Akhuwat – world’s largest interest-free micro-finance organization

By Robin Gomes

Finance is a cutthroat world of lending, borrowing, interest, credit, investment and whatnot. The dominating rules of demand and supply, profit and loss can either make you or break you.  That is why, in this game, there are gainers and losers; perhaps more losers than gainers.

The idea of an institution that has grown into a giant, and is still growing, simply by granting interest-free loans, certainly doesn’t fit into the picture.  Yes, this is exactly what the story of Akhuwat is all about. 

Based in Pakistan, Akhuwat is the largest interest-free microfinance organization in the world based on the Islamic principle of lending.  Akhuwat, meaning fraternity in Arabic, has a vision of a poverty-free society based on the principles of compassion and equity. 

Its mission is to alleviate poverty by empowering socially and economically marginalized segments of society through interest-free microfinance and education.

The brain behind Akhuwat is Dr Muhammad Amjad Saqib, its founder and executive director.   For the past 19 years, the micro-credit institution has grown and continues to grow: the facts and figures say it all. 

What began with a tiny loan of around USD 100, Akhuwat has so far disbursed around $700 million to 3 million families in Pakistan.  It has a network of some 850 branches in approximately 400 cities in the country.  Currently, it has 1 million active borrowers. 

Theirs is not a rags-to-riches story but one of grinding poverty to smiles and hope.  The photo-gallery is but a sample of the transformation the Akhuwat is bringing about in Pakistan.

A giant’s humble beginning

Dr Saqib explains to Vatican News how it all began.  While working in a poverty alleviation programme in Pakistan, he came to learn a lot about microfinance.

It was in 2001, that a poor widow in dire need of help wanted to start a small enterprise to help her family survive.  Dr Saqib arranged $100 for her, with which she purchased two sewing machines. 

Exactly six months later, she returned the entire amount, proudly declaring that she and her family could now survive.

Since then, Akhuwat has never looked back.  They have been giving tiny loans ranging between $200 to $500. 

A poor woman who has been helped by Akhuwat

Every minute one loan

“Every minute,” Dr Saqib proudly notes, “we give a loan to a poor family to fight against poverty and come out of it.”  A dedicated workforce of about 6000 people is backed by a very efficient management information system (MIS) and high-level technology. 

But what really drives Akhuwat, he points out, is the hard work of its employees who work with a lot of “passion and enthusiasm” in order to “fight against poverty and bring qualitative changes in the lives of the poor”.

Gross discrimination in loan policies

According to Akhuwat’s executive director, microfinancing is one of the best strategies of poverty alleviation.  However, the high rate of “interest is detrimental because religion and faith do not allow taking an interest”.

Besides, he finds great discrimination and inequality in loan policies.  It is unacceptable that a rich man can obtain a Mercedes car at 10% interest, whereas a poor man is charged as much as 50% to eke out a livelihood.

This, according to Dr Saqib, was “the biggest argument” behind the launch of an interest-free loan programme. 

 ‘Virtuous’ circle

The fund that Akhuwat began creating “was donated by many people”, Akhuwat’s founder says. They “started identifying good people with entrepreneurial skills and started giving” them interest-free loans.  These poor people had “the ability and skill to do business but what they lacked was this basic capital”.   

Once people are provided with capital to start their business, they gradually pay back the principal.  Akhuwat enhances the amount to help them improve further.

This, Dr Saqib points out, “is how the whole circle started”.  “Instead of calling it a ‘vicious cycle’ we call it a ‘virtuous cycle’.”  “You are supporting somebody and he is also supporting somebody” else.  

As Akhuwat’s fund grew, the programme began expanding to other Pakistani cities.

As an “organic organization”, Dr Saqib admits they have had setbacks but they learnt from their mistakes and conducted action research.  This is why, he says, Akhuwat has today reached “this scale of around 1 million active borrowers”.  

Solidarity, a basic human instinct

The micro-finance organization is planning to expand overseas, such as in the African continent.  “This is because the spirit of solidarity with the poor is universal.”  Solidarity “is not confined to any one faith”.  The desire to “help each other”, Dr Saqib says, “is the most basic human instinct”. 

“There should be solidarity between the haves and have-nots,” he insists.  Instead of giving doles or charity, people should be helped with some loan so that “they can realize their own potential”.

Akhuwat helps bring hope to families

Fraternity

“The literal meaning of Akhuwat,” Dr Saqib explains, “is fraternity - solidarity with the poor, brotherhood and sisterhood”.  “This is the essence and meaning of this word.”              

“Since we are developing a bond of solidarity with the poor, this is our name, this is our mission, this is our vision as well.  So this is the embodiment and essence of what we do.”

The poor are trustworthy – not cheats

The world of lending and borrowing is fraught with risks and dangers, but Akhuwat, which is based on a different principle, has an altogether different story. 

“One of our biggest achievements,” the founder claimed, “is that our recovery percentage is above 99, which is amazing.” 

“That proves our basic assumption that the poor are not cheats.  They are honest, they are credit-worthy, bank-worthy and trustworthy. They just need a holding-hand, our compassion, love and care.” “They are honest.” 

Whenever the poor are given a loan, Dr Saqib, he said, they are clearly made to realize that the help they are receiving is given by someone, and when they repay it, “someone else will get the money”.   “So you are here to continue this chain of humanity and solidarity, so don’t break this chain.”

The founder of Akhuwat says they “take the message brilliantly, and they become part of the organization”. They make sure they are not exploited by high interest rates.  At the same time, they “also realize it is their responsibility to continue this journey.” “This,” he says, “is the virtuous cycle that we started and it should not stop.”     

Disadvantaged women and religious minorities

Another hallmark of Pakistan’s interest-free microfinance institution is that in providing loans, “there is absolutely no discrimination on the basis of caste, colour, creed, religion, political affiliation or region”. 

Akhuwat admits it has a soft corner for disadvantaged women, because “we thought if we can help many such women, we can help the families.” 

“Women, religious minorities and the most disadvantaged” need “more compassion”.

Dr Saqib explains that “if there is one loan and there are two applicants, male and female, we prefer giving the loan to the female”.   “We believe that the social and economic empowerment of the woman means the economic empowerment of the whole family.”

Inter-faith collaboration

Another positive aspect of Akhuwat is the fact they work “through mosques, churches, temples and gurdwaras, so there is absolutely no discrimination”.  

“We believe that everybody is entitled to have his own truth, his own faith and religion. We derive this inspiration from the Islamic spirit but the message is for all humanity.  We don’t discriminate on religion or faith.”

Akhuwat prefers giving loans to women as well as to “religious minorities who are usually discriminated against in society”. The microcredit organization is convinced that “poverty cannot be eliminated if we are not able to have an inclusive society”.

Akhuwat has helped this young man to set up a shop.

Inclusive society

While carrying out Akhuwat’s mission of solidarity and compassion, Dr Saqib says, he comes across numerous cases that touch his “soul and heart”.  [BR6] “These people are a source of inspiration for us.” 

He spoke about a former drug addict who took a loan and is “now earning a very decent amount and living a very peaceful life”.  “Many criminals who were previously involved in petty crimes came to us whom we trained and inspired to be better human beings,” Dr Saqib recounts.

According to him, “this micro-finance is just a means to achieve an end,” which is “a society based on justice and economic empowerment”. 

Each of the “3 million people or families that have taken loans from us,” he says, has a unique story, “something touching to share”.   “Every day,” he says, “we meet somebody who really inspires us.”  He is surprised “how a small amount of money can make a big difference.”