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Zakat based Microfinance to alleviate poverty

by Minhaj

The primary purpose of Zakat is to transfer the prescribed portion of wealth from the hands of rich to the hands of poor. If people continue to pay Zakat regularly, one day the disparity between the people would disappear.

For wealth circulation, there are three ways to revolve money in the society:
-First one is that when a person trades by investing in the market, capital comes to the market which creates the opportunities of employment for the people, which fulfills the personal needs of the people.
-The second one is that, if he gives alms in the way of Allah ,with the intention to earn the profit in the life hereafter , in this way again capital will again evolve in the market.
-The third is that the Shariah withdraws capital in the form of Zakat by which the personal needs of the people should be met.

As Hadrat Umar (RA) announced the fair financial policy and he established a rich society whose members did not suffer from hunger or deprivation. He used to order his workers to pay zakat to the poor and needy in such a way what they become rich[ Al-Amwal, p. 565]

Practically, Hadrat Umar (RA) gave three camels to the needy that complained for poverty and advised his officers to pay sadaqah to the deserving people once. Even he announced: “I will distribute sadaqa again and again , till the time when each of them has one hundred camels.” [ Al-Amwal, p.566]

Yahya bin Saeed(RA) said,” When Umar bin Abdul Aziz sent me as a government officer to Africa to collect zakat, I collected Zakat and searched for the poor to pay Zakat, I couldn’t find anyone. Because Umar Bin Abdul Aziz had satisfied all people financially. Then I bought slaves and freed them up all with Zakat.”[Biography of Umar Bin Abdul Aziz by Ibn Abd al-Hakam,p.59]

Al-Mawakhat Islamic Microfinance (AMIM) working process
Al-Mawakhat Islamic Microfinance (AMIM) is a product-based model to serve the low-income groups as well as to people who have little or no access to typical banking services; the concept of which originates from the blessed and historic Mawakhat-e-Madinah. AMIM aims to follow footprints of brotherhood and unity, as established by the Holy Prophet (peace be upon him) in Riyasat-e-Madinah; principles which were established on the basis of mutual economic and psychological support. The ambition of AMIM is to enable these poorer segments of society, empower them through sustainable financial means so that they come out of poverty. 
Working Process:

  • The client requests AMIM to purchase an Asset on installments. The client takes the application form and fills it and then submits it to the office of AMIM. Here, there is no financial collateral taken from the client except two personal guarantors.
  • Once the client submits the form to the AMIM, the AMIM team evaluates the application and asks questions from the applicants about the purpose and need. Then, AMIM evaluates the received applications internally to review the risk of clients.
  • After the final selection of applications, AMIM calls the selected clients to the office and re-affirm their decision.
  • Al- Mawakhat members go to the market by themselves and purchase the agreed product and pay for the purchase of the asset bought. At this stage, the owner of the asset is AMIM, not the client.
  • After the complete purchase and registration of the asset, the final agreement is done between AMIM and the client, after which the client takes possession of the asset.
  • The client pays the monthly instalments as per agreed in time of contract.
  • After the maturity date, the final ownership is transferred to the client and the client becomes the final owner of the asset.

— Based on Book : Zakat & Microfinance – A Blended model of Islamic Finance to Alleviate Poverty by Dr. Hussain Mohiuddin Qadri

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