Rekindling brotherhood, one loan at a time

The sacks overflow out of his tiny house onto the narrow street. On one side a neighbor sits on his steps drinking tea, barely glancing at the pile, while on the other side a young worker industriously sorts through it. It seems business is booming for Muhammad Ashraf, a self-employed entrepreneur from Dharampura, Lahore. Ashraf, 50, is in the recycling business. He buys polypropylene bags from various factories in Lahore, cleans them, sews them together and then sells them to other buyers. Working out of his home with only his wife as a partner and an occasional young worker, he starts early in the morning and goes till late at night. His goal each day is to get a minimum of fifty bags prepped up for selling. All this, he says, would never have been possible without the help of Akhuwat, a Lahore-based Microfinance Institute (MFI) that gave him his first loan.
Ashraf guides us inside the house, seating us comfortably on a large sofa and takes a seat opposite. He tells his tale energetically, humor often vying with grief. The hands are never still—he accentuates and trumpets the highs and lows of his life with expressive gestures. Confidence is worn casually; here is a man who could turn straw into gold if given the right opportunities. Ashraf was once a successful businessman in partnership with distant family members before disputes over property and ownership led him into a financial crisis. He took his former partners to court, hoping that the law might prevail on his side. But when the final verdict came he found he had no property, no business and no livelihood whatsoever and a substantial debt to repay.
A prosperous business combined with a comfortable life had produced in him an aversion to menial labor. Starting over from scratch and working all day for a minimum profit was so unpleasant a thought that Ashraf refused to even consider it initially. His pride prevented him from asking for further help from anyone and he refused to take a loan from the bank on interest. But his children were young and they needed a stable home and a promising future and time was surely not going to slow down. It was in those crucial times when a friend told him about Akhuwat, an NGO that might aid him in setting up a business by giving him an interest-free loan. Putting aside his hesitations, Ashraf immediately applied, grateful that he would not have to seek help from a relative, and within a month he was approved for a loan of Rs 12,000.
This time he took no partner and hired no workers. His previous business had been similar in nature, involving recycling of jute sacks. Practical by nature, he drew upon the lessons learned and the experiences garnered from his previous business. Originally, these sacks contained salt dye or soda, both of which are used in dying cloth and can carry up to 50kg in weight. With help from his previous contacts Ashraf is able to collect these sacks from various factory outlets in Lahore.
He buys them for Rs 3 per bag and brings them home. Starting early in the morning, after sending all his four kids to school, he and his wife work together. They open the stitches, careful not to let the sack rip, and when enough have been gathered, one of them sits and stitches together six bags to make one large bag.
Working side by side they are able to make fifty reconstructed bags which Ashraf then sells to buyers in the large Shahalmi market near his home. After he paid off his first loan, Ashraf took another loan for Rs 20,000. His business is now stable; not only does he pay installments to Akhuwat each month, he is also paying off his previous debt of which only Rs 30,000 remains. Along with that, he helps out his group members who took loans along with him from Akhuwat and are jointly liable for each other. When a group member cannot pay in time, Ashraf steps in and contributes the amount and is later repaid. Another sign of prosperity is that all his children attend private tuition in the afternoon. This second loan is hopefully his last loan from Akhuwat. In a year or so, Ashraf plans to expand his business rapidly and he estimates that his future earnings will significantly increase. But more remarkable than Ashraf’s rapid is that in spite of his own tight circumstances, Ashraf has been a regular donor of Akhuwat since the day he took his first loan from them. Despite the fact that he is paying off his own debts, he makes sure that he gives a little extra every month so that others may benefit from his wealth. In fact Akhuwat aims to turn its borrowers into donors, so that the cycle of generosity never ends.
His pride in the future is matched only by his praise for Akhuwat. The idea of the ‘have nots’ being helped by the ‘haves’ of a society to stand on their own two feet seems too simple, too perfect to be true. Yet Akhuwat, since its inception in 2001, has granted loans to more than 170,000 families, disbursing over Rs 2 billion in loans. Currently operating out of 153 branches across Pakistan, it is the only MFI that charges 0 percent interest on its loan. Akhuwat has come a long way since it gave its first loan to a widow too proud to accept charity, and watched as she began her life anew. Her success, as they say, gave wings to the idea that the poor were indeed bankable. Indeed countless testimonial since then have only strengthened Akhuwat’s core value— that brotherhood and solidarity are the primary means of reducing poverty and in building a just society. With a recovery rate of 99.83 percent it’s not that hard to believe that an MFI relying solely on donor support, and charging 0% interest can and does thrive.