The First Islamic Microfinance Organization Of Pakistanl

The First Islamic Microfinance organization of Paksitan

FARZ FOUNDATION A brief introduction The Farz Foundation is a social performance based poverty alleviation organization with a unique and innovative Islamic Microfinance model and business design. It is the organization which has been formed on a strong ideological foundation with the notion of “partnership with the poor and profit and loss sharing” as its prior investment methodology. The asset based Islamic Microfinance integrated approach is the basic tool of the foundation to get long term sustainability, because the Farz Foundation has a strong belief that the sustainability of the client is the sustainability of the organization. Farz foundation has also convicted to bring social change with poverty alleviation. As for as marginalized poor and destitute are concerning, Farz foundation provides them productive Zakah(donation) and Qarz e Hasna (interest free loan to start their businesses after giving them the basic business training and providing them market linkages to make them able to Zakah or payer but not zakah receiver.

Fundamentals Poverty is a global challenge that the whole civilized world is addressing to alleviate it. The philosophy of globalization and its spirit demands societies coordinate economy, social change and development as

one unit and not as divided in compartments to move ahead. The attitude of compartmentalizing societal issues into cubicles cannot effectively contend with the philosophy of globalization. Microfinance started with this very approach, but unfortunately methodologies, recourses, policies, systems, and procedures to grasp a widespread made it scattered. The race of achieving high targets detracted from most of the institutions working for microfinance, thus leaving behind the initial focus which is the conviction of poverty alleviation by enhancing the productivity of poor people and building their skills to earn money with honor and dignity. Microfinance also has a social performance motivation. Farz Foundation has a strong notion that the ultimate financial sustainability cannot be availed without social sustainability. However, the dream of changing the lives of poor cannot become a reality without fulfilling the aim of social performance. No doubt, microfinance is a tool which can change not only the individual lives of the poor, but also can bring a social revolution in poor countries towards greater productivity. Social performance based microfinance is not a commercial based industry. It has a belief on socio productive profitability, which occurs as a result of prominent social change at a larger scale. In this perspective Farz (duty) Foundation was established to accomplish the real goals and objectives of the microfinance sector, which are currently neglected to an enormous extent. It is a social performance based non-governmental organization with highly committed, self-motivated, innovative and enthusiastic grassroots experts as its founding members. They are also very experienced microfinance practitioners. Farz Foundation is registered under Societies Act 1860 by its legal status. Farz Foundation is an organization in Pakistan aiming towards achieving millennium development goals with a holistic approach. It is simultaneously addressing health, education, and the financial vulnerability of poor populations to ease their burdens while systemically alleviating poverty.

The trade policy of Farz Foundation Farz foundation is an asset based Islamic microfinance organization. It performs under and according to the Law of Islam to support the poor by providing them the facilities of Zakah(Islamic charity fund), Qarz e Hasna(Interest free Loan), Murabaha(Islamic Trading Transaction) and Ijara(Islamic Leasing ) as per their financial condition and capacity to begin an income generating activity for sustaining their lives and alleviating poverty. Farz Foundation also provides Health and Education assistance to the poor without any cost and with the intention of Sadqae Jariah(Social Responsibility). Farz foundation does only interest free ( Sood sey pak) businesses and there is not any money exchange or business of currency involve with the customer. Farz foundation sells commodities having ownership and possession with the condition of their physical existence and also expresses the rent or cost and profit of the commodities at the time of agreement in the midst of mutual consent and transparency. We do not purchase or sell Illegal, and un Islamic things or commodities. Cleanliness, Purity and pollution free environment is our core value. Although Farz Foundation is at its early stage, its vision, mission, and objectives are very clear and are inevitability necessary for poverty alleviation, particularly in low-income countries like Pakistan. Farz

Foundation employs a multi-bottom line philosophy with an exceptionally creative approach, with each serving as the four dynamic cornerstones of the institution.

Dynamics of Farz Foundation Farz Foundation supports a social performance movement for socioeconomic prosperity and building a new sphere of integration. From inception, it has focused on translating the social mission of microfinance into practice.

Micro Finance

Social change

Social Performance

Integration

Target Market Goal of Farz Foundation is a peaceful social and economic revolution to generate the opportunities of business partnership among poor and microfinance facilitators through the four components of microproductivity, social performance, integration and social change. Its target markets are Home Based Workers, particularly women that are low income entrepreneurs, People living with HIV, Sex Workers, Heejras (Transgender Persons), Destitute and Vulnerable Beggars. Farz Foundation has a faith that without empowering these population groups, the microfinance industry cannot achieve its long terms goals. Farz Foundation has determined the huge untapped market of home based low income workers to be a very fertile client base for microfinance in Pakistan, which could also benefit from enhanced productivity through the power of microfinance focused on social performance.

Vision To bring social change through poverty alleviation by improving productivity and capacity of clients and staff

Mission Empowering the poor through innovative products and diverse business opportunities, by integrating social performance focused microfinance with collaborative community health and education partnerships.

Objectives To become a model organization in social performance focused Islamic microfinance. To enhance the productivity of home based entrepreneurs disabled persons, HIV people, sex workers and transgender persons. Provide ZAQAH(Donation) and QARZ e HASNA( interest free loan) along with asset based financing to the poor , while building their capacity for sustainable livelihoods. We will prepare them for a business product within one year of program entry. To graduate the home based entrepreneurs into micro-enterprise cooperatives. To provide basic education, particularly business education to the poor. To provide basic preventative health education and first aid facilities to the poor. To offer environment awareness and education at the grassroots level and motivate environmental clean-up and conservation efforts. To provide a stimulating and professional work environment to the staff and build their capacity on the continuous basis. To support the entrepreneurial modernization and technology development of Pakistan. To make the poor productive and ZAKAH payer but not ZAKAH receiver.

Asset based products of Farz Foundation Murabaha: Trade limit: Pk Rs.4000/- to 6000/Period of Trade : 6 month Frequency of repayment : weekly Profit Margin : As per mutual agreement between two parties. Basic expenditures i.e Health Takaful (Islamic insurance or Health care camping or awareness), agreement process expenditures will be paid by Farz foundation, and only Life Takaful will be paid by the client. The Target segment of this product is the poor who have a little skill or will to do a tiny business, and he is at the marginal line of Zakah receivers. How ever he or she refuses to accept any charity fund. This product to make the poor productive and successful at generate its own income by the Islamic financing from Farz foundation.

Ijarah Trade limit: Pk Rs.40,000/- to 100,000/Period of Trade : 18 month Frequency of repayment : As per cash flow Profit Margin : As per mutual agreement between two parties. Basic expenditures: i.e Health Takaful (Islamic insurance), agreement process expenditures will be paid by Farz foundation, and only Life Takaful will be paid by the client.

Target market: This product is particularly for the segment of existing entrepreneurs economically falling down due to increasing inflation and food prices and also due to not having sufficient capital for businesses.

Thecategorical purpose of this product is To protect the MEs (Micro entrepreneurs) financially and make them sustainable.

Target businesses: Business examples: Embroidery, Handy craft, Dresses stitching and sewing, grocery shops, transportation, Tire shop, Milk and food business, Beauty parlors, toy shops etc. Mechanics shop.

Productive Zakaah: Farz Foundation discourages beggary and emphasizes on productivity of financing whether it comes as trade finance, Qarz-e-hasna, or Zakah. Foundation’s top priority is to make the poor productive and to turn him or her from Zakah receiver to Zakah payer. So we identify the deprived and make a bridge between poor and the donor. More over we also provide capacity building opportunities to the poor to make them financially independent and earning hand citizen. We believe if Zakah spends for any income generating activity and becomes industrious it fulfills the aim of scarcity elimination.

Target market: Destitute and vulnerable poor are the target market of zakah according to Islamic Law

Qarz-e-hasna: Farz Foundation also provide Qarz-e-hasna to the poor who do not accept Zakah or cannot be considered as Zakah receiver but still in need of a limited amount to fulfill their urgency. We provide them free of interest micro financing on human grounds.

Legal Status Farz Foundation is a non-governmental organization registered under the Act of 1860 and is authorized to work on a ‘no profit no loss’ basis. At present Farz Foundation’s operations are exclusively concentrated in urban, semi-urban and rural areas of Pakistan through partnership with CBOs. The head office of Farz Foundation is located at Lahore Pakistan.

Organizational Design The partnership will look like the following diagram with communication openly flowing between all partners involved. In this way, each organization can maximize their strengths by focusing on what they know and do best, delivering education services, delivering health services, and delivering financial services. When the full partnership is established, all directors and senior staff managers of each organization will meet to discuss the work operations of each organization for working with the targeted group. In this way, no efforts and program activities are duplicated, with each organization in agreement on their role for service delivery.

Farz Foundation Financial

Target Population Home-based Workers

CBO Partner Health Care

CBO Partner Education

Proposed Organizational Structure of Farz Foundation within next Five years

Advisory Board

Executive Committee

Chief Executive Officer

Chief Marketing officer

GM Marketing

CFO

GM-Finance & Account

COO

Chief-HR

GM-Operations

Internal Auditor

GM-HR

Audit officer Audit officer

Accounts Manager

Finance Manager

Regional Social Manager Audit officer

Account Officer

Finance Officer

Social Manager HR-Manager

Manager Fund Raising

Manager R&D

Social Officer Training Coordinator

Advertising Officer

R & D Officer

Admin

AREA STRUCTURE

BRANCH STRUCTURE

Peon + Security Guard

BRANCH STRUCTURE

Peon + Security Guard

BRANCH STRUCTURE

BRANCH STRUCTURE

and

SERVICE PACKAGE

Service Package

BOARD OF GOVERNORS

Consultant USA

Director

Microfinance

Action Aid

Expert

OBSERVERS

Microfinance

HBME

Practitioner

Trainer s

Seiner officer Global Fund

Lawyer

Chief editor

Human Rights Techno Biz

Grass root& BusinessDeve