Sahulat Microfinance is an NGO working for promotion of interest-free Microfinance in India. It has around 30 cooperative institutions, working under its supervision. For its members, Sahulat had organsied a Two-Day Workshop on the topic “Financial Discipline” during 21-22 September 2019 at New Delhi. The seminar included three major sessions namely Financial Analysis, Rating Mechanism, Shariah Compliance and Portfolio Quality.
Sahulat has invited Mr. M H Khatkhatay and Mr. S M Wasiullah of TASIS as Resource Persons for Shariah Compliance. Mr. Wasiullah addressed the participants on the concept, need and application of scientific costing method to derive the segregated costs which are the base for collecting service charges. To the general misconception that service charges are same as interest being charged by the conventional microfinance institutions, he said, unlike interest, service charges include only the actual costs incurred on providing demand loans and not the profit or any benefit to the institution. Moreover, the services charges are linked to the nature of costs, incidence of its occurrence, amount and time period of the loan. As the objective of the institution is to provide the loan services to the borrowers, hence, as per Shariah or Shariah standards of AAOIFI, it is allowed to the institutions to collect such cost from the borrowers. The participants were advised to practically identify and segregate the costs on the basis of mock data provided in the workshop.
Similarly, Mr. Khatkhatay enlightened the participants on the need of experimenting with the Profit and Loss sharing basis of modes of interest-free microfinance. He said, in view of the limited options to have sources of funds to set-off the heavy cost of operations, it is advisable that the institution should provide profit sharing loans. However, the proportion of the fund to be exposed should be within the applicable statutory or operational guidelines provided for cooperatives. He also said, it is not compulsory that the institution should provide profit sharing loans for entire business of the borrower. It can invest in a part or in some selected products of the business. This will make the profit sharing loans operations more feasible. The resource persons have stressed the importance of documentation to ensure the Shariah compliance in the overall operations of the institutions.
Other resource persons included Mr. Arshad Ajmal (Vice President Sahulat), Mr. Fasih Ahmad (Manager, Operations and Research - Sahulat) and Mr. Fahad Ahmad (Assistant Manager, Delloitte).
The workshop concluded following the ‘Award Ceremony’ in which the 9 cooperative societies were nominated. On the basis of independent objective evaluation based on a rating scheme taking the World Council for Credit Unions (WOCCU) PEARLS monitoring system (financial ratios) as the foundation for judging the financial health of the affiliated society of Sahulat. The event was graced by Dr. Vijay Mahajan (Founder-BASIX), as chief guest. Among all the Sahulat affliates, Bait-un-Nasr (Mumbai) bagged the first prize whereas Al Khair (Ambajogai) and Sanghamam (Calicut) got the second and third respectively. During the event, Sahulat Interest Free Microfinance Sector Report 2019 was also released.