Micro Finance To Islamic Micro Finance: Akhuwat Model


Usman Khurshid a , Khalid Zamanb

IIUM, Institute of Islamic Banking and Finance, Malaysia.

 COMSATS Institute of Information Technology, Abbottabad, Pakistan



Over the past few decades, micro financing has emerged as one of the most powerful tool for the poverty alleviation from the under developing countries, but over time this tool has been modified to maximize the organization and share holders wealth, for example by using high interest rates on short term loans. Islamic micro finance on the other hand still have its true motives alive and such can be seen from the Akhuwat (100% interest free micro financing organization, Pakistan based) which is working precisely on the track, but still the source of income (donations) and the use of such income for the administrative purpose such says pays of employees etc is somehow controversial. In the paper previous case studies and research articles regarding Akhuwat are evaluated and compared with the conventional micro financing model and on the basis of the comparison and analysis, the recommendations are made such as to step in the industrial sector to provide employment to poor and to use the profit to provide masses with Qard Hasna.


Keywords: Micro financing, Akhuwat, Islamic micro financing, loans.

  1. Introduction


The concept of micro financing is as old as the concept of wealth and lending came into being, although it was not given the proper name of micro financing or I can be said that it was the only financing available at that time i.e. short term loans and high interest rates. Later on with the evolution of the society, there becomes the difference in long term and short term loans also small loans and big loans.

Over time the concept of micro financing was hidden in the strong banking system but later on as the needs of the society increase the concept of micro financing came in the spot light as the micro financing is favorable to banks. Hence Grameen bank was introduced by Dr. Yonuas in Bangladesh to support poor people to establish their own businesses. Operation of micro financing is simple, small loans on short term time period are given to people so that they can setup any micro level business or can do any economical activity to support their families in general and national economy in common. Here bank have no concern either the borrower business is successful or not, he have to pay the bank principle and high interest rate. Also bank have no interest about the business borrowers want to do until its legal in national laws i.e. he can open alcohol shop or any small casino what so ever that is allowed in national laws, or the borrower on the name of business can do any illegal activity, many scholars have pointed out that the drug abuse is common in poor people due to lack of education and of bad environment around them, so there is a chance that a borrower can use money on such activities and in that case his family have to suffer as he may lose his property or anything that he have mortgaged to the bank, unless there is no proper check and balance on the borrower and his activities.

Now if the government try to regulate this problem then the ratio of amount borrowed will become low as if banks fix certain criteria to the borrower, then the poor people wont be able to get loan as they have almost nothing in their pockets and they live life with less than $ 1 per day.

This is what eventually happened and the micro financing lost its true motive. Although this was the true motive of micro financing model introduced in the economy i.e. individuals (banks) welfare and benefit. So in order to secure the banks policies are designed in such a way that banks can have maximum benefit. Islamic micro finance on the other hand is an old concept as emerge with the advent of Islam itself, small consumable loans or qard e hasina was encouraged in islam which actually is the micro financing for consumable products as at that time loan was generally taken for the personal consumption and interest on it was “usury” or riba al jahaliya. There is no concept of loaning in Islamic finance, it either have to be qarz e hasna or gift, for investment purpose the concept of mubarabah and musharakah was in practice are and are still in practice. The last track of Islamic micro finance can be traced back to Othman Empire, where a governor provide the farmers with short term loans (qarz e hasna) for the purpose of farming and growing crops, as a finance analyst governor knew the fact that he is doing a greater benefit to the nation, as giving this micro finance the unemployment will reduce, living standard of people will rise, crime will reduce, there will be excess supply of food in the market so nation will be able to export, also the inflation will be in control. So its better for the government to provide masses with the micro finance rather than conventional loan and charge interest on it, it will be smaller benefit or the time being benefit for the government and nation.

Keeping in view the pure model of Islamic micro financing, Akhuwat, a Pakistan based NGO, that provide poor people with the interest free loans or Islamic micro credits. The main source of income of Akhuwat is donations and some contributions (willingly gifts) from the current customers, who got stable after using the loan. The main methodology remains the same that the organization provide with the cash to the individual and the workers of the organization make it sure that the money is being utilized according to the business plan, grantor in this model is the renown person of the area where the customer is living and he will guarantee to make sure that the person will be using the money for the right purpose, he won’t be liable for any funds in case of default or any other incident. The ceremony of providing funds to the customer is held in the local masjid of the area, this tradition is made in order to restore the proper use and significance of the masjid.  Further details of this model consists of the following i.e.,

1.1.      Lending Methodology

1.1.1. Program Introduction


Individual loans are marketed through awareness campaign in poor localities, market places and through previous borrowers. An introduction to the program is also given in nearby mosque or church when people have congregated there for prayers. This has not only tremendously saved the operational costs but has also opened the doors of the religious places for socio-economic development.  It also attaches a moral responsibility to return the loan on time.

1.1.2. Individual Selection


The loan process starts with the submission of applications by persons interested in getting financial assistance. The Unit Manager (Loan Officer) then evaluates that whether the applicant deserves the loan or not i.e. lives below the poverty line, has a reliable social capital, is not involved in any illegal business and possesses entrepreneurial abilities.

1.1.3. Preparation of Business Plans


Through the preparation of business plans the business idea of the intended loanee is evaluated to see if it is viable and whether it can generate income beyond the household expenses of the individual so that the loan could be repaid easily. The applicant’s family is also interviewed to make sure that they know about the loan and support the business idea.


1.1.4. Credit Appraisal


After initial appraisal by the Unit Manager, the application is forwarded to Branch Manager who appraises the technical section of the appraisal process. Then the case is referred to Loan Approval Committee. The committee comprising of Unit, Branch and Area Mangers which reviews the credit case. If the committee approves the case loan disbursement is done. The whole process takes almost 3 weeks.


1.1.5. Guarantors of Loans


Every borrower also provides two individual guarantors who vouch for his/her credentials and accept the responsibility of monitoring the borrower and give assurance to persuade the borrower for timely payment of loan. One of the two guarantors may be from the same family.

1.1.6. Credit Disbursement/Capacity Building


Disbursement takes place 2-3 times a month and 100-150 loans are disbursed at one event usually held at branch office/mosque or church. Every borrower has to be accompanied by one of the guarantors. Other people present at the time of disbursement include community members, Akhuwat staff, from the branch and Head office. Social Guidance events are also held simultaneously in which the capacity of loanees is built to carry on their work more efficiently and effectively.


1.1.7. Recovery/Follow up


Once the loan has been disbursed, the Unit Manager monitors the client with regular visits to his residence and place of work. The loan repayment has to be submitted at the branch by the 7th of each month. If a payment is not in by the 10th, the Unit Manager visits the client to remind and if repayment is still not done then the guarantors are contacted and asked to make the payment.


1.2.       Loan Products

1.2.1. Family Enterprise Loan


These loans are given for establishing a new business or expanding an existing one. Family Enterprise loan is the most common type of loan offered by Akhuwat. It comprises 91% of Akhuwat’s loan portfolio. The Family Enterprise loan varies in the bracket of Rs.10,000 to Rs. 30,000, however, most common amount for the first loan is Rs.15,000. The individual has to come up with a viable business plan to become eligible for the loan. The Enterprise loan is also known as the family Enterprise loan because during the period of appraisal and lending the entire family is involved in the process with the view to make it a family venture instead of individual effort.

1.2.2. Liberation Loan


It is used for repayment of loans taken from money lender on exorbitantly high interest rates. This type of loan is given to those who have borrowed money from moneylenders at very high interest rates. Akhuwat believes that of lending by the money lender is exploitation of the poor and needy and is resulting in increasing the poverty instead of making dent into it. Akhuwat pays the principle amount in one go for the client and then the client has to pay back the amount in interest free installments to Akhuwat. Range of this loan is up to Rs. 40,000.


1.2.3. Education Loan


It is utilized for paying dues (fees) or purchase of books and material of poor students. It provides education expenses in easy way. Range of education loan is up to Rs. 25,000.


1.2.4. Marriage Loan


Marriage loan is given for dowry of bride (daughter) or marriage ceremony arrangements. This loan helps in meeting the marriage expenses of a girl of a poor family. Range of this loan is up to Rs. 25,000. Boys are not entitled for such loans.


1.2.5. Emergency Loan


This type of loan is given to meet emergency situations such as school admission fee, treatment, purchase of medicine, etc. These loans are given to prevent the poor from major fallbacks. The amount loaned to the poorest of the poor is generally Rs. 5,000 and this has to be repaid within one year.


1.2.6. Silver Loan


This is given to increase the size of the existing business. Akhuwat recently launched this new product. This medium size loan of Rs. 50,000 is given to those who have successfully completed three or more cycles of borrowing from Akhuwat and are interested to further expand their business.


1.2.7. Housing Loan


For renovation of house, construction of room, roof, or walls, etc. Range of this loan varies between Rs. 25,000 to 70,000 and has to be repaid within two years time limit. Akhuwat started this product in collaboration with Al-Noor Umar Welfare Trust, another nonprofit organization founded by Mr. Khalil Mian, former Chairman of Pakistan Credit Rating Agency (PACRA).

Akhuwat staff also provides technical training to its clients. They make the latest knowledge and market information available to the clients so that they become more efficient. Clients who lack expertise are taught and trained in the vocations of their interest. They may do “intern-ships” with borrowers who are already running some specific enterprises and are desirous of imparting skills to others. Akhuwat coordinates activities with other NGOs and Social Welfare Organizations so that social services can reach their own clients. Akhuwat focuses especially on education and health because these are basic necessities and the right of every individual and have benefits beyond the individual himself. Legal aid has also been provided to the needy by a team of volunteer law students through one of the Board member who is a lawyer and Principal at a local Law College.


1.3.      Objectives of the study


The main objectives of the study are as follows:


  1. To create awareness in the masses about the practical approaches to the Islamic Micro financing.


  1. To provide improvements to the Akhuwat model of Islamic micro financing


  1. To provide layout for the implementation of Islamic micro finance in the society by organization other than banks.


  1. Literature review and Discussion


Achieving Triple Bottom Line: Sustainability, Growth and Welfare


“Microfinance is now a popular form of poverty alleviation. Many international donor agencies give a large amount of money to Microfinance Institutes (MFIs) for poverty alleviation. The funds are given directly or indirectly to the MFIs at varying costs. Determining the right cost of financing is an important issue in microfinance as the most suitable cost of financing is likely to result in achieving the objective of poverty alleviation both in the short term and long term. Some microfinance providers prefer low cost for various reasons, which are discussed in detail in this article and others advocate high lending cost. These two viewpoints have their own reasoning and set of arguments, which require analysis and debate. This articles attempts to find out the most suitable approach of microfinance with reference to Pakistan. As the economic, financial, social and political conditions are unique and the behavior of borrowers is also different in every country, so it cannot be said that one approach of microfinance will prove to be the best for all countries and all societies. The approach of microfinance that stresses the importance of existence and continuous development of MFIs argues that poverty alleviation through microfinance is linked to the existence of MFIs and if these institutions get weakened the process of poverty alleviation will slow down and ultimately stop when these institutions will cease to exist. This requires strengthening the institutes and keeping individuals i.e. poor borrower as the second preference. In contrast to this approach is the viewpoint of helping the poor and keeping them at the top of the priority list. The second approach supports helping poor not only by giving them opportunities to borrow but to give them finances at a cost lower than the market.”[8] Investor Capture of Conventional Microfinance and Lessons for Islamic Microfinance “spend your wealth in the cause of God and make not your own hands contribute to destruction, but do good, for God loves those who do good. Those who spend their wealth in the cause of God and do not follow their gifts with reminders of their generosity or with injury for them their reward is with their Lord. – Al Quran Majid (2.195 and 2.262).


This chapter reviews the major findings of empirical research on microfinance and makes recommendations for proponents of Islamic microfinance. The major finding of research on conventional microfinance is that it has been far more effective at rewarding investors than in alleviating poverty. The research indicates that the ideological orientations of proponents, the endurance of popular myths about the morality of poverty, the authority of insider researchers, the profit-maximizing power of investors, and the use of social coercion – not success at poverty alleviation – drives the growth of conventional microfinance. Islamic microfinance differs from conventional microfinance in that it requires that lenders not be enriched by their possession of capital. If a microfinance enterprise is Islamic it does not profit from another’s labor. There are no investors or paid managers.”[4]


Islamic Microfinance


“this study aims to highlight the significance of Islamic Microfinance as well as discusses some issues in the current practices of microfinance such as too much spotlight on financial inclusion rather than poverty alleviation, provision of high cost financing and cash financing which creates different problems i.e. adverse selection and moral hazards that further aggravate the living standards of the poor people; compelling them to opt for suicide like acts. Therefore, in order to tackle all such flaws of the existing model, a new concept, based on Islamic Microfinance has been proposed which will help in reducing poverty and improve the living standards of its clientele. This will further draw attention of the governments, civil society, and other people who have a social heart to further investigate this area of concern and find further solutions for the alleviation of poverty.”[10]


Akhuwat – It Sometimes Makes Sense to Break the Rules


“microfinance has come of age and has lost its innocence. It is now coming to be seen as just another business, which makes its profits as and where it can. Microfinance is not the only business to have chosen the poor as it’s preferred ‘market segment’. The late CK Pralahad showed that there are many ways of making profits at ‘the bottom of the pyramid’, and we do not criticise Unilever for marketing shampoo in tiny sachets, or Colgate for its profitable ten rupee toothpaste tubes. We assume that the people who buy these products are satisfied with their purchases, and we do not expect their producers to lose money on their sales to the poor.  Most microfinance institutions (MFI), at least until recently, were started with public interest funds, and with welfare objectives, but they have successfully ‘graduated’ from these limited sources of support. Their promoters argue with some logic that they must make high profits to access equity from profit-seeking investors. They must have this equity in order to leverage commercial debt which they will on-lend to satisfy the credit needs of the millions of poor people who are presently not served by traditional commercial banks. These institutions must also hire qualified and experienced managers; they must also be able to offer competitive salaries, to replace the well-meaning but un-skilled voluntary sector staff who may have started the institution.

Microfinance practitioners have also learned many lessons (although perhaps not enough), and a body of ‘best practice’ has grown up. Not every institution adheres to every practice, but it is generally accepted not only that they must be ‘sustainable’, that is profitable, in order to” [6]

Metaphor as a Source of Organization Development; A Case Study of Akhuwat


“the purpose of this article is to determine how and to what extent an organization can be understood using the concept of metaphors. The article seeks to explore and understand the impact of metaphors in the development of an organization’s culture, structure, internal and external communications and its impact on overall performance. This study is conducted on a microfinance organization operating in Pakistan by the name of “Akhuwat” (brotherhood). The very word “Akhuwat” is a metaphor in Islamic tradition and has a deep historical and religious meaning. Using the concepts of modern organization theory, we seek to understand whether this metaphor has any impact, whatsoever, on this organization.”[1]


“Akhuwat was setup in 2001, as a microfinance NGO offering interest-free credit by a group of people who shared an interest in poverty alleviation and improving the quality of life of the poor and destitute in Pakistan. Akhuwat started its function with a model based on the Islamic tenets of muakhaat i.e., brotherhood and qard-e-hasan. The model was distinctively different from all existing models in the field of microfinance. Akhuwat is a glaring example of departure from tradition, whereby it has so far defied the widely practiced ‘golden’ microfinance principles. Malcolm Harper (2008)i acknowledged the unique contribution of Akhuwat and said that “Akhuwat is already doing for conventional microfinance what Professor Younas did for conventional banking in the late 1970s.”

The first loan was given to a woman and the successful return of the first loan convinced the friends of the viability of the model and it was named Akhuwat, the first Microfinance Institution (MFI) based on the concept of qarz-e-hasan and zero interest rate. Soon the equity started to grow and people after hearing the methodology and success started to entrust Akhuwat with more and more donations.”[7]


Potential of Waqf for Poverty Alleviation; The Way Forward For Akhuwat


“in the past, Waqf has played a critical role in poverty alleviation and enhancing the socioeconomic conditions of Muslim society till the recent times. Waqf was the basic and integral unit in the economic systems of the Islamic civilizations providing people with institutions, public as well as consumer goods. Between late 19th century and early 20th century, the system of Waqf has faced a constant deterioration mainly because of compliance and inefficiencies in the administration. Considering the role Waqf played in the economies in the past, there is a strong motivation to revive this system as it existed during the golden period of Islamic Caliphate. Learning from past failures, there is a great potential to develop Cash Waqf model to assist the growth of Pakistani economy especially after the recent calamity of floods in the country.

The paper starts off by looking at the history of Waqf. The role that this system has played in poverty alleviation and enhancing the socio-economic conditions of Muslim society till the recent times will be highlighted. To support this claim, particular features of Islamic Waqf in the past and present times will be highlighted with particular examples of Waqf institutions in the Islamic history. The purpose of this activity is not to derogate or point a finger at the alternatives. Rather, this study is undertaken to identify the most practical and efficient Waqf model.

In the latter half, the paper will focus on the shortcomings of Waqf institution and will identify the reasons, which has led to its failure in all parts of the world specifically Pakistan. Keeping in mind the past failures and future constraints, a model for Cash Waqf institution would be developed, and recommendations would be made for achieving this aim effectively. This part of the paper will be applied science, where Waqf, as it was maintained in the times of Prophet (S.A.W.) and his Companions, would be used as a benchmark, and an attempt would be made to implant its features in the current Pakistani framework.”[2]


Role of Mosque in Socioeconomic Development: The Akhuwat Experience


“The fact that Akhuwat has taken the initiative to come to the aid of the poor by providing them with the desperately needed financial resources is admirable but not unique. It is admirable because in the poverty stricken society of ours such initiatives are a rare reason of hope for millions of enterprising men and women who, for want of funds, are unable to realize their God-given potential and make a living through their own efforts. The scarce financial resources of the society are made available to a small number of very affluent people who get the bulk of the funds of the society pooled by the banking system simply because they are already rich and influential. The commercial intermediaries and NGOs that are providing micro credit facilities to the poor are doing an admirable job in making the economic opportunities more equitably available to the deserving segments of the society. And Akhuwat is an important participant in contributing in that important service.”[13]


Sustainability and Growth in Akhuwat: A Myth or Reality


“sustainability in this paper is defined as the ability of a microfinance program or a Microfinance Institution (MFI) to recover all its costs and also a development surcharge for expansion from its customers/clients or borrowers. “Growth” is defined as a continuous increase in the client base of the MFI. This paper also recognises the general perception that growth and sustainability are inter-linked.


Many MFIs in Pakistan that claim to be fully sustainable have actually made it possible by accessing huge grant funds and concessional debt. Most MFIs in Pakistan are charging as much as 30% to 40% to recover their costs. Analyses show that many MFIs over time have increased the interest rates to achieve self sufficiency rather than reducing their costs.

Akhuwat, on the other hand has defined sustainability and growth in a different manner. Akhuwat considers the entire community as a client/customer in that the cost recovery and providing financial resources to run the micro finance programme is the responsibility of the society, not necessarily that of the poor clients/customers/ borrowers.


Akhuwat does not operate like a conventional institution; it does not operate to make a profit, nor does it charge any interest on its loans. The little it did was that it used to charge a very small flat membership fee of just five per cent which has been abandoned in the current financial year.”[7]


The Importance of Cultural Relevance to the Success of Microfinance


“akhuwat has achieved immense success so far. And there is every reason to suppose that this success will continue because Akhuwat has done three things that are important to the success of new endeavors.


  1. First, it has developed a lending system based on Islam which is embedded in the culture of the people of Pakistan.


  1. Second, building on that Islamic foundation, it has also developed a system that is as much dependent on social capital as it is on financial capital.


  1. Third, it has incorporated Islamic values of tolerance and acceptance to include all members of the community as potentially eligible for its programs.

A review of the literature on innovative policies tells us that new ideas will succeed best if they are embedded in the culture in which they are developed. (Flora and Heidenheimer, 1982). In her article on “Islamic Microfinance and Socially Responsible Investing” particularly, Chiara Segrado (2005) points out that “Microfinance is also a very flexible tool that can be adapted in every environment based on the local needs and economic and financial situation.” (p. 13) Researchers in Ghana (Hendricks, 2000), Morocco (Allaire et. Al., 2009), the Dominican Republic (Scholz, 2006), and Bangladesh (Rana, 2008) stress the importance of cultural relevance to the success of a microfinance project.”[5]


Finance for the Poor: Microfinance Development Strategy


“The interest in microfinance has burgeoned during the last two decades: multilateral lending agencies, bilateral donor agencies, developing and developed country governments, and nongovernment organizations (NGOs) all support the development of microfinance. A variety of private banking institutions has also joined this group in recent years. As a result, microfinance services have grown rapidly during the last decade, although from an initial low level, and have come to the forefront of development discussions concerning poverty reduction.


Despite this growth, as concluded in the recently completed Rural Asia Study, “rural financial markets in Asia are ill-prepared for the twenty-first century.”1 About 95 percent of some 180 million poor households in the Asian and Pacific Region (the Region) still have little access to institutional financial services. Development practitioners, policy makers, and multilateral and bilateral lenders, however, recognize that providing efficient microfinance services for this segment of the population is important for a variety of reasons.”[3]


Microfinance and the Millennium Development Goals


“The MDGs are globally-adopted targets for reducing extreme poverty by 2015. They address income poverty, hunger, and disease; lack of education, infrastructure and shelter; and gender exclusion and environmental degradation.


While the MDGs do not formally sets targets for financial sector access, low-income countries need microfinance to achieve the MDGs. Microfinance underpins the achievement of many MDGs and plays a key role in many MDG strategies. Microfinance fosters financially self-sufficient domestic private sectors and creates wealth for low-income people. Indeed, the General Assembly designated 2005 as the Year of Microcredit to underline its importance. By emphasizing access to microfinance in its recommendations, the UN Millennium Project1 seeks to focus country strategies and programs to build inclusive financial sectors that will catalyze achievement of the MDGs. A good financial sector efficiently manages assets and creates economic wealth for those who have access. If low income people are to manage and grow their assets, they need access to financial services. Microfinance is only “micro” because the assets of those living in poverty are micro.


Other development agendas that emphasize microfinance in reducing poverty include the G8 Declarations of 2005 and 2004;the UN 2005 World Summit, the Commission on Private Sector Development, the Brussels Programme of Action; and the Africa Commission Report. This document provides a guide to the relevant microfinance and financial sector access text in these reports.”[12]


Microfinance:; A Synthesis of Lessons Learned

“The majority of the world’s population is poor, subsisting on $2-3 per day. Over 500 million of the world’s poor are economically active. They earn their livelihoods by being selfemployed or by working in microenterprises (very small businesses which may employ up to 5 people). These microentrepreneurs make a wide range of goods in small workshops; engage in small trading and retail activities; make pots, pans and furniture; or sell fruits and vegetables. Yet these poor households often fail to secure the capital they need and miss opportunities for growth because they do not have access to financial resources – loans or a safe place to hold savings. Over 80 per cent of all households in developing countries do not have access to institutional banking services. This includes nearly all the poor people in the developing world. When there are no financial institutions to serve them, poor enterprises and households rely largely on informal sources such as family, friends, suppliers or moneylenders for their financial needs.”[9]


“Impact assessment in microfinance has received more attention than in any other area of enterprise development. It is now generally accepted that impact assessment is a critical element in further improving micro-finance services and promoting innovation.


Existing impact assessments have made an important contribution to understanding some of the complex interactions between microfinance interventions, livelihoods and different dimensions of poverty reduction and empowerment. There remains nevertheless a considerable gap between the potential contribution of impact assessment and the practical usefulness of existing findings.


It is the view of the author, as elaborated in this paper, that the challenge for impact assessment is now to build on existing impact assessments and move on from merely measuring impact of individual programs on incomes to developing ongoing and sustainable learning processes within and between programs, between programs and donors and also between microfinance users. There is currently rapid innovation in impact assessment methodologies in microfinance which point the way to possibilities of a new and more integrated sustainable learning process between different stakeholders which can itself make an important contribution to poverty reduction and empowerment.”[11]

  1. Conclusion


If the overall model of Akhuwat micro financing is evaluated then it’s for now the accurate model that shows the true principals of Islamic finance, but there always remain once question about the sources of fund for the organization. Currently the organization is getting its funds from the donors and some amount from the people who used Akhuwat loans and are now stable but still there remains the proper source from where the funds should come to the organization. Government is always the 1st option in such case but then organization is not under the government authorities so they can’t provide the funding but government have many other options too, for example use of this model for the poverty elevation but using the zakat fund and other resources or government can employee few of its members to Akhuwat for check and balances and provide it with the funding.


Other than government, akhuwat management can invest some amount of money in real assets like property etc from where it can earn profit that can be disperse as qarz e hasna later on or the organization can invest in some industry by which it can give employment to skilled unemployed people and the profit generated from that industry can later on be used as the funds to provide loans.

another significant way is that organization do mudarabah with group of un employed people and enter into a business with them, mudarib will get the jobs in this way and the bait ul mall that is akhuwat will get the profit by which it can offer more loans or enter into more mudarabah, in this way the source of funding and poverty alleviation both will be achieved.


Practically this model cannot be used by any bank, the reason for that is the return, Akhuwat provide loans with the expectation of no return in the end but the principal amount, but as the banks are the major source of funding, so some rules can be impose on them to providing people with this product too, after evaluating the proper status of the applicant i.e. he is a poor person and needy and he have a proper business plan to execute the proper disposal of funds. Islamic bank on the other hand can use this model more easily and for the good will purpose can use this model for the poverty alleviation in the society.

In contrast with the conventional micro finance, this model is much better, conventional micro finance organizations have motives of earning profit as interest and to provide people with the small loans but in Akhuwat model its totally upside down, organization provide funds for the betterment of the society for nothing in return, actually it will be wrong if say nothing in return, in long run Akhuwat model is earning much more, as the society get stable economically there will be more donors for the organization and the impact on the overall society will be much more positive.


The current operations of the organization is limited to few cities in Pakistan and critically speaking the true picture cannot be gained until it have its operations nationwide or internationally, because the traditional or conventional micro finance model working internationally and Akhuwat will said to be an alternative if it is successful in other societies and cultures too. For that purpose more volunteers and funds will be required and organization has to find a way out for getting both human and liquid assets, but again there is a strong likelihood that when the operations will expand more donors from new places will also join hand in the noble cause of poverty alleviation.


As far as involving a mosque in the operations the intentions are great but few individuals might want to keep themselves in dark that from where they are getting the fund or they may feel uncomfortable by taking funds in front of public, so akhuwat should include the consensus of individuals before the ceremony so that his feelings may not get hurt.




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Ahmad, Zeeshan. “Potential of Waqf for poverty Alleviation;the way forward for Akhuwat.” Exploring new horizons in microfinance, 2010.[2]


Asian Development Bank. Finance for the poor: Micro finance developmet strategy. Research, Asian Development Bank, 2000.[3]


Candland, Christopher. “Investor Capture of conventional microfinance and lessons for Islamic microfinance.” Exploring new horizons in Micro finance, 2011.[4]


Clark, Grace. “The importance of cultural relevance to the success of micro finance.” Exploring new horizons in microfinance, 2009.[5]


Harper, Malcolm. “Akhuwat-it sometimes makes sense to break the rules.” Exploring new horizons in microfinance, 2010.[6]


Jawad, Agha Ali. “Sustainability and growth in Akhuwat: a myth or reality.” Exploring new horizons in microfinance, 2009.[7]


Khan, Ather Azim. “Achieving tripple bottom line: sustainability, growth and welfare.” Exploring new horizons in micro finance, 2009.[8]


Mayoux, Linda. “Impact Assesment of Micro Finance: Towards a sustainable learning process.” EDIAS: Application guidance note, 2001.[9]


Ullah, Saleem. “Islamic Micro Finance.” Exploring new horizon in micro finance, 2010.[10]


United Nations development program. Essentials, Asynthesis of lessons learned. New York: Pact Publications, 1999.[11]


United Nations. “Micro finance and the millennium development goald.” readers guit to millennium project reports and other UN documents, New York, october 2005.[12]


Zaheer, Khalid. “Role of Mosque in socio economic development: the Akhuwat experience.” Exploring new horizons in microfinance, 2009.[13]