Minimizing operating cost of Islamic microfinance institutions : a case of akhuwat

Abstract EN

This case describes how Akhuwat - an Islamic microfinance NGO, working in various parts of Pakistan on qard.

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asan basis, significantly reduced high operating cost through its innovative and Islamically charished process of benovelence and cooperation.

In conventional microfinance models, high operating cost is usually considered as unavoidable cost and is ultimately transferred to the poor clients as direct credit supply cost.

Akhuwat first channelized qard.

al-h.

asan to the poor and financially marginalized communities in Lahore region through technically viable, cost ecient, socially responsible and religiously compatible processes which distinguished Akhuwat model of Islamic microfinance.

The scheme is now being replicated in other regions and by other similar organizations.

This case explains how Akhuwat devised mechanism to minimize operating cost to increase the chance of provision of loans to the poor on sustainable basis while putting minimum financial burden on the organization.