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Lending Methodology


Program Introduction:
Individual loans are marketed through awareness campaign in poor localities, market places and through previous borrowers. An introduction to the program is also given in nearby mosque or church when people have congregated there for prayers. This has not only tremendously saved the operational costs but has also opened the doors of the religious places for socio-economic development.  It also attaches a moral responsibility to return the loan on time.

Individual Selection:
The loan process starts with the submission of applications by persons interested in getting financial assistance. The Unit Manager (Loan Officer) then evaluates that whether the applicant deserves the loan or not i.e. lives below the poverty line, has a reliable social capital, is not involved in any illegal business and possesses entrepreneurial abilities.

Preparation of Business Plans:
Through the preparation of business plans the business idea of the intended loanee is evaluated to see if it is viable and whether it can generate income beyond the household expenses of the individual so that the loan could be repaid easily. The applicant's family is also interviewed to make sure that they know about the loan and support the business idea.


Credit Appraisal:
After initial appraisal by the Unit Manager, the application is forwarded to Branch Manager who appraises the technical section of the appraisal process. Then the case is referred to Loan Approval Committee. The committee comprising of Unit, Branch and Area Mangers which reviews the credit case. If the committee approves the case loan disbursement is done. The whole process takes almost 3 weeks.


Guarantors of Loans:
Every borrower also provides two individual guarantors who vouch for his/her credentials and accept the responsibility of monitoring the borrower and give assurance to persuade the borrower for timely payment of loan. One of the two guarantors may be from the same family.


Credit Disbursement/Capacity Building:
Disbursement takes place 2-3 times a month and 100-150 loans are disbursed at one event usually held at branch office/mosque or church. Every borrower has to be accompanied by one of the guarantors. Other people present at the time of disbursement include community members, Akhuwat staff, from the branch and Head office. Social Guidance events are also held simultaneously in which the capacity of loanees is built to carry on their work more efficiently and effectively. They are also apprised of social agenda that includes:

  • Emphasis on girl's education
  • Serving the community at large
  • Protection and improvement of environment
  • Importance of plantation
  • Observance of traffic rules and local laws
  • Following highest ethical values in business


Recovery/Follow up:
Once the loan has been disbursed, the Unit Manager monitors the client with regular visits to his residence and place of work. The loan repayment has to be submitted at the branch by the 7th of each month. If a payment is not in by the 10th, the Unit Manager visits the client to remind and if repayment is still not done then the guarantors are contacted and asked to make the payment.

Akhuwat’s Mutual Support Fund

Akhuwat’s Mutual Support Fund was created to support its clients and their families during extreme events like death or permanent disability. At the time of the loan disbursement, the borrower may pay 1% of the loan as insurance, although loans below 4, 000 rupees are exempted from this fee. While the 1% contribution amount is optional, most borrowers choose to give it and these contributions go into the Mutual Support Fund. In case of any borrower’s death or permanent disability, the loan is waived off and the family also receives an additional support package of 5, 000 rupees. The Mutual Support Fund is an effort to not burden the client or their families in case of an unfortunate event and instead provide them with the necessary support and assistance.

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