Micro-Finance Program

Micro Financing | Skill's Enhancement | Achievements | Implementation Mechanism

Interest-Free Micro-Financing:

This Program has adopted two-pronged approach for field interventions; provision of financial resources in the form of grants and loans, and enhancement of internal and external capacities for enterprise/business promotion.

Based on the realities of local culture and value system, IRDS has introduced a new concept ( IRDS Model of Micro financing), which is interest-free and based on profit and loss sharing. The system is implemented through the formation of local Credit Management Committees (CMCs). The basic philosophy behind the proposed concept is to empower the poorest families to fulfill their basic needs in a more sustainable and respectable manner. The project is designed to promote self-help and self-reliance. This program establishes a sustainable mechanism (revolving fund) at two levels – the IRDS and the CMC level. The Program has two phases – Phase-1 (provision of grants), which is presently being implemented in Peshawar and Malakand, and Phase-2, which deals with the provision of interest-free loans.

 

Phase-1  (Grants)…

First phase of the Project deals with the disbursement of grants of less than Rs. 5,000. These grants are provided in-kind through Credit Management Committees (CMCs) for the establishment of micro-businesses. Phase-1 is the preparatory phase for Phase-2; it will enable the Project to select Entrepreneurs who are reliable and have the potential to manage loan in Phase-2 of the Project. Phase-1 is assessed by the following indicators:

•  Number of businesses that survived after six months time.

•  Average increase in the volume of business for the last six months

•  Rate of profit – increasing or declining.

•  Ability of the Entrepreneur to report and solve the problems encountered.

 

Phase-2 (Loan)…

Loan is provided free of interest on the basis of profit and loss share to only those Entrepreneurs who have been successful in profitable utilization of the grant support in phase-1. Loan is provided with the following ratio of contribution:

•  Loan provided by IRDS = 80%

•  Cash contribution by the CMC = 10%

•  Contribution by the Entrepreneur (Cash or in-kind) = 10%

 

Loan recovery…

Under the proposed concept loan is extended for a period ranging from six months to one year depending on the nature of business and the amount of loan; recovery is made by CMCs in the form of easy installments, which are fixed through mutual agreement.

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