MICROCAPITAL STORY: Pakistan’s Akhuwat and Muslim Aid Collaborate to Disburse US$ 4,316 In Microloans

Thirty-seven people in the Pakistani town of Rawalpindi received cheques totalling Rs 348,500 (USD 4,316) through the Muslim Aid Microfinance Scheme, according to the Daily Mail. Muslim Aid is working in collaboration with Akhuwat, a Pakistani microfinance institution (MFI) in Rawalpindi to eradicate poverty through the provision of loans without interest. The Muslim Aid Microfinance Scheme has so far distributed cheques to 235 people in Rawalpindi.

Muslim Aid is a UK-based international relief and development agency which provides a number of services including emergency relief and sustainable development programmes. It was founded in 1985 by 23 community-based British Muslim organizations focusing mainly on emergency relief, but by the late 1980s they had expanded into long term sustainable development programmes. Muslim Aid reported total net assets of GBP 9.4 million (USD 14.7 million) in 2007.

Akhuwat was established in 2001 as an MFI which provided interest free credit to help people enhance their standard of living. It began lending to groups in 2001, introduced individual loans in 2003, and plans to phase out group loans and concentrate on individual lending. There is no interest charged on the loans, as Dr. Saquib, founder of Akhuwat, felt that this was in direct conflict with the teachings of Islam, however a membership fee of five percent of the loan is charged to make the process seem less like charity. Akhuwat currently has 17 branches and 7,150 active clients, disbursing over Rs 323 million (USD 4 million) over five years. In 2006 it reported total assets of USD 814 thousand and debt to equity ratio of 1.84 percent. Its return on assets was -3.64 percent.

By Lori Curtis, Research Assistant

Additional Sources:

Akhuwat: “Home” “History

Daily Mail: “Muslim Aid distributes Rs346,500 through microfinance scheme

Mix Market: “Akhuwat Profile

Muslim Aid: “Home” “Financial Summary 2007

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