 In this module, we shall discuss some enhancements to the basic Islamic microfinance model. These models could be based on murabaha, mudarbha, musharaka, salam, kardhasan or anything which is a combination of these. Circumstances are required because the targeted individual family or a community, they are actually vulnerable segments of Muslim society. In many cases, because of circumstances, they may not be able to successfully do that business and may end up in debt. That is not good for the welfare of the person you are actually trying to help. So in many countries, there are some enhancements. In case of Pakistan, State Bank of Pakistan actually offers a guarantee kind of arrangement for those who offer microfinance to some targeted community. Of course, SBP does not give reference to Islamic or conventional. Their view is that if you are offering microfinance in a particular district, we would probably give you some kind of guarantee. For example, if State Bank of Pakistan wants microfinance institutions to offer microfinance in Tata because it is an underdeveloped district, then they would tell microfinance providers if you offer microfinance in that district, 40 percent of your loss, if that happens to be the case, we would be bearing. If your loss is 100 rupees, then we would give you 40 rupees. So microfinance providers would check whether in that area there is 40 percent default. If the default is less than 40 percent, they would be very happy to enter into this arrangement with the State Bank of Pakistan. Now in case of Islamic microfinance, the enhancements to the basic structure or basic model of Islamic microfinance, they are done with the help of Zakat or donations from independent organizations. This helps the most vulnerable segment of the society, i.e., the Zakat beneficiary. So the underlying model could be anyone. Underlying model could be this one. The Salem model, for example, we discussed in the last module. But this could be Muraabha-based as well. This could be Musharka-based or Mudarva-based. Enhancement means what? For any reasons, there is a problem here. This guy felt sick, for example, and could not do business. And this income which we were expecting, this didn't come true. So it is not fault of this poor man, it's just circumstances. In that case, normally, especially this structure is very popular in Indonesia, a Zakat facility is set up. People in financial distress, they are beneficiaries of Zakat money anyway. So if this person is in distress, in that case, the Islamic microfinance provider would ask this recipient to have access to this Zakat facility to pay its debt towards Islamic microfinance provider. There are so many issues involved in this case and due care is taken in this process. For example, if this guy is indebted, Islamic microfinance provider cannot go to the Zakat facility and get the money. Because this is a requirement of Zakat, that Zakat should be paid first to the Zakat recipient. Once the Zakat recipient has received this money, only then it should come to the Islamic microfinance provider. There are some economic issues as well. There is a problem of agency problem, i.e. moral hazard problem. Because this recipient knows that there is a Zakat facility available, it is quite likely that he would not be spending a lot of time in doing the business. So there are mechanisms. So this guy, the recipient would have to work very closely with the local Zakat committee and would have to establish that he is a good guy. He is not a bad guy. If he is a good guy with good morals and ethics, only then they would give him access to the Zakat facility. If it's because of moral hazard, of course he can have access to it once, twice, three times, but not anymore. So these are the enhancements which are part of Islamic social finance. I said previously that Islamic social finance comprises quite a number of institutions. Islamic microfinance is one of them, others being WAKF and Zakat. So there are some Islamic microfinance arrangements in which Mudaraba, Musharaka, Murabha, Salam and other modes of financing, they play an important role, but there is an association with the WAKF, there is an association with a Zakat organization and so on. This kind of structures and arrangements are becoming very popular and they are being emphasised upon in the context of Islamic social finance, which is now of a big focus in the wake of COVID-19.