ESAAR MICROFINANCE A Community Based Model Arshad Mehmood Head of Program Helping Hand for Relief & Development “Livestock and Dairy Development: Role of Social Sector and Rural Community in Pakistan” December 2014, Lahore

Mission Statement To facilitate and support livelihood opportunities and microenterprise development for poverty alleviation on brotherhood and solidarity bases through provision of Islamic Microfinance

Poverty Level & Esaar MF’s Approach At the Poverty Line Below the Poverty Line Abject Poor Growth Livelihood Safety Net Mudarbah Murabah Qarad e Hasan MED IGAs Survival ClassificationObjectiveApproach Mode of Financing

Modes of Financing Qarad e Hasan MurabahMudarbah

Murabah & Mudarbah Model: Background In Pakistan, 63% population living in Rural areas High Poverty Ratio in Rural areas as of Urban Agriculture is major sector of Rural Economy Agriculture contributes 21.4% of GDP Livestock contributes 55.4% and Crops 37.6% of Agricultural Production Crops sector is, mostly, financed through Murabah Livestock sector is financed through Mudarbah

Murabah Model Conventional Practice Money lender or Arti system Delivery of Seed & Fertilizer on delay payment Price not declared at delivery time (not permissible in Shariah) Quality of delivered goods not up to mark Farmers are bounded to sale out their crop to same Arti Exploitation of farmers Esaar’s Murabah Model Sharia based Murabah Participatory approach Price and profit declared at delivery time Quality up to mark, purchase by producer/importer Low rates compared to market Farmers are free to sale out their crop in open market Farmers has extra income – due to low cost inputs and relatively high price of crop in open market.

Mudarbah Model Conventional Practice Livestock rearing on partnership bases Owner purchased and handed over to shepherd/herdsmen Purchasing price not declared Shepherd/herdsmen responsible for fodder, medicines etc. No written contract At the time of selling profit sharing No proper mechanism of loss sharing Esaar’s Mudarbah Model Livestock rearing on partnership bases Purchasing is done in presence of Mudarib and handed over Written contract as per Shariah rules Fodder and medicines are responsibility of Rub-ul-Mal (Esaar MF) Sale is done in presence of Mudarib 60% profit goes to Mudarib Loss sharing as per Shariah rules

Geographic Coverage

Esaar MF Interest Free: Shariah Compliant Cluster & Community Based Approach Online System Capacity Building Component Sustainable & Universally Replicable Integrated Approach Esaar Microfinance Model

Summary No. of Clusters26 Geographic Coverage (District and Union Councils - UCs) 24 Districts, 26 UCs Accumulative Beneficiaries13,963 Accumulative DisbursementPKR 386 Million Operating Cost Ratio15% Recovery Ratio99.8%

ESAAR MICROFINANCE PLUS Support to Livestock & Dairy Development sector in Rural Areas Micro Effort …. Macro Effects

Challenges Annual demand of milk growing 15% and supply increasing 3-4% 3% milk production processed and marketed formally 97% of milk production not linked with market mechanism Lack of education and awareness among the farming population, change management systems Lack of knowledge about optimal feed Lack of access to well trained support service staff. Financial exclusion

HHRD Livestock & Dairy Development Model Conference’s Recommendations HHRD’s existing structure Development of outline for HHRD Model

Outline/Components of Proposed Model Community Mobilization & Organization Capacity Building of Farmers Technical Assistance Islamic Financial Solution Market Linkages

Objectives To increase production of Milk and Meat and bridge the demand-supply gap To reduce poverty in rural and less developed areas To provide food security To increase efficiency of agriculture sector

Key Drivers Fodder/Feed Quality Proper treatment and medication Rearrangement of herd Best quality breed Technical assistance Capacity building Takafal Financial inclusion

How??? Using available infrastructure, Field Office and HR with addition of Livestock & Agriculture HR

Working Strategy Targeted Community (83.4% households having herd size 1-4 animals) Technical assistance Training of farmers Market linkages and Value Chain Islamic Financial solution Increase in efficiency Access to finance Increase in household income Improvement in living standard InputOutput Agri. Officer LS Officer MF Officer

Working Pattern HHRD Targeted Community Private SectorPublic Sector

After launching LSDD Program Union Council Orphans adoption Skills development Interest Free Microfinance Children with disabilities adoption Livestock & Crop sector