Akhuwat

Haji Zareen Khan house saeed abadf no

7 Kas korona mardan

Mardan

Mardan

Saeed Ullah

0315-9208249

Mardan

Parhoti

hafiz muhammad imran

0313-9954228

Al Hafiz Plaza Near Hoti Pul Parhoti

Rabab Road Near Tangoo Adda
Pehawar
Chowk shah jee peer kareem pura
peshawar
Supply Road near District Zakat Office
Faqeerabad Peshawar
Nothia Jadeed Muslimabad Peer Loghat
shah
Mohalla musa khel giki road alteen
bakery topi sawabi

Peshawar

Peshawar(Ghareebabad)

Muhammad Abid

0313-7774162
091-5853188

Peshawar

Kareem Pura (Peshawar-2)

Roman Khan

0335-9671639

Peshawar

Faqeerabad (Peshawar-3)

Amjad Mehmood

0333-54180162

Peshawar

Nothia

Muhammad Shakir

0345-9041481

Topi

Topi sawabi

Usama Khan

0333-9364245

History
In 2001 the idea of Akhuwat was presented before a group of friends at the Lahore
Gymkhana. During the conversation, charging of exorbitant interest rates on
microfinance programs aimed at poverty alleviation was being criticized. The idea of
initiating an interest free successful microfinance program was brought forth as a
challenge and at that point, no one present foresaw the shape this experiment would
eventually take. One of the friends pledged a donation of ten thousand rupees, while
another friend, Dr. Amjad Saqib, took it upon himself to utilize that donation as an
interest free loan.
The first loan of ten thousand rupees was given to a widow who was striving to earn a
decent living through honorable means. She was neither a beggar nor was she looking for
charity; she was only seeking a helping hand. By utilizing and returning that loan within a
period of six months, she reinforced the belief in the integrity exhibited by the poor when
they are helped with trust and respect. The success of the first loan brought in more
donations and the group of friends became convinced of the viability of their venture into
interest free microfinance. Herein Akhuwat was born, with these friends forming the first
Board of Governors and Dr. Amjad Saqib serving as the first Executive Director. This
marked the beginning of a new chapter in microfinance, one that found its inspiration not
in economic logic but in the spirit of compassion and generosity of mankind.
Akhuwat derives its name from mwakhaat or brotherhood, the earliest example of
which was seen in the fraternity formed by the Ansars (citizens of Medina) and the
Muhajireen (or Meccans) who had migrated to Medina to escape religious persecution.
Inspired by the spirit which induced the Medinites to share half of their wealth with the
migrants, Akhuwat seeks to invoke this very concept of brotherhood through its
operations. For Akhuwat, the metaphor of brotherhood entails the creation of a system
based on mutual support in society. To this end microfinance is only one of the tools,
albeit a powerful one, being employed by Akhuwat.

One of Akhuwats primary deviations from conventional microfinance is that it charges

no interest rates. Akhuwat has sought to base its movement on the principles of Qarz-eHassn found in the Islamic tradition which entails helping someone in need with interest
free loans, a practice favored over charity and doles. While drawing on the tradition of
Qarz-e-Hassn, Akhuwat has over time incorporated many of the best practices and
lessons learnt from conventional microfinance movements from across the globe as well.
In the initial years, Akhuwat was simply a philanthropic exercise to see how interest free
microfinance would fare. Over time however donations increased manifold with the
momentum of the movement accelerating far beyond the expectations of its founders. By
2003 donations to Akhuwat had reached rupees 1.5 million with the loan recovery rate
remaining a steadfast 100%. Consequently it was decided to formalize the organization
and Akhuwat was registered under the Societies Registration Act of 1860. The first
branch was opened at Township, Lahore and subsequently operations began to expand.
With the passage of time Akhuwats branches were opened outside Lahore, loan products
were diversified, the clientele was expanded and the message of Akhuwat began to
rapidly spread. The movement was being spearheaded by the generosity of the Civil
Society as Akhuwats reliance on philanthropy entailed tapping into the spirit of giving
and volunteerism in the society. It was important that society took ownership of the cause
thus in the initial years, Akhuwat did not seek or receive any assistance from a foreign
donor. At the same time, as Akhuwat was rapidly growing, it became pertinent to revise
and refine the operational methodology of the organization.
In the absence of interest rates and minimal registration fee (in 2011, the registration fee
was Rs. 100/ 1.14 USD), every effort was made to ensure operation costs were kept very
low. Extreme simplicity in operational activities, plain offices, use of religious places,
high levels of volunteerism in the workforce ensured that Akhuwat realized its aim of
minimal operational costs. To complement the efficient operational strategies of the
organization, four core principles were identified; interest free loans, use of religious
places, spirit of volunteerism and transforming borrowers into donors. These principles in
time became the defining features of the Akhuwat Model.
As the demand for Akhuwats products grew, Akhuwat adopted a dual track approach to
growth; one that is not driven by the need to maximize earnings but rather focuses on
spreading the message of Akhuwat to as many people as possible. On one hand, Akhuwat
continues to expand its operation in a traditional manner; by opening up new branches in
different cities and towns across Pakistan. On the other hand, it invites others to replicate
the Akhuwat model, with Akhuwat training the staff and assisting in the initial setup.
These replications are urged to strive to become local successes as opposed to emerging
as branded clones of Akhuwat.
With the success of the Akhuwat Model, it began to feature into the curriculum of
renowned international and national universities. Guided by the four core principles,
operational methodologies were further refined and documented. International
microfinance institutions and philanthropists also began to show interest in introducing

Akhuwat in their own countries and it is envisioned that the message of Akhuwat will
spread beyond the borders of Pakistan in the coming years. From its modest beginnings
as a philanthropic experiment, Akhuwat has now emerged as a movement that continues
to make a difference in the lives of all those it touches.
As a philosophy, Akhuwat cannot fail; if the movement does not succeed, it will not be a
failure of the principles and ideals that guide the organization. Failure could only stem
from the waning strength of men and the weakness of their resolve but never from the
lack of strength in the idea of Akhuwat itself.

Lending Methodology
KEY LENDING METHODOLOGIES
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.
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.
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.

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.

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.

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. They are also apprised of social agenda that
includes:

Emphasis on girl's education

Serving the community at large
Protection and improvement of environment
Importance of plantation
Observance of traffic rules and local laws
Following highest ethical values in business

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.
Akhuwats Mutual Support Fund
Akhuwats Mutual Support Fund was created to support its clients and their families
during extreme events like death or permanent disability. At the time of the loan

disbursement, the borrower may pay 1% of the loan as insurance, although loans below 4,
000 rupees are exempted from this fee. While the 1% contribution amount is optional,
most borrowers choose to give it and these contributions go into the Mutual Support
Fund. In case of any borrowers death or permanent disability, the loan is waived off and
the family also receives an additional support package of 5, 000 rupees. The Mutual
Support Fund is an effort to not burden the client or their families in case of an
unfortunate event and instead provide them with the necessary support and assistance.

Microfinance Products
1. FAMILY ENTERPRISE LOAN
The Family Enterprise loans are for establishing a new business or expanding an existing
one with the aim of enabling the borrower to secure a sustainable livelihood. It is the
most common type of loan offered by Akhuwat; comprising 91% of Akhuwat's loan
portfolio. The Family Enterprise loan ranges from 10,000 rupees to 30,000 rupees
however keeping in view the rapid inflation in the country, Akhuwat now gives initial
loans of up to 15,000 rupees. To be eligible for the loan, the individual has to come up
with a viable business plan which he may construct with the guidance and support of the
Akhuwat staff. The loan is known as the Family Enterprise Loan because it intended for
the entire family and not restricted to either male or female members of the household.
Even though the entire family is involved during the loan process, the business is
undertaken by one member of the family who has the required expertise. The Family
Enterprise Loan is designed to strengthen the social fabric by involving the whole family
in the loan process such that the enterprise becomes a family venture instead of an
individual effort.

2. LIBERATION LOAN
Liberation Loans are for repayment of loans taken from money lenders on exorbitantly
high interest rates. With the culture of informal money lenders, or baniyas, prevalent in
Pakistan, many poor people find themselves in a cycle of ongoing debt as they struggle to
pay the high interest rates for years leaving the principle amount untouched. Interest rates
may be as high as 1, 000 percent and might financially cripple the poor. Many a times,
the loan persists from one generation to the next making it impossible for the family to
secure a sustainable and respectable livelihood for themselves. Liberation loans were
introduced to counter the effects of these loan sharks and continue Akhuwats fight
against interest. Akhuwat pays the principal amount in one go for the client and the client
in turn pays back that amount in interest free installments to Akhuwat. The upper limit of
the loan is 50, 000 rupees however substantially large loans may also be given after the
approval by a Committee headed by the Executive Director.

3. EDUCATION LOAN
The Education Loan caters to the needs of the poor who are unable to finance their own
or their dependents education. Many poor students are forced to drop out of school as
they do not have enough savings to continue their education. Emphasis on education has
been an integral part of Akhuwats social agenda and through the Education Loan;
Akhuwat intends to ensure that poor students are able to continue their education in spite
of the lack of financial support. In most cases the loan is utilized for paying fees and
dues, purchasing books and material, and paying initial registration or examination fee.
The upper limit of the education loans is 25, 000 rupees.

4. HEALTH LOAN
The Health Loan is for those who are unable to support the costs for necessary health
care. In most cases, the poor do not have contingency funds or savings to support them in
shouldering the financial costs of health care. Diseases like hepatitis, tuberculosis and
diabetes are quite common in underdeveloped areas and while these diseases are not fatal
in themselves, they have contributed to the death of many poor people who are unable to
afford necessary treatments. Noting this scheme of things, the Health Loan was
specifically designed to assist the poor with funds that could help save their lives. The
loans offered range from10, 000 rupees to 20, 000 rupees. The Health Loan complements
the health services provided by Akhuwat to its borrowers, employees and the
underprivileged in general, under the auspices of Akhuwat Health Services.

5. EMERGENCY LOAN
The Emergency Loan is intended to diffuse the impacts of major contingencies or crisis
situations that undermine the sustainability of the livelihoods of the poor. Akhuwat
realizes that the economic life of the poor is perturbed by many unforeseen events and
emergencies, with the families having little or no buffer amount to counter such shocks.
The Emergency Loan has been designed to counter such inopportune shocks so that the
long term progress of the client is not compromised. Loans in this category may be used
for diffusing losses in business, health care expense, machinery repairs, motor vehicle
repair, veterinary expense and admissions fee amongst others. The loan ranges from 5,
000 rupees to 10, 00 rupees and may be repaid over one year. It is processed within 2-3
days and is the only loan product which may be utilized in conjunction with other loan
products.

6. HOUSING LOAN
The Housing Loan is for necessary renovation of houses including construction of rooms,
roofs and walls. In evaluating applications for the Loan, great care is taken to ensure that
the intended renovation is essential and necessary for the wellbeing of the borrower and
is not a luxury. The range for this loan varies between 30, ooo to 70, 000 rupees and has
to be repaid within two years. Akhuwat started this product in collaboration with Al-Noor
Umar Welfare Trust, a nonprofit organization founded by Mr. Khalil Mian. Over time

these loans have been instrumental in improving living conditions of the poor who had
been forced to live in appalling conditions for generation due to lack of monetary
resources.

7. MARRIAGE LOAN
The Marriage Loan is to facilitate the marriages of daughters. The marriage of daughters
remains a huge responsibility for parents in the Pakistani society and many poor families
are confronted with the difficulty of arranging necessary funds for marriage ceremonies
and dowries. Over the years, many poor families had expressed the need for assistance in
marrying their daughter which led Akhuwat to introduce the Marriage Loan. Up to 20,
000 rupees can be disbursed for this purpose.

Operations
Human Resources
Akhuwat has well defined recruitment policy. Vacant positions are filled with suitable
candidates possessing requisite qualifications. The academic level required for Unit
Managers is Matriculation or Intermediate, for Branch Managers Bachelor in Commerce
or equivalent degree is required. It has been relatively easy to find suitable candidates and
retain them in their jobs. Staff turnover has been very low which reflects a high degree of
commitment and motivation among the staff members. Akhuwat has over a period
developed a comprehensive Manual covering areas like operations, administration,
human resource, finance, audit, fund mobilization etc. New clauses emerging from policy
decisions are added to it from time to time. The manual has clearly defined job
responsibilities for all positions and also provides guidelines for branch management.
New hires start as interns and go through an intensive three month training in
microfinance before they are inducted as regular staff members. Staff members are also
provided
with
various
incentives
and
medical
facility.
Expansion Strategy
Akhuwat is not in competition with other MFIs. It is a completely different model which
is free from interest and commercial considerations of all nature and dimensions,
including sources of funding. Akhuwat closely follows the principle that success is not
confined to sustainability of figures; how widely the model is replicated, how effectively
and efficiently the poor are served, is more important. Numbers overwhelm but saving
the life of one person is akin to saving the entire mankind. Akhuwat emphasis in
replicating the model, looking for local partners and like minded people to start a branch
in their own cities. In case a partner organization is found Akhuwat provides training to
the local staff, helps in setting up the branch. Leaving the operations to the partner
organization, Akhuwat acts as monitoring organization. A team from Akhuwat head
office regularly visits the branches for monitoring and training purposes.

Policy Environment
Akhuwat enjoys tax
section 2(36) of the
Pakistan Centre for
Akhuwat is also

exemption granted by the Commissioner of Income Tax under

Income Tax Ordinance 2001. Akhuwat is also registered with
Philanthropy (PCP) under certificate no. PCP-R1/2008/0104.
a member of Pakistan Microfinance Network (PMN).

Audit System
The organizational structure is well defined and the hierarchies provide various checks
briefly indicated here below:

The Area Managers spend one day every week in the branches under his control.
The Credit Operations Manager visits the branches ones in a month.
The Finance Manager monitors the funds inflows and outflows, he also visits the
branches every month.
The Internal Auditor carries out audit of the branches quarterly.
An External Auditor carries out an appraisal of the branches annually.
Every year social audit is also conducted in which 80% credit cases are physically
verified during field visits.
External Audit is conducted by a reputed Chartered Accountant Firm annually.

Microfinance Businesses
Dress Making
Industrial Electrician
Artificial Insemination
Plumbing
Food Cooking and Kitchen Management
Motorcycle Mechanic
Beautician
Embroidery
AutoCAD
Welding

Computer Hardware
Computer Software
Auto Mechanic