From the commencement of microfinance services in Pakistan, very well-known MFI's are working in this field and providing the conventional microfinance financial services. The goal of every MFI was to alleviate the poverty level, to empower women and the poor community. But unfortunately, all conventional MFI's fail to attain these goals. It is now only in their files or missions but not in the real fields. It's due to race among the MFI's for making the profit up to extreme level. There is no doubt that these NGO's not having the object to earn the profit but to alleviate the poverty and sustainability in deprived lives.
In conventional MFI sector, the intention is absolutely transformed and switched to making interest. Every MFI is signing the number of staff members and assigning them enormous monthly targets of loan disbursements. To achieve these massive targets, MFI loans officers are just issuing the loans without checking the customer's reputation and his credit behaviors, resulting of these actions shows that MFI's clients liabilities are increasing gradually and people are facing the dilemmas concerning the payments and also their businesses and lives are thrilling downhill. There are number of roots and key one is that the loan is offering in CASH mode. Cash loan stimulate the clients to exploit the money in their private or non-productive purposes.
On the other hand, an innovative revaluation in this arena of MF, introduced from earlier few ages. It is the system which is under the law of Islamic Shariah. Before Islamic banking system was introduced in commercial banking system that is working in Pakistan effectively. Islamic Microfinance Institutions (IMFI's) are in tiny figures but they have started their operations in microfinance sectors. Islamic MFI's having collection of products for deprived community in which Qard-e-Hasna, Murabahah, Mudarabah, Ijarah, Salam, Istisna, Istijrar &Takaful are included. Islamic MFI's have started initially Qard-e-Hasna (Interest Free Loan) & Murabahah (Cost plus Pricing) products with Takaful (Interest Free Insurance) in targeted areas of microfinance. Islamic MFI's are also contribution for extra facilities other than lending facilities in form of social services in which basic free education, health care centers, business & environmental education, sewing schools, building mosque (masjids), markaz darul Quran (Quran educational institute), water wells etc.
In interest free option (Islamic Microfinance System), cash amount is not disbursed. Only ASSEST based lending is permitted. Due to cash loan disbursement, people consume these amounts in their individual needs (as per current survey approximately 81% by author) and become debtor gradually while on the other side, Islamic lending system is more flexible as compare to conventional system and in this system deprived people assets increase and rare change to become defaulter because of non-cash loan disbursed and people utilize these assets (which are financed by Islamic MFI's) to earning more money and also manage their saving for future needs.
