I had a visit to my Oval Office at FINCA from Dr. Muhammad Amjad Saqib, Executive Director of the AKHUWAT Foundation in Pakistan. AKHUWAT has a unique microfinance model: they don’t charge interest on their loans. You might think this would pose a problem for sustainability — and it does; the foundation is still 30% reliant on donations to cover its operating costs — but they cover 70% of their costs through voluntary fees from their grateful clients. Ninety percent of the clients make some kind of voluntary contribution from their profits.
“In this way, we turn beneficiaries into donors,” says Dr. Amjad. “It is very empowering.”
I asked him, given the current controversey surrounding microfinance, if he felt AKHUWAT was getting its client-donors out of poverty, or as some of microfinance’s detractors claim, leaving them worse off.
“Oh, absolutely we are helping them get out of poverty,” he maintained. “The women come up to me all the time, smiling and thanking me. You can see the progress. At the same time, there are many types of poverty: social, spiritual, health-related, education-related — we can’t do everything. This is where others have to come in.”
And no evidence of his program over-indebting clients and doing them harm?
“I have never had a single client tell me that our loans have done them harm.”
It’s probably not a model with the potential to reach millions, but you have to admire the lengths Dr. Amjad has gone to ensure that the majority of the fruits of their labors remain with the clients.