Intervention Summary
Title: Programme Partnership Arrangement with Islamic Relief
What support will the UK provide?
In line with a commitment by the Secretary of State to support another round of PPAs and following a
robust selection process and implementation of a Resource Allocation Model, 39 partners have been
identified for a 3 year PPA to begin in April 2011, from 430+ initial applications and a shortlist of 109.
The UK, through the Department for International Development (DFID), will invest in a 3 year
Programme Partnership Arrangement with Islamic Relief between 2011 and 2014. An initial investment
of £500,000 for 2011-12 has been agreed. The third year’s disbursement will be performance-based;
as assessed through robust monitoring and evaluation mechanisms.
Why is support from DFID required?
Civil society plays a vital role in supporting citizens to improve their lives. Civil Society Organisations
are central to delivering services, enabling citizens to be more active in their own development and
ensuring that policies benefit ordinary people – especially the poorest.
To achieve DFID’s priorities, as set out in its Business Plan (Structural Reform Plan), a multi-sectoral
and multi-pronged approach to delivery is required, one in which CSOs, along with governments and
the private sector, play a pivotal role in helping poor people to improve their lives.
The PPA is one of DFID’s main support mechanisms to CSOs. In line with a commitment by the
Secretary of State to support a final 3 year round of PPAs and following a robust selection process and
implementation of a Resource Allocation Model, partners have been identified for a 3 year PPA to
begin in April 2011. Islamic Relief is one of these. As a faith based agency Islamic Relief will bring not
only an expertise from their work at field level but also specific cultural and religious perspectives.
Islamic Relief make explicit links between the socio-economic and religious and cultural environments
that shape people’s choices and circumstances; the contradictions and tensions of globalisation; and
religious context, dogma, and discourse.
What are the expected results?
Poverty levels will significantly reduce amongst communities in 4 fragile states (Kenya, Bangladesh,
Pakistan and Sudan) in line with MDG1 (Proportion of population below $1 (PPP) per day). This will be
achieved through work in the following areas:
Islamic micro finance: The work on Islamic micro finance will support 79,500 recipients with community based access to
Islamic micro finance. The targets in the four focus countries are:
(ref. Page 9 below)
Total No.of microfinance
recipients
Total No. of benefiting people
(based on average family size of
6) i.e. above x 6.
Kenya
Bangladesh Pakistan
Sudan
2750
4500
2000
16,500
27,000
4000
24,000
12,000
This will be measured using project reports, case studies and the further development of
Information and client management systems.
Partnerships with international agencies - with the objective of international agencies working more
effectively with Islamic communities through increased awareness and understanding of Islamic issues,
Islamic Relief will produce 10 formal feedback documents on policy consultation, produce 5 new policy
documents (including policy documents on gender, child protection, conflict, food security and
microfinance/debt) and increase their engagement with multilateral organisations government, and
CSOs in relation to fragile states by 2014. This will be measured using the Islamic Relief “level of
engagement” index.
Business Case for: Programme Partnership Arrangement with Islamic Relief
Strategic Case
A. Context and need for DFID intervention
Civil Society Organisations (CSOs) are accepted as an essential part of the global partnership to
deliver the MDGs and public goods. Internationally, the role of civil society1 is widely recognised - the
Accra Agenda for Action specifically mentioned the need to ‘deepen engagement with civil society
organisations’i. In the UK, the Government has stressed the importance of strengthening the ‘Big
Society’ and developed a ‘Compact’ to shape the relationship between government and civil society.
The National Audit Office states that “Civil society organisations can play a variety of vital roles” and
are “important partners for DFID”ii. The Public Accounts Committee praised CSOs for often
performing better than developing country governments in providing benefits for the poorestiii. Other
donors also emphasise the importance of the sector, such as the European Commission, DANIDA
and SIDA.
Civil society plays a vital role in supporting citizens to improve their lives. CSOs are central to
delivering services, enabling citizens to be more active in their own development and ensuring that
policies benefit ordinary people – especially the poorest. CSOs can extend governments’ and official
donors’ reach with hard to reach groups - such as disabled people, vulnerable children, female
headed households and people living with HIV AIDS - and in hard to reach areas or where, for
example, DFID has no programmeiv.
The Review of DFID’s Support to Civil Societyv and other recent research provide additional evidence
to support the view that Civil Society is an important contributor to poverty reduction and can
demonstrate impact towards achieving the MDGs.
DFID objectives for its work with CSOs:
(i) Deliver goods and services effectively and efficiently;
(ii) Empower citizens in developing countries to be more effective in holding
governments to account and to do things for themselves;
(iii) Enable civil society to influence national, regional and international institutions
including improving aid effectiveness;
(iv) Build and maintain capacity and space for active civil society;
Benefits of PPA strategic funding
To achieve its objectives, DFID has a broad and flexible range of funding mechanisms for CSOs;
both centrally and through country programmes. In contrast to other donors, it does not exclusively
favour UK-based CSOs. These mechanisms enable DFID to balance a longer-term commitment to
civil society with instruments which allow more opportunistic, flexible and creative approachesvi .
How does DFID support Civil Societyvii:
• Unrestricted grants: 25% of total portfolio
• In-Country Funds: 53% of DFID’s total funding to CSOs
• Central Funds: 4 centrally run schemes plus humanitarian funds (47%) – including
PPAs
• Indirect funding: through joint funds such as the Common Ground Initiative (Comic
1
Civil society includes a wide range of non state actors such as non-governmental organisations
(NGOs), faith and diaspora groups, community based organisations and others. Some are large and
well established, whilst others are small and informal with limited capacity.
Relief) and Disability Rights Fund (AusAid)
• Pooled funds: increasing use especially in fragile countries
• Via multilaterals: £160 m through the World Bank, European Commission and UN
agencies
The Programme Partnership Arrangement (PPA) is one of DFID’s main support mechanisms to
CSOs. The PPAs are strategic level agreements based around mutually agreed outcomes and
individual performance frameworks against which the organisations report on an annual basis.
Critically, PPAs, subject to performance, provide the CSOs with 3-4 year funding which enables them
to better plan and deliver programmes, including in more difficult, higher risk environments. PPAs
are aimed at CSOs with a global reach and leaders in their field who can add value to DFID’s
portfolio, support realisation of its objectives, achieve real results in terms of poverty reduction and
provide good Value for Money (VfM) as demonstrated through a competitive selection process.
In particular, PPAs contribute to the delivery of the MDGs by playing a vital role in supporting citizens
to improve their lives, delivering services to specific groups of poor people, and holding governments,
donors and others to account. The PPAs have contributed in practical ways to: improving the lives of
women and girls, helping adaptation to and mitigate climate change, and strengthening partnerships
with the private sector in development, evidence of which can be found in the PPA MetaEvaluationviii.
Following NAO recommendations, DFID has strengthened areas such as baseline development and
performance frameworks. An independent external evaluation manager is contracted to oversee the
development of results frameworks, robust baselines, mid term and final evaluations. In the interest
of transparency, DFID will publish all PPA reviews and requires PPA holders to publish too, together
with a management response, as a condition of funding.
Current projections for the PPA budget allow a total allocation of £360m for 2011-2014. For the first
time, funding is performance based. Following the mid-term review, individual allocations to PPA
agencies will increase, decrease or remain the same based on their relative performance
In line with a commitment by the Secretary of State to support another round of PPAs and following a
robust selection process and implementation of a Resource Allocation Model, 39 partners have been
identified for a 3 year PPA to begin in April 2011, from 430+ initial applications and a shortlist of 109.
Islamic Relief is one of the selected PPA partners, and has been assigned £500,000 by DFID for the
first year 2011-12. Subsequent disbursements will be performance related.
B. Expected Impact and Outcome of the Islamic Relief PPA
Impact: Communities in fragile states to reduce their poverty levels in line with MDG1 (Proportion of
population below $1 (PPP) per day).
Outcome: Communities in four fragile states (Kenya, Bangladesh, Pakistan and Sudan) to benefit
from access to Islamic micro finance, and increased awareness and understanding of Islamic faith
stances on micro finance/debt, child protection, climate change, food security and conflict
transformation by civil society organisations, multilaterals and governments.
Islamic Relief will target rural and urban populations and it will benefit male headed as well as female
headed households. The initial process of social mobilisation and capacity building will orient the
communities towards the aim of the interventions and to ensure they have the capacity to make the
right decisions in terms of choices and management.
At a macro level the policy and research interventions will assist them to positively influence the
global livelihoods agenda.
Appraisal Case
A. Feasible options
There are two options for this intervention:
1. Fund Islamic Relief through a centrally managed PPA
2. Reject Islamic Relief’s proposal and do nothing (see page 17)
B. Appraisal of options
Option 1. Fund Islamic Relief through a centrally managed PPA
Costs: DFID will invest £500,000 in the first year (2011-12) of the PPA with Islamic Relief. Funding
represents 1% of Islamic Relief’s total income and can play a key role in shaping how Islamic Relief
uses its non-DFID resources
Subsequent performance-based allocations are provisionally set as:


2012/13
2013/14
£1,250,000
£1,250,000 (provisional)
PPA round 2011-14
The new PPA round, 2011-14 and for which PPA has been selected, challenged CSOs to show
greater effectiveness, results and Value for Money.
2011-14, Key criteria for selection included:
-
Niche, expertise, leadership
Strategic fit with DFID objectives and priorities and complementarity
Vision and Impact (what will be achieved)
Transparency & Accountability
Results delivery (demonstrated impact)
Value for Money
Partnership (structure and reach)
Monitoring, evaluation & learning
In addition the selection process included a Resource Allocation Model (RAM). The
2011-14 RAM ensured that appropriate funding levels were attributed to each selected
partner. Annual income, as stated in the CSO's Annual Audited Accounts, was selected
as the starting point (base). In addition, the RAM made full use of the PPA offer
document which all applicants were asked to complete. Offers were scored against
specific criteria. Each criterion was allocated a score, which was used to calculate
building blocks. These were added to the base to calculate the appropriate funding level.
It was agreed that in order to reduce dependency, PPA funding should be capped at 40%
of an organisation’s income.
Evidence base for the selected option (PPA with Islamic Relief):
Established in 1984, Islamic Relief is a network of 13 national organisations2 working together to
deliver relief and development programmes through field country offices established in 28 countries3
with over 1400 staff worldwide and a UK income of £64 million in 20104.
According to ‘The failed states index 2010’5 Islamic Relief works in 11 of the top 20 such states.
According to a report by ‘The European Think-tanks group’6 a combination of fragile states indices
shows Islamic Relief working in 17 of the top 30 fragile states. The majority of these countries are
classed as countries with low HDI7 by the UNDP8 and as least developed countries by DAC9. 12 field
country offices are located in DFID bilateral focus countries10 while the other 16 field country offices
present further potential outreach for DFID funds to be used in tackling poverty.
Islamic Relief’s reach
As an NGO with a strong Muslim identity, Islamic Relief’s strengths of cultural, religious sensitivity
and appropriateness, extensive field presence, and knowledge of the logistical and political
complexities of working in fragile states - makes it unique in being able to access and retain the trust
of vulnerable communities.
The trust and credibility they have developed enables them to engage with communities that are
perceived as having conservative values and being hard to reach. In conflict environments, Islamic
Relief is able to access hard to reach communities. In other environments, Islamic Relief is able to
introduce more challenging agendas and influence long-term community attitudes in the drive to
tackle poverty.
Islamic Relief’s credibility enables them to gain the trust of community leaders - be they tribal,
religious or political - as is seen in places such as Somalia, Pakistan, OPT, Afghanistan and Yemen.
Islamic Relief demonstrated that it has been able to deliver aid in areas that the UN has been unable
to access (e.g. parts of Somalia, Yemen and Afghanistan) and convinced institutions such as
mosques to be facilitators of change (e.g. in Bangladesh).
Within these conservative areas, Islamic Relief is able to consult at household level which means that
it understands, relays and tackles the challenges felt by hard to reach women and children (e.g. in
Pakistan, Yemen, Afghanistan). This level of acceptance is also reflected in the trust shown in Islamic
Relief by international bodies in the East and West as well as amongst governments. This enables
them to develop partnerships which bridge the potential cultural differences in order to support the
development of an internationally coordinated approach towards tackling poverty (e.g. Turkey, Qatar,
Islamic Development Bank).
Such an inclusive approach is also manifested through Islamic Relief’s presence in Muslim faith
platforms; (e.g. Muslim Charities forum), interfaith partnerships (e.g. CAFOD, Christian Aid) and
2
Australia, Belgium, Canada, Germany, Italy, Netherlands, Malaysia, Mauritius, South Africa,
Sweden, Switzerland, UK, USA,
3 Afghanistan, Albania, Bangladesh, Bosnia, Chad, China, Egypt, Ethiopia, Haiti, India, Indonesia,
Iraq, Jordan, Lebanon, Libya, Kenya, Kosova, Mali, Malawi, Niger, oPT, Pakistan, Russian
Federation, Sri Lanka, Somalia, South Sudan, Sudan, Yemen
4 http://www.islamic-relief.com/WhoWeAre/Files/IR_AR-14%201_o3j5rpzv.oeu.pdf
5
http://www.foreignpolicy.com/articles/2010/06/21/2010_failed_states_index_interactive_map_and_rankings
6
Afghanistan, Chad, Ethiopia, Iraq, Haiti, Kenya, Niger, Pakistan, Somalia, Sudan, Yemen
7
http://www.ecdpm.org/Web_ECDPM/Web/Content/Download.nsf/0/26545895915FF152C12576BF003430F8/$FILE/EUMemorandum-2010_New%20Challenges-New%20Beginnings_Summary.pdf, pg xv
8
Human development Index
http://hdr.undp.org/en/statistics/
10 http://www.oecd.org/dataoecd/32/40/43540882.pdf
9
broader NGO platforms/forums (e.g. Disasters Emergency Committee, Bond and the Humanitarian
Forum).
Outcome 1: Islamic Microfinance
Theory of change
Islamic microfinance gives vulnerable families, who are motivated by their faith, access to Microfinance. Such access will enable families to focus on activities that will increase disposable income
and their choices in life. In the case of consumption credits, family members will be able to gain
access to improved nutrition or health, an education, or other goods and services critical to their fight
against household poverty. Many families will develop new or expand existing microenterprises that
will positively impact on the local economy. As Islamic Micro-finance is built on the ‘just’ concept of
sharing the risk between lender and borrower it will also minimise the risk of borrowers falling into a
trap of further indebtedness.
Islamic microfinance
It is estimated that 72 percent of people living in Muslim majority countries do not use formal financial
services (see end notes for definition of micro-finance and the potential of micro-finance to reduce
povertyix) and even when they are available some may not use them due to an incompatibility with
Islamic rulings. Islamic microfinance has the potential to respond to this unmet demand but also to
combine the Islamic social principle of caring for the less fortunate with microfinances power to
provide financial access to the poor (Karim et al: Aug 200811). Khan and Phillips12 (2010) state that
the increasing interest in Islamic microfinance programmes is occurring as not only are many
Muslims refraining from using non Islamic based microfinance products but there are also many
Muslims who currently use conventional microfinance products but would prefer Islamic based
microfinance based products. A further assessment of Islamic Relief Worldwide Islamic microfinance
programmes in Kosovo stated “behaviour is itself influenced by many different factors, including by
faith, which becomes more relevant when dealing with more religiously observant borrowers and
staff. The extent of this influence is unclear and a more thorough investigation is required in order to
determine this13. Evidence from West Bank & Gaza, Yemen, Jordan, Algeria, Yemen, Syria and
Indonesia all point in the direction of demand for more Islamic microfinance products14. It is fair to
conclude that such faith based motivation towards Islamic microfinance may also translate itself to
Muslim philanthropists and donors, especially from the Middle East.
Islamic finance is one of the most rapidly growing sectors of the finance industry with the largest 500
institutions holding US$639.1 billion in Shariah15 compliant assets16. While El Shabrawy (Jan 2011)17
states the value of total assets held by the Islamic banking industry is nearly $1 trillion. However
Khan et al. (2011)18 argues that such interest has not yet extended to a flourishing Islamic
microfinance sector. A handful of institutions such as Islamic financial services board, the Accounting
11
Karim.N, Tarazi. M and Reille.X. (Aug 2008), Islamic Microfinance: An emerging Market Niche,
CGAP Focus note, No.49
12 Khan.A.A & Phiilips.I. (Feb 2010), The influence of faith on Islamic Microfinance programmes,
Islamic Relief Worldwide, http://www.islamic-relief.com/InDepth/2-23-the-influence-of-faith-on-islamicmicrofinance-programmes.aspx , p3
13 Ibid, p11
14 Karim.N, Tarazi. M and Reille.X. (Aug 2008), Islamic Microfinance: An emerging Market Niche,
CGAP Focus note, No.49
15 Shariah – Islamic legal system
16 Timewell.S & DiVanna.J (Nov 2008), Top 500 Islamic Financial Institutions., The banker, p4
17 El Shabrawy. A. (Jan 2011), Innovation in Microentrepreneurship & Islamic microfinance: the
model of Family Bank, 10th International Entrepreneurship forum, Tamkeen, Bahreain, 9-11 Jan
2011, p7
18 Khan.A.A & Thaut.L (2011), The opportunities and challenges of Islamic Microfinance, in Ter
Haar. G, Religion and development: Ways of transforming the world, London, Hurst & Company,
p185
and Auditing organisation of Islamic Financial institutions have developed but market penetration of
Islamic microfinance programmes remains low. Nevertheless the gap is beginning to be highlighted
and viability of Islamic microfinance is being debated. Weber (2006) comments that such recognition
is resulting in the microfinance movement attempting to dispel barriers to the implementation of such
programmes including ‘constraints such as Islamic perspectives on interest.’19
It is a fair conclusion to state that unavailability of Islamic microfinance programmes constrains the
drive towards reducing poverty, especially amongst Muslim communities. Karim et al (2008) state
that “Islamic microfinance has the potential to expand access to finance to unprecedented levels
throughout the Muslim world. Nevertheless, Islamic microfinance is in its infancy with less than 1% of
total microfinance global outreach20.
Islamic microfinance and conventional microfinance
It is important to understand the differences between Islamic microfinance principles and
conventional microfinance. The difference is often understood simply of a ban on giving or receiving
any fixed, predetermined rate of return on financial interest transactions i.e. interest based
transactions. It is however much deeper and the philosophical foundations of Islamic finance should
not be understated. El Shabrawy (Jan 2011)21 states that the philosophical basis of Islamic financial
system lies in ‘adl’ (social justice) and ‘Ihsan’ (benevolence).
The prohibition of interest in Islamic microfinance, not withstanding some subtle differences
of interpretation, is the consensus amongst Muslim scholars. A range of Islamic financial
tools have been developed in response to these principles22, murabaha23, mudaraba24,
musharaka25, ijara26 and qard hasana27. These principles and tools give Islamic microfinance
some potential advantages over conventional microfinance.
However, a number of challenges remain and need to be recognised in order to get the best out of
Islamic microfinance28. The key challenge is that of administrative burden which can result in higher
transaction costs and needs to be taken into account when developing such programmes. The
monitoring systems that need to be set up in profit/loss sharing arrangements (mudaraba and
musharaka) and the viability assessment of individual projects can add a significant burden. The
impact of this is that outreach and scale may be more limited than with conventional microfinance
programmes.
It should be noted here that Islamic Microfinance does not have an adverse gender impact, it may in
principle potentially support more female clients than conventional models. Overall, the percentage of
19
Weber.H. (2006), The Global political economy of microfinance and poverty reduction:
locating local “livelihoods” in political analysis, in Fernando.J.L (ed), Microfinance Perils and
Prospects, New York, Routledge, pp43-63
20 Brugnoni. A., Islamic Microfinance model needs changing, Islamic Investor, April 2011
21 El Shabrawy. A. (Jan 2011), Innovation in Microentrepreneurship & Islamic microfinance: the
model of Family Bank, 10th International Entrepreneurship forum, Tamkeen, Bahreain, 9-11 Jan
2011, p6-8
22 Khan.A.A & Thaut.L (2011), The opportunities and challenges of Islamic Microfinance, in Ter
Haar. G, Religion and development: Ways of transforming the world, London, Hurst & Company,
p189-193
23 Process of mark up. A predefined profit margin with a contract that reflects transparency and risk.
24 Two parties: a financier and entrepreneur.
25 Financial partnership.
26 Similar to conventional leasing
27 Benevolent loans
28 Khan.A.A & Thaut.L (2011), The opportunities and challenges of Islamic Microfinance, in Ter
Haar. G, Religion and development: Ways of transforming the world, London, Hurst & Company,
p197-202
female clients using Islamic microfinance products (59%) is comparable to those using conventional
microfinance products (65.7 % globally and 65.4% in the Arab world) 29. Islam also puts a very strong
emphasis on supporting orphans and widows. Orphans are defined as those who have lost their
father. In such circumstances it is encouraged to focus on the vulnerable group namely that of
widows.
Islamic Relief and Islamic Microfinance
Islamic Relief strategic framework 2011-2015 strategic area two, focuses on empowering
communities by providing integrated sustainable, in line with MDGs and in comparison to a 2011
baseline. Islamic microfinance programmes constitute a core part of that intervention. One of the
global outcomes in relation to strategic focus area two is “Decreased the proportion of people whose
income is less than $1 a day in 75 Islamic Relief target areas (1 target area equals 1000
households)”
As a Muslim faith based agency Islamic Relief believes that the Islamic micro finance framework can
provide culturally and religious appropriate credit facilities which will not only increase income levels
but also minimise the risk of household debt which may occur as a result of local lending systems.
Islamic Relief has core field operations in 28 locations30 of which over 60% are dominated by Muslim
populations. According to ‘The failed states index 2010’31 Islamic Relief works in 11 of the top 20
such states32 and according to a report by ‘The European Think-tanks group33’ a combination of
fragile states indices shows Islamic Relief working in 17 of the top 30 fragile states. The majority of
these countries are classed as countries with low HDI by the UNDP34 and least developed countries
by DAC35 .
Islamic Relief has experience of having implemented microfinance programmes in many fragile
states36. The coverage encompasses rural and urban contexts, Africa, Asia, Middle East and Europe.
Their approach to such programming is based on Microfinance in that it encompasses microcredit,
savings and capacity building. The foundations of this approach are the development of community
based organisations. This breadth of experience and learning coupled with their acceptance and
access to communities means that we are able to target beneficiaries who may otherwise not have
access to such microfinance services. It should also be noted that their public supporters and some
of their donors (Qatar charity, Islamic Development Bank) have been donating funds specifically for
Islamic microfinance programmes.
Islamic Relief has also strengthened its partnerships with the private sector, with banks such as
HSBC37 and Meezan38 and institutional banks such as the Islamic Development Bank. In January
2010 IR led a conference on Islamic micro-credit in the UK attended not only by development experts
but by bankers and city lawyers, and it led to new forms of engagement between the financial sector
and the development community.
29
Karim.N, Tarazi. M and Reille.X. (Aug 2008), Islamic Microfinance: An emerging Market Niche,
CGAP Focus note, No.49
30 Afghanistan, Albania, Bangladesh, Bosnia, Chad, China, Egypt, Ethiopia, Haiti, India, Indonesia,
Iraq, Jordan, Lebanon, Libya, Kenya, Kosova, Mali, Malawi, Niger, oPT, Pakistan, Russian
Federation, Sri Lanka, Somalia, South Sudan, Sudan, Yemen
31
http://www.foreignpolicy.com/articles/2010/06/21/2010_failed_states_index_interactive_map_and_rankings
32
Afghanistan, Chad, Ethiopia, Iraq, Haiti, Kenya, Niger, Pakistan, Somalia, Sudan, Yemen
33
http://www.ecdpm.org/Web_ECDPM/Web/Content/Download.nsf/0/26545895915FF152C12576BF003430F8/$FILE/EUMemorandum-2010_New%20Challenges-New%20Beginnings_Summary.pdf, pg xv
34
http://hdr.undp.org/en/statistics/
http://www.oecd.org/dataoecd/32/40/43540882.pdf
36 Bangladesh, Bosnia, Chad, China, India, Indonesia, Kenya, Kosova, Mali, Malawi, Niger, oPT,
Pakistan, Russian Federation, Sudan
37 http://www.microfinancegateway.org/p/site/m/template.rc/1.26.8854/
38 http://www.meezanbank.com/NewsDetail.aspx?iNewsID=113
35
Their programme teams contain microfinance specialists and we have just recently embarked on a
formal process of ensuring their microfinance programmes are certified by Islamic institutions39.
Since 2009 we have distributed micro credit to the value of £5 million to over 10,000 individuals. The
size of the loans vary from £100 to much larger loans of £3000 which support micro-entrepreneurs.
Islamic Relief has started its Islamic microfinance programmes more than a decade ago.
The following table illustrates a number of examples from their current Islamic microfinance
programmes:
Chad42
Pakistan43
Bangladesh
Sudan 44
Bosnia
Kenya
Kosovo
OPT Gaza
Living
wage
in
country
£39
£61
Average
loan
size
User
fees
Current
Repayment
rate
No of
Average
40
clients
size of
family
Number of
beneficiaries41
£270
£155
98.8%
98%
1,708
1,215
6
6
10,248
7290
£40
£39
£157
N/K
£153 47
£30-100
£43-70
£990
£30
£990
£2005000
£2.7
£7.6 to
£21.6
variable
10% 45
7%
variable
£51
010%49
98%
95%
99%
98%
99%
2693
580
790
328
727
329
6
6
3-446
6
648
6-7
15,050
3,480
3,950
1968
4512
4015
These examples are not exhaustive but indicate that typical size of loans and conditions vary
depending on the specific contexts. Also, the relation between living wage and loans proposed by
IRW is not necessarily the same throughout countries and projects. IRW’s Pakistan microfinance
programme started 11 years ago, their experience has showed that lending to the family as a whole
had a positive impact on repayment rates and the empowerment of women. Key success factors
include sensitization /mobilization at community level, close monitoring of the borrowers and
providing periodic advice.
Impact assessment is increasingly being encouraged for their Islamic microfinance programmes. For
example, in Sudan (Blue Nile, Khartoum, Elobied), positive impacts on the income of orphan families
have been demonstrated and beneficiary families were able to largely promote their livelihoods.
Having a global IMF Advisor – one of the measures planned in the context of this PPA – IRW will
39
The first such certificate has just been received by Pakistan
As of May 2012
41 Including family members, suppliers and new jobs created
42 2008 Country Reports on Human Rights Practices, United States Department of State.
43 varies between GBP-7.6 in the Qard-al-hasan mode of financing, versus
14% i.e. 21.6 GBP markup in a murabaha financing mode
44 Project focus areas have been Greater Kordofan and Blue Nile, 2009-2011
45 10% for Murabaha schemes being practiced in Khartoum and region
http://en.wikipedia.org/wiki/List_of_minimum_wages_by_country
“Palestinian Workers Rights - A Report Commissioned by the Palestinian Human Rights Monitoring
Group http://www.phrmg.org/Palestinian%20worker%20rights.pdf
46 http://www.childinfo.org/files/bandh4.pdf
47 http://www.imf.org/external/pubs/ft/scr/2011/cr11210.pdf
48 http://siteresources.worldbank.org/INTKOSOVO/Country%20Home/21541688/KosovoPAvol2.pdf
49 Depending on repayment period, financing scheme, beneficiary and financed project
40
have an opportunity to systematize findings, establish best practices through their programmes and
demonstrate impact in a transparent manner.
The Benefits of Funding through the PPA for the work on micro-finance
The Islamic Relief PPA will provide value added by supporting the expansion of Microfinance
programmes in Kenya, Bangladesh, Pakistan and Sudan. It will facilitate learning and knowledge
generation in this sector and from within these communities. Their acceptance by these communities
will mean that beneficiaries (who may otherwise not have had access to microfinance) will not only
be able to access microfinance, but also do this with the confidence of maintaining their faith. This
will directly contribute towards achieving MDG1, and as it will create sustainable livelihoods. In
addition, the PPA will indirectly contribute to MDG 2-7 as more disposable income is available to
households.
Within this PPA IRW wanted to focus on diverse geographical areas to ensure the most learning and
believe the choice of four countries in different parts of the world with variable economic and political
contexts gives an opportunity to not only focus on eradicating poverty but also to develop some
microfinance learning for the sector. Ultimately this PPA will create sustainable livelihoods for
beneficiaries/ households within identified communities in 4 fragile states (Kenya, Bangladesh,
Pakistan and Sudan). It will benefit rural and urban populations and it will benefit male headed as
well as female headed households. The initial process of social mobilisation and capacity building will
orient the communities towards the aim of the interventions and to ensure they have the capacity to
make the right decisions in terms of choices and management. IRW has vast experience and
knowledge of the four fragile states that this PPA will focus on, it has over 20 years experience of
working in Sudan and Pakistan, nearly 20 years of working in Kenya and many years in Bangladesh.
The work on Islamic micro finance will support 8,509 direct beneficiaries with community based
access to Islamic micro finance. The targets in the four focus countries are:
Total No.of microfinance
recipients
Total No. of benefiting people
(based on average family size
of 6)
Kenya
Bangladesh
Pakistan
Sudan
2750
4500
4000
2000
16,500
27,000
24,000
12,000
Livelihoods will be improved through the availability of microfinance which can be used for purchases
such as seeds, livestock or raw materials for businesses. To ensure maximum impact on livelihoods
communities will also be given business management skills training. Microfinance will be used to
establish new businesses or expand existing ones in areas such as petty coffee shops, cloth trading,
tailoring and bread making. This will result not only in greater income but will also create local
employment.
The intervention will benefit 79,500 people with microfinance in these 4 countries.
A number of communities in the 4 countries will have community based access to Islamic micro
finance. The microfinance approach will be based on developing community based organisations at a
village level, although they will have access to microfinance this will be supplemented by other skills
training in business management to ensure that the right decisions are made in the context of their
needs and the market. A ‘community’ constitutes a targeted group, which will be comprised of a
group of rural villages or urban households.
This will be measured using a comprehensive database established by Islamic Relief with data on
credit recipients and how the resources were used. This will be backed up by case studies and
impact assessments. Evaluation studies will be undertaken to learn how the interventions impact the
targeted communities based on their different contexts namely rural, urban and geographical. In each
of these countries existing micro finance institutions will be mapped out and IRW will engage with
umbrella organisations. In the UK IRW will be an active part of the BOND microfinance group and
strengthen further its work with the private sector.
Research will be undertaken to understand the motivation of beneficiaries as well as
compare/contrast the impact of conventional and Islamic microfinance programmes in the targeted
communities.
Outcome 2: Faith based frameworks
Theory of change
Providing faith based frameworks50, evidence and research, to identify best/appropriate practise to
civil society organisations, donors and policy makers. This will enable key stakeholders to understand
and appropriately engage with Muslim faith based communities in the areas of climate change and
food security, child protection, microfinance/debt, food security, conflict transformation in order to
tackle the roots of poverty.
As a faith based agency Islamic Relief brings not only an expertise from its work at field level but also
specific cultural and religious perspectives. Islamic Relief fills a sector-wide discourse gap and makes
explicit links between the socio-economic and cultural environments that shape people’s choices and
circumstances; the contradictions and tensions of globalisation; and religious context, dogma, and
discourse.
Islamic Relief is a broker in the policy development debate between the communities they work with
and the donors that support them. Islamic Relief influences policy perspectives of Government and
multilaterals (DFID, EC, UN), discusses best practice with its peers through networks such as Bond
and partners with fellow faith based agencies such as Muslim Charities Forum, The Humanitarian
forum, CAFOD and Christian Aid. They are well placed to engage and influence the rapidly emerging
stakeholders in the global arena through their co-operation with the Arab League, Organisation of
Islamic Cooperation and partnership with the Islamic Development Bank.
Islamic Relief has developed a range of policy papers and positions and contributed to a wide range
of policy fora as a Muslim faith based organisation.
Benefits of Funding Through the PPA:
The PPA will provide critical support to Islamic Relief in further developing its capacity to engage in
the policy discourse and provide frameworks which will help stakeholders engage with faith
communities. Islamic social teachings have never been codified in a coherent and accessible
manner, linguistically and conceptually, in relation to human development and therefore it is essential
that the various teachings relating to dignity, freedom, rights and social solidarity are clarified to
enable a clear understanding of what development means and therefore how poverty is defined and
manifested. The RAD research programme in Birmingham51 indicated that a huge gulf exists
between faith based organisations, development literacy and secular development organisations.
Such a piece of work would therefore enable the sector to engage much better with Muslim
beneficiaries and local partners and empower Muslim faith groups to communicate their aspirations
and beliefs on complex areas.
In the policy arena Islamic Relief has gradually been increasing its presence. Islamic Relief has
developed a range of policy papers and positions which can be found on Islamic Relief website. Their
contribution to the policy debate has included:
 a UNAIDS conference on Faith and HIV that took place in Geneva, in April 2008 which
included a plenary presentation on the ‘state of affairs’; advice on the conference’s invitees;
50
51
Theological frameworks based on the principles of Islam.
http://www.religionsanddevelopment.org/index.php?section=1






and a review of the conference and post-conference material;
a UNDP work shop for religious leaders, which took place in Fayyoum in Egypt, in June 2008
where Islamic Relief presented HIV-related work;
a UNFPA conference on reproductive health in Istanbul, in October 2008, where Islamic
Relief led one of the sessions and proposed closer collaboration between the two
organisations (leading to a Memorandum of Understanding in 2009);
a White Paper regional consultation meeting in Birmingham, in April 2009, when an Islamic
Relief representative reflected on DFID’s work in the previous years
a lecture series on Faith and Development, together with Oxfam, World Vision and DFID, in
2009;
Islamic Relief was a contributor to University of Birmingham ‘Religion and development’
Islamic Relief is also on the board of the Jubilee debt campaign and part of UK/Europe
networks such as Bond, Concord and NGO Voice.
Islamic Relief will develop Muslim faith frameworks52 , commission research, issue briefing papers,
engage with learning forums and provide faith based perspectives to the development discourse.
This will be done broadly under the banner of faith and development with a specific focus on:





Child protection
Climate Change and Food security
Debt & Microfinance
Conflict transformation
Gender
This work has the potential of improving poverty approaches for 1 billion people53. The quality of the
research will also improve Islamic Relief programmes so we expect that the PPA funding will help
Islamic Relief leverage further funds through improved programme quality.
Child Protection
Understanding of child rights is inconsistent and poor in some groups and institutions in the Muslim
world. Protection of children is strengthened considerably in the Muslim community when
understanding of religious obligations is better understood on child rights. Evidence of this has led to
agencies such as UNICEF investing in the codifying of child rights in Islam. However there is still a
need to look at Islamic faith teachings and principles in relation to state and institutional protection to
address serious breaches of child rights and protection in the Muslim world. In this context Islamic
Relief will:




Develop a handbook with toolkits on use of faith approaches on Child Protection
Research and dissemination on teachings and practice around child protection in Islam
conducted with Qatar and Southampton University which will provide guidance on normative
understanding and good practice to state and non-state actors.
Research into how madrassa systems can provide protective environments
Seminar on use of Islamic faith approaches and engagement with
Conflict Transformation and Fragile States
Evaluation of their Conflict transformation & peace building (CTPB) project in Yemen (2009) found
that faith references from Qur’an and Hadith54 had been particularly helpful to Imams, Judges,
Sheikhs, teachers and security personnel attending the training because it encouraged internalisation
52
Theological frameworks based on the principles of Islam
This figure has been produced on the basis of the number of Muslims that are living in the 27
countries that IRW has field country offices. Using figures related to population and the %age of
Muslims from the following website http://www.infoplease.com/countries.html
54 Sayings of the Prophet Muhammed (peace be upon him)
53
of CTPB values and teachings when working with the community. Islamic Relief believes it will be
helpful to include more Islamic faith principles supporting CTPB in their training and increase
understanding of Islamic traditions of reconciliation, non-violence, rights of minorities and consensual
decision making paradigms. Field based research into how these are used in practice will then
increase their understanding of the role Islamic faith traditions and teachings actually play in CTPB
and what potential there is to work with them. The findings will then be integrated into a handbook on
CTPB programming and enable other agencies to gain an understanding of these faith principles
when working with traditional Muslim communities. The planned deliverables are:







Development of handbook with toolkits on use of Islamic faith approaches on Conflict
Transformation
The development of conceptual understanding from Islamic sources and jurisprudence on the
basis of transforming conflict and peace building.
Papers on Islamic Relief faith stances on use of Islamic faith instruments and faith teachings
on Conflict Transformation (Governance, democracy and Islamic Faith teaching, state
citizens, governments, Islamic views on violence and prevention of violence, pluralism and
the rights of minorities/other faith communities within the Muslim state)
Research project analysing the use of traditional mechanisms and faith influence.
Research into a DRR approach to climate change and conflict.
Policy influence applied relating to Conflict Transformation and peace building
Conference on faith approaches to Conflict Transformation.
Climate Change and Environmental Protection
Islamic Relief is working in Asia, Africa and Middle East where challenging environments and
changing climate make farmers more vulnerable and increasingly more food insecure. Farmers in
developing countries used to make their decisions based on their lifelong experiences. The available
evidence showed that farmers were quite efficient in resource allocation. However, with the climate
change farmers’ previous experiences are increasingly becoming irrelevant and now they are
required to allocate their resources with less reliable experience and knowledge. They are required to
adapt and re-adapt to changing climate. Research and documentation of grassroots level knowledge
and skills that help farmers adapt to changing climate is found very useful for the farming
communities and policy makers alike. Where farmers learn from what works and what doesn’t and
benefit from the best practices, governments need this information to tailor their strategies for
providing farmers the needed support. The planned deliverables are:



Development of handbook with toolkits on use of faith approaches on environmental
protection
Understanding of the impact on, challenges and opportunities for Muslim Communities in
fragile states of climate change in relation to food security, migration and conflict.
Engagement within policy circles (Concord and BOND, EC, DFID and Rio20)
What is the likely impact (positive and negative) on climate change and environment
for each feasible option?
Categorise as A, high potential risk / opportunity; B, medium / manageable potential risk /
opportunity; C, low / no risk / opportunity; or D, core contribution to a multilateral
organisation.
Option Climate change and environment Climate change and environment
risks and impacts, Category (A, B, C, opportunities, Category (A, B, C, D)
D)
1
B
B
2
C
C
Microfinance & Debt
Islamic microfinance is currently a growing sector both within the NGO and banking industry.
However understanding is still being developed and shared on the relative merits of the different
models and their application both within Islamic Relief and between different providers. There is also
greater understanding needed on the impact of Islamic microfinance in order to influence donors and
institutions to engage with it.
Debt is an issue of huge importance, forcing many countries to shift their policies in ways that impact
negatively upon poverty and food security. Islamic Relief has been active within the UK Jubilee Drop
the Debt Campaign in the last 11 years and they are now part of the faith group that leads on this
issue. Planned deliverables are:






Development of handbook with toolkits on use of Islamic faith methodologies in Microfinance.
Paper on the impact on Muslim Communities in fragile states of religiously appropriate lending
practices including coping with climate change.
Engagement within policy circles
Research Paper on ‘impact of current sovereign debt obligations on food security in Pakistan’.
Conference for Islamic Finance representatives- ‘Investing for the Poor’ –Investing in shariacompliant Micro-finance
Impact assessment of Islamic microfinance programme
Gender
Gender is a critical area to analyse when dealing with poverty. There is a constant need from
practitioners to have a reference to guide ethical and rights based programming in relation to gender
in Islam. The enormous degree of confusion between cultural and religious values and practice
increase the importance of practitioners and beneficiaries having access to the practical
programming guidance based on Islamic teachings which will enable them to challenge oppressive
and discriminatory treatment of women. Examples may include providing access to education,
political and social representation, access to livelihoods, and inheritance rights. Planned deliverables
are:



Development of handbook with toolkits on use of Islamic faith methodologies in relation to
gender.
Briefing Papers on gender.
Engagement within policy circles
This work will be measured using the Islamic Relief “level of engagement” index. The levels are:




Level 1 – Islamic Relief’s position being developed or developed. Little engagement with
external bodies hence little understanding/ awareness of Islamic Relief’s position or external
agencies are not interested in Islamic Relief’s position
Level 2 - Evidence of engagement with external policy teams through meetings, attendance at
conferences. Exchange of ideas and documents becoming frequent
Level 3 - Evidence of Islamic Relief’s position influencing thinking through citations in
documents, speeches, and websites by external agencies. Invited to be a core speaker in a
conference related to policy
Level 4 - Joint policy work undertaken such as joint research. Joint policy documents issued.
Islamic Relief invited onto core working groups that develop and write international policy.
The specific targets are





On microfinance/debt: Increases in 3 levels for one agency and 2 levels for two agencies
On climate change and food security Increases in 2 levels for two agencies and 1 level for
one agency
On conflict: Increases in 3 levels for one agency, in 2 levels for one agency and 1 level for
one agency
On child protection: Increases in 2 levels for 3 agencies
On gender: Increases in 2 levels for one agency and 1 level for two agencies
During the first year of this arrangement, the results framework will be further developed and the
future level of support considered.
Strengths and capacity of Islamic Relief to implement a PPA:
Islamic relief’s Vision is: “Inspired by their Islamic faith and guided by their values we envisage a
caring world where communities are empowered, social obligations are fulfilled and people respond
as one to the suffering of others”.
Islamic Relief’s Mission is :
“Exemplifying their Islamic values, we will mobilise resources, build partnerships, and develop local
capacity, as we work to:
o Enable communities to mitigate the effect of disasters, prepare for their occurrence
and respond by providing relief, protection and recovery.
o Promote integrated development and environmental custodianship with a focus on
sustainable livelihoods
o Support the marginalised and vulnerable to voice their needs and address root causes
of poverty”.
Islamic Relief will carry out these activities regardless of race, political affiliation, gender or belief, and
without expecting anything in return.
Strategic plan focusing on enabling communities to adapt to, and meet the challenges of, living in
environments at risk from climate change, natural disasters, conflict and global market changes.
Islamic Relief’s Strategic objectives (2011-2015) are based on four strategic focus areas:





Protecting life and dignity: helping communities reduce the risks and effects of disasters by
improving protection (disaster risk reduction), relief and recovery.
Empowering Communities: supporting the long term development of the communities
through using a joined up approach to development and by focusing on sustainable
livelihoods and environmental management
Campaigning for Change: supporting communities, including the marginalised & vulnerable,
to voice their needs and address root causes of poverty & suffering. IR aims to empower
every layer of society to fulfil their social justice obligations through engagement, education &
empowerment. Islamic Relief will support individuals & communities to mobilise to effect
positive change.
Strengthening the Islamic Relief family: By improving efficiency and collaboration, Islamic
Relief will be recognised as a unified global family that collectively makes up the world’s
foremost Muslim NGO in terms of credibility, influence, efficiency, effectiveness and impact.
Cross cutting Issues: Islamic Faith perspectives, Child Protection & welfare, Climate change
adaptation, Building the capacities of the communities Islamic Relief works with
A particular focus of the PPA is on Islamic micro finance. A specific need has been identified for
Islamic micro finance. Building on their skills and experience, Islamic Relief will be able to meet this
need and bring benefits to large numbers of poor people in Islamic communities.
Islamic Relief has strategic arrangements with UNHCR, UNFPA, UNICEF, ECHO, UNWFP, UNWHO
and DFID.
As a Muslim faith based organisation Islamic Relief is a leader in providing a contextualised faith
perspective as it campaigns for better practices and policies, builds partnerships with communities,
civil society, governments and the private sector, to deliver programmes that contribute towards the
achievement of the Millennium Development Goals. The demand for such a voice and perspective in
the international arena is immense as demonstrated by the number of requests for engagement that
Islamic Relief receives.
Governance
Islamic Relief operates through a global network of affiliated implementing offices and locally
registered Islamic Relief Partners. They liaise closely within a formal reporting and monitoring
framework that ensures all affiliates work towards the same core strategic objectives.
The governance of Islamic Relief is the responsibility of the Board of Trustees, which is currently
made up of seven trustees. The Chief Executive chairs the Board of Directors, who manage the
following divisions international programmes, finance & services, human resources & organisational
development, communications and advocacy, international fundraising development, and UK.
The International Programmes division line manages the performance of 26 field offices and
worldwide emergency responses. Islamic Relief has the capacity to recruit professional quality staff
internationally and locally due to the quality of work and reputation as a faith based organisation.
Islamic Relief has 256 UK staff working in the UK and overseas and 1000+ local staff delivering
projects in field offices. 25% of the staff is women (a figure that has been rising over the past 3
years) and 95% of staff is classed as originating from an ethnic minority.
In the due diligence report for Islamic Relief it was found Islamic Relief needed to strengthen its
internal controls and visibility held at the centre of sub-grantees outside the Islamic Relief group.
Islamic Relief has been working on this and:
Progress
 Training delivered to all Finance Managers of all Field Offices and follow-up action plan
defined held Kosovo June 2010. This training made specific emphasis on anti-terror, antimoney laundering and Bribery Act compliance.
 Further training and progress ascertained with all Finance Managers of all Field Offices held
Pakistan July 2011
 Process document circulated now being updated with Thomson Reuters Screening software.
 Directives to all Field Offices issued August 2011.
 Contract signed with Thomson Reuters for Online screening software in October 2011;
training and roll-out to Head Office, Fundraisers and Field Offices currently in progress.
DFID officials visited Islamic Relief on 25 January 2012 to ensure that the issues raised in the “PreGrant Due Diligence Report” had been addressed and to finalise the “Assurance Audit”. They found
that good progress had been made on the critical and high priority issues highlighted in the “PreGrant Due Diligence Assessment Report” and that there had been open and constructive discussion
about findings from the Kenya/Somalia “Assurance Audit”. The visit provided evidence of Islamic
Relief having acted on the findings of the “Pre-Grant Due Diligence Assessment” and the “Assurance
Audit” identified no significant issues.
DFID officials reviewed IR's organisational Bribery Policy. The policy is a clear and concise document
which has been circulated throughout the organisation. IR has delivered awareness seminars on the
Act and key finance personnel have gone through structured training. DFID’s content that an
adequate policy is in place and that IR has taken steps to ensure staff is aware of their roles and
responsibilities.
Evidence Supplied in Relation to Progress
 ‘Partner Screening’ Directives to Field Offices
 Agenda Kosovo Training June 2010
 Follow-up action Kosovo Training
 Pakistan Agenda and Action Plan
 Thomson Reuters agreement
 Screening Process
 Supplier Screening form
 Vetting Report Format
 Partnership form Template Field Office
Future Plans
 Complete roll out and training to all offices; Evaluation and Audit to undertake periodic
reviews to ensure regular and effective use by all departments and users.
Results, Monitoring and Evaluation
Islamic relief ensures monitoring, evaluation and learning through robust reporting systems from the
field; assurance systems that focus on risk management; an extensive system of evaluations, audits;
and learning teams.
Field Monitoring:
 Field teams report on all projects on a quarterly basis.
 These reports are produced in country, by country programmes.
 Reports are assessed by desk officers and finance teams
 Any areas of concern are escalated up to senior management.
 Consolidated progress reports are issued by each desk officer who covers up to 3 countries.
 All field offices are also expected to issue consolidated annual reports.
Audit and quality assurance
 Internal Audit leads the assurance function and reports to an audit committee which includes
the CEO and trustees.
 Key learning and areas of improvement are identified and prioritised.
 Over the last 3 years 19 audits have been completed
 Bi-annual country risk assessments are undertaken which focus on risks related to human
resources and systems.
 An internal quality management system based on PQASSO55 to assess work based on 17
quality standards from planning to standards, protection to monitoring and evaluation.
 Assessments are undertaken every 2 years. In the last 3 years 20 field offices have been
assessed through this process.
Evaluation
 Evaluation department leads in coordinating external evaluations and undertakes internal
evaluations.
 In the last 3 years 26 internal evaluations have been undertaken. The internal evaluations are
55
http://www.ces-vol.org.uk/index.cfm?pg=42
based on the DAC criteria for evaluations56 and are made available to all through an internal
web portal.
 All evaluations are discussed with the relevant teams and clear learning recommendations
are agreed.
Learning
 e-learning portal will continue to be developed offering staff globally the chance to develop
their skills in line with their personal development plans
 Improving project management skills with Prince2 (85 people at foundation level so far).
 Programme learning through the evaluation and audit sections of the organisation.
 Advisors recruited in the areas of climate change and microfinance
Transparency and Accountability
Islamic Relief was assessed as part of the 2008 global accountability report57 in the areas of
transparency, evaluation, participation, complaints and response. The report concluded “Islamic
Relief performs comparatively well across all dimensions of accountability capabilities and is
particularly strong in transparency and complaints handling relative to all sector averages....Islamic
Relief scores well in comparison to all sectors, tied for third ranking in the INGO sector and tied for
sixth ranking overall”.
Islamic Relief are annually assessed as part of the Disaster Emergency Committees Accountability
Framework58 (DECAF) with clear commitments to improvement agreed and monitored.
Islamic Relief is a member of Humanitarian Accountability Partnership (HAP)59.
In July 2010 The Institute of Chartered Accountants in England and Wales has awarded Islamic
Relief with second place in an award which recognises outstanding transparency and
communication60.
Islamic Relief’s transparency and accountability system is underpinned by clear policies and
guidance to all staff supported by regular audits and evaluations in this area. Worldwide 15
accountability monitors have been trained.
Cross cutting issues
This PPA will have a significant impact related to climate change and environment. Many of the
communities that the Microfinance programme focuses on will be rural communities. The
communities in sub-Saharan Africa (Sudan) are particularly looking to adapt to the effect of climate
change. This will mean that livelihood systems at household system are shifting, availability of
microfinance will assist such communities to make this shift.
One of the core policy engagement areas will be food security, hunger and climate change. This will
look at how communities that Islamic Relief is working with are affected by climate change and how
they can adapt to this.
Climate change and the environment is a key cross cutting issue within the new strategy (which is
56
Coverage, effectiveness, impact, connectedness, relevance, appropriateness, coherence,
efficiency, cost effectiveness, standards compliance, LRRD, security, human rights and gender
57 http://www.oneworldtrust.org/index.php?option=com_content&view=article&id=114&Itemid=144
58 http://www.dec.org.uk/item/355
59 http://www.hapinternational.org/
60
http://www.icaew.com/index.cfm/route/173444/icaew_ga/en/Special_interest_groups/Charities_and_V
oluntary/Charities_Online_Financial_Report_and_Accounts_Awards_2010
now in the final stages of development). Institutional systems (project development and reporting,
evaluation and learning, research and policy, procurement and tendering) are to be adapted and
redesigned to incorporate such an approach.
This PPA targets a range of target group who suffer from social exclusions issues. Islamic
Microfinance has numerous aspects to it as it benefits poor people (who do not have traditional
access to credit). It targets females, whether they head the households or not, and indirectly all
members of a household (men, women, children, elderly and disabled). It directly helps the economy
as money is injected into the economy, and demand and supply created. Beyond the above, policy
engagement will support communities involved in conflicts, gender relations and child protection.
The impact of the micro finance work will be disaggregated to illustrate the benefits to women,
disabled people and marginalised communities.
Indicators are being developed to measure the progress of these cross cutting areas.
Alternative Option 2 (do nothing): Reject IRW’s offer
The choice not to provide PPA funding will limit the capacity of IRW to deliver its poverty reduction
priorities and to influence other CSO partners. The rigorous assessment of IRW’s proposals against
the agreed commitment to fund CSOs through PPAs makes a good case for the fit with IRW’s
objectives over that over other CSO PPA applicants.
In the table below the quality of evidence for each option is rated as Strong, Medium or
Limited.
Option Evidence rating
1
Medium
2
Strong
Summary - Value for Money Justification:
For the reasons summarised below, Option 1 offers good value for money and is proposed for
approval.
The overall theory of change for the PPA investment with Islamic Relief, is that by providing strategic
support for PPA to test and refine its most promising evidence-based development models, connect
this evidence to policy-makers to influence best practices and attract funds from other donors, and
support governments and other agencies to adopt innovative approaches where they prove relevant
and effective, the PPA seeks to leverage the local-level impact of PPA’s best initiatives to influence
national and international development policy and effect much wider change in the lives of poor
people.
As a Muslim faith based organisation Islamic Relief is a leader in providing a contextualised faith
perspective as it campaigns for better practices and policies, builds partnerships with communities,
civil society, government and multilaterals, to deliver programmes that contribute towards the
achievement of the Millennium Development Goals.
Their unique perspective is reflected in their ability to work effectively and competently in a large
range of Muslim communities (and increasingly Non-Muslim communities) across the world where
there are challenging social, political and cultural factors at play.
As a faith based agency Islamic Relief will bring not only an expertise from their work at field level but
also specific cultural and religious perspectives. Islamic Relief make explicit links between the socioeconomic and religious and cultural environments that shape people’s choices and circumstances;
the contradictions and tensions of globalisation; and religious context, dogma, and discourse. Islamic
Relief has developed a range of policy papers and positions which can be found on the Islamic Relief
website and partnerships in relation to fragile states. Islamic Relief will respond to consultations and
provide policy perspectives in areas related to faith and development.
More specifically, Islamic Relief’s choices of specific programmes to support and report on under the
PPA reflect its areas of expertise well, and have been carefully assessed by Islamic Relief as the
most promising in relation to scaling up and learning. The benefits outlined earlier, past evaluations
of Islamic Relief’s work and its broad reach beyond the scope of programming alone all contribute to
a strong case for supporting a PPA with Islamic relief and it providing good value for money.
Due diligence checks have been carried out on Islamic Relief. These were discussed with Islamic
Relief and specific areas of weakness highlighted. Actions to address these issues have been
mutually agreed between DFID and Islamic relief and included in the Memorandum of
Understanding. DFID is now confident that in addition to yielding results on the ground, Islamic
Relief has strong and efficient mechanisms in place for monitoring and evaluating its work, focusing
on results and delivery, and ensuring good value for money and transparency in all decision making.
Through performance monitoring, DFID will assess that PPA’s organisational systems are used to
deliver value for money of the PPA investment (see next section). DFID will emphasise the
importance of learning lessons and disseminating these more widely through the partnership to
reflect innovative programming aspects of PPA’s approach. PPA’s efforts to share learning would
benefit from regularly assessing impact on its and partners’ work. DFID will encourage this through
its learning and management support to PPA partners.
Cost
 2011/12
£500,000
 2012/13
£1,250,000
 2013/14
£1,250,000 (provisional)
D. Measures to be used or developed to assess value for money
Value for Money
The PPA mechanism is efficient, as set out in previous sections (administratively efficient 0.2%,
pooled resources on monitoring and evaluations, outreach, scaling up etc).
Islamic Relief as an institution has its own systems in place to ensure value for money.
In a 2010 European Commission organisational audit, Islamic Relief was categorised as low risk
in the budgets, financial control and reporting areas.
Controlling administrative costs is a driving force for Islamic Relief’s budgetary control process.
Budgets are scrutinised by a budget committee to ensure value for money before the trustees agree
the budget in line with clear indicators linked to the international strategy. The trustees set a ceiling
for administration overheads that can be deducted from various sources of income and they receive
reports against these limits.
Islamic Relief has a Finance and Services division which ensures its financial accounting and
management systems. It produces quarterly management reports for the CEO and trustees to ensure
value for money. They are globally rolling out a financial system based on Microsoft AX. Issues
were raised by the due diligence checks which are being addressed.
Procurement processes are used to ensure cost effective transparent purchases. During the
coming period the procurement department will be exploring the issue of framework contracts and
preferred suppliers for field operations.
Financial transparency has been award-winning. In 2010 ICAEW assessed Islamic Relief to be
second of the 100 largest UK fund raisers in terms of financial transparency.
Value for money is also achieved in Islamic Relief by ensuring the right programmes are focused on
and they are of good quality.
Commercial Case
Indirect procurement
A. Choice of funding mechanism that demonstrates value for money through procurement
As part of the application process for a Programme Partnership Arrangement (PPA) all applicants
were asked to provide evidence to show how they ensured value for money in their day to day
operations. Using a pre-determined scoring system each applicant was marked between 1 and 4
(with 4 being the strongest scoring) for the response they provided. Each was asked to provide
concrete examples to support the narrative provided. This score was then added to scores allocated
to other issues such as transparency and accountability and results delivery. These scores were
then added together to provide an overall score for the applicant and a decision was taken based on
the applicants overall score and the level of funding calculated using the scores.
All of the successful applicants for PPA had to be able not only to describe how they achieved value
for money but also to say how they would achieve further value for money savings over the lifetime of
the PPA funding.
Each PPA applicant was asked to complete a Procurement Questionnaire which posed a wide range
of questions aimed at giving a detailed overview of each organisation’s procurement practises and
policies. This completed questionnaire was forwarded to KPMG who were contracted to undertake a
Due Diligence check of all successful PPA applicants.
The reports which KPMG produced focused on each PPA applicant’s Internal Governance, their
Financial Management and other areas and included a substantial section entitled ‘Value for money
and procurement capacity and effectiveness’. This section described each PPA applicant’s primary
measures of value for money and its baseline procurement capacity in relation to its organisation.
The section tabled the PPA applicant’s Primary Objectives, Key performance indicators, set a
baseline for performance for the start of the PPA and set targets for improvements over the lifetime of
the PPA.
Each PPA applicant, once finalised, was issued with a Memorandum of Understanding (MOU) which
laid out the generic terms and conditions of the PPA support but also included any specific conditions
which arose as a result of the Due Diligence checks. For Islamic relief there were a number of issues
highlighted resulting from the complex international structure of the organisations. Actions to address
these were mutually agreed by DFID and Islamic Relief and the conditions with specific deadlines
were included in the Memorandum of Understanding. With these timed conditions, we can agree to
PPA funding.
Section B: Value for Money through Procurement
The Procurement Questionnaire and the Due Diligence check undertaken by KPMG have shown that
Islamic Relief places significant priority in ensuring procurement procedures follow best practice.
Procurement processes are robust and are used to ensure cost effective transparent purchases.
During the coming period the procurement department will be exploring the issue of framework
contracts and preferred suppliers for field operations.
Financial Case
A. How much will it cost?
The overall PPA budget for the three year period beginning 1 April 2011 has been set at £120m per
financial year (April to March). Of this amount £20m has been ring-fenced for applicants requesting
support under their Humanitarian and Conflict criteria with the balance of £120m per year available to
support CSOs active in any other area of the development arena.
Approval for this overall funding allocation was agreed at ministerial level following a submission to
Ministers on the future of strategic level unrestricted support to CSOs.
To set appropriate funding levels, the Resource Allocation Model (RAM) took account of the size of
the successful CSO (in terms of annual income) as well as the scores allocated to produce a final
breakdown of the PPA budget amongst all successful applicants.
In the case of Islamic Relief the RAM produced a proposed PPA funding level of:



2011/12
2012/13
2013/14
£500,000
£1,250,000
£1,250,000 (provisional)
The level of funding for year one is set but the exact funding level for years two and three will be
dependant on the outcome of an independent evaluation of the Islamic Relief PPA after 18 months
and agreement on arrangements for performance based funding in future.
B. How it will be funded: capital/programme/admin
All of the funding for the PPAs will be paid from programme funds.
Over the three year period of PPAs £300m will be paid from Civil Society managed programme funds
with a further £60m paid from CHASE managed programme funds.
C. How funds will be paid out
All of the PPA holders are civil society organisations who do not, as a matter of course, hold large
reserves of funding. To address this issue DFID has secured Treasury approval to pay CSOs in
advance for up to three months. In order to receive this advance payment approval all PPA holders
will be required to, when returning their signed Memorandum of Understanding, request that they be
paid in advance and explain why an advance payment in necessary.
All PPA holders who provide this request and justification for advance payment will be paid quarterly
(in advance) on receipt of a signed request for release of PPA support. Those not requesting
advance payment or providing no supportable justification for such a payment will be paid quarterly in
arrears.
All payments will be made by the Civil Society Department.
D. How expenditure will be monitored, reported, and accounted for
The funding provided through PPA is unrestricted. This means that when DFID transfers the funds to
the PPA holder they are free to use them for any purpose in support of their objectives. As a result
DFID does not ask them to say where the funds were actually used nor is DFID able to trace them
through accounting systems.
However, DFID asks that the PPA holder provide a copy of their certified Annual Audited Accounts
(AAA) and that they clearly show the PPA funding as a distinct line of income.
DFID holds the right, at any time, to access the PPA holder’s financial records through either its own
Internal Audit team or the National Audit Office (NAO).
The Islamic Relief PPA will follow these same arrangements.
Management Case
A. Oversight
Before entering any formal agreement with PPA DFID carried out a full due diligence check to ensure
that PPA has both the systems and process and staffing at an appropriate level to successfully
manage the funding being provided.
The PPA Manager, within DFID’s Civil Society Department, retains oversight of all PPA partnerships
within DFID.
DFID contracted an external evaluation manager to work with all PPA holders to ensure robust
logical frameworks, which have achievable outcomes, realistic and measurable milestones and
sensible baselines against which progress can be measured. A logical framework has been
produced for the Islamic Relief PPA covering the full 3 year period and can be found with other
published documents on DFID’s website.
B. Management
Within DFID, Civil Society Department (CSD) will be responsible for the day to day management of
this partnership with PPA. More specifically it will be the Relationship Managers within the CSD team
who will have lead responsibility.
The relationship manager will work closely with PPA, to ensure that it is given support to achieve the
agreed outcomes and to act as a broker to help foster relations between PPA and any relevant DFID
country offices and policy teams. The relationship manager will be responsible for ensuring the terms
and conditions as laid down in the Islamic Relief PPA Memorandum of Understanding (MOU) are
adhered to by both partners.
The MOU is the official signed document which lays down the terms and conditions which govern
DFID PPA support to PPA. The MOU covers all areas of the partnership including details on
payment processes, audit requirements, financial commitments and fraud.
In order to maximise learning and knowledge from the PPA partners, Civil Society Department has
allocated one member of staff the role of Learning and Knowledge Adviser for the PPA portfolio.
Through this role the Adviser will work closely with all PPA partners in order to ensure that lesson
learning is shared widely amongst the PPA portfolio of partners, wider civil society and across DFID.
C. Monitoring and Evaluation
The monitoring strategy for each PPA grantee is individually designed (underway) as a response to
their specific logical frame requirements for indicator evidence collection.
Monitoring and Evaluation will be integrated into PPA partners’ approach to managing the funding
they receive through the PPA mechanism. There is a strong onus on each PPA to develop a Results
Framework which will allow for a transparent evidence-based assessment of the results and value for
money achieved through the grant they receive. An externally contracted Evaluation Manager has
been put in place to ensure that the monitoring and evaluation strategies adopted by the
organisations are adequate for providing such information and to allow for an overarching fund-level
evaluation to take place.
A Results Framework has been designed by PPA, including a comprehensive logical frame, which
will be assessed against the theory of change and throughout the evaluation cycle. To date, the
evaluation manager has assessed the logical frame of PPA. Specific technical advice and guidance
has been provided to PPA with a view to strengthen the framework in so far as possible.
The PPA logical frame will provide the core framework for monitoring progress against the planned
results for the grant. A baseline will be collected for each indicator articulated in the logical frame (at
the latest baseline information will be included 3 months after funding has been agreed, unless
otherwise agreed). This will articulate, either qualitatively or quantitatively, the situation at the outset
in the areas in which PPA proposes to use PPA funding. For advocacy work it is likely that the
indicators and baseline information will be qualitative and provide descriptions of current knowledge,
awareness, understand, attitudes and behaviours.
Monitoring information will be collected regularly by PPA and updated on an Annual basis; it will also
be disaggregated by gender where appropriate.
PPA will commission independent mid-term and final evaluations of its PPA spend. A template Terms
of reference for the mid-term and final evaluations will be developed by the Evaluation Manager for
the Fund and agreed by DFID. These independent reviews will form an evidence base for the midterm and final evaluations of the PPA fund as a whole. The evaluation will use the milestones and
proposed outcomes within the agreed Islamic Relief PPA logical frame to measure success.
Indicatively the mid-term and final evaluation focus will be to undertake an overall assessment of
Islamic Relief’s progress towards Outputs, Outcomes and Impact (where data is available). They will
also seek to make an assessment of the effectiveness and efficiency of delivery, the Value for
Money, test the theory of change and identify key lessons learnt and applied.
D. Risk Assessment
Risks have been preliminarily assessed, and mitigation will be further addressed throughout logical
framework development. As they stand, risks to the programme appear manageable.
i
Better Aid – Civil Society and Aid Effectiveness (2009) OECD, p 151
ii
Committee of Public Accounts – HC 64 – 22 March 2007
iii
ibid.
iv
REVIEW OF DFID SUPPORT FOR CIVIL SOCIETY- Paper to DFID Development Committee, London (March
2010), Andrea Ledward, Roy Trivedy
v
REVIEW OF DFID SUPPORT FOR CIVIL SOCIETY- Paper to DFID Development Committee, London (March
2010), Andrea Ledward, Roy Trivedy
vi
REVIEW OF DFID SUPPORT FOR CIVIL SOCIETY- Paper to DFID Development Committee, London (March
2010), Andrea Ledward, Roy Trivedy
Supporting results, value for Money and Transparency: DFID’s work with Civil Society, Presentation to Funding
the Future, London (March 2011) Nick Dyer, Director of Policy DFID
vii
viii
ix
PPA Meta-evaluation, London (January 2010), Neil MacDonald
What is Microfinance?
Microfinance is a term which is broader than microcredit and encompasses microcredit,
micro entrepreneurship and microenterprise. According to Brugnoni (April 2011) ix
“microfinance is the supply of banking or financial services to people who experience
difficulties in accessing the banking system. These difficulties may relate either to the lack of
guarantees or to cultural and religious issues”. Such people are often termed as
“unbankable”. Microfinance therefore encompasses a much wider range of services than
just providing credit, it includes savings, insurance, money transfers, and other financial
products provided by different service providers, targeted at poor and low-income people.
Potential of Microfinance
According to the State of the Microcredit summit campaign report 2011ix, 190 million clients
are benefiting from microcredit of which 128 million are defined as poor families. If that figure
is multiplied by an average family size of 5 almost a billion people are touched by the
benefits of microcredit of which over 0.6 billion are classed as poor. This is a huge
achievement as over 10% of the worlds population is benefiting and is exposed to
microcredit. The potential impact on poverty when this tool is harnessed is immense
although not all microfinance institutions have poverty alleviation as their objectivesix.
The need to act is critical as the global economy still struggles to recover from an economic
recession. A World Bank report states that as a result of the food and fuel crisis, the number
of ‘extremely poor’ was estimated to have increased by almost 100 millionix. In recognition of
this potential the UN designated 2005 as the ‘Year of Microcredit’.