Farz Methodology: Making it big through

scarce means
Achieving financial goals in such trying times is no mean business. Farz Foundation
took up the task of fighting poverty when the microfinance world was giving in to
one of the most unique and deep sustainability crisis. Much to our amazement, the
initial outcome was quite encouraging.

Quite interestingly the whole operation was initiated with a small amount of Rs 2.5
million raised by the staff itself. Another NGO Akhuwat contributed Rs 0 .3 million.
Out of this amount about Rs 0.7 million was disbursed among its 63 clients. Total
number of beneficiaries amount to 409 persons who were provided healthcare and
education. This step was aimed at restoring the confidence of people on the
microfinance sector.

So far, the foundation has two offices including one central and one branch office.
The staff in the branch office consists of 3 persons, one branch manager, an
accountant and one field officer. The central office the staff of eight which consists
of a CEO, GM operations, Manager Monitoring, Finance Officer, Manager
Entrepreneur, Social performance Manager and a office boy.

The process was accompanied by the research operations, development of a unique

methodology constant assessment of the success rate, development of SOPs,
setting up of the internal control system, monitoring and evaluation, expansion
plans and social performance management.

What needs a special focus in all this process was the fact that simultaneously a
partnership was developed with Pak Qatar Family Takaful Pakistan for Islamic
insurance, achieved first time in Pakistan. Another partnership developed with The
Akhuwat to promote Islamic Microfinance operations.

Out of the whole invested amount of Rs 735,000, the receivable stands at Rs

892,820, recovered amount at Rs 152, 300, outstanding balance at Rs 722, 520
while Rs 18,000 was written off owing to the death of the client. Now, after the
agreement with the Pak Qatar, such a risk has been taken care of once and for all.
The recoveries are 99 percent on time with zero percent PAR.

So far 7 training sessions were conducted that include a workshop on Islamic

Banking and Finance, Islamic products, principals of Murabaha, time management,
client appraisal techniques, Farz Methodology, leadership and team building and
translating social into mission. The clients training sessions were conducted
separately on health awareness and business education.
There was another traditional method of saving, locally known as committees, was
introduced to knit the clients with each other as well as with the foundation. This
kind of method help build the assets of the clients.

This already existing system of saving was made secure by formalizing it through
incorporating it with the other Fraz Foundation operations. So far, 115 community
members are participating in the process. This product is attracting increasing
number of members with each passing day.

The first challenge that the foundation faced was the demand of clients for hard
cash instead of assets. Knowing pretty well that the cash extended is mostly spent
on immediate needs instead of initiating a productive activity, they were taught to
understand how can they rid themselves of bad loans through using the assets
provided by the foundation. They even were never shy of telling their intentions of
using the cash on their immediate needs.

There were only two clients who mismanaged their business. We event didn’t gave
up on that and gave them out of the routine training.

One important internal challenge was changing the mindset of the internal staff to
adopt to the principals of Islamic Microfinance. That was taken care of through
intensive training sessions. It is pertinent to mention that most of the staff so far
works on voluntary basis.

But the greatest challenge that we face is the direly needed finance to tap a huge
market that desperately awaits support.