of =osnia D
&er#egovina, .TA7T of Kosovo and .mall .cale 4nterprise evelopment *..4,
Program of Pakistan. =angladesh is considered first country to formally introduce Islamic
microfinance by using Muraaha and bai %uajjal while leading microfinance institutions
include Islami =ank =angladesh, .ocial Investment =ank Etd. *.I=E, and 18/s like Al
!alah and 7escue. In the non3formal non3corporate sector, .I=E
2)
also uses cash wa"f
certificates as source of donated capital. At least seven banks were practicing Muraaha,
Mudaraa, and Musharaka to finance micro enterprises in .udan
25
. The .udanese Islamic
=ank *.I=, has successfully implemented Musharaka and Mudaraa
29
providing
reasonable return on investment to both parties *the bank and the client,. The main reason
for .I=Cs success has been to work with productive families *defined as householdsC
readiness to apply means of production to raise their standard of subsistence,. .I=Cs
experience in financing productive families illustrates to achieve dual benefit of reali#ing
social objectives and profit. The bank disburses finance in a location from where the
deposits are collected. A summary of such experiences is shown in Annexure 6.
In Pakistan, very few initiatives have been undertaken with very little coverage. /nly a
few 18/s suffering from insufficientRpiecemeal and inefficient operations are making
efforts to operate on Islamic principles. The visible examples of Islamic microfinance in
Pakistan can be counted as Islamic 7elief Pakistan *I7P,, Akhuat, Karakoram :ooperative
=ank *K:=,, 1ational 7ural .upport Program and %uslim Aid. Information on use of
products and scope of financing is given in Annexure +.
Eimitations of Islamic %icrofinance in PakistanF
Islamic microfinance is mainly affected by resource and policy constraint, product
concentration, and absence of re"uisite capacity, especially the !har"a# advisory. Eike
conventional banks, Islamic banks too have not perceived microfinance as viable
opportunity. 1either, they have assumed social responsibility entrusted to them by those
who provide funds to these institutions
2-
. The key principle of Islam that redistributive
justice is achieved through support and empowerment of week has been grossly ignored.
This problem intensifies in case of Islamic banks as they have not expanded their
networks in rural areas. At the same time, inability of 18/s to recycle savings of their
2(
Obai#(""ah M) an# *han, +ari,(""ah, -!s"amicMicrofinance #e.e"o/ment 0 1ha""enges an# !nitiati.es2, Po"ic3
#ia"og(e Pa/er No) 2, !4+!, !sD5, 6e##ah, 2008)
2)
Mannan, M)7) -Ne 8rontiers of !s"amic Microfinance an# 9o"(ntar3 :ector 5anking an# 8inance; 7
com/arati.e 1ase :t(#3 7//roach2, Pa/er /resente# at the Nationa" 1onference on !s"amic 8inance, *(a"a
+erenggan(, Ma"a3sia, No.ember 2'-28, 200'
25
Ibrahim, =adr34l3in A, ?.udan 4conomy 7esearch 8roup iscussion Papers@, iscussion Paper 1o. 6(, Institute
for <orld 4conomics and International %anagement *I<I%,, 8ermany 2006 www.iwim.uni3
bremen.deRpublikationenRpdfR.4786(.pdf
29
&arper, %S ?Musharaka Partnership !inancing 3 An Approach To Ienture :apital !or %icroenterpriseC, .mall
4nterprise evelopment, Iol. (, 1o. +, 4ngland, ecember $--+
2-
!arook, .ayd. ?/n corporate social responsibility of Islamic financial institutions@, Islamic 4conomic .tudies, Iol.
$(, 1o. $, Islamic evelopment =ank, >eddah, >uly 2005.
Page 8 of 23
clients adds to the problem of sustainability. 18/s need to be linked to financial sector,
mainly banks, to leverage their resources as well as make use of savings. Product base is
not sufficient and concentration in Muraaha re"uires diversifying into other modes like
I$arah and iminishing Musharaka to support asset building and use of technology.
Iariants of Muraahah like Istijrar are re"uired to be developed due to high fre"uency of
supplies in small businesses.
The usual si#e of finance is not sufficient, hence micro enterprises operate only
marginally. The demand for installation of irrigation system, purchase of rickshawRtaxi,
etc. though exist but rarely met. Instances are there where businesses failed due to
insufficient amount of finance. %icro entrepreneurs are risk averse due to many reasons
such as illiteracy, insecurity, lack of assets, natural ha#ards, poor economic management,
and cultural barriers to use better technology. These risks can be reduced once their
confidence is enhanced, especially when institutions undertake to share bad days if they
claim right to reali#e the results of prospering business. The volume of financial
intermediation envisaged to fulfill these re"uirements is "uite large and it seems
impossible unless mainstream banking is not involved. The PoorCs capacity to save has
already been established. They are forced to save in kind and encounter fungibility and
li"uidity problems given no or low access to the saving services. /n the other hand,
market return on savings could further enhance their capacity to save. East, but not least,
microfinance clients also face life and other risks which need insurance cover
*microtakaful,, benefiting both institution and clients.
Applicability of Islamic %odes in %icrofinanceF
%ost of the Islamic products modes being used by Islamic banks can be adopted in
microfinance with necessary changes to adjust informal environment. The %!Is are
already familiar with fixed rate credit modes and can administer Muraaha and !alam
with little effort and training. It is important to note that partnership modes like Mudaraa
and Musharaka may be practiced only in selected cases and where client has already
completed certain number of graduating cycles with Muraaha. In respect of partnership
modes, it would be more appropriate to practice iminishing Musharaka in tangible assets
as the institution need not to rely on business results declared by client. The installment
based % can easily be operated to finance purchase of assets *machinery, e"uipment,
transport vehicles,, constructionR improvement of houses, small tourist
hutsRcafTRrestaurants, etc. =anks are fre"uently using this instrument and are in position to
transfer this technology for microfinance.
Product (evelopment for Microfinance: 1ot all products being used by Islamic banks
are feasible for microfinance as such. .ometimes, the structure re"uires changes while at
other the institutions are concerned with meeting full credit needs and proper utili#ation of
finance. .ome examples can be considered. Muraaha and !alam can be combined where
institution and client may enter two or more contracts, of course under master agreement,
especially in agriculturalRcrop production activity. /f different maturity Muraaha and
!alam contracts *depending on the length and type of financing, can be entered.
InputsRraw material can be sold through Muraaha while !alam can provide li"uidity to
meet financial re"uirements like hiring of tractorRlabor, purchase of water, marketing and
transportation, etc. :ombining two contracts can effectively save from chance of misuse
of finance while serving full credit re"uirements. The instrument like supplierCs credit can
Page < of 23
also be developed. %a" Ist"$rar
60
, a variant of Muraaha, is a supply side sale whereby the
supplier agrees to supply the goods on an ongoing basis at an agreed price to be paid in
advance or at a future date when repeated purchases are completed. 4ach time, there is no
documentary offer or acceptance *as in case of %urabaha, or bargain. .ettlement of price
can be decided in any of the permitted ways.
(ownscalin% 8perations of Islamic $anks
4xistence and operation of Islamic banks in urban areas reflects that underlying
philosophy of distributive justice has been ignored. The use of instruments and services
and financing criteria has been skewed towards corporate and commercial sector. .uch
preference has set standards for clients having high rating, si#able turnover and
creditworthiness. As such, Islamic banking has not been able to tap microfinance neither
as business opportunity nor social obligation despite enabling framework provided by
.=P. It does not seem possible to mainstream unless Islamic banks extend operation in
this direction.
In view of above, there is need to devise strategy for Islamic microfinance. The concern of
sustainability of %!Is is crucial. Particularly in this context, a mechanism is re"uired
wherefrom the %!Is can benefit from savings of their clients *not contradictory to .=P
regulations, and raise their e"uity. The savings of microfinance clients can be channeled to
financing bank having %udarabah arrangement with %!I, as described above. A higher
profit sharing ratio can be decided in favor of %!I than the one followed generally in case
of such arrangement. The profit sharing ratio will compensate %!I for not directly
benefiting from savings. .till, another approach of financing e"uity through %usharakah
can help raising funds of %!Is.
The .haria advisory is rare and expensive resource but is mandatory for operation of
Islamic finance. %!Is may not be in a position to engage full time .haria advisors owing
to smaller scale of their business. /ptions can be considered to undertake this task.
Islamic banks providing finance to %!Is can also provide .haria advisory and internal
.haria audit with or without cost. Alternatively, a group of %!Is can engage fulltime
.haria advisor to supervise the operation. The banks can assist in product development
process, too. The products already used and tested by Islamic banks can be modified to
adjust the microfinance sector. The Islamic banks can help structuring new products and
services compatible to the sector characteristics.
There is real need to establish Islamic microfinance banks providing microfinancial
services in entirety, saving, credit, insurance, payments, remittances, etc. /nce Islamic
microfinance banks are established, the financial discipline, corporate norms and access to
financial market would be achieved.
Some Recommendations
60
Istijrar is an agreement between a buyer and seller that the buyer will take from the seller the goods he needs without
bargaining *%usawamah, and without explicit offer and acceptance each time. In such case, either the price is paid after
a determined period or the seller leaves some money with the buyer out of which the buyer takes whenever he needs to
purchase the goods.
Page 10 of 23
/) (ownscalin% 8perations of Islamic $anks +ase of +orporate Social
Responsibility and $usiness 8pportunity:
i. It may not be possible to expand scale without participation of Islamic banks. The
linkage can result, not only providing re"uired funds *either through &ar' hassan
or Mudaraa credit line, but also facilitate technology transfer for capacity
building. As first step, Islamic banks, currently present in urban centers, may use
%!Is as outlets for Islamic microfinance. %!Is possessing necessary knowledge
and experience of working with communities can become low risk intermediary
for bank funds, besides undertaking usual job of social mobili#ation, appraisal of
finance re"uests and recovery enforcing social collateral in Islamic framework.
(ar' hassan or soft Mudaraa placement by Islamic banks will allow %!Is to
extend cheaper financing to clients and build own resources. At the same time,
%!I can benefit from .haria advisory, capacity development, and technology
transfer under some contractual arrangement. In return, %!Is may direct savings
of their clients to Islamic banks.
ii. %!I should direct savings of its clients to Islamic banks. Islamic banks should
invest these savings in usual way and share profit with clientsRdeposit holders.
.ince these savings would be collected without incurring any cost on account of
marketing, a separate pool can be formed or larger than usual weight can be
allocated to appropriate larger share of profit in favor of such customers.
iii. Islamic banks can also participate in e"uity of %!I augmenting the laterCs
resource. =esides, this relationship would help %!Is to better govern and observe
financial discipline.
iv. .imilarly, (ar' hassan or soft Mudaraa *allocating higher than normal share in
profits, would compensate %!I for directing savings to the bank affording any
cost by the latter and building own resources to ensure sustainability.
9) Role of S$P: .=P in association with Islamic banks may establish Islamic
microfinance entity to provide following servicesF
i. %aintain fund to be used as grant for capacity building of Islamic %!Is and
%!=s maintaining Islamic microfinance divisions
ii. Provide .haria advisory and product development services to %!Is and %!=s
iii. %aintain risk mitigation fund to be contributed by .=P and Islamic banks
iv. /nce sufficient tangible assets of microfinance are accumulated, the entity may
help arranging Islamic securiti#ation. =esides providing li"uidity to diversify
operations in microfinance, the process would enable microfinance sector to access
financial market and diversify risk as well as expand operation.
:) Inclusion of the Poorest: There is clear understanding that microfinance efforts can
effectively be supplemented by incorporating 'akat into the system provided
developmental goals are focused instead of mere handout distribution. It can enhance
inclusion of non3enterprising poor by transforming them to self3sustaining active part
of society. .ince livelihood needs of poor are of recurring nature, therefore, a part of
'akat fund should be allocated for empowerment. =y providing safety net in first
Page 11 of 23
place, business capacity can be developed by spending these funds for training and
business supportRstart up capital. !inancing for working capital however can be
provided through Muraaha. Iarying time frames can be set for different clients,
depending on respective capacity to develop entrepreneurial skills. %!Is can,
individually or collectively, establish 'akat trust as separate entity and out of their own
sphere where 'akat can be collected and spent for both safety net and development of
enterprise. The funds accumulated in )akat can be invested in profit earning assets for
interim period.
;) Product development for microfinance: /f course, developing micro enterprise
specific products and services is the urgent need.
i. %urabahahF To meet working capital re"uirementRpurchase of supplies for micro
enterprises and farm D non3farm activities, %urabahah shall be the most
fre"uently used instrument. 8iven the process flow of %urabahah and .haria
compliance, the instrument used by Islamic banks can easily be adopted for
microfinance. The procedure and documentation can be simplified and conditions
rationali#ed in view of social mobili#ation process and close monitoring of
microfinance clients. .upplies of items in recurring demand could be maintained
by %!Is or bulk purchases can be arranged for groups of clients. In case, Islamic
banks intermediate through %!Is, the later would be in a position to physically
ac"uire %urabaha goods and sell them to clients.
ii. In case, the client re"uires supplies "uiet fre"uently in many bits, it would be
difficult to accommodate such re"uests by concluding a number of %urabahas
with the same client, besides increasing transaction costs and price risk faced by
both the parties. The feasibility of Istijrar
6$
like instrument need consideration
62
.
.haria advisors have also suggested that Islamic banks can enter Istijrar
arrangement with supplier where the bank would pay the full or discounted market
price and sell these goods to the client on the basis of %urabahah. They also
6$
!sti=rar is an agreement beteen a b(3er an# se""er that the b(3er i"" take from the se""er the goo#s he
nee#s itho(t bargaining an# itho(t e>/"icit offer an# acce/tance each time) !n s(ch case, either the /rice
is /ai# after a #etermine# /erio# or the se""er "ea.es some mone3 ith the b(3er o(t of hich the b(3er takes
hene.er he nee#s to /(rchase the goo#s)
62
+he conce/t an# o(t"ine of !sti=rar has been #isc(sse# (n#er :ection 2 .i#e M(rabahah
Page 12 of 23
Zakat and Sadaqaat
Islamic
finance
(Murabaha)
Basic need
fulfillment
Development of
entrepreneurship
Capital
investment
Working
capital
Transformation of hard core poor
suggest another alternative through which the bank can enter into Istijrar
agreement with supplier for a certain time period wherein the agent of bank *ie.
client, may take delivery of goods from time to time within that time period.
ifferent clients can also be served through this arrangement. %!Is, however, can
maintain inventory and sell goods directly to their clients as third alternative.
There is therefore needed to make further consultations with Islamic banks and
.haria advisors to draw the structure of Istijrar to be used in microfinance
operations. The consultations would focus on .haria position of transaction in case
the client takes possession of goods from time to time on behalf of =ankR%!I and
through certain arrangement the price is paid later, at the same time reali#ing
certain amount of profit in the transaction or the feasibility of Istijrar with advance
payment be looked into where certain amount is kept with supplier and the client
*or clients, take possession of goods as and when re"uired within specific time
period.
iii. .alamF It is ideal instrument for agricultural production activity and standardi#ed
manufacturing where client can be financed for both purchase of raw
materialRinputs and li"uidity re"uirement. =anks and %!Is can arrange to collect
commodityR manufactured items. Alternatively, the client or managing committee
of the group can be appointed as agent to sell on behalf of the bankR%!I once
ownership of subject matter is ac"uired by %!I. =anksR%!Is can also enter
parallel salam contract with third parties to dispose off the supplies. :lose peer
monitoring and surveillance by the credit officers is re"uired to save from misuse
of finance disbursed in cash.
iv. .alam cum %urabahah !inancingF In case above products are used alternatively
the risk of %isutili#ation remains. !inancing through %urabahah only may not
cater li"uidity re"uirement of farmers. /n the other hand, providing salam capital
may find way towards unproductive uses. %ore appropriate would be to suggest
that bankR%!I may enter two or more separate contracts, of course under master
agreement, with client especially in agriculturalRcrop production activity. /f
different maturity murabaha and salam contracts *depending on the length of time
period for which respective financing is re"uired,, not contingent to each other,
can be entered. InputsRraw material can be sold through %urabahah while salam
can provide li"uidity to meet financial re"uirements like hiring of tractorRlabour,
purchase of water, marketing and transportation, etc.
Page 13 of 23
:ombination of %urabaha with two different maturity .alam contracts
v. iminishing %usharakah *%,F <hile it may not be possible for banksR%!Is to
finance under musharakah or mudarabah and rely on the business results declared
by the client till the time sufficient experience is gained in fixed return modes, the
installment based % can easily be operated to finance purchase of assets
*machinery, e"uipment, transport vehicles,, constructionR improvement of houses,
tourist huts, small cafTRrestaurants, etc. =anks are fre"uently using this instrument
and are in position to transfer this technology for microfinance.
vi. %udarabaS :lients with good credit history can be selected for mudaraba. =anksR
%!Is can determine number of graduating cycles where3after the clients can be
financed under this mode. :ommercial businesses, livestock rearing, etc. can be
financedS however, experience suggests meeting such re"uirements through
murabahah if financier is not in position to effectively supervise the activity.
vii. IjarahF There could be two ways to use ijarahF
=usiness centers or groups of homogenous profession can be given
e"uipment on lease for certain time period against fixed rent.
Individual clients can be financed through Ijarah wa I"tina enabling them
to ultimately own the assets. This option may not be useful for groups
owing to difficulty in collective use.
<) Shariah Advisory: .hariah advisory is the crucial part, needed for contract
development, devising operational strategy, !har"a audit, and routine operation of
microfinance program. The linkage suggested above can be the effective way to
achieve this objective.
Page 1$ of 23
=ibliography
$. =aker, >. E, ?4valuating the Impact of evelopment Projects on Poverty3A &andbook
of Practitioners@, The <orld =ank, <ashington :., 2000.
2. =arki, &usna =ano and .hah, %ehr, ?The ynamics of %icrofinance 4xpansion in
Eahore@, Pakistan %icrofinance 1etwork, Islamabad and .hore=ank International Etd.
Islamabad, Pakistan, 2005
6. =astelaer, T. I., ?oes .ocial :apital !acilitate the PoorCs Access to :reditJ A 7eview
of the %icroeconomic Eiterature@, .ocial :apital Initiative <orking Paper 1o. 9, The
<orld =ank .ocial evelopment epartment, <ashington, ;.A.
+. :entre for the .tudy of !inancial Innovation, ?%icrofinance =anana .kins 2009F 7isk
in a =looming Industry@, :8AP and :iti %icrofinance.
(. :oleman, =.4. ?The Impact of group lending in 1ortheast Thailand,@ >ournal of
evelopment 4conomics, vol. )0, pp.$0(3$+$, $---.
). :oleman, =.4., ?%icrofinance in 1ortheast ThailandF who benefits and how muchJ@
<orld evelopment, 200+.
5. !arook, .ayd. ?/n corporate social responsibility of Islamic financial institutions@,
Islamic 4conomic .tudies, Iol. $(, 1o. $, Islamic evelopment =ank, >eddah, >uly
2005.
9. 8ovt. of Pakistan, ?4conomic .urvey 200)305@, !inance division, 8overnment of
Pakistan, Islamabad, 2005
-. 8overnment of Pakistan, ?Accelerating 4conomic 8rowth and 7educing PovertyF The
7oad Ahead *Poverty 7eduction .trategy Paper,@, Poverty 7eduction .trategy Paper
.ecretariat, %inistry of !inance, 8overnment of Pakistan, Islamabad, ecember 2006
$0. &arper, %S ?Musharaka Partnership !inancing 3 An Approach to Ienture :apital !or
%icroenterpriseC, .mall 4nterprise evelopment, Iol. (, 1o. +, 4ngland, ecember
$--+
$$. &ulme, . and %osley, P., ?!inance Against Poverty@, Iol. $ and 2, 7utledgeF Eondon,
$---.
$2. Ibrahim, =adr34l3in A., ?.udan 4conomy 7esearch 8roup iscussion Papers@,
iscussion Paper 1o. 6(, Institute for <orld 4conomics and International
%anagement *I<I%,, 8ermany 2006 www.iwim.uni3
bremen.deRpublikationenRpdfR.4786(.pdf
$6. Karim 1, Tara#i %. and 7eille Q., ?Islamic %icrofinanceF An 4merging %arket
1iche@, !ocus 1ote 1o. +-, :8AP, <ashington :, ;.A, 2009. :ited from
&onohon, Patrick.. ?:ross3:ountry Iariations in &ousehold Access to !inancial
.ervices@ Presented at the <orld =ank :onference on Access to !inance, <ashington,
.:. $( %arch. 2005
$+. Khalee"u##aman, %, ?Islamic %icrofinanceF /utreach and .ustainability@, A paper
presented at II;% International :onference on Islamic =anking and !inance, 26 B 2(
April 2005, Kuala Eumpur, %alaysia.
Page 1% of 23
$(. Khandker, .., ?!ighting poverty with microcreditF experience from =angladesh@, 1ew
LorkF /xford ;niversity Press for the <orld =ank, $--9.
$). %annan, %.A. ?1ew !rontiers of Islamic %icrofinance and Ioluntary .ector =anking
and !inanceF A comparative :ase .tudy Approach@, Paper presented at the 1ational
:onference on Islamic !inance, Kuala Terengganu, %alaysia, 1ovember 25329, 2005
$5. /baidullah %. and Khan, Tari"ullah, ?Islamic %icrofinance evelopment B
:hallenges and Initiatives@, Policy dialogue Paper 1o. 2, I7TI, Islamic evelopment
=ank, >eddah, 2009.
$9. /baidullah, %ohammed, ?Introduction to Islamic %icrofinance@, I=! 1et, The
Islamic =usiness and !inance 1etwork.
$-. P%1, ?%icro<atch */ctober3ecember 2009,@, Pakistan %icrofinance 1etwork,
Islamabad
20. P%1, ?Pakistan %icrofinance 7eview 2005@, Pakistan %icrofinance 1etwork,
Islamabad
2$. .=P, ?.trategic Plan for Islamic =anking Industry in PakistanF 2009@, Islamic =anking
epartment, .tate =ank of Pakistan, Karachi, 2009
22. .egrado, :hiara, ?:ase studyF Islamic microfinance and socially responsible
investments@, %icrofinance at the ;niversity of Torino, 200(
26. .hira#i, 1asim .. and Khan Amanullah, ?7ole of Pakistan Poverty Alleviation
!undCs %icro :redit In Poverty AlleviationF A :ase of Pakistan@,
3333333333333333333333333333333
2+. <orld =ank, ?<orld evelopment 7eport 20003200$@, 1ew LorkF /xford ;niversity
Press, 200$
Page 1& of 23
Anne7ure /
Table $F Poverty .tatus of the =orrower &ouseholds
1oteF *i, The poverty bands have been determined being recipient of income more or less than
poverty line *ii, A negative sign indicates a decline and a positive sign stands for an increase.
Table 2F Poverty .tatus of the 1on3=orrower &ouseholds
Table 6F 1et Impact of PPA! %icro credit on Poverty Alleviation
Page 1' of 23
20063200+ ' of
&&
200+3200( ' of
&&
'
ifference
Poverty Eine *PE,
7s.F 969.62 per month
60.(9 Poverty Eine *PE,
7s.F 959.)+ per month
26.-- *3, ).)$
4xtremely poor
U(0'
i.e *below 7s.+$-.$$,
2.92
4xtremely poor
U(0' i.e.
*below 7s.+6-.62,
$.)

*3, $.22
;ltra Poor
V(0' U5('
i.e * 7s. +$-.$$3 7s )29.)),
$0.+2
;ltra Poor
V(0'U5('
i.e. * 7s. +6-.623 7s )(9.-9,
(.92 *3, +.) 0
Poor
V5('U$00 '
i.e * 7s.)29.)) B 7s969.62 ,
$5.6+
Poor
V5('U$00'
i.e * 7s.)(9.-9 B 7s959.)+ ,
$).(5 *3, 0.55
Iulnerable Poor
V$00'U$2('
i.e. * 7s. 969.62B 7s. $0+5.95,
$).96
Iulnerable Poor
V$00'U$2('
i.e.*7s.959.)+B 7s$0-9.60 ,
$(.)9

*3, $.$(
Wuasi 1on BPoor
V $2(' U 200 '
i.e. * 7s. $0+5.95B 7s.$)5).)+,
65.$5
Wuasi 1on BPoor
V$2('U 200 '
i.e. *7s.$0-9.6B 7s.$5(5.29,
+0.+2 *X,6.2(
1on3Poor
V200'
i.e. *7s.$)5).)+ and above,
$(.+2
1on3Poor
V200'
i.e. *7s.$5(5.29 above,
$-.5$ *X,+.2-
20063200+ ' of
&&
200+3200( ' of
&&
'
ifference
Poverty Eine *PE,
7s.F 969.62 per month
2-.62 Poverty Eine *PE,
7s.F 959.)+ per month
2(.59 *3, 6.(+
4xtremely poor
U(0'
i.e *below 7s.+$-.$$,
+.06
4xtremely poor
U(0'
i.e. *below 7s.+6-.62,
2.$9

*3,$.9(
;ltra Poor
V(0' U5('
i.e * 7s. +$-.$$3 7s )29.)),
-.06
;ltra Poor
V(0'U5('
i.e. * 7s. +6-.623 7s )(9.-9,
(.99 *3, 6.$(
Poor
V5('U$00 '
i.e * 7s.)29.)) B 7s969.62 ,
$).2)
Poor
V5('U$00'
i.e * 7s.)(9.-9 B 7s959.)+ ,
$5.52 *X,$.+)
Iulnerable
V$00'U$2('
i.e. * 7s. 969.62B 7s. $0+5.95,
$9.(0
Poor
V$00'U$2('
i.e. *7s.959.)+B 7s$0-9.60 ,
$(.(9

*3, 2.-2
Wuasi 1on BPoor
V $2(' U 200 '
i.e. * 7s. $0+5.95B 7s.$)5).)+,
65.05
Wuasi 1on BPoor
V$2('U 200 '
i.e. *7s.$0-9.6B 7s.$5(5.29,
+$.+- *X, +.+2
1on3Poor
V200'
i.e. *7s.$)5).)+ and above,
$(.$$
1on3Poor
V200'
i.e. *7s.$5(5.29 above,
$5.$( *X, 2.0+
Page 18 of 23
?ast 1o"(mn
+ab"e 1 (+1)
?ast 1o"(mn
+ab"e 2 (+2)
Difference
(+1-+2)
O.era""
(-)&)&1 *3,3)%$ *3,3)0'
4xtremely poor
*3,1)22 *3,1)8% *X,0)&3
;ltra Poor *3,$)&0 *3,3)1% *3,1)$%
Poor *3,0)'' *X,1)$& *3,2)23
Iulnerable *3,1)1% *3,2)<2 *X,1)''
Wuasi 1on BPoor *X,3)2% *X,$)$2 *3,1)1'
1on3Poor *X,$)2< *X,2)0$ *X,2)2%
Anne7ure 9
Potential emand for Islamic %icrofinance
.ourceF :8AP, <ashington :, ;.A, 2009
Page 1< of 23
8r%ani!ation
conducted survey
Surveyed +ountries Proportion of respondents
preferrin% Islamic
Microfinance
:8AP 2009 >ordan, Algeria, and
.yria
20 to +0'
Pla1et !inance 2005 <est =ank and 8a#a 6(' 3 <est =ank
)0 ' 3 8a#a
;.AI 2002 >ordan 2+.-'
I!:R!I1:A 200) >ordan 62'
!rankfurt .chool of
!inance D
%anagement 200)
Algeria 20.5'
I!: sponsored .tudy Lemen +0'
I!: 2005 .yria +63+)'
=ank Indonesia 2000 Indonesia *4ast >ava, +-'
Anne7ure :
/perations of Islamic =anks in .udan
1ame of =ank Percent of
total finance
%ode*s, in use Target group %ethodology and *conditions,
The .udanese
Islamic =ank
*.I=,
5+' %urabaha,
mudaraba,
musharaka, and
saving deposit
Productive
families,
small enterprises,
crafts and
informal sector
activities.
!amily affairs sections to prepare clients under
productive family concept and deal with
investment, feasibility studies and project follow
up in micro enterprises of farmers and small
manufacturers *63+ percent monthly Muraaha
margin. ;p to ) months Muraaha period,
!aisal Islamic
=ank of .udan
*!I=.,
$00' %urabaha :raftsmenRwomenF Project evaluation and financingF %icro projects of
purchasing machinery, spare parts, means of
transport, raw material, agricultural implements
and installation of electric bakeries *63+ percent
monthly Muraaha ;p to one year Muraaha
Period,
Islamic :o3
operative
evelopment
=ank *I:=,
$00' %urabaha .mall producers
And craftsmen
;rban 3 ?:raftsmen .upport !und@ to finance
blacksmiths, carpentry, fishing boats and oil
mills.7ural 3 :lients financed through productive
family concept for poultry, cows and manual
looms. .mall3scale projects 3 oil mills, tailoring,
needlework, soap making, grain3mills and sweet
making *63+ percent monthly Muraaha ;p to
oneyear Muraaha Period,
1elein
Industrial
evelopment
=ank 8roup
*1I=8,
$00' %urabaha and
mudaraba
.mall enterprises
And productive
families
!easibility of projects against cost of client.
Projects food processing *cheese, yoghurt,
*"sra *flat brad,, biscuits, sweets and rural oil
mills,S tailoring and needlework, leatherwork,
soap3making, building materials and
engineering workshops, building and packing
services, tire repair workshops. *$( '
Muraaha margin for
amount up to $(00 thousands. 2('
Muraaha margin for
amount more than $(00, but less than 2000,
Agricultural
=ank of .udan
*A=.,
1A %urabaha .mall
enterprises,
Productive
families and
crafts
Productive families in agriculture and
livestock, as well as small industrial and
service enterprises
!armers =ank
*!=,
1A %urabaha :raftsmenRwome
n Productive
families,
Professionals
and small
.mall enterprises of farmers including crop
production
Page 20 of 23
industries.
.aving and
.ocial
evelopment
=ank *..=,
2-' %urabaha and
musharaka
.mall industries,
Productive
families,
and retail trade
*$(' Muraaha margin, with grace period up
to
five months.,
.ourceF Ibrahim, =adr34l3in A, ?.udan 4conomy 7esearch 8roup iscussion Papers@,
iscussion Paper 1o. 6(, Institute for <orld 4conomics and International %anagement *I<I%,,
8ermany 2006 www.iwim.uni3bremen.deRpublikationenRpdfR.4786(.pdf
Page 21 of 23
Anne7ure ;
Islamic %icrofinance Programs in Pakistan
1ame of
Institution
%ode of !inance Target :lientele 7ange of financing
*7s.,
Purpose of financing
Islamic
7elief
*..4,
%urabaha ;rban
microentreprises
9,000 B 2(,000 <orking capital, supplies, e"uipments,
tools, house renovation, etc.
Akhwat War# hassan 3do3 $0,000 B 20,000 3do3
K:= %urabaha 7ural
microenterprises
2(,000 B $00,000 agricultural inputs, flour machines,
wood cutting saw, supplies for the
microenterprises, raw material etc.
17.P %urabaha 7ural
microenterprises
$0,000 B 20,000
Agricultural production
inputs, Eive stocks sector
development i.e. purchasing
milch animals, fattening etc.,
Asset creation i.e. purchasing
home appliances, purchasing
small machines which can be
used for income generation
%uslim Aid %urabaha 7ural D urban
microenterprises
$0,000 B 20,000 Agricultural inputs, suppliesRraw
material, machinery, and e"uipments
Page 22 of 23
$