LOAN PROCESS OF AKHUWAT ISLAMIC MICRO FINANCE (AIM)
1) Eligibility Criteria for Loans
Following general points are compulsory for eligibility of loan:
Applicant should have valid CNIC.
Having the ability to run / initiate business activity having age between 18-62 years.
Applicant should be economically active.
Applicant should not be convicted of any criminal offence in lieu of which proceeding are in progress.
Applicant should have good social and moral character in his community.
Applicant should have capacity to provide two guarantors other than family members.
Applicant should be resident of operational area of branch office which might be around 2-2.5 KM radius.
Note: – Project specific eligibility criteria may be varied.
2) Lending MethodolsZogy
AIM’s lending policy involves disbursement of interest free or Qard-e-Hasan loans through
However, decision of lending methodology depends upon the loan product as well as project specific requirements.
3) Group Lending
Group Lending includes disbursement of Qard-e-Hasan loans among groups of men and women who are looking forward to enhance their family income but are unable to do so due to scarce resources. In group lending methodology groups of 3 to 6 members will be formed, all group members would guarantee loans and credentials of each other. Group Lending enables group members to resolve their social and economic problems through mutual understanding and decision making.
Before applying for a loan, applicant is supposed to constitute a group of 3 to 6 members residing nearby to each other and members shouldn’t be close relatives to each other.
4) Individual Lending
Individual Lending includes disbursement of Qard-e-Hasan loans among individuals. Loans are offered to certain individuals that fulfill the eligibility criteria of scheme in order to facilitate them to meet their needs through interest free loans. In case of individual lending two guarantors will be provided by applicant for availing interest free loan.
5) Application Submission
The loan process will start with the submission of application. The application fee may vary from scheme to scheme. The unit manager will then evaluate the application through eligibility criteria. Thus, these loans will be given out on social collateral. The following steps will be followed in application submission.
Applicant will visit nearest AIM branch along with his/her relevant documents (mentioned below) for submission of loan application.
Unit manager will discuss with the applicant to check whether applicant falls under eligibility criteria of the scheme.
Potential candidate will submit loan application on prescribed form. Loan application will be provided and filled by AIM staff in branch office.
Unit manager will check documents and application will be processed after completion of required documents.
The following are the details of collaterals that may be applied for loans:
Any additional collateral in special case.
Following documents shall be submitted along with loan application
Copies of CNIC
For verification in Management Information System (MIS)
Bank Requirement for collecting money
Latest Utility Bills
For address verification
To assess Payment Behavior
Copy of Nikahnama
(may be waived if not available after verification by other means)
For identification in case CNIC of wife is not with the name of husband
Note: – Additional documents may be demanded according to scheme’s requirements.
6) Social Appraisal
Social appraisal aims to verify character and credibility of the applicant by visiting his residential place. After receiving the Application, unit manager performs social appraisal through following methods.
Information from existing borrowers
From the living style of the applicant
Views of neighbors about the applicant
Personal interview/ family interview
7) Business Appraisal
Through the scrutiny of business plans the business idea of the intended borrower will be evaluated to see if it is viable and whether it can generate income beyond the household expenses sufficient for loan repayment. Business requirement is evaluated in business appraisal. This will also help fine-tune the applicant’s business idea itself. The applicant’s family will also be interviewed to make sure that they know about the loan and support the business idea.
8) Second Appraisal:
After initial appraisal by the unit manager, the application will be forwarded to Branch Manager who will appraise the social and business appraisal process once again and conduct a meeting with borrower and their guarantors.
9) Guarantors of Loans
In cases of individual lending every applicant will provide two 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. Whereas in group lending the members of the group would guarantee each other and thus formally constitute a group.
10) Loan Approval Committee (LAC)
Every branch will have its own Loan Approval Committee (LAC). The committee is headed by the Area Manager, and other members of the committee are unit managers and Branch Manager. All credit cases will be reviewed by the committee. If the committee approves the case, loan is finalized and is ready to be disbursed. The whole process takes almost 3 to 4 weeks.
11) Fund Request & to head office
Once loans are approved by Loan Approval Committee (LAC), required amount of funds is requested to head office through Regional Manager. Head office makes necessary arrangements for transfer of funds into their respective bank account for disbursement. Area accountant has been intimated once funds are transferred to their bank account. Area accountant prepares the cheques for disbursement for approved applicants.
12) Loan Disbursement
Disbursement will take place once in a month and loans would be disbursed through event usually held at mosque or church. In case of individual lending, applicant has to be accompanied by at least one of the guarantors. In case of group lending all group members should be present at the time to disbursement.
Following are some points relevant to the loan disbursement event:
Every individual will be present at time of the disbursement. In case any borrower is absent, loan will not be disbursed and may be cancelled.
All borrowers will bring their original CNIC in the disbursement event.
Borrowers would receive cheques of the loan amount sanctioned to them.
Acknowledgement of cheques would be taken from each borrower.
The disbursement event would be monitored by Area Manager.
13) Social Guidance
Social Guidance is also briefed simultaneously at the disbursement events in which the capacity of borrowers will be built to carry on their work more efficiently and effectively particularly keeping in view the Islamic or ethical principles.
Social agenda items include:
Emphasis on girls’ 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
14) 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 made at the branch till 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 made then the guarantors are contacted and asked to make the payment.
15) Summary of Loan process
Following table provides brief summary of loan process and steps with precise objectives and their place of occurrence.