Client Name

ASA Microfinance Bank (Pakistan) Limited

Faculty Advisor

Dr. Irum Saba

SBS Thought Leadership Areas

Islamic Business and Finance

SBS Thought Leadership Area Justification

This project is fundamentally an exercise in applied Islamic finance. Its central deliverable — Sakhi Salam — is a Shariah-compliant agricultural microfinance product for ASA Microfinance Bank, structured on a Salam contract with Parallel Salam and governed by AAOIFI Shariah Standard No. 10. Designing this product required deep engagement with Islamic contractual principles: the prohibition of riba, valid conditions for Salam, and the distinction between permissible risk-sharing and prohibited gharar.

The project also involved benchmarking Malaysia's Islamic microfinance ecosystem — analyzing AIM's product suite and Bank Negara Malaysia's Shariah governance framework — to extract features adaptable to Pakistan's regulatory context under SBP guidelines.

Most significantly, the product was shaped through live Shariah review by Mufti Muhammad Shoaib, whose feedback redirected the design toward contractual authenticity. This experience of subordinating commercial convenience to Shariah integrity reflects the core discipline of Islamic Business and Finance.

Aligned SDGs

GOAL 5: Gender Equality

Aligned SDGs Justification

Sakhi Salam is designed exclusively for rural women farmers in Pakistan — a demographic that faces compounded exclusion from formal financial systems due to both income barriers and religious conviction. By offering a Shariah-compliant agricultural financing product, the project directly addresses voluntary financial exclusion among women who refuse interest-based credit on religious grounds.

The product is delivered through ASA MFB's existing women's centre group infrastructure, reinforcing financial autonomy and collective economic agency among female borrowers. Disbursement via mobile wallets (JazzCash/Easypaisa) further reduces dependence on male intermediaries for fund access.

At its core, Sakhi Salam treats gender-responsive product design not as a marketing feature but as a structural requirement — building eligibility criteria, disbursement mechanisms, and group governance around the specific constraints faced by women in rural Pakistan.

NDA

Yes

Abstract

Approximately 750,000 of ASA Microfinance Bank (Pakistan's) borrowers are women, the interest-based group lending structure, and a loan book of PKR 33 billion. The State Bank of Pakistan has given in-principal approval to ASA to launch Shariah compliant financing and subsequently deposit products. This report answers the question which logically follows the approval: What is the first Islamic product ASA should introduce and how should it be designed? Based on that, we recommend a single contract Salam product, designed for the existing pool of rural women borrowers, predominantly the backbone of ASA's borrower population and the Pakistan farm economy, and which we refer to as “sakhi” (a woman's trusted companion). Salam is a conventional Islamic forward-purchase contract: Bank agrees to pay the total price today for a certain quantity and quality of a commodity grown by an agriculturalist which will be delivered at the time of harvest. One of the few sale contracts that are permissible under Shariah to nonexistent goods and has been used by the farmers since the time of the Prophet (PBUH). It is the Islamic answer to the greatest problem faced by the conventional microfinance service to the farmers: the monthly repayments on the household, and the income is received once at harvest time in one lump sum. Salam is the right contract – and the right segment – for women. About 68% of the females who are employed are engaged in agriculture and in rural areas, about 63% of females are unpaid contributing family workers working in sowing, weeding, harvesting, livestock and post harvest activities and only about 13% of females in rural areas are banked. That the woman is paid a cash advance in her name, on her own pledged produce, and is thereby freed of the village middleman who invariably charges low prices for distress-sold produce, is the reason. Dignity and finance, there is a price in the market. Product is commercially feasible. In our illustrative model, gross profit of the bank in Salam is around 10 per cent. of discount; thus the gross profit at the end of a crop cycle (Rabi and Kharif) is around 10.7 per cent and that at the end of the year is around 21 per cent. This is conservative given that Wasil's gross margin is reported to be 30%. The bank reduces the risk of commodity prices by conducting parallel sale of the same commodity to another buyer, such as a flour mill or rice husker, as a separate forward sale, which is similar to the way SBP's own model Salam product is conducted. Based on these assumptions, the product line breaks even at about a PKR 400 million portfolio (about Year 3) and reaches a portfolio of PKR 1.7 billion servicing 18,000 women by Year 5.

Document Type

Restricted Access

Document Name for Citation

Experiential Learning Project

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