Al-Qard al Hassan, resilient microfinance

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With more than 200,000 microcredits granted in 2019, the Hezbollah-affiliated organization has never been so active, in the shadow of the crisis that has shaken the country for a year.

In 2019, “al-Qard al-Hassan” granted 200,000 loans.

At “al-Qard al-Hassan”, in the Salim Salam sector, it almost feels like a traditional bank, with its counters and long lines of customers who come to deposit or withdraw money. But this institution, which employs nearly 500 people and has around 30 branches across the country, operates completely on the fringes of the financial system. Affiliated with Hezbollah, it has been one of the entities sanctioned by the US Treasury since 2007, which does not prevent it from being the largest microcredit organization in the country. The collapse of the traditional banking sector in a Lebanon in crisis for more than a year has only reinforced its attractiveness.

Founded in 1983 and registered as a non-governmental organization since 1987, “al-Qard al-Hassan” collects on the one hand unpaid deposits in accordance with the principles of Islamic finance, in dollars or pounds, and grants other microcredits. “We grant interest-free microloans, capped at $5,000 (in fresh dollars), aimed at meeting various needs such as marriage, the financing of a project or personal needs”, explains its executive director, Adel Mansur.

To benefit from a zero-interest loan, repayable over a maximum period of 30 months, the client must be guaranteed by a depositor or mortgage an object or gold jewellery. He must also pay administrative costs of approximately three dollars per month (always in fresh dollars or in LL at the black market rate), any gold storage costs and save the equivalent of 12 dollars every monthly, placed in an unpaid account.

According to Adel Mansour, nearly four out of five loans, especially those granted in dollars, are guaranteed by gold. “The value of the loan cannot exceed 70% of the value of the mortgage, which helps protect us from risk.”

In the midst of a crisis, “al-Qard al-Hassan” thus suffers neither from an increase in bad debts nor from a lack of liquidity.

Read also: The Lebanese are selling off their gold to survive

“We are extremely patient with our customers. In the event of difficulties, we reduce the amount of the monthly payments and extend the duration of the loan. But those who can no longer pay anything ask us to sell their gold, in order to repay their loan and recover the rest in dollars, ”says Adel Mansour, without giving figures. It is this model which, according to him, explains the success of the organization. “Our depositors know that their savings will not disappear, as was the case in Lebanese banks, while allowing thousands of people to emerge from precariousness. This risk-free environment, which contributes to social well-being, has created a dynamic of migration from the traditional system to our institution. The value of our deposits has at least doubled since 2019!”, he says with satisfaction.

Does the financial crisis alone explain this migration? “The American pressure on the allies of the Islamic resistance may be pushing some customers towards us in order to avoid unjust sanctions,” he concedes.

Anyway, “al-Qard al-Hassan” has never been so active. “I don’t have the figures for 2020 yet, but in 2019, we granted no less than 200,000 loans with an average value of $2,500, for a total of $500 million,” says Adel Mansour, who expects new records this year. “We launched a new campaign in October aimed at small projects in agriculture, crafts or industry. Reimbursable over 60 months after a grace period of one quarter, the administrative costs are even lower and the sum can reach 80 million Lebanese pounds,” says the director.

A dynamism that makes other players in microcredit in Lebanon green with envy.

Hezbollah’s patronage tool?

“It’s simple, ‘al-Qard al-Hassan’ alone gives as many credits as the eleven other microfinance institutions put together!” exclaims a source in the sector who requested anonymity. “The activity is generally penalized by the banking crisis, which imposes a de facto control of capital, which is not the case of “al-Qard al-Hassan”, which operates outside the financial system”, adds she.

Does this advantage benefit the Shiite clientele in particular and, by extension, does it allow Hezbollah to strengthen its hold on its community? “Anyone who wants to mortgage gold can get a loan in less than an hour. We give money to people of all faiths, and even of all nationalities, without any discrimination!”, assures the executive director of the bank.

But for the researcher Joseph Daher, author of the book Hezbollah, religious fundamentalism put to the test by neoliberalism (Syllepse 2019), there is no doubt. “By looking at the geographic distribution of branches, we can clearly see that the service is primarily aimed at one particular community, even though there are a very small number of branches in mixed regions,” he notes. he.

Read also: Microfinance continues to grow in Lebanon despite the crisis

In the world of microfinance, we want to be more nuanced, affirming that in this sector as elsewhere, alas, there is a “natural” segregation of the market. “There are microcredit institutions for each community. The al-Tamkeen institution, for example, mainly serves the Druze community, while the Lebanese Cooperative for Development mainly serves Christians. In fact, people tend to naturally go to institutions that look like them”, adds the source interviewed, recognizing however that this type of establishment allows political parties to convert “from shareholders of a failed state to development workers”.

Joseph Daher, on the other hand, does not go there four ways. “Hezbollah’s propaganda machine promotes the ‘al-Qard al-Hassan’ institution, which is part of its network of organizations and associations that serve, in particular, as tools in its strategy of political domination and to encourage his vision of society within the Shiite community,” he underlines. “It’s not really a special case since all parties do this, but not with the same social impact in terms of mass influence,” he adds.

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