How to give loans interest-free to the poor and still be profitable ?
Al-Khair Cooperative Credit Society Ltd is an exemplary model
The Patna based Al-Khair Cooperative Credit Society Ltd is an exemplary model of providing interest-free finance to improve the lives of some of the most improvised members of society irrespective of their religion, caste, or creed, while at the same time being a sustainable business model.
The story of Al-Khair began in 1998 when some members of Patna's Muslim community formed a charitable trust to help the disadvantaged members of their society. But they soon realised the enormity of the task at hand, and after a great deal of deliberation, the founders decided to set up a micro-finance cooperative.
In 2002, with initial capital provided by some 20 odd persons, the Al-Khair Cooperative Credit Society was registered under the Multi-State Cooperative Societies Act of 2002 (Government of India). Its unique feature is that it is a completely interest-free micro-finance institution.
According to their website,alkhairsociety.com, their main objectives are:-
- To fight poverty through cooperation.
- To defeat the cruel system of interest-based privateer money-lending which is eroding the productive capacity of micro-entrepreneurs.
- To finance enterprises that create self-sustainable economic system and helps in reducing poverty.
- To provide all kinds of social benefits to its members in order to enhance the lives of their members.
Al-Khair has seen a tremendous response from all sections of society. What started a decade and a half ago with a small office in Patna and two employees, today has 100 employees in 13 branches spread across the states of Bihar, Jharkhand, Uttar Pradesh and Delhi.
In that time, it has disbursed interest-free loans in excess of Rs 50 crore to nearly 20,000 people, most of whom are micro-entrepreneurs on the very bottom of the economic pyramid.
What makes Al-Khair an attractive option to the poor, many of whom are not literate, is that unlike banks, Al-Khair was conceived to serve the poor and requires minimal paperwork to open an account.
More importantly, when people are unable to secure a bank loan, which is quite often in the case of underprivileged and low-income people, they are forced into the clutches of private money-lenders who charge cripplingly high-interest rates. Al-Khair has proven to be a low-risk alternative to the private money-lenders.
From its very inception, Al-Khair intended to be an inclusive organisation by offering its facilities to all sections of society irrespective of ones cast or creed. And so it has been a great boon for large sections of marginalised people, skilled and unskilled, from unorganized sectors such as small traders, roadside shopkeepers, marginal farmers, and women.
"Even a small amount of five to ten thousand is significant for people who don't have access to banks," said Nayiar Fatmi, managing director of Al-Khair Society.
"Interest-free loans may be a concept associated with Muslims as Islam prohibits interest as its terms are unjust, but it has a universal appeal and can benefit all, not just Muslims," said Shamim Rizvi, a retired bank officer closely associated with Al-Khair Society for nearly a decade.
Fatmi goes on to add: "nearly 50 percent of the beneficiaries of interest-free loans (given out by Al-Khair) are Hindus. Most of them use the money for earning livelihoods that empower them." That 50 percent, amounts to nearly 9,000 Hindus who were able to free themselves from exploitative moneylenders thanks to interest-free loans from Al-Khair.
One such person is Kamla, in her mid-40s, and a shop owner in the Mir Shikar Toli neighborhood. She says: "I used to sell potatoes and onions in a small roadside shop. I was often exploited by moneylenders for a small amount of Rs 2,000 to Rs 5,000 that I needed for my business. But a few years ago, I was surprised when someone informed me of interest-free loans from Al-Khair Society. It helped me expand my business from a vendor to a wholesale trader."
Kamla first took a loan of Rs 10,000 to run her shop. She followed this up with loans ranging between Rs 20,000 and Rs 50, 000. She is now doing financially well enough to fund the education of her two sons, with one getting admission in an engineering college and the other in a B.Ed. college.
Another example is of Sanjay Singh who used to sell garments on a bicycle. He now owns a small garment shop run by his wife, even as he continues to sell clothes on his bicycle. He favours Al-Khair over banks because he feels that banks have no time for vendors like him and they have no interest in giving out small loans. Furthermore, he adds: "banks charge interest and there is a lot of paperwork involved that only discourages and frustrates the poor."
The Al-Khair Cooperative Credit Society is managed by its board which consists of 21 members. The board is elected by the general body in an annual general meeting of the members. The tenure of the board is for five years and is headed by a chairperson.
The Board appoints the chief executive of the society. He is assisted in his work by other full-time staff such as branch managers, accountants, deposit collectors, etc.
To become a member of the society, one has to purchase shares in the Society. Each share is of Rs 10 and minimum ten shares are required to be purchased initially by a member. In addition, it is also mandatory to pay an admission fee of Rs.25 and a donation of Rs. 15.
To generate income, so as to pay the permanent staff members, office rent, and other expenditures, Al-Khair society collects a nominal service fee from those who take interest-free loans to pay salaries of its employees.
At the end of the 2016-17 financial year, Al-Khair had 16,875 members holding over 1.77 crores of shares, which when compared to 550 members and 2.13 lack shares of FY 2002-03, shows an increase of over 80 times the initial shareholding in a span of 14 years. In the same time period, Deposit Balance grew from 3.91 lakhs to 8.54 crores, Loan Amount grew from 4.26 lakhs to 11.60 crores.
In FY 2016-17, the number of people availing loans reached 3,037, an increase of nearly 30 times the initial year. The loan recovery stood at an impressive 95 percent of the loans disbursed. The profit was at 8.85 lakhs, and the society has been largely profitable over the past 7 years.
The Al-Khair Cooperative Credit Society of Patna is indeed an exemplary model of an entity that is both profitable, as well as contributing to social good, to the betterment of some of the most disadvantaged in society to become self-sufficient, proud, and contributive members of society.
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Russian President Putin says India, Russia collaboration not directed against anyone
New Delhi (PTI): The India-Russia collaboration is not directed against any country and it is solely aimed at safeguarding the national interests of the two sides, Russian President Vladimir Putin has said against the backdrop of Washington's aggressive approach towards New Delhi and Moscow.
In the context of India's energy ties with Russia, Putin said certain "actors" dislike New Delhi's growing role in international markets in view of its close relations with Moscow and these elements are aiming to constrain India's influence for political reasons by imposing "artificial obstacles".
In an interview to India Today news channel that was released on Thursday evening, the Russian president, referring to Western sanctions against Moscow, said his country's energy cooperation with New Delhi largely "remains unaffected".
Putin landed in New Delhi this evening on a two-day visit to hold summit talks with Prime Minister Narendra Modi.
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His trip comes at a time India-US relations are going through possibly the worst phase in the last two decades after Washington imposed a whopping 50 per cent tariff on Indian goods, including 25 per cent levies for New Delhi's procurement of Russian crude oil.
"Neither me nor Prime Minister Modi, despite certain external pressure we face, have never approached our collaboration to work against someone," the Russian president said in response to a question on Washington's aggressive approach.
"President Trump has his own agenda, his own goals, whereas we focus on ours -- not against anyone, but rather aimed at safeguarding our respective interests, India's and Russia's interests," he said.
Rejecting Washington's objection to India procuring crude oil from Russia, Putin said if the US has the right to buy Russian fuel, why "shouldn't India have the same privilege".
"As for India's purchase of energy resources from Russia, I would like to note and have already mentioned this once, the US itself still buys nuclear fuel from us for its own nuclear power plants," Putin said.
The Russian president also responded to a question on India lowering procurement of crude oil from Russia in view of Western sanctions on Moscow.
ALSO READ: Russian president Putin arrives in Delhi on 2-day visit
"Well, there is a certain decline in overall trade turnover during the first nine months of this year. This is just a minor adjustment. Overall, our trade turnover stands almost at the same level as before," he said.
"I can't give you exact monthly figures right now, but trade in petroleum products and crude oil, as well as the production of petroleum products for consumers of oil, Russian oil, is running smoothly in India," he said.
Putin also said that India cannot be treated the way it was several decades back.
"Prime Minister Modi is not someone who succumbs to pressure easily. The Indian people can certainly take pride in their leader. This is absolutely obvious," he said.
"His stance is unwavering and straightforward, without being confrontational. Our goal is not to provoke conflict; rather, we aim to protect our lawful rights. India does the same," he said.
On the Ukraine conflict, Putin said he believed the US is actively seeking a solution to this problem. "I am absolutely certain, with no doubt at all, he (Trump) sincerely aims for a peaceful resolution."
Putin said Trump genuinely wants to end the hostilities and prevent further loss of lives. "But there could also be political interests tied to ending the confrontation between Russia and Ukraine, or economic motives too."
On bilateral trade, Putin said over 90 per cent of "our transactions are already conducted in national currencies".
"While some complications arise due to the presence of numerous intermediaries, there are also solutions," he said.
The Russian president also complimented PM Modi's leadership.
"Our collaborative endeavours with Prime Minister Modi carry significant weight because they transcend our mutual ties," he said.
"Given its direct relevance to both nations, ensuring stability in key areas of engagement is crucial, as it helps secure the fulfilment of our objectives. Prime Minister Modi sets very challenging tasks for the country --and for himself in the first place, then for the administration, and eventually for the nation," he said.
The Russian president did not give a direct reply to a question on if India was looking at procuring additional batches of S-400 missile systems.
"India stands out as one of our reliable and privileged partners in this area. We are not merely selling something to India and India isn't merely buying something from us in the sphere of defence and security.
"It is a different level, a different quality of relations we have with India, and we value this. We see how India values this relationship too," he said.
Putin said Russia is not simply selling defence technology to India but it is sharing it with the country.
"It is a very rare thing to see in the sphere of military-technical cooperation. It speaks to the level of trust between the two countries and the level of trust between the two peoples.
"We have a broad portfolio indeed, including naval construction, rocket and missile engineering, and aircraft engineering," he added.
