Profit and Loss Sharing Group Loan: A Profit and Loss Sharing (PLS) loan is equity participation in a business venture, in which the parties share the profits or losses according to a predetermined ratio. In the microfinance world, the Microfinance Institution (MFI) acts as the investor in the borrower’s business, and over the duration of the loan, the MFI and the business share the profits or losses. These products are difficult to sustain due to the higher operational costs associated (i.e. education of borrowers, reporting requirements, etc.) Ankaa Investors has launched an innovative pilot testing out a PLS GROUP loan that provides the necessary financial literacy training to a group of borrowers, empowering them to share in the responsibilities of tracking their businesses’ financials over time. The group works together to hold each other accountable, reducing much of the overhead costs that are traditionally the responsibility of the MFI distributing the loan.
Ankaa Investors believes the PLS model is 1) safer for the borrower because the MFI shares in the losses of the business should the borrower not be able to repay and 2) allows for further financial inclusion in otherwise neglected observant Muslim communities. We are working in some of the poorest communities in the developing world, and we feel very strongly about providing financial opportunities to these regions that will bring both economic and social returns.
Financial Literacy Trainings: An added bonus of our PLS Group loan is the large numbers of participants in our Financial Literacy trainings. Ankaa has educated more than 100 potential borrowers and small business owners about the importance of micro-savings, potential insurance products, as well as creating a sustainable business model.
Interest-Free Loan: We offer interest-free loans to the poorest of the poor from the communities in which we operate. The loan terms are as short as two months or as long as one year, and are in the amounts of $25 to $50. These loans are usually for healthcare, education, or other income supplementing activities.
Ankaa Investors believes in this product because it 1) avoids predatory lending practices often associated with interest-bearing products, and 2) allows for observant Muslim communities to participate. In Islam, charging interest is considered usury, which excludes the millions of impoverished Muslims around the world from participating in traditional microfinance products.
