Brothers For Social Good

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Launched in Support of National Poverty Graduation Initiative

The inception of microfinance, as is known today, began with an experiment conducted by a professor in Bangladesh in 1976. To help the poverty-stricken and flooded village of Jobra in Bangladesh, Professor Mohammad Yunus, a lecturer of economics at Chittagong University, lent $27 each to a few women as working capital without interest. What surprised him was the fact that these women invested this money in their modest commercial enterprises and were successful. They came back thanking him and returned the borrowed amount. Thus, this small experiment started what was to become a global revolution in microfinance.

As time passed, microfinance was perceived as the answer to the world’s poverty problem. World leaders were thrilled around the globe and uptake of microfinance boomed amongst institutions and non-government organizations (NGOs) with billions of development funds coming through to eradicate poverty and help the cause of female empowerment. So much was the enthusiasm and confidence present in the scheme that the United Nations (UN) and the World Bank declared 2005 as the year of microfinance and Yunus and Garmeen bank were awarded the Nobel Peace Prize in 2006 for starting this revolution to create economic and social development. However, unfortunately, the charm and enthusiasm faded out within the next five years as the claims of poverty eradiation and female empowerment were challenged and could not be corroborated.

Moreover, incidences of exorbitant interest rates in excess of 40 percent being charged by the institutions were revealed. The presence of high-interest rates is justified from an economic perspective. Many reports suggested that microfinance had not helped achieve its initial goal of eradicating poverty. Whereas it had provided support to some entrepreneurs saving them from unregulated money lenders (who offered even worse interest rates) and had led to consumption smoothing, its overall objective had not been achieved.

Given the failure of conventional microfinance to alleviate poverty, interest-free or charity-based microfinance models have gained popularity in developing countries and especially in Islamic countries where the concept of interest-free Islamic finance products appeals to the public, in general. Some of the countries where interest-free microfinance has gained popularity include Pakistan, India, Bangladesh, Bosnia, and Herzegovina and some African countries.

Keeping in mind the barakah of interest-free loaning, BARKAT Interest-Free Loan Scheme was launched in 2019 as a new initiative of The NGO World in tehsil Kabir Wala district khanewal with the aim to help the poor establish, or uplift their small scale businesses to support their living.

As 1st step 15 borrowers were identified and given cheques of PKR 30 thousand each after completing the process. With this scheme trying to bring visible reduction in poverty situation of our borrowers. BARKAT model entails a zero interest. It uses the value of social collateral whereby members of a group act as collateral for each other, decreasing the risk of default.

We have coupled this scheme with BARKAT MUDARABAH MODEL that covers all administrative and service expenses.

 

Eligibility Criteria of Borrowers

  • Age been 18 to 60 years
  • Individuals from households on Score of 0-40 on Poverty Score Card
  • Valid National Identity Card (CNIC)
  • Resident of targeted union council of the district
  • Economically viable business plan