Financial Services in a Value Chain - · PDF filePirn Winding (Women/ Children) Local...
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Legend KPK/FATA_Boundary District Boundary Tehsil Boundary Union Council Boundary Islamabad Punjab Jammu & Kashmir Afghanistan Haji Zai Dheri Zardad Khan Hassan Zai Batgram Maira Umarzai Matta Mughal Khel Chindro Dag Dir Bara Kalam Wari Bahrain Kalkot Timergara Safi Kabal Landi Kotal Tangi Pindiali Charsadda Khar Barikot Barawal Jamrud Samar Bagh Babuzai Barang Upper Momand Mamund Matta Sebujni Halimzai Prang Ghar Yaka Ghund Nawagai Charbagh Khwazakhela Matta Khararai Salarzai Tehsil Ambar Utman Khel Utman Khel Bar Chamarkand Chitral Swat Kohistan Kohat Mansehra Karak Dera Ismail Khan Upper Dir Tank Buner Haripur South Waziristan Agency Swabi Lakki Marwat Kurram Agency Mardan Hangu North Waziristan Agency Khyber Agency Bannu Nowshera Shangla Abbottabad Fr Tank Fr D.i.khan Batagram Peshawar Fr Bannu Malakand P.a. Lower Dir Mohmand Agency Bajaur Agency Charsadda Orakzai Agency Fr Kohat Fr Peshawar Fr Lakki Marwat FATA Khyber Pakhtunkhwa (KPK) Shabqadar Traditionally two major products are weaved: 1. Woollen Shawl (for men and women of different types and designs) 2. Woollen Cloth (for waistcoats and traditional cap (called Pakol). Objectives of the Project: To provide Islamic (need based) financial services to the clients of Murguzar Valley District Swat through establishing operations by Asasah on sustainable basis. Three Main Islamic Financial Products offered by Assasah 1. Musharakah (Partnership for Working Capital) Nature Partnership on profit & Loss Sharing Investment by Asasah Rs. 50, 000 to 150,000/- Investment share (%) of Asasah Maximum 90% Share in profit of the business Asasah 40% Weaver 60% Share in loss As per investment by each party Partnership Period 1 month to 6 months 2. Murabaha (Asset Based Financing) Nature Sale of asset to client Investment by Asasah Rs. 15, 000 to 50,000/- Items Handloom, spindle, materials Asasah Profit Margin 8% to 20% on net profit Partnership Period 3 months to 6 months Recovery Frequency Monthly 3. Qarz-e-Hasna (for the very poor clients) Nature Sale of asset to client Investment by Asasah Rs. 3,000 to 10,000/- Items Business asset materials Asasah Profit Margin 0% Partnership Period 3 months to 6 months Recovery Frequency Monthly Outreach - Expected to reach 3,000+ clients at the end of 2014; with that number the branch of the financial service provider in Islampur will break even Country: Pakistan Financial Services in a Value Chain An Example of Islamic Lending Sub-Sector: Hand Weaving Industry, Islampur, District Swat Product/s 1. Context Overall Goal: Resilient and improved livelihood systems to cope with natural- or conflict-related vulnerabilities Predominantly rural, irrigated agriculture High degree of degradation of natural environment Very vulnerable to climate change hazards, serious impact on livelihoods Livelihood Project, Hindukush, Pakistan Implemented by HELVETAS Swiss Intercooperation Funded by Swiss Agency for Development and Corporation Impact Facilitate the entry of a new service provider into the market covering a function (financial services) which had not been there earlier Revival of a cottage industry Bonded labor freed, improved livelihoods Improved confidence and trust in the sector Culture of collaborate efforts among development stakeholders increased, weavers' associations strengthened by getting legal recognition Increased awareness on the role women of weavers' families through the work of Assasah Past Involvements of HSI in the Sector: HSI subsidized 50% of the cost of handlooms to 10 weavers Weavers increased their income by 50% Weavers could now act independently Tremendous demand for similar support from 1,000 + hand weavers of the area " HSI had to think of a sustainable market-based solution Outline of main Interventions Understanding of the Market by Asasah itself Development of need based financial products Certifying the products from AlHuda, a certifying body Testing the products Key features Financial products are designed according to the needs and culture of communities especially for poor weaving communities Financial service provider trains entrepreneurs on financial literacy and business development Financial service provider supports weavers in their businesses management (coaching) Micro finance organisation takes a share in the entrepreneurial risk: profit and losses are shared between client and micro finance provider 2. Constraints for woven products in market system 2.1 Output Markets National as well as export markets (Afghanistan) have been a traditional market for the woven products. This market is negatively impacted by the regional conflict. Transactions not done by cash but in kind Seasonal market demand Higher income market segments wants design changing with fashion; however, no support for weavers to adopt new design that is in demand by the market 2.2 Input supply Weavers get imported mixed woollen yarn of low quality No spinning units in the region 2.3 Capital Middlemen provide advance to weavers; weavers are essentially bonded to middlemen No alternative source of capital for weavers in the area Value Chain Map Local Shop (city and village) Supplier/Importer in Lahore, Rawalpindi and Peshawar Handloom Weaving Middlemen Beaming Warping (Women/ machine) Dyeing Tassel Making (Women/Children) Washing Ironing Packing Pirn Winding (Women/ Children) Local Wholesaler Exporter National Wholesaler Inland Spinning Mills/Import from China Local Retailer National Retailer Foreign Retailer Foreign Wholeseller International Consumer National Consumer Middlemen Banks Islampur Cottage Industry Association Islampur Weavers’ Association SMEDA Projects by NGOs Asasah (MFI) Supporters Actors Enables Conservative in terms of the social set up Mobility of women is restricted War against terrorism near the Afghan border, the military operations and insurgency affects these areas directly. Armed groups take refuge high level of criminal activities Interest-based lending not permitted in the area Actors in the local economy Small Medium Enterprise Development Authority is interested in promotion of the industry of Islampur Local Industry Association interested in providing support Mennonite Economic Development Associates (INGO) works for micro-entrepreneurs Asasah - micro finance service provider
Transcript of Financial Services in a Value Chain - · PDF filePirn Winding (Women/ Children) Local...
Legend
KPK/FATA_Boundary
District Boundary
Tehsil Boundary
Union Council Boundary
Islamabad
Punjab
Jammu & Kashmir
Afghanistan
Agra
Aba Zai
Panjpao
Dakki
Kangra
Gandira
Hisara Nehri
Dusara
Ziam
Koz Behram Dheri
Behlola
Dargai
Katuzai
HarichandShowdag
Haji Zai
Sher Pao
Tarnab
Maira Prang
Turang Zai
Mandani
Mirza Dher
Rashkai
Sarki Titara
Razar-ii
Khan Mahi
Dusara
Umar Zai
Sheikhu
Hissara Yasinzai
Dheri Zardad Khan
Hassan
Zai
Batgram
Daulatpura
Mohammad Nari
Nissatta
Maira Umarzai
Matta Mughal Khel Chindro Dag
Razar-iGhunda Karkana
Dir
Bara
Kalam
Wari
Bahrain
Kalkot
Timergara
Safi
Kabal
Landi Kotal
TangiPindiali
Charsadda
KharBarikot
Barawal
Jamrud
Samar Bagh
Babuzai
Barang
Upper Momand
Mamund
Matta Sebujni
Halimzai Prang Ghar
Yaka Ghund
Nawagai
Charbagh
Khwazakhela
Matta Kh
ararai
Salarzai Tehsil
Ambar Utman Khel
Utman KhelBar Chamarkand
Chitral
Swat Kohistan
Kohat
Mansehra
Karak
Dera Ismail Khan
Upper Dir
Tank
Buner
Haripur
South Waziristan Agency
Swabi
Lakki Marwat
Kurram Agency
Mardan
Hangu
North Waziristan Agency
Khyber Agency
Bannu
Nowshera
Shangla
Abbottabad
Fr Tank
Fr D.i.khan
Batagram
Peshawar
Fr Bannu
Malakand P.a.
Lower Dir
Mohmand Agency
Bajaur Agency
Charsadda
Orakzai Agency Fr Kohat
Fr Peshawar
Fr Lakki Marwat
FATA
Khyber Pakhtunkhwa (KPK)
Shabqadar
Traditionally two major products are weaved:1. Woollen Shawl (for men and women of different types and designs)2. Woollen Cloth (for waistcoats and traditional cap (called Pakol).
Objectives of the Project:To provide Islamic (need based) financial services to the clients of Murguzar Valley District Swat through establishing operations by Asasah on sustainable basis.
Three Main Islamic Financial Products offered by Assasah1. Musharakah (Partnership for Working Capital)
Nature
Partnership on profit & Loss Sharing
Investment by Asasah Rs. 50, 000 to 150,000/- Investment share (%) of Asasah Maximum 90% Share in profit of the business Asasah 40%
Weaver 60% Share in loss As per investment by each party Partnership Period 1 month to 6 months
2. Murabaha (Asset Based Financing)Nature Sale of asset to client
Investment by Asasah Rs. 15, 000 to 50,000/-
Items Handloom, spindle, materials
Asasah Profit Margin 8% to 20% on net profit
Partnership Period 3 months to 6 months
Recovery Frequency Monthly
3. Qarz-e-Hasna (for the very poor clients)
Nature Sale of asset to client
Investment by Asasah Rs. 3,000 to 10,000/-
Items Business asset materials
Asasah Profit Margin 0%
Partnership Period 3 months to 6 months
Recovery Frequency Monthly
Outreach- Expected to reach 3,000+ clients at the end of 2014; with that number the branch of the financial service provider in Islampur will break even
Country: Pakistan
Financial Services in a Value ChainAn Example of Islamic Lending
Sub-Sector: Hand Weaving Industry, Islampur, District Swat Product/s
1. ContextOverall Goal: Resilient and improved livelihood systems to cope with natural- or conflict-related vulnerabilities
Predominantly rural, irrigated agriculture High degree of degradation of natural environmentVery vulnerable to climate change hazards, serious impact on livelihoods
Livelihood Project, Hindukush, PakistanImplemented by HELVETAS Swiss Intercooperation
Funded by Swiss Agency for Development and Corporation
ImpactFacilitate the entry of a new service provider into the market covering a function (financial services) which had not been there earlier Revival of a cottage industry Bonded labor freed, improved livelihoodsImproved confidence and trust in the sector Culture of collaborate efforts among development stakeholders increased, weavers' associations strengthened by getting legal recognition Increased awareness on the role women of weavers' families through the work of Assasah
Past Involvements of HSI in the Sector:HSI subsidized 50% of the cost of handlooms to 10 weavers Weavers increased their income by 50%Weavers could now act independently Tremendous demand for similar support from 1,000 + hand weavers of the area " HSI had to think of a sustainable market-based solution
Outline of main Interventions Understanding of the Market by Asasah itselfDevelopment of need based financial productsCertifying the products from AlHuda, a certifying bodyTesting the products
Key features Financial products are designed according to the needs and culture of communities especially for poor weaving communitiesFinancial service provider trains entrepreneurs on financial literacy and business developmentFinancial service provider supports weavers in their businesses management (coaching)Micro finance organisation takes a share in the entrepreneurial risk: profit and losses are shared between client and micro finance provider
2. Constraints for woven products in market system2.1 Output Markets
National as well as export markets (Afghanistan) have been a traditional market for the woven products. This market is negatively impacted by the regional conflict. Transactions not done by cash but in kind Seasonal market demand Higher income market segments wants design changing with fashion; however, no support for weavers to adopt new design that is in demand by the market
2.2 Input supplyWeavers get imported mixed woollen yarn of low qualityNo spinning units in the region
2.3 Capital Middlemen provide advance to weavers; weavers are essentially bonded to middlemenNo alternative source of capital for weavers in the area
Value Chain Map
Local Shop (city and village)
Supplier/Importer in Lahore,
Rawalpindi and Peshawar
Handloom Weaving
Middlemen
BeamingWarping(Women/
machine)
DyeingTassel Making (Women/Children)
WashingIroningPacking
Pirn Winding(Women/Children)
Local Wholesaler
ExporterNational
Wholesaler
Inland Spinning Mills/Import from China
Local Retailer
National Retailer
Foreign Retailer
Foreign Wholeseller
International Consumer
National Consumer
Middlemen
Banks
Islampur Cottage Industry Association
Islampur Weavers’ Association
SMEDA
Projects by NGOs
Asasah (MFI)
Supporters Actors Enables
Conservative in terms of the social set up Mobility of women is restricted War against terrorism near the Afghan border, the military operations and insurgency affects these areas directly. Armed groups take refuge high level of criminal activitiesInterest-based lending not permitted in the area
Actors in the local economySmall Medium Enterprise Development Authority is interested in promotion of the industry of Islampur Local Industry Association interested in providing supportMennonite Economic Development Associates (INGO) works for micro-entrepreneurs Asasah - micro finance service provider
