The First Islamic Microfinance organization of

Paksitan

FARZ FOUNDATION
A brief introduction

The Farz Foundation is a social performance based poverty alleviation organization with a
unique and innovative Islamic Microfinance model and business design. It is the organization
which has been formed on a strong ideological foundation with the notion of “partnership with
the poor and profit and loss sharing” as its prior investment methodology. The asset based
Islamic Microfinance integrated approach is the basic tool of the foundation to get long term
sustainability, because the Farz Foundation has a strong belief that the sustainability of the
client is the sustainability of the organization. Farz foundation has also convicted to bring social
change with poverty alleviation. As for as marginalized poor and destitute are concerning, Farz
foundation provides them productive Zakah(donation) and Qarz e Hasna (interest free loan to
start their businesses after giving them the basic business training and providing them market
linkages to make them able to Zakah or payer but not zakah receiver.

Fundamentals

Poverty is a global challenge that the whole civilized world is addressing to alleviate it. The philosophy of
globalization and its spirit demands societies coordinate economy, social change and development as
one unit and not as divided in compartments to move ahead. The attitude of compartmentalizing
societal issues into cubicles cannot effectively contend with the philosophy of globalization.
Microfinance started with this very approach, but unfortunately methodologies, recourses, policies,
systems, and procedures to grasp a widespread made it scattered. The race of achieving high targets
detracted from most of the institutions working for microfinance, thus leaving behind the initial focus
which is the conviction of poverty alleviation by enhancing the productivity of poor people and building
their skills to earn money with honor and dignity. Microfinance also has a social performance
motivation. Farz Foundation has a strong notion that the ultimate financial sustainability cannot be
availed without social sustainability.

However, the dream of changing the lives of poor cannot become a reality without fulfilling the aim of
social performance. No doubt, microfinance is a tool which can change not only the individual lives of
the poor, but also can bring a social revolution in poor countries towards greater productivity. Social
performance based microfinance is not a commercial based industry. It has a belief on socio productive
profitability, which occurs as a result of prominent social change at a larger scale.

In this perspective Farz (duty) Foundation was established to accomplish the real goals and objectives of
the microfinance sector, which are currently neglected to an enormous extent. It is a social performance
based non-governmental organization with highly committed, self-motivated, innovative and
enthusiastic grassroots experts as its founding members. They are also very experienced microfinance
practitioners. Farz Foundation is registered under Societies Act 1860 by its legal status. Farz Foundation
is an organization in Pakistan aiming towards achieving millennium development goals with a holistic
approach. It is simultaneously addressing health, education, and the financial vulnerability of poor
populations to ease their burdens while systemically alleviating poverty.

The trade policy of Farz Foundation

Farz foundation is an asset based Islamic microfinance organization. It performs under and according to
the Law of Islam to support the poor by providing them the facilities of Zakah(Islamic charity fund), Qarz
e Hasna(Interest free Loan), Murabaha(Islamic Trading Transaction) and Ijara(Islamic Leasing ) as per
their financial condition and capacity to begin an income generating activity for sustaining their lives and
alleviating poverty. Farz Foundation also provides Health and Education assistance to the poor without
any cost and with the intention of Sadqae Jariah(Social Responsibility).

Farz foundation does only interest free ( Sood sey pak) businesses and there is not any money exchange
or business of currency involve with the customer. Farz foundation sells commodities having ownership
and possession with the condition of their physical existence and also expresses the rent or cost and
profit of the commodities at the time of agreement in the midst of mutual consent and transparency.
We do not purchase or sell Illegal, and un Islamic things or commodities. Cleanliness, Purity and
pollution free environment is our core value.

Although Farz Foundation is at its early stage, its vision, mission, and objectives are very clear and are
inevitability necessary for poverty alleviation, particularly in low-income countries like Pakistan. Farz
Foundation employs a multi-bottom line philosophy with an exceptionally creative approach, with each
serving as the four dynamic cornerstones of the institution.

Dynamics of Farz Foundation

Farz Foundation supports a social performance movement for socioeconomic prosperity and building a
new sphere of integration. From inception, it has focused on translating the social mission of
microfinance into practice.

Micro Social
Finance Performance

Social Integration
change

Target Market
Goal of Farz Foundation is a peaceful social and economic revolution to generate the opportunities of
business partnership among poor and microfinance facilitators through the four components of micro-
productivity, social performance, integration and social change. Its target markets are Home Based
Workers, particularly women that are low income entrepreneurs, People living with HIV, Sex Workers,
Heejras (Transgender Persons), Destitute and Vulnerable Beggars.

Farz Foundation has a faith that without empowering these population groups, the microfinance
industry cannot achieve its long terms goals. Farz Foundation has determined the huge untapped
market of home based low income workers to be a very fertile client base for microfinance in Pakistan,
which could also benefit from enhanced productivity through the power of microfinance focused on
social performance.
 Vision

To bring social change through poverty alleviation by improving productivity and capacity of clients and
staff

Mission
Empowering the poor through innovative products and diverse business opportunities, by integrating
social performance focused microfinance with collaborative community health and education
partnerships.

Objectives
To become a model organization in social performance focused Islamic microfinance.

To enhance the productivity of home based entrepreneurs disabled persons, HIV people, sex workers

and transgender persons.

Provide ZAQAH(Donation) and QARZ e HASNA( interest free loan) along with asset based financing to

the poor , while building their capacity for sustainable livelihoods. We will prepare them for a

business product within one year of program entry.

To graduate the home based entrepreneurs into micro-enterprise cooperatives.

To provide basic education, particularly business education to the poor.

To provide basic preventative health education and first aid facilities to the poor.

To offer environment awareness and education at the grassroots level and motivate environmental

clean-up and conservation efforts.

To provide a stimulating and professional work environment to the staff and build their capacity on

the continuous basis.

To support the entrepreneurial modernization and technology development of Pakistan.

To make the poor productive and ZAKAH payer but not ZAKAH receiver.
 Asset based products of Farz Foundation

Murabaha:
Trade limit: Pk Rs.4000/- to 6000/-

Period of Trade : 6 month

Frequency of repayment : weekly

Profit Margin : As per mutual agreement between two parties.

Basic expenditures i.e Health Takaful (Islamic insurance or Health care camping or awareness),
agreement process expenditures will be paid by Farz foundation, and only Life Takaful will be paid by the
client.

The Target segment of this product is the poor who have a little skill or will to do a tiny business, and
he is at the marginal line of Zakah receivers. How ever he or she refuses to accept any charity fund. This
product to make the poor productive and successful at generate its own income by the Islamic financing
from Farz foundation.

Ijarah
Trade limit: Pk Rs.40,000/- to 100,000/-

Period of Trade : 18 month

Frequency of repayment : As per cash flow

Profit Margin : As per mutual agreement between two parties.

Basic expenditures: i.e Health Takaful (Islamic insurance), agreement process expenditures will be paid
by Farz foundation, and only Life Takaful will be paid by the client.

Target market:
This product is particularly for the segment of existing entrepreneurs economically falling down due to
increasing inflation and food prices and also due to not having sufficient capital for businesses.
Thecategorical purpose of this product is To protect the MEs (Micro entrepreneurs) financially and make
them sustainable.

Target businesses:
Business examples: Embroidery, Handy craft, Dresses stitching and sewing, grocery shops,
transportation, Tire shop, Milk and food business, Beauty parlors, toy shops etc. Mechanics shop.

Productive Zakaah:
Farz Foundation discourages beggary and emphasizes on productivity of financing whether it comes as
trade finance, Qarz-e-hasna, or Zakah. Foundation’s top priority is to make the poor productive and to
turn him or her from Zakah receiver to Zakah payer. So we identify the deprived and make a bridge
between poor and the donor. More over we also provide capacity building opportunities to the poor to
make them financially independent and earning hand citizen. We believe if Zakah spends for any income
generating activity and becomes industrious it fulfills the aim of scarcity elimination.

Target market:
Destitute and vulnerable poor are the target market of zakah according to Islamic Law

Qarz-e-hasna:
Farz Foundation also provide Qarz-e-hasna to the poor who do not accept Zakah or cannot be
considered as Zakah receiver but still in need of a limited amount to fulfill their urgency. We provide
them free of interest micro financing on human grounds.

Legal Status

Farz Foundation is a non-governmental organization registered under the Act of 1860 and is authorized
to work on a ‘no profit no loss’ basis. At present Farz Foundation’s operations are exclusively
concentrated in urban, semi-urban and rural areas of Pakistan through partnership with CBOs. The head
office of Farz Foundation is located at Lahore Pakistan.
 Organizational Design
The partnership will look like the following diagram with communication openly flowing
between all partners involved. In this way, each organization can maximize their strengths by
focusing on what they know and do best, delivering education services, delivering health
services, and delivering financial services. When the full partnership is established, all directors
and senior staff managers of each organization will meet to discuss the work operations of each
organization for working with the targeted group. In this way, no efforts and program activities
are duplicated, with each organization in agreement on their role for service delivery.

Farz Foundation
Financial

Target Population Home-based

Workers

CBO Partner Health CBO Partner Education

Care
 Proposed Organizational Structure
of
Farz Foundation within next Five years

Advisory Board Executive Committee

Chief Executive Officer

Chief Marketing officer CFO COO Chief-HR Internal Auditor

GM-Finance & Account GM-HR Audit officer

GM Marketing GM-Operations

Audit officer
Accounts Manager Finance Manager Regional Social Manager

Audit officer
Account Officer Finance Officer Social Manager

HR-Manager
Manager Fund Raising Manager R&D Social Officer

Training Coordinator Admin

Advertising Officer R & D Officer
AREA STRUCTURE

BRANCH STRUCTURE

Peon + Security Guard

BRANCH STRUCTURE

Peon + Security Guard

 BRANCH STRUCTURE

BRANCH STRUCTURE and SERVICE PACKAGE

Service Package
BOARD OF GOVERNORS

Consultant Director Microfinance Seiner officer Lawyer Chief editor Grass root&

USA Action Aid Expert Global Fund Human Rights Techno Biz BusinessDeve

OBSERVERS

Microfinance HBME

Practitioner Trainer s