DFarz Foundation is the newest social player with a new, modern and social performance based Methodology known as Farz Methodology. Farz believes in Partnership with the poor instead of making them borrowers. Farhat Abbas Shah, the CEO of Farz Foundation, introduced a pivotal economic theory labeled Twist Up theory which emphasizes the economic sustainability of the poor by making them productive. The theory explains that the economic flow must go from down to upward, instead of trickling down from above.

Social entrepreneurship is the work of social entrepreneurs. A social entrepreneur recognizes a social problem and uses entrepreneurial principles to organize, create and manage a venture to achieve social change (a social venture). While a business entrepreneur typically measures performance in profit and return, a social entrepreneur focuses on creating social capital. Thus, the main aim of social entrepreneurship is to further social and environmental goals. Social entrepreneurs are most commonly associated with the voluntary and not-for-profit sectors [1], but this need not preclude making a profit. Social entrepreneurship practiced with a world view or international context is called international social entrepreneurship.[2] See also Corporate Social Entrepreneurship.
History.

The terms social entrepreneur and social entrepreneurship were used first in the literature on social change in the 1960s and 1970s.[3] The terms came into widespread use in the 1980s and 1990s, promoted by Bill Drayton the founder of Ashoka: Innovators for the Public,[4] and others such as Charles Leadbeater.[5] From the 1950s to the 1990s Michael Young was a leading promoter of social enterprise and in the 1980s was described by Professor Daniel Bell at Harvard as 'the world's most successful entrepreneur of social enterprises' because of his role in creating more than sixty new organizations worldwide, including a series of Schools for Social Entrepreneurs in the UK. Another British social entrepreneur is Lord Mawson OBE. Andrew Mawson was given a peerage in 2007 because of his pioneering regeneration work. This includes the creation of the renowned Bromley by Bow Centre in East London. He has recorded these experiences in his book "The Social Entrepreneur: Making Communities Work" [6] and currently runs Andrew Mawson Partnerships to help promote his regeneration work.[7]. The National Center for Social Entrepreneurs was founded in 1985 by Judson Bemis[8] and Robert M. Price[9], and Jerr Boschee served as its president and CEO from 1991 to 1999.

Although the terms are relatively new, social entrepreneurs and social entrepreneurship can be found throughout history. A list of a few historically noteworthy people whose work exemplifies classic "social entrepreneurship" might include Florence Nightingale (founder of the first nursing school and developer of modern nursing practices), Robert Owen (founder of the cooperative movement), and Vinoba Bhave (founder of India's Land Gift Movement). During the nineteenth and twentieth centuries some of the most successful social entrepreneurs successfully straddled the civic, governmental, and business worlds - promoting ideas that were taken up by mainstream public services in welfare, schools, and health care.

Current practice:
The space is fast-changing. The U.N. mandated University for Peace is now offering a dynamic online course titled 'Entrepreneurship, Innovation and Social Change' which brings together social entrepreneurs from around the world for this unique opportunity.

Farz Foundation is the newest social player with a new, modern and social performance based Methodology known as Farz Methodology. Farz believes in Partnership with the poor instead of making them borrowers. Farhat Abbas Shah, the CEO of Farz Foundation, introduced a pivotal economic theory labeled Twist Up theory which emphasizes the economic sustainability of the poor by making them productive. The theory explains that the economic flow must go from down to upward, instead of trickling down from above. One well-known contemporary social entrepreneur is Muhammad Yunus, founder and manager of Grameen Bank and its growing family of social venture businesses, who was awarded a Nobel Peace Prize in 2006.[10] The work of Yunus and Grameen echoes a theme among modern day social entrepreneurs that emphasizes the enormous synergies and benefits when business principles are unified with social ventures.[11] In some countries - including Bangladesh and to a lesser extent, the USA - social entrepreneurs have filled the spaces left by a relatively small state. In other countries - particularly in Europe and South America - they have tended to work more closely with public organizations at both the national and local level.

In India, a social entrepreneur can be a person, who is the founder, co-founder or a chief functionary (may be president, secretary, treasurer, chief executive officer (CEO), or chairman) of a social enterprise, which primarily is a NGO, which raises funds through some services (often fund raising events and community activities) and occasionally products. Rippan Kapur of Child Rights and You and Jyotindra Nath of Youth United, are such examples of social entrepreneurs, who are the founders of the respective organizations. Jay Vikas Sutaria of Bhookh.com is a social entrepreneur who is leveraging the power of the Internet to fight hunger in India. Upendra Agrawal and Jitendra Agrawal of click2plant.com are social entrepreneurs who are leveraging the power of the Internet to plant a tree online with the support of each and every individual click.

Another excellent example of a non-profit social enterprise in India is Rang De [1]. Founded by Ramakrishna and Smita Ram in January 2008, Rang De is a peer-to-peer online platform that makes low-cost micro-credit accessible to both the rural and urban poor in India. Individuals get to directly invest in borrowers from across India, track their investments online and receive regular repayments, with a token 2% pa. ROI.

Today, nonprofits and non-governmental organizations, foundations, governments, and individuals also play the role to promote, fund, and advise social entrepreneurs around the planet.[12] A growing number of colleges and universities are establishing programs focused on educating and training social entrepreneurs.[13] Wittenberg University in Springfield, OH recently established a partnership between the entrepreneurship department and Village Markets of Africa, allowing students hands-on experience with an organization working directly with producers.[14]

In the UK in 2002 seven leading nonprofit organisations established UnLtd - The Foundation for Social Entrepreneurs. It holds a £100 million endowment especially to invest in social entrepreneurs in the UK. UnLtd provides individuals with cash awards and practical support that includes coaching, training, and networking opportunities to help develop community projects. UnLtd Ventures is the in-house consultancy division of UnLtd and focuses on a number of outstanding social entrepreneurs, providing them with business support and helping them to scale up or replicate their organisations or get investment ready. Another of their operations, UnLtd Research, is becoming the world's primary source of evidence and thinking around social entrepreneurship. Its central purpose is to lead the global business, public policy, and academic debates about the role of social entrepreneurship in community regeneration, employment, and growth strategies.
The George Foundation's Women's Empowerment program empowers women by providing education, cooperative farming, vocational training, savings planning, and business development. In 2006 the cooperative farming program, Baldev Farms, was the second largest banana grower in South India with 250 acres (1.0 km2) under cultivation.[15] Profits from the farm are used for improving the economic status of the workers and for running the other charitable activities of the foundation.[15]

Some have created for-profit and for-a-difference organizations. A recent example is Vikram Akula, the McKinsey alumnus who started a microlending venture, SKS Microfinance, in villages of Indian state of Andhra Pradesh. Although this venture is for profit, it has initiated a sharp social change amongst poor women from villages. A great example is the activity of Brent Freeman [2], Norma LaRosa [3], and Nick Reder [4] the co-founders of Roozt.com [5] a new e-commerce site in the United States that connects online shoppers with socially responsible, social entrepreneur vendors through a daily deal format. Each customer's purchase also donates to a monthly cause. This online shopping site aims to empower everyday online shoppers to make a difference in the world through everyday purchases and is committed to providing double bottom line value with every sale.

There are continuing arguments over precisely who counts as a social entrepreneur. Some have advocated restricting the term to founders of organizations that primarily rely on earned income – meaning income earned directly from paying consumers. Others have extended this to include contracted work for public authorities, while still others include grants and donations. This argument is unlikely to be resolved soon. Peter Drucker, for example, once wrote that there was nothing so entrepreneurial as creating a new university: yet in most developed countries the majority of university funding comes from the state.

Organizations such as Ashoka: Innovators for the Public, the Skoll Foundation, the Omidyar Network, the Schwab Foundation for Social Entrepreneurship, Athgo, Root Cause, the Canadian Social Entrepreneurship Foundation, New Profit Inc., and Echoing Green among others, focus on highlighting these hidden change-makers who are scattered throughout the world. Ashoka's Change makers "open sourcing social solutions" initiative Changemakers uses an online platform for what it calls collaborative competitions to build communities of practice around pressing issues.

The North American organizations tend to have a strongly individualistic stance focused on a handful of exceptional leaders, while others in Asia and Europe emphasize more how social entrepreneurs work within teams, networks, and movements for change. The Skoll Foundation, created by eBay's first president, Jeff Skoll, makes capacity-building "mezzanine level" grants to social entrepreneurial organizations that already have reached a certain level of impact, connects them through the annual Skoll World Forum and Social Edge, the Foundation's online community, and highlights their work through partnerships with the Sundance Institute, Frontline World, NewsHour with Jim Lehrer, and other film and broadcast outlets. Skoll also supports the field of social entrepreneurship, including through Skoll's founding of the Skoll Centre for Social Entrepreneurship at the Said Business School at Oxford University. Examples of social entrepreneurial business in the USA include NIKA Water Company, which sells bottled water in the USA and uses 100% of its profits to bring clean water to those in the developing world, as well as Newman's Own which donates 100% of its profits to support various educational charities.

Youth social entrepreneurship is an increasingly common approach to engaging youth voice in solving social problems. Youth organizations and programs promote these efforts through a variety of incentives to young people.[16] One such program is Young Social Pioneers, which invests in the power and promise of Australia's young leaders. The program, which is an initiative of The Foundation for Young Australians, strengthens supports and celebrates the role of young people in creating positive change in their communities. About Face International [6] has a program that promotes youth social entrepreneurship amongst middle school, high school, and college students by providing interest-free loans, grants, and mentorship. They also help middle schools, high schools, and colleges form youth social entrepreneurship after-school clubs on site. Roozt's [7] business model parallels such an approach by "paying it forward" with their commitment to help educate today's youth about the fundamentals of socially responsible businesses so that they may become progressive leaders of tomorrow.
Istanbul Bilgi University launched the BİLGİ Young Social Entrepreneur Awards project in May 2010 to identify, educate, and provide financial support for young social entrepreneurs in Turkey. Cooperating with International Youth Foundation, Sylvan/Laureate Foundation and TEGV, through this comprehensive strategy, Istanbul Bilgi University seeks to contribute to the development of a new generation of socially conscious citizens leading change in their communities.

Another youth social entrepreneurship organization is rooted in Turkey, the organization named SOGLA [8] (The Academy of Young Social Entrepreneurs). SOGLA provides young entrepreneur candidates (named SOGLA pioneers) with a high quality of education and supports pioneers to develop, start-up, and sustain their social entrepreneurship projects.
Fast Company Magazine annually publishes a list of the twenty-five best social entrepreneurs, which the magazine defines as organizations "using the disciplines of the corporate world to tackle daunting social problems."[17] In 2009, Business Week followed suit, publishing a review of America's twenty-five most promising social entrepreneurs, defined as "enterprising individuals who apply business practices to solving societal problems."[18]

The internet and social networking websites have been pivotal resources for the success and collaboration of many Social Entrepreneurs. These media allow ideas to be heard by broader audiences, help networks and investors to develop globally, and achieve their goals with little or no start-up capital. For example, starting with no capital and just an interesting idea, three Australian students (1egg1world) are in the process of raising AUS$1million for Charity starting out with just one egg, an excellent example of the growing opportunities brought by the internet to people with good ideas.

Down grading of America's credit rating from AAA indicates world economic recession is aggravating. About ten thousand American industries have shut down since 2003. In equality between extreme incomes groups is soaring. All these developments emphasize the fact the interest based economic system has failed to kick start the economy. And this has come to the point where political and social unrest is hitting the economies like United Kingdom. All that is left is a partnership based system, which Farz Foundation has propounded. Despite all these eye opening developments, world financial bodies are clinging to market fundaments. Real Islamic financial model still provides a middle of the way road to fight the current economic mess. By engaging the have nots through profit and loss business mechanism a viable solution could be offer. A historic opportunity has been provided by the economic recession to the Islamic Banks. By making Islamic banks a little bit flexible for profit and loss sharing great results could b had.

The fall of credit rating of America unveiled the reality of the claims about offsetting economic crises by subsidizing banks and imposing cuts on various grounds in different areas of the globe. Here the importance of "twist up economy" accentuates the implementation at a required level. Two and half billion poor people are still an opportunity to provide a strong foundation to the world economy and the asset based microfinance could be an effective tool to achieve the targeted results. If the financial institutions come with a productive and unbiased vision, it is not an unattainable goal. Only a one hundred thousand SME Villages can change the scenario. Partnership with the poor on profit and loss basis is the core component of the Twist Up Theory, which can exhibit a great sense of responsibility at grass root level to keep the world secure. Poor can be utilize positively to create a productive universe at large by making them partners.

Farz Foundation working with the notion to make available a precedent, which is still in the process of becoming an Islamic Microfinance bank , has created over 3200 micro business models by sustaining the same number of families on profit and loss basis. The most important point to be made here is that there has not been even a single default. By taking a risk on profit and loss basis we infect eliminated the risk factor almost in totality. We actually close the door of default by creating the stakes of the client.

Farz foundation has introduced a new and structured model of Halal investment through livestock. We provide five goats to one poor rural family. In a course of one year it becomes a flock of 25 goats. According to this business model the family raising the goats 10 of goats . Farz Foundation and the investor have an equal share of the rest of the goats. Mean while the value of the principle goats is doubled in one year. The next years the male goats are taken out to be sold on handsome price, while the female goats will again be ready to produce 60 goats. In three and a half year the indicial five goats will become a flock of at least 150 goats. This simple arithmetic demonstrates a huge potential of this purely Islamic financial product. What goes without saying is the fact that there are swear shortage of goat meat in the Pakistani Market, which has pushed the price of goat meat to at least $ 7 per KG, which is a very high price considering income index of the majority of the population in Pakistan. All the major agricultural bodies are waring against swear food shortages in not very distant future. This type of economic models simultaneously can help the individuals in need while give a boost to the agricultural sector which in Pakistan consist of 60 present of the total economy. This model can help the African countries also where famon has almost hit a large number of people of black continent. To have a more crystal view of this Halal investment model, one can visit CGAP MicrofinanceGateway.

http://www.microfinancegateway.org/p/site/m//template.rc/1.9.51696

The practitioners, professionals and scholars of Islamic Microfinance are facing a challenge to draw a standard Islamic Microfinance Model's out line, which could encircle the needs and issues of the social and commercial both modes of poverty alleviation. A sustainable faith-based microfinance model is the real requirement of the industry, which has been expected from conventional models also and obviously not fulfilled according to the necessity.

In case of a faith based model the situation is very interesting because it is not totally depended on product development experts, who have demonstrated their expertise by developing poverty alleviation products in the recent past. Although it apparently seems a matter of conflict between conventional microfinance minded professionals and faith-based philosophy of poverty alleviation, but there is a commonality between three major religions of the world Islam, Christianity and Judaism, which can provide a great agreement upon faith-based microfinance. The three above-said religions condemn the interest in any case. If, for a moment, we understand and agree to the case, we easily will move a step forward. We kick a bundle of confusions when we try to get the same gains with the similar approach through a different and totally contrary source.

The point vital to comprehend is a difference between the principles of God and the strategies of a man. Even for a non believer, it is important to understand the universal will of prophets and the effort for social justice of a financial expert.
Not any religion forbids to earn a reasonable profit but obviously with an objective of benefit for all. Where the buyer and a seller both could get equal benefits. Regarding the benefits, it is so difficult for individuals but institutions provide this kind of justice at some extent conditioned with the availability of a true leadership.

The second core component of the faith-based Microfinance is the partnership on profit and loss sharing. Without believing in the principle of profit and loss sharing and without abiding by the law, it is impossible to attain high profits for each partner.
Third and the forth are the honesty and transparency principles. Any business cannot be a successful business for a long term without honoring these values.

The fifth principle is to avoid the acts. Shariah forbids from (Haram). Because if someone mixes Halal and Haram, it damages the real spirit of the code and ultimately spoils the whole system. To avoid the uncertainty, doubt and ambiguity and keeping the business clean and clear, is also the part of the model as the sixth component. Because it saves you from a lot of issues and conflicts. Keeping a will sacrifice or volunteerism as the seventh principle also plays a very productive role as a social responsibility. The eighth component is the cushion for the vulnerable in any cast is also important. It means there is not any space for the policy of zero percent tolerance, particularly in case of poor community and when you are claiming to help and support. Ninth, to please the God or the work for goodness and betterment of the mankind, humanity, peace and justice, is the nucleus of any faith-based business, so that it cannot be neglected in this case. The emphasis on women and children's betterment could be mention as tenth component jointly with the culture of equality from the staff to the clients and from the clients to the community and society is the a basic principle of the Islamic code. Although where as the policies are concerned, there are a lot of aspects common in conventional and faith-based models, but unfortunately, it never found in practice. No doubt there is a long term profitability with a sustained way, though, a strong belief system is inevitable to make this model successful. Otherwise right after 25 years there can be another economic blast to push the global economy in a more complicated crisis.

The structural format also needs a different architecture for faith based or a socially responsible microfinance. Without including Zakah, Sadaqat, Khairat (social funding), Qarz e Hasna ( With its true application and not as a few organizations are doing with document charges, time bound and forced donations etc.), it is hard to find the original silhouette and finally the partnership with the poor on profit and loss basis it is difficult to get the real original and long term profitability from the Model. It will certainly bridge the development and microfinance in very productive ties. Just imagine if billions of poor may able to just sustain their livelihoods and become a productive part of the global economic mainstream, how big the impact they could create.

Unfortunately, most of the sector players are trying to only provide a resolve, which could be felt as faith-based Microfinance Model. They are also trying use Shariah scholars to get solutions but not the true structure. It is most critical that the practitioners seek more liberty to cross the boundaries or to get a sincere guidance from original people only for taking advantages by setting and inducting their own policies even with the consent of stretchable Shariah scholars. Ultimately, it will hit the system and will create hidden issues, which can make the plane crash. While the faith-based systems have the power of a long-lasting sustainability. Faith never stops getting rewards and profits. It bounds to make justice for investor, worker and consumer all of them. Profit and loss sharing mode has a miraculous potential of high profits. Farz Foundation is passing through a novel experience of counting high profits in the field of livestock micro financing on a profit and loss sharing basis. However, socially responsible microfinance demands a right direction towards the goal through a pure professional and socially responsible approach. Faith based mean faith based. The amalgamation will destroy the all kinds of investments.

What I am seeing in near future, two kinds of faith-based microfinance models as pure Islamic model, like Farz Foundation and a mix model with a blend of conventional and Islamic model. Where the experts will try to present a resolve of Shariah Issues. While the Farz Foundation's model will cater not only the pure Islamic market but will achieve the genuine benefits of the model and set a milestone of success to provide the economic benefits for all above creed or color and irrespective of focusing on any religion.

10 core components of Islamic Microfinance Model requires a bit elaboration of the prohibitions also. When we enter in Poverty alleviation scene through any Islamic model, we can't exclude Zakah, Qarz e Hasna, and Sadqah Khairat. The microfinance professional who believe in microfinance as a social business will agree that the earning high profits by the partnership with the poor is better than earning from the poor. If we claim that we wish to make the poor productive but we did do not develop the mechanism and can not assure the productivity of the poor, how we can expect the required results even from the mechanism we implement. According to CGAP Microfinance Gateway, the study '' Non-Productivity of Microfinance Loans in Pakistan" by Mazhar M.(4 Sep 2010 microfinance gateway) "examines the productivity of microfinance loans in Pakistan. It compares the success of Islamic microfinance lending methodology in Pakistan to that of conventional lending.

The study is based on field work with foundations and bank clients, and data obtained from MFI and microfinance bank employees. It discusses:

• Principles and objectives of microfinance;
• Challenges faced by Pakistan's microfinance sector;
• Principles and methodologies of microcredit;
• Microfinance programs in Pakistan;
• Comparison of microfinance methodologies in Pakistan;
• Principles of Islamic microfinance;
• Difference between productive and non-productive loans;
• United Nations Millennium Development Goals.

The study illustrates the asset delivery methodology (Farz methodology) developed by the Farz Foundation. It compares data from conventional and Islamic MFIs in Pakistan on aspects such as staff behavior, facilities offered by MFIs, loan type preferred by clients, impact of loans on microenterprises and poverty, and productivity of loans. It identifies characteristics of a successful MFI and emphasizes the importance of trust-building with clients. The study states that MFIs in Pakistan should focus on attaining the Millennium Development Goals."
Why the organizations lost their trust among the borrowers? Because they remain unsuccessful to make them productive, while the didn't stop taking profits from them.

The most important impact of Islamic Mechanism of poverty alleviation is that it justifies the loses and profits in a very humanistic way to make an economic justice for every one either he or she is an investor or service provider or partner. The prohibition of usury, actually based on this above mentioned philosophy. Interest based financial tools can not focus on any one's productivity. They keep watching only one-sided profitability.

There is an issue of taking some profit on Qarz e Hasna prevails as a hidden syndrome can be observed in a few of Islamic Microfinance organizations.

But a number of Muftees are not ready to digest it as a Halal transaction according to the Qarz e Hasna Principals. The turning of Zakah into Qarz Hasna is already an interrogative sign for Ulema ( Muslim scholars). Here we can see, what Islam says about Zakah and Qarz e Hasna as followed.

Literally Zakah means
Blessing, purification, increase and goodness. It is so called as it blesses the wealth from which it is taken and protects it from misfortunes. Ibn Taimiah said, "The soul of one who gives Zakah is blessed and so is his wealth."
Technically Zakah is defined as

"A determined portion taken from wealth and allocated to those deserving it, by a Qur'anic injunction." Sometimes Zakah is referred to in the Holy Qur'an as Sadaqah (alms). The Qur'an says, "Of their goods take alms, that so thou mightest purify and sanctify them; and pray on their behalf, verily thy prayers are a source of security for them." (Surah Al-Taubah, No.9, Verse: 103). In an authentic hadith, the Prophet (peace be upon him) said to his Companion Mu`adh, when he was sent to Yemen as governor, "Tell them that Allah has made Zakah obligatory for them, that it should be collected from the rich and distributed among the poor."

It is clear that there is not any modification is allowed in the case of Islamic Principles. Only unclear matters can be brought under Ijtehad.
Ijtihad (Arabic: اجتهاد‎, ʼiǧtihād) is the making of a decision in Islamic law (sharia) by personal effort (jihad), independently of any school (madhhab) of jurisprudence (fiqh).[1] as opposed to taqlid, copying or obeying without question. It is mainly associated with the Shi'a Muslim Jafari school of jurisprudence. To be valid and accepted it has to be rooted in the Qur'an and the hadith and it is required that no established doctrine rules the case. A mujtahid is an Islamic scholar who is competent to interpret sharia by ijtehad( Wikipedia )

In Islamic law, the analysis of problems not covered precisely in the Qur'an, the Hadith, or the scholarly consensus called the ijma'. In the early Muslim scholarly community, every jurist had the right to exercise such original thinking, but the growth of legal schools prompted Sunnite Muslim authorities to declare that the principal legal issues had been settled by the 10th century. Shi'ite Muslims have always recognized ijtihad, and jurists considered learned enough for this kind of analysis have great authority. In the 20th century an attempt was made to restore ijtihad among Sunnites to help Islam adapt to the modern world.

The directions about Zakah and Qarz e Hasna are very clear and they don't need any more elaboration or explanation. So that to translate them according to any ones strategy is not only a sin but a social crime also, because instead of providing kind hearted donors an awareness, taking benefit of their unawareness can not be call a social work. In the long run it can be a media blast like the Norwegian Govet and professor Yunus story of misusing the aids funding. Qarz e Hasna also can not be used as a loan. Any kind of benefit against Qarz e Hasna is strictly prohibited. The lender of Qarz e Hasna can not bound the beneficiary to pay within a particular time period. It is upon the borrower's discretion that when he pay back the loan. May be till his or her economic sustainability.

There is still a dilemma of Islamic Banks that they are not willing to become a partner on profit and los basis instead of a lender.

In Pakistan Punjab province assembly has passed a bill against lending money on interest basis and a committee has been formed ( Shariah compliant loaning to the farmers ) to bridge the Islamic Banks and the formers. Ms. Humaira Awais the member board of advisers of Farz Foundation is the key person to make this milestone effort successful. So the basic philosophy is an Islamic microfinance Model is to earn money or to get big profits by making the poor partners not by pulling them under debt. So it must be keep in mind that EARNIN WITH POOR, NOT EARNING FROM POOR.

Lots of studies conducted by major stakeholders showed Islamic microfinance as a huge untapped market. The figures suggested to jump into any new pattern of microfinance. The pitfalls of conventional microfinance also pushed the serious players of the sector towards Shariah compliant model along with a new commence of SME. The incentive for MFIs to graduate into Microfinance Banks ( The department of Microfinance, State Bank of Pakistan is working smartly on this move ) and the decisions of G20 policy makers proved that the expectations from conventional microfinance could not bring-in the targeted results and devastated their confidence upon the sector. Finally, the removal of Professor Yunus confirmed that the high ups has taken the decision to minimize the conventional microfinance activity and to convert the investment potential to the SME and Islamic Microfinance model. High interest rates like Compartamos Banco exercises, over indebtedness, rapid growth, weak impact, suicides of clients in Andhra Parades, suicides of MFI staff in Asasa Pakistan, late night recoveries, and the role of ghost managements of MFIs jointly directed the stakeholders towards a paradigm shift.

CGAP's studies and initiatives turned the attention of the concerned people towards Islamic Microfinance and a suggestion to the financial and other pertinent institutions and organizations were made with a strategic manner to channel Shariah Compliant instrument. The "Islamic Microfinance Challenge" was one of the major revelations to kick off the plan. Suddenly, the whispers stated blow sounding, Why Islamic Microfinance is not scaling up?

It may be this whisper makes a man wonder for a moment but for us, it was quite an expected phenomena, Because we were observing all the bustle very minutely with a deep longing for the success of Islamic Microfinance. We were analyzing and also expressing mainly through "Microfinancefocusnews" that although the endeavors ( which are undoubtedly sincere and honest ) were being made to achieve the goals. However, these were still being steered by the conventional players, (without understanding the spirit of the faith based system) for the conventional players and to the conventional players. We examined at our humble level that the copy paste method is being implemented but innovation is being told. Irony is that, even the so called Islamic Players are also just trying to present the solution of the same conventional gear by changing their exterior only.

Islamic Microfinance Challenge could be a useful tool to collect the innovative Islamic microfinance ways but that again came up with a few products, which were also being practiced already by a few institutions and the innovation seemed a question.

An Islamic conference and advisory services champion of Pakistan satirically comment about the livestock product of Farz Foundation by saying, Mr. Shah you have nicely pulled in livestock into Islamic Microfinance. I astonished at his comment because the goat farming is a prophetic profession which is historically proven a beneficial business, particularly for the poor and The Holly Prophet Hazrat Mohammad (PBUH) Himself demonstrated it. A senior banker sitting in the State Bank of Pakistan's committee for Institutional Strengthen Fund suggested me to adopt any Musharkah product by borrowing from any Islamic bank instead of spending money on product development procedures. I find that gentleman not so false, because the same copy past methods have become the culture of the sector in Pakistan, and he thought the same about Farz Foundation, while I was trying to convey about the structural modifications by Farz Methodology to translate the true Islamic poverty alleviation attitude into microfinance. However, he was fixed at his position with a typical Pakistani bureaucratic manner. I mean to say that If we want to do something new with an old mindset, we could only make the things more confuse. The gentle man was true with his almost 20 years professional experience, while I were also not tending to change my own mind set.

PMN has formed an Islamic Microfinance wing within the PMN. PMN was supposed to achieve a certain target regarding a particular number of clients, which could not be attained unfortunately due to lot of reasons. Now a group consisted upon four five old conventional MFIs has been formed under the leadership of a very well known and well reputed Qarz e Hasna model charity based MFI, to manage the opportunity of Islamic Microfinance. It shows the members of PMN do not want to lose any chance to step in. Yet it leaves lot of questions behind it. An international Islamic Microfinance Network has been institutionalized in Pakistan and it can not be activated yet in a factual sense. There was a very interesting situation occurred, when during a meeting of the network, the meeting started by playing recitation of Holly Quran on a Laptop. May be apparently it doesn't seems awkward but it shows a conspicuous triviality regarding the faith based and cultural sensitivities. All these actions taken by the sector players are making loud the whisper in my ears, "why the Islamic Microfinance is not scaling up". The policy makers sitting in World Bank, CGAP, IMF and other stakeholders seriously would like to put a huge investment in the sector of Islamic Microfinance, and there is a big untapped market undoubtedly, but the fog is not ready to go off. I believe there is a chance to change the economic fate of Pakistan and the whole universe as well through the faith based model, though, the Clarity never comes by vague tools. The sector ( conventional microfinance ) could not demonstrate any reasonable impact during 25 years even after spending billions of dollars, how they will earn something real without having the original vision and mission. Pakistan needs true efforts for economic stability. A peace full economically sustained Pakistan is inevitable not only for us but also for the rest of the world. If we honestly review, among the all financial institutions, only the State Bank of Pakistan is credible and can play a pivotal role in the current scenario. If the honorable Governor of State Bank of Pakistan and his higher management appoint a visionary leadership for the task to create a new era of economic sustainability of the country through Islamic Microfinance, the objective can be made. I appreciate the collective efforts of Pakistan State Bank, Pakistan Poverty Alleviation Fund and Pakistan Microfinance Network but it these efforts can not become fruitful without a visionary, sincere, honest, unbiased and true leadership. It is impossible to get the expected targets without changing the whole previous scenario of the sector. The Microfinance Department and The Islamic Banking Department of State Bank of Pakistan are making their efforts with their limited influence, since it requires more resources to set a new framework for conventional and Islamic both microfinance sectors. MFIs and their networks also must be come under the regulations of State Bank of Pakistan at country level and this practice can be insured also at international level according. Otherwise poverty alleviation or economic sustainability is mere a dream and it will remain only a wishful thinking. Let's see what's happening once again.

I was going through the host of facts and figures before offering an analysis of socio-economic conditions in Bangladesh when I stumbled to an observation about poverty by an expat Ashley Wheaton. I decided to discard all the figures and instead quote the following observation by the above-named person in the Third World Review:

“Living in a country like Bangladesh constantly forces me to redraw the lines around my mental conception of poverty. A factory worker seems hard done by until you meet the construction worker. The construction worker earns your sympathy until you see the child collecting trash. The child is then outdone by a disabled beggar... When I was not immersed in this reality it was easy to treat them all as poor, to condemn all of the conditions they faced as equally bad. But in reality the poverty here is extremely complex and it isn't realistic or meaningful to treat each person's poverty as if it were the same.”
Lets see another expat’s observation,

“With an estimated 80% of the country surviving on less than $2 a day, Bangladesh is sharply divided between those struggling to survive and those living it up. Being rich, in Bangladesh typically means being insulated and detached from the tragedies that fall upon the country”.
These lines speak volumes about the economic conditions of Bangladesh. Grameen Foundation alone has invested about $ 1.4 billion to target poverty, along with 72 other institutions grappling with this mammoth crisis. To date, 80 percent of Bangladeshis earn dollar 2 or less in a day. Despite all the good intentions, it seems, the sector has paved its way to hell. To save the sector we need to have a clinical analysis of the efforts made so far in this direction.

The picture in the rest of the region that include India, Pakistan etc is not different from Bangladesh. With each passing day the set backs in the sector are being reported in the international media. The Indian sector is faced with a severe crisis of liquidity and looming default.  
It requires a lot of labour to put together an estimate of all the efforts and funds spent in the sector at large to lessen poverty. But the overall results, which are hardly enviable, demand a kind of thorough inquiry and lead us to the conclusion that all was not done properly over the last 25 years. Instead of helping the macro economy during its worst recession in history, the microfinance posed another problem and further complicated the situation.

One solution that is being offered to fight this menace is Islamic banking and finance whose mainstay is partnership instead of simple lending on the basis of interest. This option is even being seriously considered in the first or developed world where sub prime loan crisis has dismantled mammoth institutions which are being bailed out to cope with the liquidity crisis.
What so far bars the conventional or even Islamic banks from extending facility on partnership basis is the risk factor. What greater risk could be awaiting us than the conventional sector took through traditional methods.

Now the traditional microfinance organizations which somehow, are responsible for the debacle in countries like Pakistan and India, seem poised to practice Islamic method. Even CGAP initiative of Islamic Microfinance Challenge 2010 preferred older organizations in the name of innovations, with making public the reason why certain orgs qualified and why didn’t the others. This calls in questions the transparency of the methods used to make vital decisions.         

In Pakistan, there is a mysterious silence over a questionable performance of partner organizations, even by the likes of PPAF and PMN. There was a much talk about a Credit Bureau System but unfortunately there hardly seems any positive change. Many organizations have acquired funds for MIS, but are not implementing it for reasons best known to them. Now it is being alleged in the media that even Grameen misspent about $ 100 million. Similarly, a Pakistani organization Asasah has allegedly invested money acquired for poverty alleviation in a mobile oil business. PPAF though stopped them from resorting to this practice, but failed to take punitive steps to avoid such practices in the future.

Quite recently probably USAID approached National Accountability Bureau to investigate misuse of funds. It goes with saying that such practices has plunged the whole sector and without taking care of this sorry factor, we will be doomed even in the future.
It is very unfortunate that the tax money of the western tax payers is not being spent to realize the goals of Barak Obama and other countries of G-20. There were many instances in India where desperate borrowers committed suicide, while in Pakistan staff of microfinance sector was forced to hang themselves to death because of cruel and ruthless practices.
In line with the US policy, a careful selection of the new players and through monitoring the process of spending, still a lot could be achieved and, particularly in Pakistan, the wrecked agri sector could be turned into an opportunity, by avoiding the malpractices of the past.       

"With an estimated 80% of the country surviving on less than $2 a day, Bangladesh is sharply divided between those struggling to survive and those living it up. Being rich, in Bangladesh typically means being insulated and detached from the tragedies that fall upon the country.

Recent floods in Pakistan have further plunged the already reeling economy. The estimation of the total damage will take some time but the need to microfinance the victims are dire as the failure in this sector can create a famine in not too distant a future.

The government is already cash-strapped and avoided default the last year with the help of IMF. Another dilemma is the trust deficit due to which the enough aid is not coming and the donors are relying upon the non-governmental bodies.

The real challenge is that of rehabilitating the destroyed businesses of the flood victims as through this process we can even fight the hunger and disease by reestablishing their productivity.

Pakistan is said to be a predominantly an agricultural economy and it was this sector that has been severely damaged. Through microfinance and SMEs, this damage can effectively be dealt with in a matter next 5 to 10 years. Millions of acres of agri land has presently been under flood waters. And the only redeeming feature is the fertility that the flood will leave behind.

Here comes the role of the microfinance and SME but with a difference as the damaged has been caused by various internal and external causes. No doubt this is the time when the investments are taking a very interesting twist from the conventional to Islamic and from microfinance to small medium enterprise as well. Although the various conventional MFIs are shifting their mode of financing also, but they could not have positive results and the mission rift issue is another tragic story, told by these MFIs.

As I ever admitted that only the microfinance could reduce the miseries of the vulnerable. However, the sector has to come with a new enthusiasm and an innovative paradigm.

As the current scenario of Pakistan demands a well planned agriculture based microfinance or SME financing to ensure the rehabilitation of the flood victim rural community of Pakistan.

According to a study conducted by Farz Foundation, 50% population in rural areas of Pakistan earns livelihood from agriculture and 50% from other sources. The people involve in agribusinesses also do live stock as another source of income. While the other 50% population do the businesses like grocery shops, and transport, embroidery along with the labor on daily wages.

Instead of group methodology or village banking etc, the product of entrepreneur or SME village through the vehicle of Farz Methodology could have a far wider scope as the earlier methods could not reach out to a considerable number of people. That is the only way to have the long awaited trickle down effect so that it could lend economic stability at a macro level as well through “Twist Up Economy”(  Twist up theory emerges as a rejoinder to trickle down theory. It is a course with the notion that the sustained micro and small businesses assure the sustainability of the macro economics. It increases the numbers of consumers and their capability to buy. It also strengthens the markets and supports rich persons to expand their businesses. The Farz Methodology implements Twist Up Economy as its core strategic component).

One SME village would economically engage about 7000 persons from without the proposed village. This model could easily be replicated in a matter of 5 to 10 years, as pointed out earlier.
G 20’s decision to promote the SMEs could not have come at the more opportune moment. Even President Obama’s emphasis indicates the importance of this method. Now we need to handle it in such a way that the maximum out put could be had in as less a time as possible.

One SME village could consist of 100 to 500 families. Now in Pakistan there are thousands of villages whom we can adopt and initiate economic activity over there.

We do have the option of building new model villages where livestock, poultry forms, garments and other businesses could be established.  They can be given the market linkages for their products.

The element of risk is eliminated with ownership of the provider whose staff would oversee the whole activity in the proposed villages.

The government can also come forward as the partner through providing land and roads etc.

The ownership of business and homes etc will gradually be transferred through diminishing Mudarbah or Murabaha, further mitigating the element of risk.

We have entered into very interesting times and the response must be intelligent and effective. It further adds to the responsibility of the World Bank, CGAP IDB and other financial institutions.

As far Pakistan is concerned, we need to move quickly before the next harvesting season. Government alone can hardly deliver in this regard. The stability of Pakistan is very important for the rest of the region, because the destabilized Pakistan next to Afghanistan could be a nightmare for the rest of the world.                

If a product could not provide the solution to the purchaser against the price, how long it can stay in the market? No doubt the products of microfinance were need based, however they could not fulfill the actual objective of poverty alleviation as per the expectation. Although the cash based products fulfill the immediate need of the clients, but they cannot find the real solution to poverty. It goes against the vision and mission of the business. The productive loans proved unproductive at the end, that’s why crisis took place and the bubble market was created.

Microfinance was never a routine business, like an electronic or home appliance trade. It, of course, addressed a global curse of poverty. But Poverty is not a single dimensional phenomenon and irony was those trying to address it had no direct exposure to it. The people who made policies, most of them lacked a multi-dimensional approach to it. Off course, they conducted a lot of researches, invented various instruments and tools, however, all these efforts were intended to measure the poverty, without feeling it. There is a major difference between gauging and feeling it. There was another dilemma of the experts that they were studying the poor but were thinking that they are studying poverty.

It is strange to me, the people are still counting the heads of the vulnerable, and however they are not feeling the intensity of the starvation. I will recommend another rectal scale, which can measure the hunger and thirst, and behind. If we want to sell the solution of poverty, we have not only to know the poverty but have to feel the poverty, if we could. Otherwise we will again design the products similar to the ones that did not deliver.  The previous products worked like a painkiller but not like a wound heeler. We launched the gigantic discussions on the various topics like "interest rates" or "whether microfinance is a social business or commercial". However we never try to analyze the nature of poverty to design the products accordingly. Even we did not try to know that which products built the assets for the poor in the human history within different cultures and geographies.        

There is also a significant aspect that needs to be kept in mind that different people react differently in different times and spaces. Certainly different poor communities deal differently with their poverty in different situations.  The people of Afghanistan are very different from the poor in India and the poor in Africa must be dissimilar than those in Indonesia. Nature of poverty in a far deep rural area is certainly different than that of a cosmopolitan city. Sometimes poverty forces to kill others, and sometimes pushes to commit suicide.

This is the time to find out of the box solutions in the real sense and not only as a fashion. The people who have a true concern with microfinance are seriously worried for the survival of the sector. My humble suggestion for them is to initiate an original product development move. Those who are focusing on the need for innovative products, they should be careful about the selection of the product developers. Sometimes products look original apparently but actually are not. It is a very critical time for the Global Economy. The microfinance is going to play a very significant role to strengthen the capitalism and free market economy as well. The new structures and partnerships are going to emerge out of reinventing microfinance. So the components like financial and non financial services, Social Performance Management and Information Systems must be intelligent and according to the nature of poverty. Methodologies and strategies also need refinement, and we have to design the products which can provide the solution against the price, the poor borrowers are paying. The long term profitability of the sector certainly depends upon this fact. Because if a soft drink cannot fulfill the thirst and does not satisfy the customer, It means it will be no more in the market.