4th ICIB Ministry of Planning Development & Reform Conference Secretariat: Mr. Ikram Ullah Khan Mr. Ehtesham Rashid

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1 ICIB 4 th International Conference on Islamic Business 2016 Quaid-e-Azam Auditorium, IIUI Faisal Masjid Campus, Islamabad, Pakistan February, 2016 Organized By: riphah international university riphah centre of islamic business Collaborators: Islamic Economics, Finance, Entrepreneurial Development & Public Policy for the Ummah s Socio-economic Wellbeing Under the above theme, the speakers / paper presenters will discuss the vision of Islamic economics, business and finance, public policy for entrepreneurial development and to enhance social inclusion and good governance, meaning how to develop Islamic countries economies giving fair opportunity to all segments of the society and provide them not only suitable jobs / employment but also dignity and respect in the society and falah in this world and the Hereafter. As it is possible only through application of the principles of the Shariah, in letter and spirit, in all socio-economic disciplines and business and finance affairs, Shariah compliance of all institutions, products and activities would also be covered in the Theme of the ICIB-2016 event. Ministry of Planning Development & Reform Conference Secretariat: Riphah Centre of Islamic Business (RCIB) Riphah International University, 274-Peshawar Road, Rawalpindi. Mr. Ikram Ullah Khan (Ikramullah.khan@riphah.edu.pk; +92 (333) ) Mr. Ehtesham Rashid (ehtesham.rashid@riphah.edu.pk; +92 (345) )

2 Agha Ali Javad

3 NRSP was setup in 1991 for country wide replication of AKRSP GoP provided seed capital Works in all Provinces and AJK Largest outreach by any not for profit organization in the country 64 district 116 field offices (Tehsil level) 4,000 staff

4 LEGEND NRSP Programme District 59 Chitral Ghizer Gilgit NRSP Hub Office 9 Astore Diamer Skardu NRSP District Office 54 NRSP Field Unit 116 FATA Mirpur Bhimber Dera Ismail Khan Zhob Dera Ghazi Khan Chagai Rahim Yar Khan Khuzdar Dadu Kech (Turbat) Sanghar Tando Allah Yar Umarkot Tharparkar

5 HARNESSING PEOPLES POTENTIAL INTRODUCING NATIONAL RURAL SUPPORT PROGRAMME

6 Social mobilization Identification and targeting the poor using Poverty Score Card Organizing the poor into three tiered institutions Community Organizations (at mohalla level) Village Organizations (at village level) Local Support Organizations (Union Council level) Needs assessment Household and Village level planning

7 Household level: Social Protection Grants to poorest Health insurance Livelihoods Community Investment Fund for interest free loans Sustainable Micro Credit for entrepreneurial poor Skills training Village level (community managed infrastructure) Irrigation and Drinking water Village infrastructure Agriculture and Livestock services

8 Local Support Organization (LSO): Federation of Village Organizations at UC level LSO Leaders, Executive Committee and General Body. Exec Comtt.: all VO leaders; General Body: All CO leaders All villages represented in LSO LSO Village Organization (VO): Federation of Community Organizations Leaders and General Body (all CO Presidents and Managers) All mohallas/settlements represented in VO 100% inclusion of poorest households through COs VO Community Organizations (COs): Participatory body (Leaders and Members) Separate COs for Men and Women (if required) Each CO to have members CO CO CO 7

9 HARNESSING PEOPLES POTENTIAL FORMATION STEPS Preparation of Portfolio of Opportunities Levels Plans Identified Interventions Household Level Income Generation - Line of Credit - Training, Asset transfer/igg Group Level Land Improvement - Line of Credit Joint Enterprises Collective Supplies - Training - Technical Assistance and Marketing Village Level Social Sector Needs - Engineers services, such as - Proposal writing, Linkages, _ Drinking Water Supply - Fund raising _ Schemes and Sanitation _ Health & Family Planning _ Education _ Infrastructure Needs

10 SUSTAINABLE LOCAL COMMUNITY DEVELOPMENT INTRODUCING NATIONAL RURAL SUPPORT PROGRAMME Based on Portfolio of Opportunity the following are the sectors who are providing technical support to COs Social Organization Microfinance & Enterprise Development Programme (MEDP) Human Resource Development Natural Resource Management Physical Infrastructure & Technology Development Social Sector Services Gender And Development

11 Community Organizations (COs) formed 181,201 CO membership 2,904,745 Village Organizations formed 6,265 Local Support Organizations (Union Council level) 677 Community Members Trained 3,173,316 Staff Members Trained 57,410 Savings Rs Million 1,540

12 Community physical infrastructure (32,427 schemes) Vocational and technical training On going education programme (community schools, government schools, PLACES, increasing awareness) On going health programme (LHV based clinics, health awareness, immunization etc) Child protection programme, Safety net programmes Basic rights, women empowerment, gender

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14 Community Managed Financial Services (Community Investment Fund (CIF) Interest Free Loan (IFL) Karobari Sarmaya (KS) Profit and loss sharing Conventional Micro Credit Micro Insurance

15 Non-Poor Transitory Non-Poor Transitory Vulnerable Transitory Poor Microfinance (Credit, KS, Savings and Insurance) Chronic Poor Extremely Poor Safety Net Programs 14 (Savings, CIF, IFL and Insurance)

16 Package Type Loan ceiling (Rs.) Period Credit (Months) Repayment Agriculture Inputs Small Enterprise 75,000/- Up to 12 Lump sum or Monthly installments 75,000/ Up to 18 Lump sum or Monthly installments Livestock 75,000/ Up to 12 Lump sum or Monthly installments Irrigation/ Land leveling 75,000/ Up to 18 Monthly/ quarterly/ six monthly installments First loan not to exceed Rs. 30,000/-. However, this condition is not applicable for irrigation

17 Loan Disbursements (Rs.) 111,114,563,412 No. of Clients served 2,690,882 No. of Loans 6,030,254 No. of Active Loans 620,139 No. of Loan Officers 3,542 Loans Per Loan Officer 175 Current Portfolio (Rs.) 10,685,083,333 Portfolio at Risk over 30 Days 0.89%

18 Introduction to credit programme Need Identification Turned down by CO Turned if NRSP terms not met Returned to CO if NRSP terms not met Social Appraisal Resolution by CO/Credit Group Social Appraisal Technical Appraisal Documentation Sanction & electronic fund transfer Confirmation from the client At Hhd level By Field Assistant At Hhd level By Credit Officer At District Office At District Office By Village Branch

19 Social appraisal gives answers of the following five questions: 1. Is the loan applicant a LOCAL resident? 2. Is the loan applicant HONEST? 3. Is the loan applicant RESPONSIBLE? 4. Is the loan applicant NEEDY? 5. What is the managerial capacity of the client in terms of loan amount?

20 CIF is a fund which is owned, run and managed by the community institutions (COs/VOs/LSOs) with a mission to benefit the poorest especially through the poorest women members. NRSP provides CIF to the community institutions as grant and community institutions use this grant as revolving fund and provide loans to their members who belongs to 0-23 category in the poverty scorecard. Community institutions design the loan product and set other terms and conditions according to the needs of the community NRSP help community institutions in designing the loan product and policy and train the institutions in microfinance discipline.

21 No. of Districts covered 28 No. of Community Institutions received grant 353 Grant Funds Transferred (Rs.) 420,266,000 Loan Disbursements by Community Institutions (Rs.) 983,762,324 No. of Loans 63,669 Active Loans 17,689 Outstanding Loan Portfolio (Rs.) 272,062,361

22 NRSP is implementing Prime Minister s IFL scheme in six districts. The scheme is under implementation in four districts of Punjab and two districts of Sindh. Interest free loans are disbursed to the community members who belong to 0-23 bracket in poverty scorecard. All the loans are provided to the women.

23 No. of Districts covered 6 No. of Union Councils covered 52 Loan disbursed (Rs.) 532,915,000 No. of Loans 21,760 Active Loans 15,304 Outstanding Loan Portfolio (Rs.) 256,718,713

24 Product Component Product details Eligibility criteria for Must be a resident of NRSP programme area. selecting clients Must be of sound mind and good in character Must be in the age of Experienced shagird/intern or experienced entrepreneurs who want to set up a new business. A minimum of three years experience Duration/tenure of Minimum 6 months and maximum 12 months financing Ceiling of financing Up to Rs. 75,000 per business. Minimum Rs 10,000. Profit/loss sharing terms Assessment of profit/loss Processing Fee Profit payment and NRSP share s repayment Client s share 4/5th and NRSP share not more than 1/5th. However in order to benefit the client NRSP share will not be more than equal to 28% of NRSP s investment calculated on a diminishing basis. A ready reckoner has been prepared which specifies the amount of profit to be recovered which is less than 1/5th. The partner will be trained in maintaining a minimum set of books to calculate incomes, expenditures and cash flows. In case of loss or profit less than the projected one NRSP will pick up the deficit in the ratio of financing. Rs 500 (Rupees five hundred upfront) Profit payment is allowable on a daily, weekly, fortnightly and monthly basis. Repayment of NRSP share of financing is allowable on a monthly as well as at the end of the full tenure of 12 months.

25 No. of Districts covered 8 Number of partners 864 Financing amount (Rs.) 37,325,000 Outstanding Financing Amount (Rs.) 36,068,518

26 The hospitalization Medical Insurance covers in-patient hospitalization expenses incurred due to illness or accidental bodily injury up to Rs. 15,000. The Personal Death Insurance covers each member against death or permanent disablement up to Rs. 15,000. The insurance is provided as a part of the credit package and the premium is Rs. 150 payable to the insurance company for the client and his/her spouse. NRSP contribute Rs. 50/client in the premium. Non credit CO members can buy this scheme at a premium of Rs. 500/family. The maximum compensation for hospitalization is Rs. 25,000/family and for death it is also Rs. 25,000 for NRSP CO member only.

27 Total No. of insurance under written 5,600,278 Total No. of Clients 2,571,269 Premium Collected (Rs.) 415,805,675 Total No. of Claims Received 24,896 No. of Claims in Verification Process 1,003 No. of Claims Rejected 2,891 No. of Claims Approved and Reimbursed 21,002 Amount Reimbursed (Rs.) 223,865,617

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29 Evaluations/Assessment of RSPs Social mobilisation UNDP, 1998: An Interim Evaluation of NRSP In sum, the NRSP model is unique. It is highly responsive to community motives and aspirations within the context of community participation.. Clearly, NRSP s experiences suggest that it is feasible to unlock the productive and entrepreneurial potential of Pakistan's rural people. (page 6) World Bank, 2007: Ending Poverty in South Asia Ideas That work The average income per capita in northern Pakistan was less than one-third of the national average in By 2001 it has risen to more than half of the national average. Even though national economic growth slowed down in the 1990s the NAC [Northern Areas and Chitral] region experienced impressive growth in per capita income, showing an 84 per cent increase from 1991 to (Page 144) Pakistan s experience with Rural Support Programmes demonstrates that social mobilisation can work on a large scale even in an unfavorable climate of low growth, high poverty, weak democracy, and frequent changes of regime. (Page 137)

30 Overall RSP Evaluations = Social mobilisation HTSPE/RSPN, 2010: Assessing the Impact of RSPs Social Mobilisation in Pakistan. The RSPs have created an unparalleled network of participatory community organisations. (Page 57) RSP formation of WOs has supported wider changes in gender relations in Pakistan. It has helped: Persuade men to allow women a right to organize and meet Strengthen women s existing right to undertake independent economic activity Show women what empowerment might look like (Page 69)

31 Evaluations/Assessment of RSPs Microfinance SDPI 2009: Impact & portfolio assessment of NRSP;s Microcredit Programme in DGK NRSP has put in place all best practices in terms of efficiency, productivity, risk management and transparent financial reporting; leading to reach maximum number of clients. NRSP has also demonstrated ability to inculcate a culture of good repayment as it has kept the default at below 1%. In terms of outcomes of the programme NRSP s microcredit has shown positive results in terms of increasing incomes, generating employment, increasing women participation, improving nutrition, health and education UNDP, 2003: Pakistan National Human Development Report In terms of the comparative picture of NGOs, 68 per cent of NRSP respondents ate their fill daily and 65 per cent ate better now than earlier [before accessing credit]. (Page 93) The top performer is NRSP with 81.6 percent of its beneficiaries experiencing a sustainable increase in their income after receipt of a loan.

32 Evaluations/Assessment of RSPs Microfinance Mahmood Hassan Khan year 2000 There is a 7.5% additional increase in income over non members impact on the participating households in terms of their total and farm income., total expenditure, savings, consumer durable goods, children in school and it tends to increase with time.

33 Evaluations/Assessment of RSPs Microfinance PERI 2006: Economic Analysis of various components of DGK Rural Development Project (Part I & II) NRSP According to various economic indicators including Net Present Value, Benefit Cost Ratio, EIRR; all sub projects initiated in this intervention were found economically viable. Benefits of credit: About 91 percent of NRSP s loanees have reported that the loan received from NRSP has helped them to purchase agricultural inputs in time and about 90 percent reported that they used those inputs in time. According to their estimate, loss averted due to timely use of inputs was around Rs. 12,500 per loanee. Similar reports were made regarding the loans obtained from other banks. A comparison is made below (Page 18) Procedural Difficulties Faced: It has been noticed during the survey that time taken by NRSP for advancing loan is the minimum i.e. only 6 days No. of visits made by the loanees to the loaning agency were also minimum in case of NRSP, only 2 Documentation cost is also low, Rs. 8 in case of NRSP

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