Microfinance

Business Loans – Qarde Hasana

Primarily, Isaar is dependent on donors to meet its financial obligations.

VISION 
A poverty free society built on the principles of compassion and equity.

MISSION 
To alleviate poverty by empowering socially and economically marginalized families through interest free microfinance and by harnessing entrepreneurial potential, capacity building and social guidance.

OBJECTIVES

• To provide interest free microfinance services to poor families enabling them to become self reliant
• To promote qard-e-hasana as a viable model and a broad-based solution for poverty alleviation
• To promote qard-e-hasana as a viable model and a broad-based solution for poverty alleviation
• To provide social guidance, capacity building and entrepreneurial training
• To institutionalize the spirit of brotherhood, compassion, and volunteerism
• To transform Isaar borrowers into donors
• To make Isaar a sustainable, growth-oriented and replicable organization

GUIDING PRINCIPLES OF ISAAR

Interest-free microcredit: 
Isaar provides the economically poor with interest free loans so that they may acquire a self-sustaining livelihood. It also provides the skills and support they need to actualize their full potential and abilities.

Reliance on philanthropy: 
Since its inception Isaar has solely relied upon the philanthropists in extending its services to the community. However, in order to fulfil the increased credit needs of its ever-increasing clientele it is now willing to work with the international donors as well.

Spirit of volunteerism: 
The spirit of volunteerism that Isaar’s management and its team members exhibit is indicative of the success Isaar achieved within a short span of time.

Family loans: 
A Family loan is the most common type of loan that Isaar offers to its clients for setting up or expanding a business. Income from this business is jointly shared by the whole family. The loans given by Isaar are co-signed by male and female head of the family. Isaar believes in strengthening family unit as some studies show that separate loans to male and female in a family may result in tensions in the family and hence may cause disintegration of this important institution.

Linkages with Mosque and Community: 
An important and novel idea associated with individual loans is the use of the local mosque/community infrastructure as the center for loan disbursement and as an avenue for community participation.

Combination of individual and group lending program: 
Diversification of loan portfolio by offering different loan products has helped to increase the outreach of the organization.

Credit Plus approach: 
Isaar has employed a credit plus approach by introducing the idea of social guidance for its credit beneficiaries. The purpose of this approach is to help borrowers flourish their small enterprises so that they can lead socially healthier lives than before.

Lending Methodology

Introduction: 
Individual loans are marketed through awareness campaign in poor localities, market places and through previous borrowers. An introduction to the program is also given in nearby mosque or community halls where people have congregated there for prayers. This has not only tremendously saved the operational costs but has also opened the doors of the religious places for socio-economic development. It also attaches a moral responsibility to return the loan on time.

Individual Selection: 
The loan process starts with the submission of applications by persons interested in getting financial assistance. The Unit Manager (Loan Officer) then evaluates that whether the applicant deserves the loan or not i.e. lives below the poverty line, has a reliable social capital, is not involved in any illegal business and possesses entrepreneurial abilities.

Preparation of Business Plans: 
Through the preparation of business plans the business idea of the intended loanee is evaluated to see if it is viable and whether it can generate income beyond the household expenses of the individual so that the loan could be repaid easily. The applicant’s family is also interviewed to make sure that they know about the loan and support the business idea.

Credit Appraisal: 
After initial appraisal by the Unit Manager, the application is forwarded to Branch Manager who appraises the technical section of the appraisal process. Then the case is referred to Loan Approval Committee. The committee comprising of Unit, Branch and Area Mangers which reviews the credit case. If the committee approves the case loan disbursement is done. The whole process takes up to 4  weeks on average.

Guarantors of Loans: 
Every borrower also provides two individual guarantors who vouch for his/her credentials and accept the responsibility of monitoring the borrower and give assurance to persuade the borrower for timely payment of loan. One of the two guarantors may be from the same family.

Credit Disbursement/Capacity Building: 
Disbursement takes place every 3 – 6 months and numerous loans are disbursed at one event dependent upon funds, usually held at branch office/mosque or hall. Every borrower has to be accompanied by one of the guarantors. Other people present at the time of disbursement include community members, Isaar staff, from the branch and Head office. Social Guidance events are also held simultaneously in which the capacity of loanees is built to carry on their work more efficiently and effectively. They are also apprised of social agenda that includes:

• Emphasis on self empowerment and education
• Serving the community at large
• Protection and improvement of environment
• Importance of plantation
• Observance of traffic rules and local laws
• Following highest ethical values in business
• Employment leading to maximum benefits or recruitment of others

Recovery/Follow up: 
Once the loan has been disbursed, the Unit Manager monitors the client with regular visits to his residence and place of work. The loan repayment has to be submitted at the branch by the 7th of each month. If a payment is not in by the 10th, the Unit Manager visits the client to remind and if repayment is still not done then the guarantors are contacted and asked to make the payment.

Microfinance Products

FAMILY ENTERPRISE LOAN

The Family Enterprise loans are for establishing a new business or expanding an existing one with the aim of enabling the borrower to secure a sustainable livelihood. It is the most common type of loan offered by Isaar. The Family Enterprise loan ranges from 5,000 rupees to 50,000 rupees however keeping in view the rapid inflation in the country, Isaar may now gives initial loans of up to 50,000 rupees. To be eligible for the loan, the individual has to come up with a viable business plan which he may construct with the guidance and support of the Isaar staff. The loan is known as the Family Enterprise Loan because it intended for the entire family and not restricted to either male or female members of the household. Even though the entire family is involved during the loan process, the business is undertaken by one member of the family who has the required expertise. The Family Enterprise Loan is designed to strengthen the social fabric by involving the whole family in the loan process such that the enterprise becomes a family venture instead of an individual effort.

Examples of Microfinance Businesses

• Dress Making
• Embroidery
• Plumbing
• Industrial Electrician
• Food Cooking & Kitchen Management
• Motorcycle Mechanic
• Auto Mechanic
• Chicken Farming
• Computer Software
• Computer Hardware
• Welding
• AutoCad
• Donkey & Cart for Deliveries
• Woodcutters