MICROCAPITAL BRIEF: Pakistan-based Microfinance Institution (MFI) Wasil Foundation Wins $100k Islamic Microfinance Challenge 2014

The Wasil Foundation (Wasil), a nonprofit that aims to alleviate poverty through enterprise development in Pakistan, has won the 2014 Islamic Microfinance Challenge, a competition that promotes Sharia-compliant microfinance products, which prohibit interest payments in keeping with Islamic practices. The theme of the challenge was “beyond murabaha;” “murabaha” is a “cost-plus-markup”[1] concept often used in Islamic financial solutions. The 2014 Islamic Microfinance Challenge was jointly sponsored by Al Baraka Banking Group, a Bahrain-based financial institution that offers Sharia-compliant retail, corporate, investment banking and treasury services; CGAP (Consultative Group to Assist the Poor), a US-based nonprofit policy and research center; the Islamic Development Bank, a multilateral development finance institution located in Saudi Arabia; and Triple Jump, an Amsterdam-based “responsible” investment manager. The challenge received entries from MFIs located in 11 countries.

As part of its prize from winning the contest, Wasil has won a grant of USD 100,000 for its agricultural financing packages called “Salam” and “Ijara” due to their “impact on the lives of its clients,” “sustainability” and “potential to scale up in Pakistan and in other predominantly Muslim countries”[1]. “Salam” is designed to offer cash advances for smallholder farmers against a guaranteed purchase price of their produce. “Ijara” allows smallholder farmers to sub-rent agricultural land from Wasil for a pre-defined time period. Customers of “Ijara” include fruit, vegetable, flower, wheat and rice farmers. Producers of fruit, vegetables and flowers pay a monthly rental fee in cash, while producers of wheat and rice may pay at harvest time. The customers of the two winning products collectively represent 10 percent of Wasil’s total portfolio.

According to a statement attributed to Ms Farida Tariq, Wasil’s Founder and Chief Executive Officer, “to alleviate poverty in Pakistan, we have to focus on the farmers, but many farmers will not opt for interest-based lending because of religious reasons”[1].

Wasil reported approximately 6,100 active borrowers and a gross loan portfolio of USD 1.1 million as of December 31, 2013. The institution does not accept deposits.

By Alíz Crowley, Research Associate

About Wasil Foundation

Wasil Foundation (formerly known as Women Co-operative Development) was established in 1992 as a non-governmental organization in Pakistan. The foundation is headquartered in Lahore, Pakistan, and it primarily operates in the Punjab region of the country. It aims to alleviate poverty in Pakistan through enterprise development and empowering rural communities. The foundation offered conventional microfinance until 2009, when it introduced Islamic microfinance. Since 2010, the foundation has only offered Islamic microfinance. As of December 31, 2013, the foundation reported approximately 6,100 active borrowers and a gross loan portfolio of USD 1.1 million. The institution does not accept deposits.

About Al Baraka Banking Group

The Al Baraka Banking Group, based in Bahrain, offers financial services in accordance with Islamic law (Sharia). As of 2013, it reported total assets of USD 19 billion and subsidiary branches in 15 countries.

About CGAP (Consultative Group to Assist the Poor)

CGAP (Consultative Group to Assist the Poor) is a US-based nonprofit policy and research center dedicated to increasing financial access for poor people worldwide. It is supported by approximately 40 development agencies and private foundations in its efforts to provide market intelligence; promote standards; and offer advisory services to governments, microfinance providers, donors and investors. CGAP reported operating expenses of USD 9 million as of 2013. CGAP is co-located with the offices of the World Bank Group in Washington, DC.

About Islamic Development Bank

The Islamic Development Bank (ISDB) is a Saudi Arabia-based development financial institution that formally began operations on October 20, 1975. The bank aims to foster the economic development and social progress of its 56 member countries as well as Muslim communities in non-member countries, in accordance with the principles of Islamic Law. As of 2012, ISDB has total assets of USD 15.9 billion.

About Triple Jump

Triple Jump was founded in 2006 to support the expansion of microfinance institutions (MFIs) through the provision of capital and advisory services. Triple Jump was established by the NOTS Foundation, a Dutch development organization; Oxfam Novib, a Dutch organization for international cooperation and development; and ASN Bank, a “sustainability-driven” Dutch bank. Its shares are divided among these organizations and Triple Jump’s management team. Triple Jump is comprised of Triple Jump Fund Management (TJFM) and Triple Jump Advisory Services (TJAS). TJFM provides its clients with four investment options: hard and local currency loans, equity, guarantees and subordinated loans. TJAS is an independent foundation that provides consulting services and technical assistance to tier-3 and tier-4 MFIs. Triple Jump manages five microfinance investment funds, with capital invested approximately equivalent to USD 360.1 million as of December 31, 2013. Its investments span 163 portfolio companies in 52 emerging markets in Latin America, Eastern Europe, Africa and Asia.

Sources and Additional Resources

[1] CGAP (Consultative Group to Assist the Poor), Pakistan’s Wasil Foundation Wins Islamic Microfinance Challenge

MicroCapital, December 2, 2013, Applications Open for $100k “Islamic Microfinance Challenge 2013: Beyond Murabaha”

MicroCapital, March 27, 2011, CGAP Launches Islamic Microfinance Blog Series Featuring Finalists of Global Islamic Microfinance Challenge 2010: Al Amal of Yemen, Tanzania ecoVolunteerism, Bisma of Indonesia and Tameer, CWCD of Pakistan

MicroCapital, February 18, 2011, Al Amal Bank of Yemen Wins Islamic Microfinance Challenge 2010

MicroCapital Universe Profile: Wasil Foundation

MicroCapital Universe Profile: Al Baraka Banking Group

MicroCapital Universe Profile: Consultative Group to Assist the Poor (CGAP)

MicroCapital Universe Profile: Islamic Development Bank

MicroCapital Universe Profile: Triple Jump

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