INTERNSHIP REPORT ON

Formers Friend Organization

SUBMITTED TO:
SIR.ABID RASHID
PREPARED BY:
NAME:

MUHAMMAD HAMID RASHID

CLASS:

M.COM

REGISTRATION NO.

2014-AG-337

SESSION:

2014-2016

Institute of Business Management Science

UNIVERSITY OF AGRICULTURE, FAISALABAD
1

Dedication

I dedicated this research project to Almighty Allah.

This internship report is dedicated my Parents and Teacher because whatever I am

its due to my Parents and my Teachers make me able to face different challenges
and achieve those challenges & all those who have a soft corner for me in their
hearts.

ACKNOWLEDGMENT

With the name of Allah most Merciful and Beneficent

I am very thankful to Almighty Allah who gave us the opportunities, courage and
insight to explore more knowledge to complete this research project. I am also
thankful to my parents whose prayers always supported me in very task.
I am glad to express my gratitude to my supervisor Sir Ehtisham Sahib and also a
big thank to the University of Agriculture Faisalabad, which provides me the
opportunities to improve my skills.

LIST OF CONTENTS
INTRODUCTION

MICRO FINANCE INSTITUTIONS

FORMERS FRIENDS ORGANIZATION

10

VISION STATEMENT

11

MISSION STATEMENT

11

ORGANIZATION

12

BOD PROFILES

13

STRUCTURE OF THE ORGANIZATION

15

HIERARCHY

16

FRIENDS & PARTNERS PROGRAMS

17

PRODUCTS AND SERVICES

27

SOCIAL MOBILIZATION PROGRAM

32

GENDER EQUITY PROGRAM

37

COVERAGE

41

PROJECT OFFICES

42

VILLAGE BANK NETWORK

43

FINANCIAL PERFORMANCE

44

OTHERS/MISC. PERFORMANCE

48

CONCLUSION

49

RECOMMENDATIONS

50
5

INTRODUCTION
Microfinance is a form of financial services for entrepreneurs and small businesses lacking
access to banking and related services. The two main mechanisms for the delivery of financial
services to such clients are: (1) relationship-based banking for individual entrepreneurs and small
businesses; and (2) group-based models, where several entrepreneurs come together to apply for
loans and other services as a group.
In some regions, for example Southern Africa, microfinance is used to describe the supply of
financial services to low-income employees, which is closer to the retail finance model prevalent
in mainstream banking.
For some, microfinance is a movement whose object is "a world in which as many poor and
near-poor households as possible have permanent access to an appropriate range of high quality
financial services, including not just credit but also savings, insurance, and fund transfers."[1]
Many of those who promote microfinance generally believe that such access will help poor
people out of poverty. For others, microfinance is a way to promote economic development,
employment and growth through the support of micro-entrepreneurs and small businesses.
Microfinance is a broad category of services, which includes microcredit. Microcredit is
provision of credit services to poor clients. Microcredit is one of the aspects of microfinance and
the two are often confused. Critics may attack microcredit while referring to it indiscriminately
as either 'microcredit' or 'microfinance'. Due to the broad range of microfinance services, it is
difficult to assess impact, and very few studies have tried to assess its full impact. [2] Proponents
often claim that microfinance lifts people out of poverty, but the evidence is mixed. What it does
do, however, is to enhance financial inclusion.

MICRO FINANCE INSTITUTIONS

Those institutions which have microfinance as their main operation are known as micro finance
institutions. A number of organizations with varied size and legal forms offer microfinance
service. These institutions lend through the concept of Joint Liability Group (JLG). A JLG is an
informal group comprising of 5 to 10 individual members who come together for the purpose of
availing bank loans either individually or through the group mechanism against a mutual
guarantee. The reason for existence of separate institutions i.e. MFIs for offering microfinance
are as follows:

High transaction cost generally micro credits fall below the break-even point of
providing loans by banks

Absence of collaterals the poor usually are not in a state to offer collaterals to secure the
credit

Loans are generally taken for very short duration periods

Higher frequency of repayment of installments and higher rate of Default

Non-Banking Financial Companies (NBFCs), Co-operative societies, Section-25 companies,

Societies and Trusts, all such institutions operating in microfinance sector constitute MFIs and
together they account for about 42 percent of the microfinance sector in terms of loan portfolio.
The MFI channel is dominated by NBFCs which cover more than 80 percent of the total loan
portfolio through the MFI channel.
Sl. No. Type of MFI

Number

Legal Registration

400-500

Society Registration Act, 1860

Not-for Profit MFIs

1

NGOs

Indian Trust Act, 1882

2

Non-Profit companies

20

Section-25 of Indian Companies Act, 1956

7

Mutual Benefit MFIs

3

Mutual

benefit

MFIs

200-250

Mutually Aided Co-operative societies, Act

Mutually Aided Cooperative

enacted by State Governments

Societies (MACS)
For Profit MFIs
4

Non-Banking

Financial45

Indian companies Act, 1956

Companies (NBFCs)

Reserve Bank of PakistanAct, 1934

Source: NABARD ISSUES RELATED TO MICROFINANCE

FORMERS FRIENDS ORGANIZATION:

Farmers Friend Organization (FFO) is a development non-governmental organization that was
established by a group of young committed people in 2003. Its initiation was a response to the
increasing poverty and injustice prevailing in the society by its founder members.
The primary purpose and the basic cross-cutting theme of the organization is Community
Development through an integrated approach. Following the same, it is working to facilitate the
community development initiatives at grass roots level in rural as well as low profile urban areas
of Sheikhupura, Nankana and Muzaffargarh Districts of Pakistan.

VISION STATEMENT
Well organized and progressive communities making effective use of their potential and
resources for attaining sustainable social, economic and political development.

MISSION STATEMENT :

To facilitate the community development through social organization and capacity building and
providing the communities social and advocacy support to achieve sustainable socioeconomic
and political development.

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ORGANIZATION
Farmers Friend Organization (FFO) is a development non-governmental organization that was
established by a group of young committed people in 2003. Its initiation was a response to the
increasing poverty and injustice prevailing in the society by its founder members. The primary
purpose and the basic cross-cutting theme of the organization is Community Development
through an integrated approach. Following the same, it is working to facilitate the community
development initiatives at grass roots level in rural as well as low profile urban areas of
Sheikhupura, Nankana and Muzaffargarh Districts of Pakistan. The organization is registered
under the Societies Registration Act XXI of 1860.

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BOD PROFILES
MR. ARSHAD MAHMOOD CHAUDHARY
(CHAIRPERSON)
{Will be updated soon}
MR. MUHAMMAD IRFAN KHOKHAR
(MEMBER/CEO/SECRETARY)
Mr. Irfan Khokhar did his Masters in English Literature from University of the Punjab, followed
by an MBA in Banking and Finance from PIMSAT. He started his professional career from
RCDS, where he contributed significantly towards developing systems of planning, operations
and management. He laid the foundation of Farmers Friend Organization at Sheikhupura in 2003
and made it a successful organization through his charismatic leadership. Currently he holds the
position of Chief Executive Officer at Farmers Friend Organization. Through his prior
experience in microfinance and leadership qualities, Mr. Khokhar has succeeded in turning FFO
into a rapidly growing organization. Mr. Khokhar possesses more than ten years cumulative
experience in microfinance sector. His areas of expertise include business planning and financial
modeling, operations planning management, financial management and risk management. He is a
renowned trainer. Mr. Khokhar has delivered a number of trainings on various topics e.g. Risk
Management, Leadership etc.
MR. QAZI SHOAIB ALAM FAROOQI
(MEMBER)
Qazzi Shoaib Alam Farooqi is the CEO of Jinnah Welfare Society (JWS) since its inception in
1992. He has over seventeen years of experience in social sector development, twelve of which
have been with JWS as Executive Director. Mr. Shoaib has been an active member of the civil
society of Gujranwala and has worked for many years to bring together the NGOs of district
Gujranwala on one platform. His efforts resulted in the establishment of Gujranwala NGOs
Forum (GNF) in 2008, which Mr. Shoaib has been heading this forum since its inception. With
over 17 years of professional experience, he specializes in community development,
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microfinance and enterprise development, project management, institutional strengthening and

social mobilization.

MR. MUHAMMAD AWAIS REHMAT

(MEMBER)
{Will be updated soon}
MR. MUHAMMAD IFTIKHAR
(MEMBER)
{Will be updated soon}
MS. SALMA REHMAT
(MEMBER)
{Will be updated soon}
MR. NAEEM MAHMOOD
(MEMBER)

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STRUCTURE OF THE ORGANIZATION

The organization has the following Governing and Management authorities:
(I) GENERAL BODY
Consisting of ten members, the GB is primarily responsible to give overall policy guidelines and
directions for efficient functioning of the organization.
(II) BOARD OF DIRECTORS
The BOD consists of seven members and is generally responsible to generally peruse and carry
out the objectives of the organization through having a direct control over the major management
decisions of the organization. The BOD is liable to determine the direction and scope of the
activities of the organization.
(III) MANAGEMENT
Headed by a Chief Executive, the management is responsible to carry out the day to day
operations of the organization. The management team has been assigned the responsibilities and
authorities for the proper administration of the funds, affairs and resources of the organization.

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HIERARCHY

15

FRIENDS & PARTNERS

FFO understands that strong partners will help in meeting the organizations goals. We have
partnerships with public and private organizations. The partners belief in our strength lends us
the courage to work with greater zeal. Following is the list and brief description of our friends &
partners:

PAKISTAN POVERTY ALLEVIATION FUND:

As one of the largest sources of pro-poor spending in the country, the Pakistan Poverty
Alleviation Fund (PPAF) is the lead agency for poverty reduction in Pakistan. It embodies the
spirit of public-private partnership to address the multi-dimensional issues of poverty with a
view to achieving social and economic change.
Being a community-led, demand-driven institution, PPAF focuses on partnerships which are nonprescriptive and model-neutral but value-driven. The essence of PPAFs work is to support and
strengthen institutions for the poor (partner organizations) in developing institutions of the poor
that are well governed, transparent, democratic, and accountable.

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ORIX LEASING PAKISTAN LIMITED:

ORIX Leasing Pakistan Limited OLP is Pakistans leading leasing company. A part of ORIX
Corporation Japan, OLP offers cost effective value-added products and customized services to a
wide array of customers throughout the country. The blend of international experience and local
expertise acquired over last 25 years provides OLP a distinctive competitive edge. OLP takes
pride in the fact that it has played a major role towards economic development of the country by
supporting Small and Medium Enterprises (SME) Sector and creating thousands of jobs directly
and indirectly. It has helped grow numerous small businesses into medium sized enterprises.
Today OLP stands as one of the most prominent Non-Banking Finance Companies in Pakistan
with presence all over the country and a large network of individual and corporate customers.
SOUTH ASIA PARTNERSHIP PAKISTAN:
As member of South Asian civil society movement, is striving to empower marginalized sections
of society and working to influence policies in favor of people.

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SAP-PK derives its name from a regional network, i.e., South Asia Partnership. This is a
volunteer network of participatory development-support organizations operating under the same
name and for the same purposes in Canada and four South Asian countries, i.e., Bangladesh,
Nepal, Pakistan and Sri Lanka. It has some presence in India as well, through a collective form
of three different organizations. All these organizations and Sri Lanka Center for Development
Facilitation collectively form SAP-International.
ENVIRONMENTAL PROTECTION AGENCY:
Pakistan Environmental Protection Agency is an attached department of the Ministry of Climate
Change and responsible to implement the Pakistan Environmental Protection Act, 1997 in the
country; an Act to provide for the protection, conservation, rehabilitation and improvement of
environment, for the prevention and control of pollution, and promotion of sustainable
development. Pakistan Environmental Protection Agency also provides all kind of technical
assistance to the Ministry of Climate Change.
Promotion and attainment of sustainable development through effective integration of economic
and environmental considerations and rectification of adverse environmental effects of solid,
liquid and gaseous wastes is the purpose of existence of Environmental Protection Department of
Government of Punjab.
The above purpose is achieved through protection, conversation, rehabilitation and improvement
of the environment through prevention and control of pollution and promotion of sustainable
development in Punjab.
DEVOLUTION TRUST FOR COMMUNITY EMPOWERMENT:
Established in July 2003, Devolution Trust for Community Empowerment (DTCE) is an endsorientated, information-intensive and knowledge-based organization that strives to make
consistent efforts to create a new relationship between the citizen and the state, based on shared
rights and responsibilities. DTCE has an organizational culture that strongly believes in the
importance of keeping abreast of new developments, keeping channels of communication open,
keeping information systems fluid and relevant, and managing knowledge in such a way that
change can be easily incorporated into structure and processes as and when it becomes necessary.
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It employs participatory action research methodologies to support a permanent learning process.

The methodologies employed are consultative, participatory, and treat on-going social and
managerial processes as learning experiences.
FREE & FAIR ELECTION NETWORK:
The Free and Fair Election Network (FAFEN) was established in 2006 as a coalition of 30 nongovernmental organizations to observe the general elections and mobilize voters. The Asia
Foundation facilitated the formation of the network. However, the purpose-based network
continued its working after the general elections held in February 2008 and expanded its scope to
work from election oversight and reforms to include parliamentary oversight and reforms,
governance oversight and reforms and political parties oversight and reforms. FAFEN is
currently governed by the Trust for Democratic Education and Accountability (TDEA).
BANKING WITH THE POOR NETWORK:

The Banking with the Poor Network (BWTP Network) is Asias microfinance network that
works towards building efficient, large-scale sustainable organizations, through co-operation,
training and capacity building with the aim of achieving innovative, appropriate and demanddriven financial services for the poor. The Network is an association of a diverse range of
microfinance stakeholders committed to improving the quality of life of the poor through
promoting and facilitating their access to sustainable financial services. The BWTP Network is
an initiative of the Foundation for Development Cooperation and its Secretariat is based in
Singapore.
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PUNJAB MICROFINANCE NETWORK:

The purpose of the PMFN is to ensure the prosperity and sustainability of the microfinance
sector in Punjab. PMFN plays a vital role in creating a local network as well as seeking equity
and loan funds, new technology and conflict resolution between microfinance institutions.
PMFN through its activities nurtures small NGOs and enables them to mature as full-fledged,
sustainable NGO-MFIs. In the process, it supports NGOs that are community based and have
experience of working with women groups for their social and/or economic empowerment.
PMFN enters into a partnership with potential NGO-MFIs and assists them with accessing loan
funds and institutional development support in the initial phase of their operations. It builds their
capability to access funds from other financial institutions and deliver microfinance services to
poor households who are economically active.
INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT:

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International Fund for Agricultural Development (IFAD), a specialized agency of the United
Nations, was established as an international financial institution in 1977 as one of the major
outcomes of the 1974 World Food Conference. The Conference was organized in response to the
food crises of the early 1970s that primarily affected the Sahelian countries of Africa. The
conference resolved that "an International Fund for Agricultural Development should be
established immediately to finance agricultural development projects primarily for food
production in the developing countries". One of the most important insights emerging from the
conference was that the causes of food insecurity and famine were not so much failures in food
production, but structural problems relating to poverty and to the fact that the majority of the
developing world's poor populations were concentrated in rural areas. IFAD is dedicated to
eradicating rural poverty in developing countries.

Working with poor rural people, governments, donors, non-governmental organizations and
many other partners, IFAD focuses on country-specific solutions, which can involve increasing
poor rural peoples' access to financial services, markets, technology, land and other natural
resources.
UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT:
USAID is the United States federal government agency primarily responsible for administering
civilian foreign aid. USAID seeks to "extend a helping hand to those people overseas struggling

21

to make a better life, recover from a disaster or striving to live in a free and democratic country."
It operates in Africa, Asia, Latin America and Europe.
President John F. Kennedy created USAID in 1961 by executive order to implement
development assistance programs in the areas authorized by the Congress in the Foreign
Assistance Act. The Congress updates this authorization through annual funds appropriation acts,
and other legislation. Although technically an independent federal agency, USAID operates
subject to the foreign policy guidance of the President, Secretary of State, and the National
Security Council.
AURAT FOUNDATION:
Aurat Foundation is a women's rights organization based in Islamabad, Pakistan. Aurat
Foundation does active lobbying and advocacy on behalf of women. It also holds demonstrations
and public-awareness campaigns.
Aurat Publication and Information Service Foundation (Aurat Foundation/AF) is registered in
1986 as a non-profit society under the Societies' Registration Act 1860.Aurat Foundation has its
Head Office in Islamabad, and four regional offices in the provincial capitals (Lahore, Karachi,
Peshawar and Quetta). Further, AF has a countrywide network of voluntary citizens' groups and
individual activists.
AF is a civil society organization working for women's empowerment and citizens' rights with
the collaboration of citizens' groups and organizations to provide information, build capacity and
undertake advocacy for women's issues and for good governance in Pakistan.
HUMAN RESOURCE DEVELOPMENT NETWORK:
Human Resource Development Network (HRDN) is a membership based network of
professionals from all over Pakistan and across Asia. The process started in 1997 and was legally
registered in 2001 with the aim to improve human and institutional development (HID) services
and create a platform for professionals relating to the field of learning and capacity building. The
idea was to bring the development practitioners on a single platform to share and benefit from
their experiences and best practices. The network has a rich resource pool of experts among its
members from diverse background and experience in development and management. These
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experts have been working with different national and international development agencies, Govt.
departments/projects and multinational companies. The members of HRDN include individuals
as well as organizations.
PAKISTAN MICROFINANCE NETWORK:
The Pakistan Microfinance Network finds it origins in 1995 as an informal association based on
the exchange of thoughts and experiences between microfinance providers operating in Pakistan.
In 1999 this loose collaboration, the Microfinance Group Pakistan, sought and received financial
support from the Aga Khan Foundation and the Asia Foundation. Through its expanding and
more formalized operations it continued to build confidence and trust amongst donors,
government and microfinance institutions. In 2001 it moved successfully to become a separate
legal entity under the name of the Pakistani Microfinance Network (PMN).
PAKISTAN CENTER FOR PHILANTHROPY
AKDN & John Hopkins Institute conducted a Study on Indigenous Philanthropy in 1998. A
Steering Committee was formed to review the findings and move forward.
The International Indigenous Philanthropy -2000 conference was attended by His Highness the
Aga Khan and the then President Pervez Musharraf. The Conference endorsed the idea of
creating an enabling policy and administrative environment for civil society and philanthropy
and endorsed the creation of PCP.
PCP promotes voluntary giving and serving in Pakistan. PCP believes that bringing together the
business sector, citizen sector and the government in this sentiment can make a powerful
difference in addressing the challenges of poverty.

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OUR PROGRAMS:
Background and Introduction
Farmers Friend Organization (FFO) is a specialized MFP that provides financial services to poor
households. FFO Microfinance was initiated in 2003 to combat the incidence of poverty. It is
guided by the principle that poor need opportunity, not charity. FFO seeks to eradicate poverty by
providing basic financial services (loans, savings, remittances etc.) to the poor through the
processes of social mobilization and peer lending. This will allow FFO to continue to expand its
outreach to poor families throughout the country.
Approach and Philosophy
Following a rights-based approach, FFO places a particular emphasis on the right to a sustainable
livelihood and income security. To realize this purpose, we strive for creating and providing
opportunities and resources to enable people living in poverty to exercise their right to enhance
and stabilize income to live a dignified life. Microfinance is the best tool to achieve this aim and
therefore, provision of financial services to the poor is actively pursued by FFO.
FFO believes that by providing the poor with economic opportunities such as credit, they can
reach their full potential and overcome the barriers of poverty.
Vision for Microfinance
We envision an enabling environment in which most poor people have permanent access to a
required range of financial products and services delivered through a variety of convenient
mechanisms.
Program Goal
To empower the poor households to become economically self-reliant by providing appropriate
financial services in a sustainable manner.
Guiding Principles
In its attempt to achieving both the social and commercial purposes of the microfinance program,
the organization adheres to the following guiding principles:
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Be clear on why microfinance is to be carried out Design and establish program policies and
procedures to actually reach and empower the poor, particularly women
Be participatory and responsive to the needs of the clients
Provision of quality services to the clients through processes of dignified treatment
Be transparent and standardized in procedures, systems and disclosure
Place a continued focus on institutional strengthening
Attain sufficient scale to reach optimum level of operational, financial and institutional
sustainability
Link the scale of microfinance operations with the human and institutional capacity of the
organization

FFO Microfinance Values

Put the customers first
Quality of services
Lead and inspire each other
Earn the trust of the community
Transparency
Equality
Standardization
Dignified treatment
Appropriate pricing

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PRODUCTS AND SERVICES

FFO provides microcredit services with the belief that the poor better know which businesses to
start and how best to employ working capital. Loans to the working poor are provided in
different categories. Following loan products are provided to the clients:

Operating System
FFO has devised a solid, decentralized and replicable branch system with the emphasis on
standardization. This type of operating system enables quick but controlled delivery of products
in an efficient manner. FFO's branches function in alignment of the standard operating
procedures that provide policies and procedures for all operational and management actions.
Methodology
FFO microfinance methodology is primarily based upon peer-lending model, integrating
industry's best practices with our own innovations. Moreover, to diversify the clientele range and
loan portfolio, individual lending is also a component of the lending methodology.
Portfolio Management System
To maintain a strong portfolio quality, FFO has developed and implemented an accurate, simple
and user-friendly electronic portfolio tracking system that manages small transactions efficiently,
increase staff productivity, provide financial accountability and generates information and reports
for efficient and effective management and decision-making.
Integration of Unique Program Strengths: To achieve its objectives of outreach and
sustainability, the FFO has made certain relevant arrangements. These arrangements represent

26

the innovative strengths of the program and are essential in reaching the intended financial and
social goals. The particular strengths include:
Vision Clarity
Targeting the real poor and responsiveness to their needs
Long-term operational and financial planning
Low-Cost operations and management model
Internal training and orientation systems
Simplicity and standardization
Strong internal control & efficient risk management
Vibrant policy environment
Transparency and accountability
An exclusive focus on financial sustainability and institutional viability

Village Banking
Background and Introduction
About 70% of the nations population lives in rural areas and a dominant portion of the rural
people is poor. Despite the fact that a dominant portion of the population lives in rural areas,
formal financial institutions do not provide financial services within these areas. To these
financial institutions, the income derived from these services does not warrant the cost of
provision due to the limited extent of services and the remoteness of most of the rural villages.
Furthermore, characteristics of the rural areas such as poor infrastructure, low population density,
high levels of illiteracy, and limited business activities further restrain formal financial
institutions from addressing the financial needs of the rural population. Rural villagers on the
other hand, face high transaction cost in travelling to the nearest bank and often do not adhere to
27

the minimum requirements set by the bank for either opening a savings account or obtaining a
loan.

On the other hand, this is a commonly agreed reality that the rural poor need a variety of
financial services to cater their diversified financial needs. The financial services rural people
need or demand are as follows:
The safe keeping of cash and saving opportunities: Several research studies indicate that rural
people have the ability to save. Often the importance of savings in rural areas has been neglected
since it was assumed that rural people cannot and will not save due to low income levels and a
high propensity to consume.
Credit: Credit is needed for several purposes. In addition to the credit demand for productive
purposes, poor need credit for some consumption purposes including marriages, births and health
and education needs.
Insurance: As an essential part of the financial services, people need insurance services to cope
with emergencies and reduce the risks of any of the adverse situations.
Remittances Services: Extended family networks found in the rural areas and extensive ruralrural and urban-rural migration lead to the demand for better electronic transmission services.
Such services will allow money transmission between urban and rural areas as well as within and
between the rural areas.
In order to respond to the above-mentioned financial needs of the rural poor, innovative
approaches and processes are required to be introduced that address not only the risk and cost
restraints, but also fulfill the specific financial needs of the rural poor in a sustainable manner.
As an attempt to bridge to enhance the rural poors access to the required set of financial services
in a sustainable and cost-effective manner, FFO has initiated an innovative model of Village
Banking Program. The village banks are community based semi-formal financial institutions
that create access to basic banking services on a sustainable basis by utilizing the communitys
rules, customs, relationships, knowledge, solidarity and resources combined with formal
28

financial methods and concepts. A bank is initiated, owned and managed by the villagers
themselves.
Approach and Philosophy
The village banking program is based upon the bottom-up approach rather than a top-down.
Under the bottom-up approach, target group of the microfinance is made Custodian of
resources rather than creating just a Liability for them.

Given the financial needs of rural poor and the problems of adverse selection and some cultural
and environmental hazards associated with providing these services, FFO makes use of the
concept of decentralized financial services. The concept of the decentralized financial services
entails that these services are primarily organized and managed by the local community itself.
Program Goal
To establish a sustainable and socially compatible financial system that is well capable of
providing the tailor made financial services to the rural poor as a means to empowering them to
help them.
Program Strategies
Following strategies are used to implement the program:
Social Mobilization and Organization
Capacity Development
Provision of the Lines of Credit
Monitoring, Evaluation and Research
Implementation Methodology
Under the program, Community Development Organizations (CDOs) are established and
strengthened through various capacity development interventions. After gaining maturity against
29

different indicators, these CDOs work as Village Banks to fulfill the financial needs of the rural
poor. The village banks first accumulate their own financial resources through membership fees,
members' savings and wherever possible, through some grants. After having built up the required
level of financing at their own, they are provided the lines of credit by FFO. These lines of credit
are utilized by the Village Banks to finance their village-level credit operations. Through
accumulated earnings and other incomes, FFO plans to make every Village Bank sustainable in a
period of three years.
An Outline of FFOs Village Banking Model
Following is an outline of the concept and methodology of FFOs Village Banking:
A village is selected for the establishment of a Village Bank.
Making use of the common tools and techniques of social mobilization, a Community
Development Organization (CDO) is established in the village to work as a Village Bank.
The CDO/VB is provided technical support to evolve its structure, develop by-laws, get the legal
status through registration and design procedures to work as a financial intermediary.
After certain interventions of CDO/VB strengthening and capacity building interventions, an
agreement is signed between FFO and the VB.
The VB accumulates its own financial resources through members savings, membership fees,
and grants. After a VB accumulates the required level of internally generated funds as per the
criteria, FFO provides the VB a line of credit.
The Village Bank selects its borrowers; borrowers are selected by the VB members. FFO staff
does not conduct loan analysis.
The VBs Credit Management Committee (CMC) is responsible for the overall performance of
the banking activities.
Some Important Implementation Modalities
Followings are some important implementation modalities including criteria, salient policies and
major prerequisites:
30

After the initial assessment, a Village Bank (in the form of a CDO) is established in the selected
village
Every VB have a General Body consisting of all the members. The general body elects an
Executive Body and a Credit Management Committee (CMC).
The membership fee is Rs. 300
The minimum compulsory saving for each member is 7% of the loan required
The average rate of mark-up charged by the village bank is 20% (flat) per annum
The rate of mark-up charged by FFO to VBs is 12% (flat) per annum
No single loan disbursed by a VB exceeds Rs.50,000
The line of credit to a Village Bank by FFO is determined on the basis of the performance of a
particular Village Bank. The performance is measured against a set of established indicators.

SOCIAL MOBILIZATION PROGRAM

Background and Introduction
Diverse development practices and researches have concluded that lack of collective thinking
and concerted actions fall among the major reasons of people's social, economic and political
deprivations. To response to this major shortcoming, FFO has included social mobilization as its
primary program. The approach is that the poor should be well organized into small community
development organizations (CDOs) to foster the overall development processes. For this purpose,
FFO has declared Social Mobilization a core activity and a pre-requisite for the implementation
of any type of development program.

LIVELIHOOD ENHANCEMENT & PROTECTION PROGRAM (LEP)

Background and Introduction
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In the rural and semi-urban localities of the target area of the proposed program, there is an
increasing number of ultra-poor, poor and vulnerable who are facing the challenge of their
subsistence and survival. Such a challenge is faced by the people due to lack of opportunities to
earn incomes sufficient enough to survive at the minimum levels of living standards.
There are a lot of factors that have given birth to such a situation. In rural areas, agriculture and
livestock rearing are the primary sources of livelihoods in the rural settlements. Agriculture
accounts almost 50 percent of the total household income. But the role of agriculture in
household economy/food security is gradually diminishing due to several reasons. Different
farmer groups are being affected by the different factors resulting in an increasing food and
livelihood insecurity. As per the feedback given by the farmers and small land-holders and FFOs
situation analysis, agriculture does not seem to provide livelihood security. Therefore, the need is
to promote some off-farm entrepreneurial activities to support the livelihood security of the rural
poor.
In the semi-urban localities, there are extremely limited opportunities of training and skill
enhancement for the ultra-poor especially for the women. People seldom find any opportunity to
acquire cost-effective training and skills that are innovative and marketable and can help them
overcome the barriers of their economic subsistence and survival. More, such ultra-poor are
exclusively asset-less and so cannot invest anything in any income generating venture. As a
result, people remain unemployed causing a severe degree of food insecurity and their
subsistence is at stake.
Program Goal
To promote improved livelihoods security for the ultra-poor groups/communities in the target
areas through imparting innovative and marketable entrepreneurial skills and providing them the
required financial resources

Immediate Objectives/Outputs
Followings are the immediate objectives/outputs of the Livelihood Enhancement and
Protection program:
32

Ultra-poor are organized into groups around entrepreneurial activities and able to plan
participatory livelihoods focused development effectively.
The linkages of the ultra-poor have been developed with other livelihood and safety nets
program of government and private sector.
Selected persons of the poor communities have been provided innovative and marketable
entrepreneurial skills (vocational, skills and technical trainings).
The trained and skilled poor have been provided appropriate financial resources to be engaged
in income generation activities on sustainable basis.
Diversified food & income options promoted and access to markets improved.
Ultra-poor have been graduated from livelihood grants to economic mainstream through
facilitating access to microfinance program and improved institutional maturity.
The Strategies
FFO has devised and adopted a set of strategies to achieve the required objectives. The strategies
include:
Appropriate Targeting: Livelihood protection and enhancement component has been included
only for the ultra-poor groups. Therefore, the targeting and selection of the programs
beneficiaries are carried out through a rigorous process making use of different tools including
poverty score card.
Provision of Entrepreneurial Skills and Training: The selected ultra-poor persons are imparted
innovative and marketable skills to enable them be engaged in some income-generating
activities.
Asset Transfer: The trained community members are provided financial resources in the form of
cash grants to establish their business avenues.
Community Livelihood Fund: The eligible CDOs and their clusters are provided funds to
promote on-lending within the communities. To ensure success of the local level lending
operations, appropriate training packages are provided to the CDOs and their clusters.
33

Mainstreaming and Linkages Development: The targeted ultra-poor are brought in the
development mainstream through their membership in the CDOs. They are provided facilitation
to grow linkages with the relevant markets, institutions and organization.
An Outline of Implementation Methodology
In order to implement the livelihood enhancement and protection program successfully, FFO has
adopted a set of relevant activities that includes:
The Community Development Organizations (CDOs) who have already included the ultra-poor
as the members of the CDOs do select the potential beneficiaries as per the established criteria.
In consultation of FFO, the CDOs make skill enhancement plan for the selected persons.
The selected persons are imparted the relevant skill enhancement trainings.
After the successful completion of the training, the persons being trained submit a business plan
including a projection on the required financial resources.
Financial assets are transferred to the eligible persons to establish their businesses.
The CDOs and their clusters are provided funds for on-lending.
Special attention is paid on developing the linkages of the ultra-poor to the relevant programs,
organizations, institutions and line departments.
Monitoring and facilitation process does remain continue throughout the course of
implementation. Special attention is given to ensure the sustainability of the process.
Anticipated Impacts
Inclusion of the ultra-poor in the development mainstream.
Ultra-poor will find appropriate opportunities and access to resources to alleviate their poverty
and secure their economic base on sustainable basis.
Socio-economic empowerment of the ultra-poor.
34

Ultra-poor will be able to raise voice against the violation of their rights and demand for the
same in an organized and effective manner.
The targeted ultra-poor households will be brought out of poverty on permanent grounds instead
of provision of temporary food security assistance.

35

GENDER EQUITY PROGRAM

Background and Introduction
Pakistans social and cultural fabric clearly represents a patriarchal society. So-called social,
cultural and religious believes, concepts, traditions and rituals restrict women to access their
basic human rights and have made women of the country almost exclusively dependent upon
men in all spheres and processes of their lives. Womens mobility is strictly restricted and
controlled by men and all the decisions relating to their lives and rights are taken by men. In such
a social context, Pakistani women lack social value and status because of negation of their roles
and rights. Women of the country are far behind as far as the matter of access and control of
resources and opportunities is concerned. Female members are hardly given opportunities to
access such education and skills that can lead them towards independence and empowerment.
Women are rarely given any chance to affect the decisions regarding their marriages. In most of
the cases, women remain unable to acquire the right of inheritance that the laws of land and even
the Islamic laws have given them.

Pakistani women status is not homogeneous, there is a considerable diversity in the status of
women across classes, regions and the rural /urban divide due to orthodox socio-economic
development, impact of tribal, feudal and capitalist social formation on women lives. However,
in an overall context, women have an extremely low percentage of rights in society; especially
the rural women are still in the process of awakening.

Among the root causes of the womens deprivations, the notion of males izzat (honor) is at top
of the list. Males honor is linked with womens attitude, mobility and sexual behavior. So,
womens sexuality has become a so-called threat to the males honor and standing in the society.
Such threats give birth to a variety of violence against women.

36

The growing rate of violence against women is a topic of severe distress. Domestic violence is
seen widely spread across all classes. Its form ranges from slapping, hitting, and kicking, to
murder. The society, police and law enforcing agencies view domestic violence as a family
matter; it goes unobserved until it reaches the most extreme form of murder or attempted murder.
Apart from domestic violence, other critical forms of violence against women include incidences
of stove burning, honor killing, dowry, acid attacks, gang rape, marital rape, trafficking of
women, kidnapping, forced prostitution and sexual violence at the workplace.
The survivors of above-mentioned gender based violence (GBV) often lose confidence, become
depressed and remain isolated from the social and economic mainstream. Little efforts are put in
place to bring such women back in normal life; whereas, these survivors deserve attention,
support and facilitation to be able to live a dignified life.
Under this program, FFO conducts such activities and processes that help GBV survivors be
economically self-reliant. A well thought-out entrepreneurship program supports the targeted
women be self-employed or seek job in formal or informal sector. While these GBV survivors
are economically independent, they will become an active citizen of society and be in better
position to strive for their rights. Economic empowerment of women is among the cross-cutting
themes and the core objective of FFO.
Program Goal
GEP is to facilitate economic rehabilitation of Gender Based Violence (GBV) Survivors through
motivation, capacity building, skill enhancement and supporting linkages. Such facilitation will
bring the GBV survivors back in mainstream life.
Expected impact of the Program:
The targeted 200 GBV survivors will become economically self-reliant through self employment
or work placement in formal or informal sectors. The economic self-sufficiency will lead these
women towards a real empowerment. When economically independent, these women will be
able to have control over their assets and decisions. Such independence and empowerment will
introduce new trends in communities regarding women development. The economic and social

37

status of the targeted women and their families will be enhanced and be able to live a dignified
life.
Implementation Methodology
The approach that is employed for the implementation of the program is of entrepreneurship.
First of all, a skill assessment exercise is carried out with the targeted GBV survivors to assess
their existing aptitude/skill sets and identify potential for future activities. Based on the
assessment, customized rehabilitation plans are prepared for each survivor and they are
organized into common interest groups (CIGs). The members of a particular CIG are of a same
category of trade or sector.
Appropriate/customized modules are developed for capacity building and skill development of
each CIG. Following these modules, the targeted GBV survivors are imparted life skills
including vocational and technical skills. The imparted skills are the basis of their employability
and work placement.
Apart from skill-based vocational and technical trainings, the targeted beneficiaries are also
imparted a customized training called enterprise development training (EDT). This training
module includes basic business orientation, financial management, book keeping, marketing etc.
Parallel to these trainings, motivational sessions and exercises are also conducted with these
women to create courage and will within them to be back in normal life.
After imparting the required trainings, the GBV survivors will be facilitated to be self-employed
or be place in formal or informal sector. This important activity will be accomplished through
facilitating loans from MFIs and linkages with a range of institutions, organizations and
departments.
Key activities and description, including outputs/deliverables and indicators being used:
Conducting skill assessment exercise with the survivors to assess their existing aptitude/skill
and identify the future training and capacity building needs
Preparation of appropriate rehabilitation plan for each survivor

38

Formation of common interest groups (CIGs) consisting of survivors of same aptitude, trade or
sector
Development of technical and vocational training modules for each CIG
Conducting trainings for different CIGs
Development of enterprise development training (EDT) module
Conducting enterprise development trainings
Conducting motivational sessions and exercises with the survivors
Facilitating access to microcredit
Facilitating access to internship and jobs
Performance & Achievements
as on June 30,2013
Number of Village Banks 10

39

COVERAGE:
Currently FFO is serving the communities in the following areas:

Sr # City/Locality

Tehsil

District

Sheikhupura

Sheikhupura

Sheikhupura

Feroze Wattowan

Sheikhupura

Sheikhupura

Farooqabad

Sheikhupura

Sheikhupura

Daokey

Muridke

Sheikhupura

Muzaffargarh

Muzaffargarh

Muzaffargarh

Kujjar

Sheikhupura

Sheikhupura

Kaloke

Sheikhupura

Sheikhupura

Dera Sharianwala

Sheikhupura

Sheikhupura

Kharianwala

Sheikhupura

Sheikhupura

10

Basra Colony

Muridke

Sheikhupura

11

Khanpur

Sheikhupura

Sheikhupura

12

Wandala

Feroze Wala

Sheikhupura

40

13

Burj Atari

Feroze Wala

Sheikhupura

14

Manawala

Sheikhupura

Sheikhupura

15

Kot Mehmood

Sharqpur

Sheikhupura

41

PROJECT OFFICES

Sr #

Projects

Social

District

Mobilization Farmers

(Institutional Development)

1,

Club

Friend
Road,

Organization

Opposite

Dar-ul-

Amman, Gulshan Hameed Colony,

2

Livelihood Enhancement & Protection (LEP)

Gender Equity Program (GEP)

Muzaffargarh

Branch Market:

Currently FFO is serving the communities through following 5 branches:

Sr # Branch

Address

Gillani Street, Near Madina Tent Service,

Sheikhupura

Khalid Road, Sheikhupura

Feroze Wattowan

Near Captain Abdullah Masjid, Feroze

Wattowan, District Sheikhupura

Farooqabad

Street # 2, Mohalla Islampura, Farooqabad,

District Sheikhupura

Daokey

Street # 1, Near Dar-e-Arqm School,

42

Rehmanpura, Daokey, Muridke

Muzaffargarh

1, Club Road, Opposite Dar-ul-Amman,

Gulshan Hameed Colony, Muzaffargarh

VILLAGE BANK NETWORK

Currently FFO is serving the communities through following 10 village banks:

Sr #

Branch

Address

Kujjar

Village

Kujjar,

Tehsil

&

District

Tehsil

&

District

Sheikhupura

Kaloke

Village

Kaloke,

Sheikhupura

Dera Sharianwala

Village Dera Sharianwala, Near Ghazi

Minara, Tehsil & District Sheikhupura

Kharianwala

Main

Bazar,

Sheikhupura

43

Kharianwala,

District

Basra Colony

Street # 4, Masjid Noor Ghousia, Thanay

Wala Bazar, Rachna Town, Feroze Wala,
District Sheikhupura

Khanpur

Main Bazar, Opposite Honda Laundry,

Sheikhupura

Lahore

Road,

Khanpur,

District Sheikhupura

Wandala

House # 111, Street # 2, Mian Colony

Begumkot, District Sheikhupura

Burj Atari

Near Saim Sweet, Street # 6, Masjid Wali

Galli, Burj Attari, District Sheikhupura

Manawala

Main Bazar Manawala, Tehsil & District

Sheikhupura

10

Kot Mehmood

Near

Minhaj-ul-Quran

Mehmood,

Tehsil

Sheikhupura

PERFORMANCE:
MICROFINANCE

PERFORMANCE

As on June 30, 2013

No. of Districts Covered

44

School,

Sharqpur,

Kot

District

No. of Tehsils Covered

No. of UCs Covered

No. of Branches

No. of Village Banks

Cumulative Groups/Centers formed

Cumulative Disbursement

Outstanding Loan Portfolio

Cumulative Saving Collection

Outstanding Saving

Cumulative Clients

Cumulative Female Clients

Cumulative Male Clients

Active Clients

Active Female Clients

45

Active Male Clients

Recovery Rate

Client per Credit Officer

Average Outstanding Loan Size

Average Loan Disbursed (Avg. Loan Size)

46

OCIAL SECTOR PERFORMANCE

SOCIAL

SECTOR

PERFORMANCE

As on June 30, 2013

SOCIAL MOBILIZATION:

Direct Beneficiaries

Indirect Beneficiaries

No. of COs formed

No. of VOs formed

No. of LSOs formed

No. of Community Exposure Visits

No. of Exposure Visits' Participants

No. of Community Trainings Conducted

No. of Community Trainings Participants

Female Training Participants

Male Training Participants

47

LIVELIHOOD ENHANCEMENT & PROTECTION PROGRAM:

Direct Beneficiaries

Indirect Beneficiaries

No. of CIGs formed

No. of Community Exposure Visits

No. of Exposure Visits' Participants

No. of Community Trainings Conducted

No. of Community Trainings Participants

Female Training Participants

Male Training Participants

GENDER EQUITY PROGRAM:

Direct Beneficiaries

Indirect Beneficiaries

48

No. of CIGs formed

No. of Community Exposure Visits

No. of Exposure Visits' Participants

No. of Community Trainings Conducted

No. of Community Trainings Participants

Female Training Participants

Male Training Participants

49

FINANCIAL PERFORMANCE

FINANCIAL

PERFORMANCE

As on June 30, 2013

Operating Self Sufficiency (OSS)

Debt to Equity

Working Capital to Asset

Current Ratio

Cost of Funds

Financial Expenses to Total Expenses

Administrative Expenses to Total Expenses

Salary to Total Expenses

Yield on Gross Portfolio

Portfolio to Total Asset

Portfolio at Risk PAR > 30 Days

50

Write-off Ratio

Risk Coverage Ratio

51

OTHERS/MISC. PERFORMANCE

OTHERS/MISC.

PERFORMANCE

As on June 30, 2013

No. of Total Staff

Female Staff

Male Staff

Microfinance Staff

Head Office Staff

Branches' Staff

Village Banks' Staff

Project Staff

Managerial Staff

Non-Managerial Staff

52

CONCLUSION
In review this internship has been an excellent and rewarding experience. I have been able to
meet and network with so many people that I am sure will be able to help me with opportunities
in the future.
One main thing that I have learned through this internship is time management skills as
well as self-motivation. When I first started I did not think that I was going to be able to make
myself sit in an office for eight hours a day, five days a week. Once I realized what I had to do I
organized my day and work so that I was not overlapping or wasting my hours. I learned that I
needed to b organized and have questions ready for when it was the correct time to get feedback.
From this internship and time management I had to learn how to motivate myself through being
in the office for so many hours. I came up with various proposals and ideas that the company is
still looking into using.
I am going to continue to work for Farmer and Friend Organization although I am still
keeping my options open for new opportunities. I enjoy this line of work, but I am not sure if
there is enough room to grow through this company. I will continue to work hard in my position
and hope to continue to learn about the industry and meet new people. This was an excellent
experience and I hope that other interns got as much out of it ass

53

RECOMMENDATIONS
1. Proper Regulation: The regulation was not a major concern when the microfinance was in its
nascent stage and individual institutions were free to bring in innovative operational models.
However, as the sector completes almost two decades of age with a high growth trajectory, an
enabling regulatory environment that protects interest of stakeholders as well as promotes
growth, is needed.
2. Field Supervision: In addition to proper regulation of the microfinance sector, field visits can
be adopted as a medium for monitoring the conditions on ground and initiating corrective action
if needed. This will keep a check on the performance of ground staff of various MFIs and their
recovery practices. This will also encourage MFIs to abide by proper code of conduct and work
more efficiently. However, the problem of feasibility and cost involved in physical monitoring of
this vast sector remains an issue in this regard.
3. Encourage rural penetration: It has been seen that in lieu of reducing the initial cost, MFIs
are opening their branches in places which already have a few MFIs operating. Encouraging
MFIs for opening new branches in areas of low microfinance penetration by providing financial
assistance will increase the outreach of the microfinance in the state and check multiple lending.
This will also increase rural penetration of microfinance in the state.
4. Complete range of Products: MFIs should provide complete range of products including
credit, savings, remittance, financial advice and also non-financial services like training and
support. As MFIs are acting as a substitute to banks in areas where people dont have access to
banks, providing a complete range of products will enable the poor to avail all services.
5. Transparency of Interest rates: As it has been observed that, MFIs are employing different
patterns of charging interest rates and a few are also charging additional charges and interest free
deposits (a part of the loan amount is kept as deposit on which no interest is paid). All this make
the pricing very confusing and hence the borrower feels incompetent in terms of bargaining
power. So a common practice for charging interest should be followed by all MFIs so that it
makes the sector more competitive and the beneficiary gets the freedom to compare different
financial products before buying.
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6. Technology to reduce Operating Cost: MFIs should use new technologies and IT tools &
applications to reduce their operating costs. Though most NBFCs are adopting such cost cutting
measures, which is clearly evident from the low cost per unit money lent (9%-10%) of such
institutions. NGOs and Section 25 companies are having a very high value of cost per unit
money lent i.e. 15-35 percent and hence such institutions should be encouraged to adopt costcutting measures to reduce their operating costs. Also initiatives like development of common
MIS and other software for all MFIs can be taken to make the operation more transparent and
efficient.

55