ESAAR MICROFINANCE
A Community Based Model
Arshad Mehmood
Head of Program
Helping Hand for Relief & Development
“Livestock and Dairy Development: Role of Social Sector and Rural
Community in Pakistan”
16-17 December 2014, Lahore
Mission Statement
• To facilitate and support livelihood
opportunities and microenterprise
development for poverty alleviation on
brotherhood and solidarity bases
through provision of Islamic
Microfinance
Poverty Level & Esaar MF’s Approach
Classification
Objective
Approach
Mode of
Financing
At the
Poverty
Line
Growth
MED
Mudarbah
Below the
Poverty
Line
Livelihood
IGAs
Murabah
Abject
Poor
Safety Net
Survival
Qarad e Hasan
Modes of Financing
Qarad e
Hasan
Murabah
Mudarbah
Murabah & Mudarbah Model: Background
• In Pakistan, 63% population living in Rural areas
• High Poverty Ratio in Rural areas as of Urban
• Agriculture is major sector of Rural Economy
• Agriculture contributes 21.4% of GDP
• Livestock contributes 55.4% and Crops 37.6% of
Agricultural Production
• Crops sector is, mostly, financed through Murabah
• Livestock sector is financed through Mudarbah
Murabah Model
• Conventional Practice
• Esaar’s Murabah Model
• Money lender or Arti system
• Sharia based Murabah
• Delivery of Seed & Fertilizer on
• Participatory approach
•
•
•
•
delay payment
Price not declared at delivery time
(not permissible in Shariah)
Quality of delivered goods not up
to mark
Farmers are bounded to sale out
their crop to same Arti
Exploitation of farmers
• Price and profit declared at
•
•
•
•
delivery time
Quality up to mark, purchase by
producer/importer
Low rates compared to market
Farmers are free to sale out their
crop in open market
Farmers has extra income – due
to low cost inputs and relatively
high price of crop in open market.
Mudarbah Model
• Conventional Practice
• Esaar’s Mudarbah Model
• Livestock rearing on partnership
• Livestock rearing on partnership
•
•
•
•
•
•
bases
Owner purchased and handed
over to shepherd/herdsmen
Purchasing price not declared
Shepherd/herdsmen responsible
for fodder, medicines etc.
No written contract
At the time of selling profit sharing
50-50
No proper mechanism of loss
sharing
•
•
•
•
•
•
bases
Purchasing is done in presence of
Mudarib and handed over
Written contract as per Shariah
rules
Fodder and medicines are
responsibility of Rub-ul-Mal (Esaar
MF)
Sale is done in presence of
Mudarib
60% profit goes to Mudarib
Loss sharing as per Shariah rules
Geographic Coverage
Esaar Microfinance Model
Interest
Free:
Shariah
Compliant
Cluster &
Community
Based
Approach
Integrated
Approach
Esaar
MF
Sustainable
&
Universally
Replicable
Online
System
Capacity
Building
Component
Summary
No. of Clusters
Geographic Coverage (District and Union
Councils - UCs)
Accumulative Beneficiaries
Accumulative Disbursement
Operating Cost Ratio
Recovery Ratio
26
24 Districts, 26 UCs
13,963
PKR 386 Million
15%
99.8%
ESAAR MICROFINANCE PLUS
Support to Livestock & Dairy Development sector in Rural Areas
Micro Effort …. Macro Effects
Challenges
• Annual demand of milk growing 15% and supply
•
•
•
•
•
•
increasing 3-4%
3% milk production processed and marketed formally
97% of milk production not linked with market mechanism
Lack of education and awareness among the farming
population, change management systems
Lack of knowledge about optimal feed
Lack of access to well trained support service staff.
Financial exclusion
HHRD Livestock & Dairy Development Model
Conference’s
Recommendations
HHRD’s existing
structure
Development of outline
for HHRD Model
Outline/Components of Proposed Model
Community
Mobilization &
Organization
Market Linkages
Islamic Financial
Solution
Capacity
Building of
Farmers
Technical
Assistance
Objectives
• To increase production of Milk and Meat and bridge the
demand-supply gap
• To reduce poverty in rural and less developed areas
• To provide food security
• To increase efficiency of agriculture sector
Key Drivers
• Fodder/Feed Quality
• Proper treatment and medication
• Rearrangement of herd
• Best quality breed
• Technical assistance
• Capacity building
• Takafal
• Financial inclusion
How???
• Using available infrastructure, Field Office and HR with
addition of Livestock & Agriculture HR
Working Strategy
Input
• Technical
assistance
• Training of
farmers
• Market
linkages and
Value Chain
• Islamic
Financial
solution
Output
MF Officer
LS Officer
Agri. Officer
Targeted
Community
(83.4%
households
having
herd size
1-4
animals)
• Increase in
efficiency
• Access to
finance
• Increase in
household
income
• Improvement
in living
standard
Working Pattern
HHRD
Public Sector
Private Sector
Targeted
Community
After launching LSDD Program
Orphans
adoption
Livestock &
Crop sector
Skills
development
Union
Council
Children with
disabilities
adoption
Interest Free
Microfinance
www.hhrd.org