2010

The First Annual Report

FARZ FOUNDATION
The First Islamic Microfinance Organization of Pakistan
(Shariah Certified)
D edicated to all our staff who pioneered a new
era of microfinance.

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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 zmicrofinanceTo enhance the
productivity of home based entrepreneurs' disabled persons, HIV people, sex workers and transgender
persons.

Provide “PRODUCTIVE ZAKAH” (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.

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TABLE OF CONTENTS

VISION & MISSION............................................................................................3

SUCCESS STORY OF FARZ FOUNDATION.....................................................6

INTRODUCTION OF FARZ FOUNDATION......................................................7

FARZ METHODOLOGY......................................................................................15

FARZ OPERATIONS............................................................................................31

SUCCESS STORIES OF OUR CLIENTS............................................................35

SERVICES.............................................................................................................37

FINANCIALS........................................................................................................43

SOCIAL PERFORMANCE MANAGEMENT......................................................51

STAFF CAPACITY BUILDING PROGRAM.......................................................60

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WHAT I STAND FOR

P oetry has been my life long passion (Having 67 published books on my credit) which helped me feel the
misery and deprivation of the people around. I have felt and studied this all pervasive poverty from
possible dimensions, giving me the belief this is not the ultimate destiny of the people on this planet earth.
Now the question was how to fight it. I have wandered a lot to find the answer and ultimately was convinced that
microfinance could be the ultimate tool in the given circumstances. Then I began to study the already existing
structures of the microfinance. Without rejecting the whole exercise done so far, I embarked upon modifying it,
without disturbing the existing strategies. And then one day, like Ian Fleming, I stumbled into Farz Methodology,
which I developed further to the extent of reinventing microfinance. Once being convinced of this method, I
wasted no time to practice it and spent all that I had, without any regard to the outcome. Without any claim to
greatness, I firmly believe this methodology can even undo the certain miss adventures done in the past.

Farhat Abbas Shah

5
SUCCESS STORY OF FARZ FOUNDATION

A chieving financial goals in such trying times is no mean business. Farz Foundation took up the task of
fighting poverty when the microfinance world was giving in to one of the most unique and deep
sustainability crisis. Much to our amazement, the initial outcome was quite encouraging.
Quite interestingly the whole operation was initiated with a small amount of Rs 2.5 million raised by the staff
itself. Another NGO Akhuwat contributed Rs 0 .3 million. Out of this amount about Rs 1 million was disbursed
among its 85 clients. Total number of beneficiaries' amount to 409 persons who were provided healthcare and
health care awareness. This step was aimed at restoring the confidence of people in the microfinance sector. There
are 467 separate members who given Zakah to be made productive.
So far, the foundation has two offices including one central and one branch office. The staff in the branch office
consists of 5 persons, one branch manager, an accountant, 2 social officers and one office boy. The central office
has the staff of 12 which consists of a CEO, CFO, GM operations, Manager Monitoring, Finance Officer,
Manager Entrepreneur, Social performance Manager, Head of Communication and Market Intelligence an
office boy and driver.
The process of organisational development was accompanied by the research, product development,
development of a unique methodology, constant assessment of the success rate, development of SOPs, setting up
of the internal control system, monitoring and evaluation, expansion plans and social performance management.
What needs a special focus in all this process was the fact that simultaneously a partnership was developed with
Pak Qatar Family Takaful Pakistan for Islamic insurance, achieved first time in Pakistan. There was another
partnership developed with The Akhuwat to promote Islamic Microfinance operations.
Out of the whole invested amount of Rs 999,000 the receivable Rs 1,220,180, recovered amount Rs:338,900,
outstanding balance at Rs 863,280 while Rs 18,000 was written off owing to the death of the client. Now, after the
agreement with the Pak Qatar, such a risk has been taken care of once and for all. The recoveries are 99 percent on
time with zero percent PAR.
So far 7 training sessions have been conducted that include a workshop on Islamic Banking and Finance, Islamic
products, principals of Murabaha, time management, client appraisal techniques, Farz Methodology, leadership
and team building and translating social into mission. The clients training sessions were conducted separately on
health awareness and business education.
There was another traditional method of saving, locally known as committees, which was introduced to knit the
clients with each other as well as with the foundation. This kind of method helps build the assets of the clients.
This already existing system of saving was made secure by formalizing it through incorporating it with the other
Fraz Foundation operations. So far, 102 community members and 11 times Farz Foundation (as a member) is
participating in the process. This product is attracting increasing number of members with each passing day.
The first challenge that the foundation faced was the demand of clients for hard cash instead of assets. Knowing
pretty well that the cash extended is mostly spent on immediate needs instead of initiating a productive activity,
they were taught to understand how they can rid themselves of bad loans through using the assets provided by the
foundation. They even were never shy of telling their intentions of using the cash on their immediate needs.There
were only two clients who mismanaged their business. We even didn't gave them up and gave them out of the
routine training.
One important internal challenge was changing the mindset of the internal staff to adapt to the principals of
Islamic Microfinance. That was taken care of through intensive training sessions. It is pertinent to mention that
most of the staff so far works on voluntary basis.
But the greatest challenge that we face is the direly needed finance to tap a huge market that desperately awaits
support.
Finally, I pay thanks to my team and all others, particularly Dr Amjad Saqib, the CEO of Akhuwat who
contributed to the success of the Farz Foundation.
Farhat Abbas Shah,
The CEO

6
 INTRODUCTION
OF
FARZ FOUNDATION

7
A BRIEF INTRODUCTION
The Farz Foundation is a social performance based poverty alleviation organization, implementing on a unique
and innovative Islamic Microfinance vehicle and integrated business mechanism Farz Methodology. 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 instrument. 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 in emergency situation) to start or protect their businesses. After giving them the basic business
training and providing them market linkages FF provides them Murabaha, and other Shariah compliant business
facilities to make them sustained.

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.

DYNAMICS OF FARZ FOUNDATION

Microfinance Social performance
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.

Social change Integration

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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

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 in
Lahore Pakistan. Now we are about to be transformed into company under the Company Ordinance 1984 sub-
section 42. .

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GOVERNANCE

T he Farz Foundation's Board of directors is consisting of professionals having a strong back ground of
microfinance and development sectors and capable of implement effective governance.

The board, through management, guides the organization in fulfilling its mission and protects the organization's
assets. Fundamental to good governance every individual Director is capable to work in partnership to balance
strategic and operational responsibilities. The board provides proper guidance to management regarding the
strategic direction for the institution, and oversees management's efforts to move in this direction. The chair
person of the board interplays between board and management centers on this relationship between strategy and
operation, both of which are essential for the successful evolution of the organization.
In exercising their governance responsibilities, board members consider the perspectives of numerous external
actors. Depending on the legal status of the Farz Foundation, these actors can include providers of capital such
as donors, governments, depositors or other financial institutions; regulatory bodies and other stakeholders,
including clients, employees, and shareholders. In its governance role, the board also is accountable to all these
stakeholders and assesses continually which of these are the most important for the institution.

BOARD OF DIRECTORS

Mr. Daud Saqlain

Chair Person BOD(Board of Directors) of Farz Foundation
Provincial Controller Action Aid.

Specialization: Gender sensitization, Development and

Governance, Community mobilization.

Experience: More than 22 years

Mr.Remesh Singh Arora

Member BOD of Farz Foundation
Chief Executive Officer of Mojiz Foundation, Micro finance
Specialist

Specialization: Institutional Development, Capacity Building,

risk Management, Monitoring & Evaluation.

Experience: More than 12 years

Ms.Dr. Huma Qureshi

Member BOD of Farz Foundation
Health & Education Management Consultant, Specialist in
program implementation & Evaluation.

Specialization:.Intagrated Development Project, Planning,

Monitoring and Evaluation, Preventive & re-Productive Health,
integrated Development and Community Development.

Experience: More than 20 years

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 Mr.Nadeem Fazil Ayaz
Secertory BOD
Advocate & Member Human Rights Commission of Pakistan,
LLM International Human Law

Specialization: Human Rights, Monitoring & Evaluation,

Globalization, Effective Conflict Regulation, Training/workshop
Module Developer.

Experience: More than 23 years

Mr.Shahid Khan
Member BOD of Farz Foundation
Executive Editor Monthly Techno Biz, Social Worker, CEO of
Global CNG.

Specialization: Entrepreneurship, Community services & Social

Work, Civil Society Mobilization.

Experience: More than 14 years

BOARD OF ADVISERS

Br(r).Hamid Saeed Akhter

Chairman Board of Advisers

Scholar, Writer, Researcher & Columnist

Mr. Tashie Zaheer

Chairman Oversees

Managing Director at Innovative Staffing Solutions

Founder/ CEO at Business & Real Estate Group EVP at Citibank.

Mr.Tahir Malik
Member Board of Advisers and ambassador for poverty alleviation

CEO, Trafco Group of Companies, Economist, Intellectual

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 Mr.Nadeem Bhatti
Vice Chairman Board of Advisers

Chairman regional standing committee of garments industry

Federation of Pakistan, Chamber of Commerce & Industry

Mr. Raza Ali

Member Board of Advisers

Islamic Banking & Finance, Trainer, Banker

Mr. Ali Nawaz Shah

General Secretary Board of Advisers

Project Director, Writer, News Caster PTV, Social Worker.

MANAGEMENT

Mr.Farhat Abbas Shah Founder

Chief Executive Officer & Head of HR, of Farz Foundation,
Microfinance Management Expert.

Specialization: Business Development, Marketing &

Advertising,Communications, Financial Management, Project
Management, Social Performance Management.

Experience: More than 30 years

Hafiz Muhammad Ali Chaudhry

Chief Finance Officer, CA finalist of the institute of charted
accountants of Pakistan, MBA Finance.

Specialization: Accounting & Finance, Business Development &

Strategic Planning, Costing & Budgeting.

Experience: More than 7 years

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Mr.Rafay Mahmood Founder
General Manager Operation & Marketing, Micro Finance
Practitioner.

Specialization: Marketing & Sales Management, Microfinance

Portfolio Management, Risk Management, Financial
Management, Trend Analysis, Competitor Analysis &
Management, Customer Relationship Management, Market
Intendance & Analysis.

Experience: More than 17 years

Mr.Saeed Ahmad
Head of Communication & Market Intelligence

Specialization: leading journalist, columnist, TV anchor and

political economy analyst. Apart from doing post-graduation in
English Literature, he has obtained a diploma in communication
from the University of Las Vegas (UNLV)

Experience: More than 20 years

Mufti Mahmood Ahmad

Shariah Auditor

Specialization: Head of online fatawa programe Jamia Ashrafia,

Student of Mulana Taqi Usmani

Experience: More than 10 years

Mr.Tariq Javaid
MBA Finance, Monitoring Manager

Specialization: Policy Monitoring, Branch Monitoring, System &

Procedure Monitoring

Experience: More than 6 yearsz

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 Ms.Noumana
Entrepreneur Development Manager

Specialization: Micro-Enterprise Capacity Building, Visibility &

Market Linkages,Skills Development Management.

Experience: More than 10 years

Ms.Kanwal Niaz
Operational Manager

Specialization: Microfinance Portfolio Management, Risk

Management, Financial Management, Trend Analysis,
Competitor Analysis & Management.

Experience: More than 3 years

Mr.Naveed Liaqat
Finance & Account Manager

Specialization: Accounting & Finance, Costing & Budgeting.

Experience: More than 10 years

OUR PARTNERS

AKHUWAT

PAK QATAR FAMILY TAKAFUL COMPANY LTD.

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 FARZ
METHODOLOGY

15
FARZ METHODOLOGY (REINVENTING MICRO FINANCE & SME)

CONCEPT

P overty certainly emerged as the single most problem that lies at the heart of modern day crisis. It quite
recently has assumed alarming proportions. Many efforts were made in the past but they could not wholly
succeed. Among significant tools, the microfinance was also used for getting rid of poverty which quite
recently plagued the whole world. There is always a room for innovation to be introduced to already existing
structures. Though microfinance made some gains in alleviating it but with sufficient services the amount
invested lie in the danger of being spent on the items of daily use owing to extreme poverty.
What in fact is required is the provision of certain services that may enable the person concerned to become self-
earning unit. So the first and foremost thing in this regard is not to simply extend credit. It is more advisable to do
kind of asset sharing, along with provision of services which could lead to an economic activity at an individual
level.
Certain experiences in this regard bore good results. For instances a woman who was provided with the necessary
material and skill, is successfully running her business of making and selling artificial flowers. What worked in
this case was the fact the instead of extending credit, she was provided the raw material along with the skill. What
could further be added to it is the provision of health and education facilities to the community so that each
individual keeps on learning during this process.
By adopting this method microfinance becomes a well-organized business as well as a community services and
incidence of default is reduced to the maximum level.
Now this issue of poverty is what upon which the future of political structures rests. It needs more coordinated and
scientific approach. Among the efforts made so far, this method of empowerment through education and asset
based loaning has bore good results. At a time when world economies are shrinking and people at large losing
their jobs worldwide, this method could be used to off set the impact of recession in the poorer world. We have
seen that the government agencies could not come up to the expectations and number of people falling below the
poverty line is growing. The supply side economics or trickle down theory is being looked at with suspicion. We
need more non-governmental structures to fight this growing menace.
Owing to shrinking world economy, the poor countries are also being hit hard. The individuals' economies cannot
sort this problem out as they have to cut their non-development expenses. In such a critical period poverty needs to
be fought at war footing.
Recently, Farz Foundation (The First Islamic Microfinance Organisation ) has completed its two-year pilot
project in the area of Shalimar Lahore in two phases. The organisation has done the comparative analysis of
currency disbursement and the Farz Methodology (asset delivery method) in which the asset based microfinance
shows 80 percent positive and productive results while the popular practice of microfinance, which is based on
credit in the shape of currency depicted 80 percent negative and non-productive results. The study confirms the
reports are already being published in the international journals about the very low impact of currency deals in
microfinance. Although the efforts made by the CGAP and other agencies at the international level and Pakistan
Poverty Alleviation Fund at the national level cannot be ignored but the speed of the inflation and poverty increase
ratio demands more sincerer and creative efforts.
There is another challenge of exploring the new markets which still needs to be addressed because the process of
demand and supply matters even at the level of the micro entrepreneurship. Home Based Women Entrepreneurs
are still in the clutches of the middle man, who is earning far more than the HBMEs.
Another important issue is trust-building. The development sector has successfully won the hearts of the
community but unfortunately the microfinance sector is losing the trust day by day particularly in Pakistan and
India. Although The SEWA in India and RSPs in Pakistan has set the milestones remarkably, however, various
MFIs have annoyed the poor community.
Though the poverty alleviation objective stipulates to support the innovative mechanisms like Farz Methodology,
even at the government level as well as at the institutional level; the microfinance donors are not encouraging the
new and innovative players as per the need and the requirement of the day. It will be lethal not only for the
innovative human recourse of the sector but also will reduce the impact of the endeavors already being made by
the sector of microfinance.

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There is Chinese proverb that says we are living in very interesting times. Indeed we are. Old economic patterns
are directly flying in our face. The ongoing recession has defied most of our beliefs. What triggered this, to put it
brief, was the irresponsible ways of lending that almost sunk the world economy.
Amid all this there is another effort through lending to alleviate poverty, known as microfinance. It began with a
justified fanfare and made certain gains as well but the over all outcomes betrayed some imperfections. This right
up would tend to elaborate the so-called Farz Methodology, which, in fact, is another attempt to avoid certain
negative outcomes. The irresponsible ways of lending, which we mentioned earlier and which almost sunk the
ship of world economy, may also be one of the factors responsible for certain negative results in the world of
microfinance.
What could not work in the cold world of business could never have done better where the borrower is a
marginalized poor. Here comes the Farz Methodology which enshrines in its philosophy the passage to the
relative well being of the person concerned through social as we as economic empowerment.
Another technique that this methodology carries is that of not allowing the direct access to the poor and the
vulnerable to the hard cash. What is suggested instead is educating the poor along with providing him with
necessary tools such as the stuff he needs to initiate an economic activity.
Our initial experience was also a clear testimony to the potential that this method carries. Our success rate in our
projects remained 80 per cent which also worked as a spur because we had a long list of volunteers who were
ready to work without compensation in the beginning
What made a clear difference was the realization that microfinance is not a mere business. It rather needs a
business like skill, understanding of the world in which the poor exist and understanding of their limitations. We
achieved this by looking at the world through the eyes of the poor.
Farz Methodology as an innovative economic mechanism ensures the long-term profitability of microfinance.
We need to help the borrower make his business successful. Recovery, of course, cannot be had from a failed
business. MFIs must make certain the recoveries from their profits, instead of their losses. Recovering from losses
defeat the very purpose of the whole exercise. The micro trade cycle technique of Farz can ensure not only the
sustainability of the sector but the long term profitability as well.
There are many researches that demonstrate that funds spent and efforts made are being wasted. What our
methodology ensures is the maximum possible empowerment through basic health and education. Because the
human resource of external organization (Members or clients ) should also be capable of delivering things well
regarding their businesses. A business can not be a successful with bad health, illiteracy and skills. As the
organizations build the capacity of their staff to get more and more output. Similarly microfinance sector will
have to trained their clients to get more and more out put. So the integrated approach of Farz Foundation
emphasizes on a skilled poor community to win the war against poverty to achieve the ultimate vision of the
sector.
Today even the first world is no more unscathed by this recession. But that still has the advantage of a skilled labor.
This fact alone would soon retrieve the falling economy in the rich countries, may be sooner than later. But in
countries like Pakistan we need to initiate this activity on war footing.
The strategies of Pakistan Poverty Alleviation Fund (PPAF), studies of Pakistan Microfinance Network, (PMN)
efforts of Social Performance Management and Social Performance Task Force focus on making loans
productive through social performance is need of the hour.
Considering our collective past experience, we should not hesitate far a moment to implement these strategies
with collaboration of Farz Methodology because the purpose of the sections is the same, how ever the Farz
methodology will protect the expected gains. This would even help retrieve even the failing projects.
The capacity building of clients like training in credit discipline, basic marketing skill, and feasibility preparation
are of paramount importance. This should be carried out the way we train our staff.
Another advantage of this strategy is that it would bridge conventional microfinance and Islamic banking. That
would also allow us in a huge market that still remains untapped.
At a time when Pakistan's economy is expected to grow by less than 2 per cent, we should adopt this measure to
enhance the growth. Government is facing many other challenges like war on terror and perhaps cannot focus on
economy as much as the civil society can. In the ultimate analysis war on terror could only be won through
economic and social empowerment of the people. So the success of microfinance is the success of the forces
struggling for peace and betterment of the country.
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The idea of decoupling that was being put forth in the beginning of this recession could only be materialized by
kick starting growth where the impact of the world recession is slightly less.
The task of course is gigantic. But of course the journey of thousands miles begins with one step. Let's start
restructuring existing MFIs methodologies and also begin establishing new projects to steer out of these testing
times.
Changing the economic environment always calls for more innovative response. We, of course, are living in a
time where hosts of events have crowded a comparatively short time span, particularly in the world of finance.
Despite an incorporated world economy, the tools and methods needed in the so-called Third World would
definitely be different from those of implied in the developed world. For instances the ways to fight poverty in the
countries like Pakistan needs certain changes to suit a constantly aggravating economic situation.
The main emphasis in this approach is that by empowering an individual through services other than finance, in
fact, we secure the money lent and make it productive over a long time. The most important task that today we face
is not only to mitigate the impact of the recession but also to off set it. The governments in the region are tied with
the host of other challenges, including war on terror. It makes it more important for the civil society to play its role
in more effective and intelligent way. By kick starting an economic activity through incorporating the poor with
provision of non-financial services as well as financial, we would bring them closer to the institution of
microfinance. They own this whole process which in turn is enhancing their productivity and also inculcates a
sense of responsibility among them.
The various research and evaluation projects have already unveiled the causes of the breakdown of the financial
services system. So it is imperative to sort out a method which could offer a viable solution to provide a long-term
relief. Undoubtedly the microfinance can provide a contingency plan in the right direction. Different studies
suggest that the week impact of different microfinance methodologies already in place demand an innovative
microfinance mechanism to be implemented at a large scale. The efforts made to link microfinance with Small
Medium Enterprise (SME) and SME to Medium Enterprise and then macro enterprise are still in the process of
achieving the goals to make any breakthrough. One reason behind not achieving our goals has been undue
compartmentalization and division of work. What is needed, instead, is the integration. No business or credit or
any financial system can be sustained in isolation. This is the core philosophy of Farz Microfinance Methodology.
What goes without saying is the fact that consumption is the key to all types of production. Dwindling
consumption means a stalled or hampered productive process. Thriving need-based local markets can become a
gateway to micro productivity. At the micro enterprise level there are a lot of things that need to be addressed like
the role of middle man and the whole sellers. Farz methodology emphasizes providing a just economic system for
the productive poor according to their needs and requirements. The productive poor will have to be facilitated as a
wheel for the international trade cycle. The role of currency should also be minimized and would have to be
replaced by income generating kinds like tools and assets, etc. The artificial expansion of businesses or trade
should be checked through asset providing mechanism. Farz Methodology as Noe Microfinance has proved
through positive outcome as the most effective system in the given economic milieu. This inference has been
made on the basis of results achieved in the poor neighborhoods like, Chongee Amarsidhu and Meu Colony in
Lahore. Previously about eight MFIs targeted this area and six left by declaring them red (negative) areas. Two
reaming are grappling with their zero tolerance policy and late night recovery problems. In the same area Farz
Foundation has started its pilot to gauge the results and to observe the effectiveness of Farz Methodology.
First time in Pakistan the microfinance is being customized according to cultural and religious circumstances
simultaneously unlikely the various previous practices. Farz Foundation has also launched a saving scheme that
requires each member to pool a specific amount on monthly basis which is given to one member or the other on the
basis of lucky draw. This is a practice known as committee (community's rotating funds) which develops saving
habits and also works as a trust-building measure. What FF did was that it began, in accordance with Farz
Methodology by conducting free eye camps and also picked some of the poor families and took the responsibility
of paying for their children's education. Through further penetration into the area it was learnt that previously the
borrowers were further lending the money at even a higher rate of interest, which defeated the very purpose of the
whole exercise. They, of course, were bound to fail. All that Farz Foundation has dealt with so far does not lay bare
the whole panorama of opportunities. In the future FF intends to provide direct market linkages to eliminate the
role of middleman that will further increase the rate of profit of the home-based women entrepreneurs.
As the first Islamic microfinance organization of Pakistan from its first day with a full fledge Islamic vision of
trade and business Farz Foundation has provided an Islamic solution of the non productivity of the micro loans,
which not only can cater to a huge Muslim Market but the general clientage as well. The main aim of this exercise
is to kick start the demand at micro level which will initiate an economic activity at the supply side.

18
Even agricultural sectors lie untapped and the efforts made so far did produce desired results. As mentioned
earlier, through adequate financing, the expectations assigned to the microfinance sector could easily be fulfilled.
At a later stage it wont even involve a great deal of finances as through market linkages an economic activity
would be initiated on the credit bases between the venders and sellers all that would be required to monitor and
guide it to more productive directions. However currently it needs the support from the institutions which are
working for the promotion of Islamic or conventional microfinance as a poverty reduction tool.

FARZ METHODOLOGY (System)

Intend to do

Our Target
Household

Step-1
Request for Membership through
Offer for Membership through

Household
Business
Membership
done via
Female

Step-1 Takaful

Step-2 Murabaha

Meet Business
Expanses
Household Reinvestment in
Step-2
Profit generated Business
Business from Business
Member Meet Household
Business Expanses
Installment of
Farz Committee

Business
Step-3
Education

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 Step-3b Step-3a Step-3
Household
Profit generated Installment of
Business from Business
Member Farz Committee
Business

Member gives
installment to FF
FF Provides facility to client (See Farz Committee)
Farz Committee
Pool

From every 3rd to

11 th,member gets the
Share PKR:200 total collection2,200
In Committee through a monthly lucky
Pool Draw . (1st and 2 nd
collection go to FF &
group organizer)
Farz Foundation
as 1 Member
Committee Pool and Committee Group
total Collection= Member
10 Members of PKR: 2,200
Community from
One Cluster

Committee Pool and Committee Group

Total Collection= PKR:
2,200
Member

To meet
PKR: 2,200

immediate Needs
Members Members
get PKR: do
2,440 partnership Option Build asset
after one with FF
Year or
Monthly Reinvest in Core
PKR:20
Business

Investment Pool of Farz Foundation r

he
(FF & Community are partners in MURABAHA
s ot e
Business) te om
n era f Inc ient
ge o Cl
FF urce heir
so o r t
f

20
 Step-4
Health Care Awareness

Household

FF Provides health care

awareness to clients

Step-5
Future Protection Program

Household
FF gives awarness to clients
about their children’s
education through
“Children Education Awareness Program”

Ultimately
Business
Education
Profitability of the
Long term

Sector

Financial
Service

Sustained Clients
Health
Care

21
AN INTEGRATED APPROACH

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 that of the organization.

TARGET MARKET Target Market

There are three categories of markets namely the Upper, Middle

and Lower but Farz Foundation is working with the Lower
Market.

Farz Foundation has categorized the“lower” into four different

types and offering products package for each market.

22
MURABAHA

Murabaha refers to deferred payments structure agreement for the sale of tangible goods. The seller acquires an
asset, which the buyer agrees to purchase at some point in the future. The seller is entitled to a profit, as long as the
exact profit is disclosed in the contract. Payments may be spread out over time. Murabaha agreements are often
used for real estate financing and other purchases that are paid off over time.

Murabaha Size
Murabaha (Small) PKR: 5,000 to 30,000
Murabaha (Medium) PKR: 31,000 to 80,000
Murabaha (Large) PKR: 81,000 to 150,000

OUR CLIENTS GRADUATION STRATEGY

1200

1080 1079

1017
1000
936

834

800
734
707

Murabaha Small
600 Murabaha Medium
553 556
536
Murabaha Large
499
468 473

384 396
400
340
319

251
231
180 207 194
200 157 148
107
73
58 49
34
0
0
1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year

IDENTIFICATION OF AREA FOR OPERATION

To allocate the Area for Social Center (Branch)

To allocate the Potential working areas for social center
Product needs assessment.
Potential businesses.
Cash flow of different businesses.
Size of micro trade.

STAFF HIRING
Add for staff hiring in local News paper.
Collection of CVs as per given date.
Short listing of CVs and finalize prospective candidates for interview.
Sending calling letters to all selected interviewees.
Conduct 1st interview.

23
CAPACITY BUILDING OF STAFF
To deliver the orientation of FARZ FOUNDATION to final candidates for jobs.
To deliver three days Step-in-Training to all Selected staff.(In house)
Islamic banking & finance. Conventional microfinance Farz Methodology
Basic Selection criteria of FARZ FOUNDATION
Area survey
Effective Mobilization skills
Clients appraisal training
Cluster formation steps
Conduct of community meetings
Customer relationship management
Social performance management
Delinquency management
Monitoring
Three days on the job training to the staff.
Basic Selection criteria of FARZ FOUNDATION
Area survey
Effective Mobilization skills
Clients appraisal training
Cluster formation steps
Conduct of community meetings
Customer relationship management
Social performance management
Monitoring
Islamic banking & finance. Conventional microfinance
Farz Methodology
Interview and selection for one month internship
Selection for 11 month on a contract.
After 11 month, contract extension / permanent employee.

SOCIAL CENTER (BRANCH) OPENING

Social Center Opening Ceremony.
Mobilizationz

KICKING OF OPERATIONS
BRANCH STRUCTURE

Office Boy

24
COMMUNITY CLUSTER STRUCTURE

Cluster has three groups each consisting of five

members. Each group has a leader while one Cluster Committee
cluster managers heads the whole body. Three
group leaders and cluter managers forms a
cluster committee that responsible for
collecting installments and ensures social
performance.

DELIVERY PROCESS

STEP-1
MOBILIZATION

OBJECTIVE

To mobilize the target customer who is able, willing and independent

PURPOSE OF MOBILIZATION

To inform people about the objectives of the organization

To know about the needs of the people through question answer session
To introduce the facilities extended by the organization

25
 STEP-2
COMMUNITY MEETING CONDUCTED BY SOCIAL OFFICER (SO)
OBJECTIVE

To introduces Farz Foundation in detail

To finalize the group leaders and cluster managers
To inform about the existing and upcoming facilities of the foundation
Detail of the duties of all participants
To tell about the method of installment and meeting
To tell about the documents

THE METHOD OF COMMUNITY MEETING

After the mobilization, gather all the members at place, address their objections and after resolving them form
groups consisting of five members and then let them choose their group leaders and afterwards their cluster
manager.

STEP 3
COMMUNITY MEETING CONDUCTED BY SOCIAL (SM)
To finalize the cluster manager and group leaders

STEP 4
HOME SCREENING
OBJECTIVE

To visit the final members homes after community meeting

To fill the KYC and home screening forms at each members home

THE METHOD OF HOME SCREENING

On visiting the potential members home for verification, home screening form is to be filled. To fill
KYC form after the member fulfills the home screening criteria

STEP 5
BUSINESS SCREENING
OBJECTIVE

After the community meeting and home screening, to check the home and business of final members
To fill the business screening form at the place of business of the members

METHOD OF BUSINESS SCREENING

At the place of the potential members business first of all business screening form is to be filled
The KYC form is to be filled after the potential member's place of business is verified

Note: The business details will only be obtained from the businessman.
Note: The 100 per cent screening of cluster will be done after or during the filling of KYC form
26
DIRECTIONS FOR FILLING THE FORM

Cluster SO will work according to the laid down method.

The screening of cluster manager and filling of the form should be done in the presence of group
leader
The screening of group leader and filling of the form should be done in the presence of cluster
manager
The screening of the members and screening of the form should be done in the presence of the group
leader·
Forms are to be filled after question answer session.
Form and the copy of the original documents should be signed as ' original seen.
Home screening, business screening and KYC forms should be filled at the home of the members
KYC form should also be filled along with them

STEP 6
FINAL FORMATION MEETING
OBJECTIVE

To tell the cluster manager, group leader, members about the responsibility of the cluster
To verify the home visit by the cluster committee

THE METHOD OF FINAL FORMATION MEETING

If a member exit during the filling the form , new member should be introduced to the cluster.
Cluster committee and members to be apprised of principles and agenda of the Farz Foundation.
After the completion of all the five clusters all the members and their heads should be gathered in the
social centre to approve according to the agenda given bellow.

STEP 7
SALE AGREEMENT AND DELIVERY OF ASSET & STOCK
OBJECTIVE

To buy the required things to the members

To sign the agreement about the things agreed to verify all the things bought by the members

THE METHOD OF SALE AGREEMENT

METHOD 1

FARZ FOUNDATION staff will go with the members to a selected vender to buy the stuff and sign the
agreement at the time of delivery.

METHOD 2

To buy the stuff according to list and handover it to the member after signing the agreement.

METHOD 3

An agent with the confidence of the community to be sent to buy thing, to bring them to the branch to hand
over after signing agreement.

27
MONITORING & EVALUATION
Daily, weekly, monthly, quarterly and six monthly reports system.
Field visits of bottom to top Management.
Fortnightly Meetings with 100% Clients.
Social Performance Management.

ASSET BUILDING
Farz Committee: Rotatable community saving

Farz Foundation has developed a market driven, need based and innovative product having deep cultural roots.
The product is known as Committee (Rotating savings) in Pakistan. The people usually build their assets by this
rotating saving activity at a street or a market level informally and without any proper bookkeeping. However,
Farz Foundation has not only made it formal but uses it as another source of income by providing the service of
investment in Murabaha as a partner. Farz Foundation in Pakistan proposes this partnership concept-based
approach to encourage community savings and profitability to sustain its clients. Members of the committee have
regular meetings in order to save and borrow from a community's pool of money. Each member contributes equal
amount of money to the pool and at each meeting, one member takes the whole amount by a lucky draw. The idea
is for transparency of the entire saving, lending, borrowing, process and generating another source of income.
The foundation's role is that of a manager, monitor and trainer as well as a bookkeeper. Farz Foundation also takes
part in this Committee as a member by contributing its money to the pool and gets first Committee. According to a
cultural rule manager gets the privilege of taking the first Committee. It is a triple edge financial service because
of its participatory, saving and investing features.

FEATURES OF FARZ COMMITTEE

Heads Features
Committee Size Min=PKR:100 and Max=unlimited
Period of Committee Cycle 11 Month
Participants of Committee in each Group 10 Members + 1 Farz Foundation=11
Number of Committee group under one cluster Min=1 and Max=3
Frequency of Committee installment Fortnightly
Frequency of Committee draw (lucky draw) Every Month

HEALTH CARE
The biggest reason for the low productivity according the WHO is the poor health all over the world. The Farz
Foundation pays keen attention to this aspect and conducts health awareness workshops and health camps.

AWARENESS PROGRAM
The greatest problem in the area we work is the water born diseases and we teach them to boil water before
drinking. The general principals of cleanliness for instances, washing hands before taking meals are emphasized
during the training.

EYE CARE
Farz Foundation has launched its eye care program by starting a free eye care camp for poor peoples of the branch
area. In this camp Farz Foundation provide eye checkup facility and provide spectacles to the poor home based
micro entrepreneurs with any cost.

28
FUTURE PROTECTION PROGRAM
This program deals with educating the clients to provide education to their children apart from picking the kids of
the most vulnerable members and provide expenses for their education. This is done to ensure the better future of
the community.

ENTREPRENEUR DEVELOPMENT PROGRAM

346
350

300

250 235 Trained for Murabaha Medium

Trained for Murabaha Larg

200
177
172
160
150 151
150
127
109
102
100
80
74
58 62
50
50
34
23
16

0
1st Year 2nd Year 3rd Year 4th Year 5th Year 6th Year 7th Year 8th Year 9th Year

CHALLENGES FOR HBMEs FARZ PROVIDES

• Lack of Health
• Lack of Business Education
• Lack of Skills
• Family & Business (Both sides
Personal Management) • Health Care Awareness
• Families Restrictions • Business Training
Personal • Skill Development Training
• Lack of Fund • Takaful (Islamic Insurance)
• Lack of Research
• Lack of Market Linkages
• Lack of Networking • Murabaha
• Lack ofProduct Demand • Book keeping training
Value • Other Source of income
Internal • Lack ofBusiness Management Internal • Business Development
Training
knowledge
• Problems of Mobility • Market Linkages
• Networking
• lack of Access to Market
• Client Satisfaction
• Delayed payments
• Distance to Wholesaler
Market External • Guarantee
• Exploitation by Middleman
• Lack Guarantee
External • Low profit Margin
• Bad debts
• Unwilling Employees

29
FUTURE PLAN

SCALABLE
SUSTAINABLE
&
PROFITABLE

FARZ HBME/SME VILLAGE

Livestock Form Livestock Form Livestock Form

Solar /wind Poultry Form Poultry Form Poultry Form

Energy Plant Vegetable Vegetable Vegetable

Agriculture Field Residence Residence Residence

Agriculture Field
Production Unit Production Unit Production Unit
(Embroidery) (Handicraft) (Garments)
Display Shop Display Shop Display Shop
Health

Livestock Form
Production Unit
Village

Poultry Form
(Dairy Products)
Display Shop

Residence
Care

Vegetable
Judiciary
Center
Import &
Farz Village Bank

Marketing Finance Transport Packaging

Export
Play
School Administration Block
Ground
Internet

Livestock Form
Production Unit

Poultry Form
Display Shop

Telecommunication Local Sale & Purchase

(Wood work)

Vegetable
Residence
Service

Business Education
Center
Display Shop Display Shop Display Shop
Production Unit Production Unit Production Unit
(leather product) (Stitching) (Artificial Jewelry)

Residence Residence Residence

Village Water
Supply
Chiller & Agriculture Field
Agriculture Field Cold Livestock Form Livestock Form Livestock Form
Storage
Poultry Form Poultry Form Poultry Form

Vegetable Vegetable Vegetable

30
FARZ OPERATIONS

31
WORKIG TARGET AREA
The area, where the Farz Foundation team started its operation is 16 kilometer from the Lahore city. The name of
the area is “Kacha Jail Road Chungi Amar Sidhu” which is not well developed and the living standard of the
people is quite low .Especially the level of education, health is very poor along with environmental problems.
About six to seven microfinance institutions also work in this area and facilitate the people through financial
service .

PRODUCT OFFERED
1. Murabaha (Small)
2. Fraz Committee
3. Takaful
4. Health
5. Business Education
6. Donations

OUTREACH
This report covers the activities from Jan 2010 to 30th June. Farz Foundation has 1070 Clients, 85 clients of
Murabaha with Business Education & Takaful , 102 clients of Farz Committee, 467 beneficiaries of Zakah and
Business Education service, 409 beneficiaries of our health service and 9 beneficiaries of child education
program. We have only one social center operating in the undeveloped area of Lahore districts of the province of
Punjab. The graph below illustrates growth in Farz Foundation's outreach from 1st Jan 2010 to 30th of June 2010.
Farz Foundation will continue to focus on maintaining and even accelerating this growth.

OUTREACH

120
102
100 85 500 467
409
80 400

60 300

40 200

20 100
9
0 0
# of Murabaha Small with # of Farz Committee Beneficiaries Beneficiaries Child education
Business Education & of Health Service of Zakah / business program
Takaful education

Murabaha Small
Keeping in line with growth, disbursement successfully surged month by month. The figure below depicts
cumulative micro trading to the tune of PKR. 999,000 or roughly $11,753. The table on the next page
demonstrates breakdown of Farz Foundation's portfolio by the institution's product and corresponding average
trade sizes PKR. 11,753 till month ending on June-2010. Farz Foundation's micro trades were disbursed in the
form of Murabaha during the Jan 2010 to June 2010.

32
 MONTH # OF CLIENTS FUNDED AMOUNT
Jan-2010 22 Farz Foundation 255,000
Feb-2010 15 Farz Foundation 178,000
Mar-2010 13 Akhuwat 166,000
Ari-2010 13 Akhuwat+Fraz Foundation 134,000+2000
May-2010 0 - 0
Jun-2010 22 Farz Foundation 264,000
85 999,000

SUPPORT TO DIFFERENT BUSINESS SECTOR.

The figure below illustrates distribution of different areas. As many of Farz Foundation's clients are located in
Lahore and surrounding areas, 61% invested in TRADING Sector and 29% in the services sector and only 10%
invested in MANUFACTURING & PROCESSING Sector.
As Farz Foundation expands and goes deeper into rural areas, it is building its clientele base in other sectors.

MANUFACTURING &
PROCESSING 10%

TRADING
SERVICE
MANUFACTURING &
SERVICE29% PROCESSING

TRADING 61%

33
REPAYMENTS

Descriptions Details

Due Recovery (Jan 2010) PKR.4110

Recovered PKR.4110
Due Recovery (Feb 2010) PKR. 27980
Recovered PKR. 27980
Due Recovery (March 2010) PKR. 45880
Recovered PKR. 45880
Due Recovery (April 2010) PKR. 74330
Recovered PKR. 74330
Due Recovery (May 2010) PKR. 80220
Recovered PKR. 80220
Due Recovery (June 2010) PKR. 106380
Recovered PKR. 106380
Total due PKR. 338,900
Total Recover PKR. 338,900
On time Percentage (%) 100 %

34
SUCCESS STORIES
OF
OUR CLIENTS

35
Asia Bibi W/O M. Arif
16 Km.Feroz Pur Road Chungi Amer Sidhu Lahore.

M y name is Asia Bibi, wife of Mohammad Arif. Before becoming Farz

Foundation's client, I was daily wager of sewing clothes. I had
already borrowed money from a microfinance organization but used
it to meet my immediate needs. Then Farz Foundation approached me and
trained me how to productively use the loan. I direly needed to be self-
sufficient as my husband is mentally retarded and is also dependent upon me.
I have five children, one son and four daughters and was not even able to pay for
their education. The eldest daughter got marriage, while the rest, depended
upon me. The Farz Foundation conducted a community gathering where I was
introduced to it. I told them about my needs. They offered the people
productive assets to start or to upgrade their micro businesses. I asked for
money but they told me they don't deal with cash and they can give only
productive assets etc as par their policy. I thought I had already mismanaged a
previous loan and now I was convinced that asset based help can get me out of
my crisis.
They, according to my demand, bought me cloth for bed sheets of worth
Rs15,000. I began to produce bed sheets as I already had a sewing machine
began to sell them in the Sunday Bazaar with the help of my son. In a matter of
three weeks I earned and additional Rs 15,000 in three weeks. Now I could
seriously realized the benefit of asset based help. Now I have reinvested the
same amount while using the profit to meet my needs. Now I am even repaying
the previous loan to the other MFI as well as to the Farz Foundation as I am
earning enough to meet all these expenses. Thank you Farz Foundation.

Rubina W/O Ejaz Ahmed

16 km.gulshan coloni feroz pur road chungi amer sidhu lahore.

M y name is Rubina wife of Ejaz Ahmed and I live in Chungee Amar

Sidhu Lahore. My husband is earning only Rs 2, 000 as a driver in a
factory. I used to work at a beauty parlor as an assistant. I was
making some money, but could not meet my expenses. We have three children
and could not afford their education. I was taking loans without knowing how I
would repay them. I had no idea how I could get rid of this vicious circle. One
day my friend who was working at some other Parlor, told me about the Farz
Foundation, which lends assets and gives business training to women so that
they could be self-sufficient. I visited where there was a training session being
held by the Farz Foundation. There I met Nomana sister, a trainer at Farz
Foundation. I had a five-day course of business development. There we were
taught that to be self-sustained and we need to start our own business. And we
also need a business education to be successful.
They taught us book keeping, preparation of feasibility and estimation of
income and expenses. After the training they offered certain productive assets
to us to start our business. I wanted to establish my own beauty parlor. They
bought me assets worth Rs 10,000 . I started a little parlor from my own home.
In accordance with the education given by the Farz Foundation, I introduced
my beauty parlor in the neighboring area. Within one month I shifted my
beauty parlor to an independent place. Now I look forward to further
development of my business. I now earn about Rs 15,000 to 20,000 a month
and can easily meet my expenses, including school fee for my children, apart
from paying my installments to the Farz Foundation. Thank you Farz
foundation.

36
SERVICES

37
PRODUCTS PACKAGES FOR DIFFERENT MARKETS

FINANCIAL SERVICES
MURABAHA

Murabaha refers to an installment credit agreement for the sale of tangible goods. The seller acquires an asset,
which the buyer agrees to purchase at some point in the future. The seller is entitled to a profit, as long as the exact
markup is disclosed in the contract. Payments may be spread out over time. Murabaha agreements are often used
for real estate financing and other purchases that are paid off over time.

Product Trade Size

Murabaha (Small) PKR: 5,000 to 30,000
Murabaha (Medium) PKR: 31,000 to 80,000
Murabaha (Large) PKR: 81,000 to 150,000

THE KINDS OF MURABAHA

1. Murabaha Small
2. Murabaha Medium
3. Murabaha Large
Features of Murabaha Small

HEADS DETAILS
Trade size PKR: 5,000 ($ 60) to PKR: 30,000 ($ 37)
Annual increase in trade size In according with the business performance
Rate of profit 24% Flate
Duration of installment One Year
Exempted days Eid holidays
Total Installment 22
Frequency of Payment Fortnightly
Collateral 1 Personal guarantee
Collateral 2 Post dated cheque

38
 Features of Murabaha Large
HEADS DETAILS
Trade size PKR: 31,000 ($ 369) to PKR: 80,000 ($ 952)
Annual increase in trade size In according with the business performance
Rate of profit 24% Flate
Duration of installment One Year
Exempted days Eid holidays
Total Installment 22
Frequency of Payment Fortnightly
Collateral 1 Personal guarantee
Collateral 2 Post dated cheque

Features of Murabaha Medium

HEADS DETAILS
Trade size PKR: 81,000 ($ 964) to PKR: 150,000 ($ 1786)
Annual increase in trade size In according with the business performance
Rate of profit 24% Flate
Duration of installment One Year
Exempted days Eid holidays
Total Installment 22
Frequency of Payment Fortnightly
Collateral 1 Personal guarantee
Collateral 2 Post dated cheque

FARZ COMMITTEE

Summary
Farz Foundation has developed a market driven, need based and innovative Product, having very deep cultural
roots. The product is known as Committee (Rotating savings) in Pakistan. The people usually build their assets by
this rotating saving activity at a street or a market level informally and without any proper book keeping. How
ever Farz Foundation not only makes it formal but uses as another source of income by providing the service of
investment in Murabaha as a partner. Farz Foundation in Pakistan proposes this partnership concept based
approach to encourage communal savings and profitability to sustain its clients. Members of the committee have
regular meetings in order to save and borrow from a communal pool of money. Each member contributes an equal
amount of money to the pool and at each meeting; one member takes the pool home by a lucky draw. The idea is
for transparency of the entire saving, lending, borrowing process and developing another source of income. The
foundation’s role as a manager, monitor and train this committee in bookkeeping. Farz takes part in this
Committee as a member by pooling its money also and gets first Committee as par the culture, because, according
to the cultural rule, manager gets the privilege of taking the first Committee. It is a triple edge financial service
because of its participatory, saving and investing features.

39
WHAT IS A COMMITTEE ? (COMMUNITY ROTATING INFORMAL SAVINGS)
Committees are a popular form of informal saving in many countries and considered as a form of participatory
savings at community level. Committee is a community participatory informal saving mechanism having a long
cultural history. According to this informal saving activity at community level a group of individuals who agree to
have regular meetings for a defined period of time in order to save and borrow together and pool a same amount of
money by a manager from the same group. Some times the group selects a committee manager from the group
who collects a pre settled particular amount of money from the members and gives it to a single member.
Sometimes an already known collector initiates a new committee. Usually she or he keeps the first collected
amount of money by her or himself. Committees are the poor man's POOL, where money is not idle for long but
changes hands rapidly, satisfying both consumption and production needs.

Meetings can also be regular or tied to seasonal cash flow cycles in rural communities. Each member contributes
the same amount at each meeting, and one member takes the whole sum once. As a result, each member is able to
access a larger sum of money during the life of the COMMITEE, and use it for whatever purpose she or he wishes.
This method of saving is a popular alternative to the risks of saving at home, where family and relatives may
demand access to savings. Every transaction is seen by every member during the meetings. Since no money has to
be retained inside the group, no records have to be kept.

Features of Farz Committee

HEADS DETAILS
Size of Committee Installment Min=PKR:100 ($ 1) and Max=unlimited
Period of committee cycle 11 Month
Participants of committee in each group 10 Members + 1 Farz Foundation=11
# of committee group under one cluster One Year
Frequency of committee Installment Eid holidays
Frequency of committee draw (lucky draw) 22

TAKAFUL (ISLAMIC INSURANCE)

A type of Islamic insurance, where members contribute money into a pooling system in order to guarantee each
other against loss or damage. Takaful-branded insurance is based on Sharia, Islamic religious law, and explains
how it is the responsibility of individuals to cooperate and protect each other.

Farz Foundation and the Pak-Qatar Family Takaful has made this type of agreement at the microfinance level for
the first time. Both the organizations have set this milestone in the Islamic microfinance sector of Pakistan.

Takaful Details
HEADS TAKAFUL FEE TAKAFUL AMOUNT
Member PKR: 115 ($1.35) PKR: 20,000 ($ 235)
Head of the family PKR: 115 ($1.35) PKR: 20,000 ($ 235)

40
NON-FINANCIAL SERVICES

BUSINESS EDUCATION

CHALLENGES FOR HBMEs FARZ PROVIDES

• Lack of Health
• Lack of Business Education
• Lack of Skills
• Family & Business (Both sides
Personal Management) • Health Care Awareness
• Families Restrictions • Business Training
Personal • Skill Development Training
• Lack of Fund • Takaful (Islamic Insurance)
• Lack of Research
• Lack of Market Linkages
• Lack of Networking • Murabaha
• Lack ofProduct Demand • Book keeping training
Value • Other Source of income
Internal • Lack ofBusiness Management Internal • Business Development
Training
knowledge
• Problems of Mobility • Market Linkages
• Networking
• lack of Access to Market
• Client Satisfaction
• Delayed payments
• Distance to Wholesaler
Market External • Guarantee
• Exploitation by Middleman
• Lack Guarantee
External • Low profit Margin
• Bad debts
• Unwilling Employees

Farz Foundation offer four types of training to clients:

1. INITIAL BUSINESS TRAINING

The first one is regarding the market research, collecting information about the potential buyers and venders
dealing in raw material/finished goods. It also help client decide the type of business which he or she deems more
suited to his or her aptitude. The business plan or feasibility is also part of the initial training.

2. BUSINESS DEVELOPMENT

The second training deals with the clients/non-clients having already running business but they lack the skills to
efficiently run it. They are taught to conduct their relations with clients and vendors a more productive
relationship. They are also provided effective market linkages to make their business more profitable. They are
also trained to market their products more effectively.

3. BOOK KEEPING

The training deals with daily book keeping monitoring the expenses and income.

4. PRODUCT QUALITY

This type of training teaches to enhance the quality of the product they intend to sell so that they can compete in
the market to their advantage.

41
HEALTH
The biggest reason for the low productivity according the
WHO is the poor health all over the world. The Farz
Foundation pays keen attention to this aspect and conducts
health awareness workshops and health camps.

AWARENESS PROGRAM
The greatest problem in the area we work is the water born
diseases and we teach them to boil water before drinking. The
general principals of cleanliness for instances, washing hands
before taking meals are emphasized during the training.

EYE CARE
Farz Foundation has launched its eye care program by starting
a free eye care camp for poor peoples of the branch area. In this
camp Farz Foundation provide eye checkup facility and
provide spectacles to the poor home based micro
entrepreneurs with any cost.

FUTURE PROTECTION PROGRAM

This program deals with educating the clients to provide
education to their children apart from picking the kids of the
most vulnerable members and provide expenses for their
education. This is done to ensure the better future of the
community.

42
FINANCIALS

43
44
45
46
47
48
49
50
 SOCIAL
PERFORMANCE
MANAGEMENT

51
MANAGING SOCIAL PERFORMANCE
We are convinced from the day one that without the social performance we can neither sustain the clients nor
institutions. The Farz Foundation has put its social mission into practice. The principals of social performance are
part and parcel of our systems and procedures. It also formed a body to implement the newly promulgated law
against sexual harassment. We also formed a client complaint cell to address their problems with the staff.
To put it brief, the code of conduct for customers' protection is the major chapter of our operational manual.

SOCIAL PERFORMANCE STANDARDS REPORT

This is a print, original can be provided as request

52
53
54
55
56
57
58
59
 STAFF CAPACITY
BUILDING PROGRAM

60
STAFF CAPACITY BUILDING PROGRAM
Farz Foundation has its own capacity building vehicle “ Learning Solutions”. Through Learning Solutions Farz
foundation not only builds the capacity of its own staff by inviting outside trainers as well as its own experts, but
also offers services to the other institutions. Learning Solutions offers on going certificate programs throughout
the year and aims to start a diploma program in Islamic microfinance and Sharia compliant products in coming
days.The all staff of Farz Foundation have earned seven training programs (mentioned below) during the year
2010.

TRAINING # OF STAFF
Ledership & Team Building All Staff
Islamic Microfinance All Staff
Intentional Time Management All Staff
Principle of MURABAHA All Staff
Farz Methodology All Staff
Community & Social Mobilization All Staff
Clients Appraisal Training All Staff

61
 CONTACT US
Office No. 327-3rd Floor
Eden Center, Jail Road, Lahore Pakistan
Ph: +92 42 37556194 - 5
Email: info@farzfoundation.org
URL: www.farzfoundation.org