Akhuwat 1 PDF

KS1198
Case Number 2074.0
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Akhuwat: Fighting Poverty with Interest-Free Microfinance
“As a philosophy, Akhuwat cannot fail; if the movement does not succeed, it will not be a failure of the principles
and ideals that guide the organization. Failure could only stem from the waning strength of men and the weakness
of their resolve but never from the lack of strength in the idea of Akhuwat itself.”
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Dr. Amjad Saqib, Founder and Executive Director Akhuwat Pakistan
In July 2011, Dr. Amjad Saqib, head of Akhuwat, one of Pakistan’s largest microfinance organizations, sat on
the carpet inside his office and looked outside the window towards the vast open sky, contemplating a decision
that could potentially make or break Akhuwat’s future. In the last ten years, Saqib had led Akhuwat from being a
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philanthropic experiment to a fast growing non-profit microfinance organization with 70 branches across Pakistan.
Now, Akhuwat had an opportunity to expand more rapidly than he had ever imagined.
“We had access to a large sum of money from the government and we wanted to double Akhuwat’s
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operations,” said Saqib. “I went to a very famous management guru, who also teaches at one of the world’s most
prestigious universities, and told him that we want to go from 70 branches to 150 branches in three months. He
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told me that this was not possible and that we were preparing the perfect recipe for disaster: ‘You have managed
to operate 70 branches in 10 years and now you want to double your size in three months? This is not possible,’ he
said.”
But Saqib was convinced that Akhuwat’s unique business model had the ingredients for rapid expansion. He
took a deep breath and started laying out a plan.
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The Plight of a Widow

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Akhuwat was created in 2001, out of the plight and desperation of a widow who had to nurture her four
children without any support. Seeing no way out, she approached Saqib, who then worked with the Punjab Rural
Support Program, which gave out small business loans in the rural villages of Punjab (a province in Pakistan). Saqib
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was deeply moved by the woman’s plight. Later as he met a group of friends over lunch, he expressed his desire
1
Author interview with Dr. Amjad Saqib conducted in July 2015 in Lahore. Unless noted, subsequent quotations from and
attributions to Saqib come from this interview.
2
The name Akhuwat is derived from the Arabic word “mwakhat” meaning brotherhood. This term took shape when the earliest
Muslims and Prophet Muhammad migrated north from Mecca to the small town of Medina. The citizens of Medina formed an
unusual pact of brotherhood wherein they willingly gave away half their wealth and property to the emigrants. This event is
known as the “Mwakhat.”
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This case was written by Ussama Ahmad Khan, HKS MPP 2016, in collaboration with Dick Cavanagh, Adjunct Lecturer in Public
Policy, at the John F. Kennedy School of Government, Harvard University. HKS cases are developed solely as the basis for class
discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective
management.
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This document is authorized for educator review use only by Ali Asghar, University of Agriculture, Peshawar-Pakistan until Feb 2020. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
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for what would later become Akhuwat. During the conversation, it quickly became clear that one of the problems
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facing the poor was limited access to affordable finance. The solution was clear: easy access to interest-free loans.
Within a few days, Saqib went back to the widow and gave her an interest-free loan of Rupees 10,000 ($100)
so that she could start a small business of her own. By successfully utilizing and returning the loan within a period
of six months, she reinforced his belief that interest-free loans were a way to help people become self-employed
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and come out of poverty. Buoyed by the success of the first loan, Amjad collected donations from friends and
family and soon their vision of interest-free microfinance started to take informal shape. Akhuwat was born with
these friends forming the first Board of Directors and Saqib serving as the first Executive Director. Ms. Rehana and
Ms. Tabassum were the first employees who were trained by Saqib and the three of them started working in a
poor locality of Lahore.
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In the initial years, Akhuwat was a philanthropic exercise to see how interest-free microfinance would fare.
Over time, however, donations increased manifold with the momentum of the movement accelerating far beyond
expectations. By 2003, donations to Akhuwat had reached Rupees 1.5 million ($15000). Consequently, Saqib
decided to formalize the organization and registered Akhuwat under the Societies Registration Act of 1860. The
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first branch opened in the industrial area of Township in Lahore and soon operations began to expand.
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Akhuwat: The Context
By mid-2015, Akhuwat had over 350 branches all across Pakistan and had given more than Rupees 13 Billion in
loans (US $ 130 m). It had over four hundred thousand active borrowers and was on track to give out its one
millionth interest-free loan. One of Akhuwat’s notable achievements was the 100 percent loan recovery rate it
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had maintained throughout its 14-year operations.
By the end of June 2015, Akhuwat was the third largest provider of micro-credit in Pakistan with 405, 937
active borrowers, which was equivalent to 11.6% of market share. The largest micro-credit providers were the
National Rural Support Program and Khushhali Bank with 589,807 (16.8%) and 492,950 (14.1%) active borrowers
respectively. Among the non-government microfinance providers, Akhuwat was the largest in Pakistan with the
highest number of active borrowers. The Kashf Foundation and Tameer Microfinance Bank Ltd. also had a
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significant percentage of market share in terms of active borrowers. Akhuwat however was unique as it was the
only organization that did not charge interest.
In the micro-insurance sector, the National Rural Support Program and Khushhali Bank (both started by
government) were the largest providers of micro-insurance with 896,963 and 539,854 policyholders. Akhuwat was
the fifth largest micro-insurance provider with 405,937 policyholders, which was 9.7% of market share in terms of
policyholders.
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To date, many other organizations have started following in Akhuwat’s footsteps by providing interest-free
loans but Akhuwat is the pioneer and largest organization that provides completely interest-free microfinance
3
Akhuwat, “What We Do,” www.akhuwat.org.
4
“MicroWATCH: A Quarterly Update on Microfinance Outreach in Pakistan,” Issue 36, Quarter 2, Apr-Jun 2015,
http://www.microfinanceconnect.info/assets/articles/fd610dcd18076c879ec30ddb5c6bced2.pdf.
HKS Case Program 2 of 24 Case Number 2074.0

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loans to consumers. (A list of some loan products of the two largest microfinance providers is provided in Exhibit
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1.)
Dr. Amjad Saqib: The Story of a National Hero
Saqib was a medical graduate from King Edward Medical College, one of Pakistan’s most prestigious medical
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colleges. He entered the highly selective and prestigious Civil Service of Pakistan in 1985 and quickly rose to senior
positions. Nearly 18 years later, in 2003 Saqib resigned, with the intent of dedicating himself to becoming a social
entrepreneur and making a positive impact through Akhuwat–which had already been launched in 2001. His
resignation sent ripples in the civil service community as such a decision had been unheard of. Saqib, however, was
not afraid of taking such a drastic step in his professional career. For him, “it was all a part of a universal grand
design that guided me towards the right decision.”
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The salient feature of Saqib’s public service career–one that perhaps changed the course of his life–was his
last assignment, a five-year stint as general manager of the Punjab Rural Support Program (PRSP) from 1998 to
2003. It is there that he had the opportunity to closely examine the various initiatives of poverty alleviation,
education management, participatory development and conventional microfinance. And this made him realize that
“something different had to be done.” The desire to do something more effective for the poor spurred him to
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conceive and introduce an interest-free microfinance model based on the idea of “Mwakhat” or brotherhood.
Saqib became a published author of six books including the “Journey of Akhuwat,” a memoir of his
experiences through the different stages of Akhuwat’s development. An inspiring public speaker, Saqib has often
appeared on television shows, seminars and has held a strong social media presence. Due to his charismatic
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personality and eloquence of speech, he has often been called in as a guest speaker to address large audiences. He
was also appointed as Vice Chairman for Punjab Educational Endowment Fund (PEEF) by the Chief Minister of
Punjab. PEEF is the largest fund created by Government ever to provide free education to poor students. In 2010,
he was awarded the Sitara-e-Imtiaz (one of the three highest civilian awards) by the President of Pakistan on
account of contributions made for social development and poverty alleviation in Pakistan.
Pakistan
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Pakistan gained independence from British India in 1947. In 2014, as the sixth most populous country in the
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world, Pakistan was home to nearly 200 million people. An overwhelming majority of the population was Muslim
(97%) followed by Hindus and Christians. Pakistan’s economy was mostly agrarian with a majority of the
population living in rural areas. In its 68-year history, Pakistan saw multiple martial laws and dictatorships with the
first civilian democratic government transition occurring in 2012. With weak infrastructure and lack of social safety
nets, most low-income individuals turned to informal—and often exploitative—lenders during financial
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emergencies.
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United States Census Bureau, U.S. and World Population Clock, http://www.census.gov/popclock/.

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According to the Qur’an, charging interest on any loan transaction is forbidden. And according to most
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Muslim scholars, any premium on a loan is classified as interest regardless of the amount. The Qur’an describes a
loan as a Qard-e-Hasan or the “beautiful loan” which means that a loan can only be given without interest. In
essence, a loan cannot be used as an instrument to earn profit by the lender. There are other equity-based
instruments available that can be used if someone wants to earn profit. Despite this Qur’anic injunction, most
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banks both at the state and the private sector in Pakistan charge and receive interest on loans. More recently,
there has been a rise in “Islamic Banks” not only in Pakistan but other Islamic countries that offer equity-based
financing such as Musharika (joint venture financing), Mudhariba (venture capital financing) and sukuk (Islamic
bonds). (For a summary of major Islamic finance products, see Exhibit 10.)
In 2013, almost 12.5 percent of Pakistan’s population lived below the $1.25 per day poverty line and
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according the UNDP Multidimensional Poverty Index, 45.6 percent of the population was living in multi-
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dimensional poverty. With more than 40 percent of the population above the age of 10 and illiterate as of 2013,
access to consumer loans was limited due to inability to open bank accounts and fulfill all legal requirements.
Without a basic education, it was difficult for citizens to complete the necessary steps such as writing their name
and signatures in order to open a bank account. In the absence of formal access to consumer credit, many
individuals turned to private lenders who charged exorbitant interest rates. Unscrupulous lenders severely abused
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individuals who failed to pay back loans. There were numerous documented incidents of abuse, violence, and
harassment including forced sex, child labor and physical torture by lenders in instances of failure to pay back the
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loans. According to a report by the 2014 World Slavery Index, there were as many as 2 million enslaved individuals
in Pakistan. Most of this enslavement was in the form of bonded labor, which occurred when debtors were unable
to pay their loans, and thus forced to do work for the lender. With weak law enforcement many of these crimes
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went unchecked. (For a map of Pakistan, see Exhibit 12.)
Akhuwat: The Idea
Saqib had seen first-hand the causes and consequences of poverty in Pakistan. Having worked for public and
private sectors and having closely observed the lifestyle and social dynamics surrounding poverty, he concluded
that being poor was not only limited to having a low or no income. “Poverty is not just the name of one thing,”
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Saqib said. “Poverty is much more pervasive and devastating. Economic poverty is when you do not have money.
Social poverty is that you do not have friends and status. Political or moral poverty is that you do not have political
rights and you cannot go to court. People also have spiritual poverty, which is a lack of good character. The
Akhuwat model aims to alleviate all forms of poverty. By giving loans, we get rid of economic poverty. By making
people sit together in all the important stages of the loan process, we alleviate social poverty. By giving them
guidance we make them aware of their political rights, and coming into the mosque gives people spiritual
enrichment and fulfillment.”
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The Qur’an is the most sacred text for Muslims, which they believe to be the word of God revealed to Prophet Muhammad.
7
United Nations Development Programme, Human Development Reports, http://hdr.undp.org/en/countries/profiles/PAK.
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Pakistan Social and Living Standards Measurement (PSLM) Survey 2012-13.
9
For instance see: Taha Siddiqui, “Extortion: Swimming with the Loan Sharks,” The Express Tribune, February 16, 2012,
http://tribune.com.pk/story/337187/extortion-swimming-with-the-loan-sharks/.

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The Akhuwat idea was based on four key principles: 1) Interest-free Loans 2) Use of Religious Places 3) Spirit of
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Volunteerism 4) Turning Borrowers into Donors. These four principles did not develop as a result of design or
strategy, but rather through a process of action research, learning and improvement. “We did not design or plan to
adopt these four principles,” Saqib said. “It seems everything was done under a grand universal design. For
example, once it was very hot and we had to go to a woman's house to give her some money but she was not
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home. There were some 12-13 women with us who were the loan recipients for that day and we had nowhere to
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go. There was a mosque in front of the house and we asked the imam if we can sit inside and he said yes. So we
sat inside and distributed the loans. That experience was very valuable, as we not only found a communal place to
organize our meetings and disbursements; it was also completely free with a tinge of sacredness! Since then the
use of religious places such as a mosque or a church became vital to our operations.”
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Saqib’s ability to draw together people and inspire them towards the cause of Akhuwat has proved to be vital
in helping Akhuwat develop into what it is today.
Use of Religious Places
Akhuwat relied heavily on the use of religious places to conduct events such as pre-loan meetings and the
actual loan disbursement process. Loan disbursements at Akhuwat carried the significance of a ritual. Every month
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all the borrowers set to receive loans were asked to gather inside a mosque or a church. When the majority of the
recipients were Muslim this event was conducted in a mosque and when the majority were Christian, in a church.
(Exhibit 2 shows a typical disbursement event with Saqib leading the proceedings.) This event does not only act as
social collateral but also gives an air of sanctity and spirituality to the whole process. Borrowers believed it their
responsibility to work hard and return loan installments on time. According to Saqib this created other positive
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outcomes as well, “Sometimes we had problems when some people objected to non-Muslims being admitted into
a Mosque. However, in most cases people were welcoming. We have conducted many disbursements with
Muslims, Christians and people from other religions sitting together in a mosque. This has led to an increase in
inter-faith harmony and fall in sectarianism as people started to know each other’s faith.”
Interest-free Loans
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Akhuwat is based on a completely interest-free micro-finance model. This means that borrowers return, in
absolute terms, the same amount of money that they borrowed from the organization. There is an initial
application fee of Rupees 200 ($2) which acts as a screening mechanism to ensure only serious borrowers apply.
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This policy of charging no interest was based not only on religious law but also to correct deep-rooted inequity in
the existing system. “There are two problems with charging interest,” Saqib said. “The first is religious: Our faith
prohibits us from taking interest especially from a person who is very poor. The second is social justice: someone
who is already rich pays only 10-12 percent to buy a Mercedes car and a person who is only to earn his bread and
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set up a food cart has to pay 30 percent at interest. What kind of a world is this?”
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An Imam is usually the religious head of a mosque.
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The Qur’an prohibits Muslims from either paying or taking interest on loans. Interest is defined as any pre-determined
premium on a loan transaction. Traditionally, Muslims view both high and low interest as prohibited and see no difference
between usury and interest.

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A loan given on interest is profitable business and not assistance said Saqib: “In Islam it is much more virtuous
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to give Qard-e-Hassan (beautiful loan) to someone rather than charity or doles. Charity is rewarded ten times while
giving a loan is rewarded eighteen times as remarked by Prophet Muhammad. When your brother or sister asks
you to help them, you don’t charge them interest for it. You take back what you gave them. This is the spirit of
brotherhood and compassion that embodies Akhuwat.”
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Saqib believed that Akhuwat’s success was proof that conventional practices were faulty. By charging no
interest, Akhuwat developed a bond of trust and sincerity with its borrowers. Borrowers did not get trapped in
endless cycles of repaying interest and felt much more confident in returning their loans to Akhuwat. The
organization saw interest as a barrier to widespread proliferation of capital. “Our borrowers are our inspiration,”
Saqib said. “We believe that no one is short of ideas, only short of capital. Our borrowers have initiated more than
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150 different kinds of business. These businesses earn a very high rate of profit for our borrowers. The billions of
rupees that we have disbursed to these entrepreneurs has arguably resulted in multifold wealth generation
allowing them to earn a dignified livelihood, send their children to schools, improve their health and live a better
life.” (A list of the types of businesses started by borrowers can be seen in Exhibit 11.)
Spirit of Volunteerism
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Akhuwat’s typical employee regularly worked extra hours without claiming extra compensation. Employees
while paid for 40 hours also volunteered another 10-20 hours a week, on average. “This is how employees quench
their thirst for volunteerism,” said Saqib. “This is what gives them strength that they are doing it for the sake of
God.” Saqib himself represented this spirit of volunteerism; despite working full-time for the organization he has
received no remuneration. His dedication and service for the cause of Akhuwat has motivated many people to join
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the organization and to dedicate their lives for the cause. “Sometimes we work on weekends, even on Sundays but
we know this is helping us because we are doing something good and noble,” said Ali, an Akhuwat Employee. “We
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know that a poor widow will pray for us when we help her. This is also our compensation.”
Saqib paid careful attention to training Akhuwat employees. Most offices displayed the four principles of
Akhuwat to help employees remember what they were working for. “We tell our employees that their
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compensation is not only monetary,” said Saqib. “Wherever you go people treat you with respect. Widows and
orphans give you their prayers. This is also a form of compensation. You are serving the people of God irrespective
of distinction like caste, creed, color or faith. We tell them that every person says that society is becoming corrupt.
So there should be someone who stands up and says ‘I am going to put an end to this.’ Someone has to make the
sacrifice. If a generation sacrifices only then will they progress forward. This is not only a job, it is a responsibility
and a way how we all can make this world a happy place to live in.”
According to Saqib, the spirit of volunteerism in employees is one of Akhuwat’s greatest assets. “If someone
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were to give us millions of Rupees and asked us to take out this spirit of volunteerism and turn Akhuwat into a
12Author interview with Akhuwat employee Ali conducted in July 2015 in Lahore. Unless noted, subsequent quotations from
and attributions to Ali come from this interview.

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corporate business, we would simply say no. The spirit of giving and serving has no parallel. This cannot be traded
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against money.”
Turning Borrowers into Donors
Interestingly, Akhuwat turned its borrowers into donors. Even though no interest was charged on loans,
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Akhuwat encouraged borrowers to give something back to the organization. Giving back was strictly voluntary. If
borrowers did not give anything back, it did not hinder their chances of securing other loans in the future.
Borrowers were told to give as much as they were willing to help others in need. For example, once there was a
local mechanic who had lost his property in a flood. He applied for and successfully secured a loan from Akhuwat
with which he was able to restore his business. Later, he got a job in Dubai and moved there. He then donated a
substantial amount to Akhuwat from his foreign earnings so that he could pay back the organization that helped
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him during his time of need. “Seventy percent of our borrowers are now our donors; they give something back to
the organization so that they can help others too,” Saqib said. “Microfinance is not an end; it is a tool, a means
towards an end. The end is a society that has brotherhood and solidarity between the haves and the have-nots.
One section of society that has, helps the one, that does not.”
In this way the local branches of Akhuwat slowly started helping others. Local small business owners who did
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not need Akhuwat’s loans also began making contributions. According to Malcolm Harper, Emeritus Professor at
the Cranfield School of Management UK, who studied Akhuwat’s model, borrowers, donors, volunteers and the
paid staff at Akhuwat felt they were all equal. Although the loans were only made possible by the generosity of
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donors, there was no sense of obligation; all the stakeholders shared a common purpose.
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Loan Products
Akhuwat offered a broad range of loan products. The majority of loans were Family Enterprise or Business
Loans, which accounted for 85 percent of all loans. Other forms of loans included the Liberation Loan for people
already under debt and being exploited by loan sharks. Other loan products included Housing Loan, Education
Loan, Marriage Loan, Emergency Health Loan and others. (A detailed breakdown of all nine types of loan products,
their description, and features is presented in Exhibit 3.) For many people, Liberation Loan, is very unique and Lend
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with Care, a subsidiary of Care International, a UK based Charity already a partner of Akhuwat, is thinking to
support its expansion.
Borrower Profile
Sixty percent of all borrowers were male while forty percent, female. This went against conventional micro-
finance practice, which operated under the belief that women were typically more responsible borrowers than
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men. There was some evidence from countries such as Bangladesh, however, that lending to women rather than
men led to a rise in domestic conflict as the men in the household felt threatened when the women took control of
the financial affairs of the family. Akhuwat avoided this problem altogether by lending to an entire household.
According to Malcolm Harper, “wives and husbands are required to sign loan agreements, or mothers and sons, or
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Malcolm Harper, “Akhuwat: A Case Study,” http://www.akhuwat.org.pk/akhuwatcaseStudy.asp.

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fathers and daughters, and the loans are known as family loans. Every member of the family knows that they have
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taken a loan, and this creates a sense of unity in the household and avoids conflict and duplication of loans in the
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same family.”
Loan Process
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The loan process at Akhuwat included the following steps:
1. The applicant approached the nearest branch. He or she filled the application in the Branch Office in
front of the Unit Manager. Most loans were given in the form of groups, however, individual loans
were also given in exceptional circumstances.
2. The Loan Officer visited the applicants at home and conducted a comprehensive appraisal which
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included both social and financial appraisal as well as interview of personal guarantees.
3. The Unit Manager prepared the case. The Branch Manager reviewed it and visited the residence or
business place of applicant. The case was then submitted for approval to the Loan Approval
Committee (LAC). The LAC had the authority to approve the loan
4. After approval of the loan, the Accountant in the Area Office prepared the checks. Two authorized
signatories signed the check.
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5. Signed checks were sent to the respective Branch Office, where the checks were handed over to the
member in a religious place i.e. a mosque or a church. This event was arranged and used as an
opportunity to build capacity and provide social guidance to the borrowers.
6. Borrowers paid monthly installments at their local branch office.
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All applicants paid a mandatory Rupees 200 ($2) loan fee which amounted to 1% of the average loan size.
Borrowers were also given the option of signing up for an optional Mutual Support Fund Contribution, which was
also 1% of the loan amount. This Fund was used to write off the outstanding loan in case the borrower died and
the family of the deceased was given Rupees 5000 ($50) to cover the cost of funeral and burial.
Organizational Structure and Set-up

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Akhuwat, currently, is based in the historical city of Lahore, which is the cultural hub of Pakistan. A board of 9
members consisting of philanthropists, civil servants and prominent businessmen governs it. The head office is
responsible for managing, planning and organizing different activities and projects of the entire organization
divided into three national regions: North, Central and South. The Chief Credit Officer leads a team of three
regional managers who are responsible for their respective regions. A Regional Manager leads 7-10 Area Managers
who in turn are in charge of 5-7 Branch Managers. A typical Branch Manager is then responsible for 4-6 Unit
Managers. Some Areas have a steering committee, consisting of 8-10 prominent individuals living in that area and
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two representatives from Akhuwat, generally the Area and the Branch Managers. The job of the committee is to
oversee all the functions of the branch and also to mobilize funds in their respective areas. (The organogram can
be found in Exhibit 4.)
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Ibid.

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The Board of Directors, including Saqib, charges no remuneration. The organization does not own vehicles and
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staff are expected to use local transport or their own vehicles, for which they are reimbursed. Akhuwat offices are
small and simple. A typical office has no chairs or office desks. Employees and customers both sit on the floor,
often on ordinary cushions or pillows facing a low-rise wooden platform, which is used as a desk. Often desks are
shared by more than one employee. (See a typical office space in Exhibit 5.) Since most activities such as pre-
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disbursement meetings and actual disbursement ceremonies are carried out in mosques or churches, the
organization has had no additional costs in conducting these regular activities.
Working with the Government
Saqib spent nearly two decades as a civil servant with the Punjab Government. During this time he built a
strong network of friends and admirers who would later play an important role in Akhuwat’s success. In the mid-
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1990s, Saqib was appointed as the Deputy Secretary to Shahbaz Sharif, the Chief Minister for Punjab–the most
populous and most prosperous province in Pakistan. Saqib’s hard work and dedication left a deep impression on
the Chief Minister. Soon after in 1999, however, PMLN was overthrown in a military coup in which General Pervez
Musharraf declared martial law in Pakistan. Shahbaz Sharif was thrown into exile and Saqib, soon after, took leave
from office to work with the Punjab Rural Support Program (PRSP). “In 2000, when I went to England I met
Shahbaz Sharif when he was in exile. He remembered who I was and we spent some time together. We talked
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nothing but poverty. How can we help the poor and build Pakistan? He told me that when he came back to
Pakistan, he would like us to work together.”
True to his promise, when Shahbaz Sharif returned to Pakistan in 2007 and became the Chief Minister of
Punjab again, he asked Saqib to lead a program in Education. Saqib conceived the Punjab Education Endowment
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Fund (PEEF) and was appointed its vice chairman. PEEF was Pakistan's largest education program with funding
amounting to $170 million. This organization has supported more than 100,000 poor but talented students to
complete their education in best institutions of the country. His association with PEEF was also on volunteer basis.
Later in 2009, Saqib presented the idea of Akhuwat to Sharif who agreed to make a revolving fund solely for
the purpose of giving out interest-free loans. This fund would belong to the government but Akhuwat was chosen
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as the service provider. In November 2011, Saqib’s efforts bore fruit and the Government of Punjab, through the
Punjab Small Industries Corporation, set-up a revolving fund for Rs 5 Billion ($50 million). His next project was to
get a similar initiative approved by the Government of Gilgit-Baltistan, a province in the north of Pakistan. Under
this initiative, the government of Gilgit-Baltistan agreed to give out Rupees 210 million ($2.1 million) in May 2013.
Saqib then convinced the federal government of Pakistan to setup a similar revolving fund after meeting the
Prime Minister, Nawaz Sharif the elder brother of Shahbaz Sharif. The federal government started a similar
program and promised Rupees 336 million ($3.36 million). But instead of making Akhuwat the sole service
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provider, Saqib convinced the federal government to hire multiple service providers. He helped select twenty-six
more organizations that would act as service providers for this program. (A breakdown of Akhuwat’s initiatives
with the government can be seen in Exhibit 6.)

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Putting It All together
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Saqib was disappointed with the management expert’s less than optimistic view of the idea to double the
number of Akhuwat branches, but he knew that the time had come to test the true impact of the philosophy of
Mwakhat. “We told the management guru that the philosophy of our organization is mwakhat. This mwakhat will
also be our growth strategy. Mwakhat means that one person adopts another person, one family adopts another
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family, and gives them the feeling of companionship and brotherhood rather than making them dependents and
beggars.”
The plan was set in motion. Every existing branch was designated as the “ansaar” or helper branch and was
assigned the task of making another branch just like itself, which would be called the “muhajir” or “emigrant”
branch. Each existing branch was also made responsible for making a new branch in a new city or an uncovered
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part of the same city. Branch managers were tasked with hiring 5-7 new employees and training them for one
month. These new employees were then brought to the head office and further trained for one month. Next, they
were told to return to their new “muhajir” branches and their respective “ansaar” branch was tasked with assisting
them in operations. Each branch had the target of setting up and starting operations for another branch over a
period of three months. Saqib believed this task could not have been led from the head office.
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If we did this from the head office, this would have meant a tremendous strain on our
resources,” Saqib said. “But for one branch to make another branch utilize local resource and
knowledge is not something difficult. The old branch acted as an incubator for the new branch
for one year and would be responsible for all operational and motivational issues. This is how in
three months we moved from 70 branches to 150 branches. To monitor, supervise and fill the
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gaps (in this growth), volunteers from the head office staff independently visited each branch
and provided assistance in training wherever it was needed. We set up an independent body of
volunteers who appraised the capacity and quality of new branches. So in just three months we
doubled our program without any fall in our performance, loan recovery rate or any important
indicator...
No
Between 2011 -2015, Akhuwat was able to achieve a seven-fold increase in the amounts of loans disbursed
per year. Most of this growth came from its strategic partnerships with the provincial and federal governments of
Pakistan. Akhuwat has also now moved from 150 to 495 branches using a similar growth and expansion plan. (For
a detailed overview of Akhuwat’s growth, see Exhibit 7.)
Moving Forward
In December 2015, Akhuwat had 495 branches all over Pakistan and had disbursed a total of $208 million. It
Do
had a total of nearly 400,000 active borrowers and had reached a total of 1.1 million borrowers. Saqib envisioned
reaching 3 million borrowers in the next five years. When asked how long it would take Akhuwat to reach this
target, he responded:

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We made a strategic plan by hiring PwC Pakistan. The targets that they predicted we would
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achieve in 2017, we achieved those in 2014. They often tell us that we cannot make any strategic
plan for you. You break every rule. When God is helping then there is no end in sight. In the first
seven years, we gave out a total of $5 million. Now every month we give out that much. We
gave out $90 million in 14 years and $80 billion in one year alone. I can't tell you why we want to
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reach out to 3 million borrowers; it can be 5 million, but there should be some substantial
difference.
In the past several years, Akhuwat branched out into many different areas of social impact including opening a
business incubator, offering scholarships to 1,000 students, offering free healthcare and helping Internally
Displaced Persons after the devastating floods in Pakistan made millions of people homeless. (A complete list of
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Akhuwat’s initiatives can be found in Exhibit 8 and Akhuwat’s progress indicators to date can be seen in Exhibit 9.)
Akhuwat was also working on building Akhuwat University which aims to provide interest-free education
loans. According to Saqib, there are two types of strategies for poverty alleviation: short-term and long-term. He
believed that although short-term poverty could be alleviated by giving small loans, long-term poverty could only
be alleviated by educating people.
op
Microfinance is a tool and not the goal,” said Saqib. “If you give $200 to someone right now, he
will be saved from hunger. In the long term, people can be empowered only through education.
We want to build a college and a university and make it the best university in the region. If a loan
can be without interest then education can be without fees as well. This is long-term Qarz-e-
Hasan. If someone wants to get education and they don’t have resources, they can study at our
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university on interest-free student loans and return the money whenever they start earning.
Through Akhuwat University Saqib also wants to create the next generation of leaders for Akhuwat. He is a
firm believer that those people who Akhuwat will help, will come back and serve the organization:
Those people who are in the streets and we adopt, help, and educate will come back to lead the
organization. This is our succession plan. At the moment we have sponsored one thousand
No
students who are studying in different universities. This is what we inculcate in them, that we are
investing in you so that you can lead this organization in the future. God chooses people to serve
His people. I don't know if my son will do it or not as this is not in blood necessarily. If you are
more passionate than I am, then I am already waiting for you to come and get my place in the
organization. Leadership is like a relay race. We will, one day, handover the light to someone
ready to take it and fade away in the mist of past. We are preparing ten thousand people as our
successors who will lead the organization tomorrow.
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Exhibit 1: List of Loan Products
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Source: Khushhali Bank Website, https://www.khushhalibank.com.pk/About-Khushhali-Bank; National Rural
Support Programme Website, http://nrsp.org.pk/.
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Exhibit 2: Saqib Addressing People in a Mosque at a Loan Disbursement Event
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Source: Permission courtesy of Akhuwat.

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Exhibit 3: Nine Types of Loan Products
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Products % Description Product Features
1. Family Enterprise Loan 80 These constitute the majority of Range: From $ 100 to $ 500
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loans offered by Akhuwat and are Duration: 10 - 24 months
given for the establishment of a new Profit Rate: 0%
business or the expansion of an Initial Application fee: Up to $2
existing one. Post Approval Application fee: None
Mutual Support Fund Contribution:
Optional 1% of loan amount
2. Liberation Loan 2 These loans are given to the persons Range: From $ 100 to $.1000
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who have taken loans from Duration: 10-36 months
exploitative money lenders to save Profit Rate: 0%
them from undue interest rates. Initial Application fee: Up to $2
Akhuwat pays off the balance Post Approval Application fee: None
amount to the money lenders in one Mutual Support Fund Contribution:
go and in return borrower pays back Optional 1% of loan amount
the principal amount to Akhuwat in
easy installments.
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3. Housing Loan 2 The purpose of the housing loan is Range: From $ 300 to $ 1000
to provide financing facility for Duration: Up to 36 months
renovation of houses, construction Profit Rate: 0%
of rooms, roofs, walls, etc. These are Initial Application fee: Up to $2
given to those poor families who Post Approval Application fee: None
occupy a single room and their Mutual Support Fund Contribution:
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family size goes up to 8 or above. Optional 1% of loan amount
4. Education Loan 5 This loan is targeted towards families Education Level: Post Matriculation up to
who are unable to send their Masters
children to school without receiving Range: From $100 to $500
at least a partial subsidy for their Duration: 10 - 24 months
education expenses and are utilized Profit Rate: 0%
for paying school fees or purchasing Initial Application fee: Up to $2
No
books and other materials. Post Approval Application fee: None

5. Health Loan 2 Health loans are given to poor Range: From $100 to $500
people suffering from serious Duration: 10 - 24 months
illnesses and ailments and who do Profit Rate: 0%
not have contingency savings. Initial Application fee: Up to $2
Post Approval Application fee: None
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6. Marriage Loan 2 Marriage loans are for parents who Range: From $100 to $500
face difficulty in arranging the Duration: 10 - 24 months
necessary funds for the marriage Profit Rate: 0%
ceremonies and dowries of their Initial Application fee: Up to $2
daughters. Post Approval Application fee: None

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7. Emergency Loan 2 This product is for poor families Range: From $100 to $500
who face unfortunate events and Duration: 10 - 24 months
emergencies, e.g. sudden losses in Profit Rate: 0%
business, etc. Initial Application fee: Up to Rs, 200
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Post Approval Application fee: None
8. Education Assistance 2 The objective of the Akhuwat Education Level: Post graduation to
Program Education Assistance Program is to Professional Education
extend interest free loans to highly Range: Up to $1000 per year (depends upon
deserving candidates who have the fee).
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exhibited excellent academic Duration: Post Qualification (grace period till
results, belong to a low-income individual gets employment)
background and are unable to pay Profit Rate: 0%
for post-secondary education. This Initial Application fee: None
program aims at inculcating social Post Approval Application fee: None
responsibility in the lives of these Mutual Support Fund Contribution:
students. Optional 1% of loan amount
9. Equip and Build the 3 This product is a loan targeted at Range: From $250 to $1500
op
School existing low-income private schools. Duration: Up to 36 months
In order to equip these schools with Profit Rate: 0%
basic amenities, Qard-e-Hasan will Initial Application fee: Up to $5
be provided for the following: Post Approval Application fee: None
 Furniture and fixtures Mutual Support Fund Contribution:
 Provision for construction Optional 1% of loan amount
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 Provision of clean drinking

water
 Provision of toilets
 Provision of renovations of
school premises, etc.
Source: Akhuwat Company Documents.

No
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Exhibit 4: Akhuwat’s Organogram
os
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No

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Exhibit 5: A Typical Akhuwat Office
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No
Source: Permission Courtesy of Akhuwat.

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Exhibit 6: Public-Private Partnerships
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The Chief Minister’s Self-Employment Scheme – Punjab
November, 2011
By providing access to financial services, the CMSES seeks to empower low-income families to make their own
choices and construct their way out of poverty in a sustained and self-determined manner. To this end, the
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Government of Punjab through the Punjab Small Industries Corporation has partnered with Akhuwat. Until
November 2015, the initial grant of $50 million had been translated to over $150 million disbursed in 802, 969
interest-free loans.
The Chief Minister’s Self-Employment Scheme - Gilgit Baltistan,

April 2013
The CMSES-GB has served over twenty-four thousand families with interest-free loans worth $ 5.5 million by
November 2015. The CMSES-GB was launched in partnership with Ministry of Youth Affairs through a grant of $ 2.1
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million given to Akhuwat.
The Prime Minister’s Interest-Free Loan Scheme,

August 2014
The federal government has awarded $ 3.3 million to the Pakistan Poverty Alleviation Fund (PPAF) that in turn will
work through partner organizations to provide interest-free microfinance to small entrepreneurs all over Pakistan.
Akhuwat is one of the partners under the PM-IFL and has received $ 4.46 million.
op
The Governor of Khyber Pakhtunkhwa’s Interest-Free Loan Scheme for FATA
October 2015
Under the leadership of the Governor of Khyber Pakhtunkhwa (KPK) an interest-free microfinance scheme was
launched in the Federally Administered Tribal Areas (FATA) through a partnership with Akhuwat. It is the first
microfinance program of this nature to be launched in the region.
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TEVTA Interest-Free Loan Scheme

October 2015
Recently the Technical Training and Vocational Training Authority (TEVTA) has partnered with Akhuwat to create a
credit pool of $5 million that would offer interest-free loans exclusively to TEVTA graduates. The TEVTA Interest-
Free Loan Scheme is being administered from all branches of Akhuwat in Punjab and offers interest-free loans
ranging from $100 to $1000.
No

Do

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os
Exhibit 7: Growth of Akhuwat
Growth in Number of Loans disbursed

per year
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400,000
350,000
Number of Loans
300,000
250,000
200,000
Number of Loans
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150,000
100,000
50,000
0
op
Growth in Value ($) of Loans disbursed
per year
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80,000,000
70,000,000
60,000,000
Value of Loans ($)
50,000,000
40,000,000
Value of Loans ($)
30,000,000
No
20,000,000
10,000,000
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Do

t
os
Growth in Number of Branches
495
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Number of Branches
289
254
153
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77
22 36
11 18 20
1 2 4 7
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Number of Branches
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No

Do

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Exhibit 8: List of Initiatives Sponsored by Akhuwat
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Program Name Description
1 Akhuwat University Akhuwat Faisalabad Institute of Research, Science and
Technology (FIRST). Program in biotechnology based completely
on need-based scholarships.
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2 Internship and Leadership Program for providing internship opportunities in multiple
Program organizations in the development sector.
3 Volunteer Services Program for involving student and professional volunteers in
Akhuwat’s operations.
4 Cloth Bank Program for collecting and distributing used clothes to poor
individuals.
5 Akhuwat My Biz Incubator Center Business incubator for start-up companies.
6 Health Services Akhuwat subsidiary that provides affordable, efficient and
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effective health care services such as diabetes and gynecology
clinics.
7 Khwajasira Support Program Program for empowering socially disadvantaged transgendered
individuals.
8 AISEM Customized training and capacity-building facility.

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Exhibit 9: Progress Indicators
PROGRESS INDICATORS (2015) TOTAL
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Total Benefiting Families 1,137,043

Total loans disbursed to Males (60%) 679,287
Total loans disbursed to Females (40%) 457,758
Amount Disbursed $ 208 m
Percentage Recovery 99.92%
Active Loans 469,017
Outstanding Loan Portfolio $ 57 m
No
Number of Branches 495

Number of Cities and Towns in Pakistan 276

Do

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Exhibit 10: Summary of Major Islamic Banking and Finance Products
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Hibah: This is a token given voluntarily by a debtor to a debtor in return for a loan. Hibah usually arises in practice
when Islamic banks voluntarily pay their customers a 'gift' on savings account balances, representing a portion of
the profit made by using those savings account balances in other activities.
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Ijarah: Ijarah means lease, rent or wage. Generally, the Ijarah concept refers to selling the benefit of use or service
for a fixed price or wage. Under this concept, the bank makes available to the customer the use of service of assets
/equipment such as plant, office automation, or motor vehicle for a fixed period and price.
Istisna: In an Istisna sale, the buyer asks the manufacturer to create a specific commodity with material from the
manufacturer. The price is fixed after all parties give their consent and agree on all the necessary specifications of
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the commodity.
Murabaha: Murabaha is a sale with an agreed-upon profit margin.
Mudharabah: In Mudharabah, the customer provides funds to the bank, which then invests the funds into various
investment schemes and financing.
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Musharakah (Investments): Musharakah means “to share.” In a banking context, it indicates that all profits or
losses are shared equally.
Qard: Qard transactions are loans without profit. The borrower is required to repay only the principal amount
borrowed but may pay an extra amount as a token of appreciation at the borrower’s absolute discretion. Qard
contracts can also be used to support current accounts, in which customers lend the money to the bank. The bank
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generates profit on this loan and returns the capital and some of the profit it has obtained.
Salam: Salam is a sale in which the seller supplies specific goods to the buyer at a future date in exchange for a
price fully paid in advance. It is typically used to finance agriculture. The bank must take delivery of the commodity
on maturity and it can enter into a parallel contract of Salam with another party to sell the commodity on the
future date. (It is prohibited to sell the commodity to the original party.)
No
Takaful (Islamic Insurance): Takaful is an alternative form of cover that a Muslim can avail himself against the risk
of loss due to misfortunes. Takaful is based on the idea that what is uncertain with respect to an individual may
cease to be uncertain with respect to a very large number of similar individuals.
Tawarruq: Tawarruq is a finance method with which one can raise loan financing through buying installments in a
local commodity owned by the bank. Applicants then authorize the bank to sell their share in this commodity, on
their behalf, to a third party for cash and then deposit the proceeds into his account.
Do
Sukuks: Sukuks are Islamic bonds that must be linked to an underlying asset. Banks cannot raise funds by issuing
generic fixed or floating coupon-bearing bonds. Banks can securitize a stream of cash flows from Ijarahs or
Murabahas and then issue Sukuks. The coupon cash flow for these Sukuks can be the cash flow from the
underlying Ijarahs or Murabahas, for example.

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Wadiah: In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank and
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the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the
depositor demands it. The depositor, at the bank's discretion, may be rewarded with Hibah as a form of
appreciation for the use of funds by the bank.
Source: Islamic Banking Products and Processes-Key Regional Variations,
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http://www.oracle.com/us/industries/financial-services/islamic-banking-process-wp-1898554.pdf.
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No
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Exhibit 11: Major Categories of Businesses Started by Akhuwat Borrowers
os
Serial No. Categories of Business
1 Agriculture Inputs
2 Artificial Jewelry
3 Auto Workshop
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4 Beauty Salon & Cosmetics
5 Butcher Shop
6 Clinics
7 Construction & Material
8 Crockery Business
9 Cycle Works
10 Dairy Industry
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11 Decoration & Gift Item
12 Electronic & Services
13 Embroidery
14 Food Stuff
15 Furniture
16 Garments
17 Handicrafts
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18 Home Appliances & Services
19 Home Industry
20 Leather Industry
21 Livestock
22 Lubricant Business
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23 Mechanical & Engineering Works

24 Music & Instruments
25 Plastic Molding
26 Poultry Business
27 Scrap & Recycling Work
28 Sports Industry
29 Stamp Paper & Composing
No
30 Stationery & Printing

31 Transportation
32 Tuition Centre
33 Vendor
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Exhibit 12: Map of Pakistan
os
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yo
op
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Source: The University of Texas at Austin, Perry-Castañeda Library Map Collection,

http://www.lib.utexas.edu/maps/middle_east_and_asia/pakistan_admin-2010.jpg.
No
Exhibit 13: Akhuwat Logo

Do
Source: Courtesy of Akhuwat.


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KS1198

Case Number 2074.0

The Plight of a Widow

had maintained throughout its 14-year operations.

HKS Case Program 2 of 24 Case Number 2074.0

Dr. Amjad Saqib: The Story of a National Hero

HKS Case Program 3 of 24 Case Number 2074.0

went unchecked. (For a map of Pakistan, see Exhibit 12.)

Akhuwat: The Idea

HKS Case Program 4 of 24 Case Number 2074.0

Use of Religious Places

HKS Case Program 5 of 24 Case Number 2074.0

HKS Case Program 6 of 24 Case Number 2074.0

Turning Borrowers into Donors

HKS Case Program 7 of 24 Case Number 2074.0

Organizational Structure and Set-up

HKS Case Program 8 of 24 Case Number 2074.0

Working with the Government

HKS Case Program 9 of 24 Case Number 2074.0

HKS Case Program 10 of 24 Case Number 2074.0

HKS Case Program 11 of 24 Case Number 2074.0

Source: Permission courtesy of Akhuwat.

HKS Case Program 12 of 24 Case Number 2074.0

family size goes up to 8 or above. Optional 1% of loan amount

books and other materials. Post Approval Application fee: None

Optional 1% of loan amount

HKS Case Program 13 of 24 Case Number 2074.0

 Provision of clean drinking

Source: Akhuwat Company Documents.

HKS Case Program 14 of 24 Case Number 2074.0

Source: Akhuwat Company Documents.

HKS Case Program 15 of 24 Case Number 2074.0

Source: Permission Courtesy of Akhuwat.

HKS Case Program 16 of 24 Case Number 2074.0

The Chief Minister’s Self-Employment Scheme - Gilgit Baltistan,

The Prime Minister’s Interest-Free Loan Scheme,

TEVTA Interest-Free Loan Scheme

Source: Akhuwat Company Documents.

HKS Case Program 17 of 24 Case Number 2074.0

Growth in Number of Loans disbursed

HKS Case Program 18 of 24 Case Number 2074.0

Source: Akhuwat Company Documents.

HKS Case Program 19 of 24 Case Number 2074.0

Source: Akhuwat Company Documents.

Total Benefiting Families 1,137,043

Number of Branches 495

Source: Akhuwat Company Documents.

HKS Case Program 20 of 24 Case Number 2074.0

Murabaha: Murabaha is a sale with an agreed-upon profit margin.

HKS Case Program 21 of 24 Case Number 2074.0

Source: Islamic Banking Products and Processes-Key Regional Variations,

HKS Case Program 22 of 24 Case Number 2074.0

23 Mechanical & Engineering Works

30 Stationery & Printing

HKS Case Program 23 of 24 Case Number 2074.0

Source: The University of Texas at Austin, Perry-Castañeda Library Map Collection,

Exhibit 13: Akhuwat Logo

Source: Courtesy of Akhuwat.

HKS Case Program 24 of 24 Case Number 2074.0

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