Legal issues possibly sorted out

[Geetha Balvannanathan]

Dear all,

For those of you who are closest to the project and have asked and been kept informed of all its evolutions, this will come as a very heartlifting news.

Yesterday, I met a lady, Lamia, who mentioned that she could put me in touch with one of the Sheikhas in Dubai who would then possibly help me with the project, including resolving the legal issues surrounding it.

As I mentioned to some of you earlier this month, I had to stop the project for legal issues. Indeed, on the one hand, the setting up of the US 501 c3 entity was becoming a complicated matter that the first fiduciary service provider was unable to handle and on the second hand, you all know of the difficulties of setting up in the UAE such an entity that is in between a charitable and financial entity.

For those who are not aware, let me clarify the matter. We all know that it is not a matter of the UAE not wanting charities to be created but it is more a matter of the UAE wanting to monitor and avoid embezzlements that some ruthless individuals might want to resort to, using people's good intentions and turning them against them. This is also one of the reasons that I deposited a trademark request for the name in order to distinguish and protect it from any future attempts by ill-intentioned individuals.

Indeed, I had discovered during my endeavours that many people thought of this initiative as a great manner to make "a quick buck", which obviously saddened and sometimes angered me - depending on how I was approached - and made me resolve to avoid the name being tarnished in future by such cynics.

One of the major complications stands to the fact that Microfinance is not a very well known initiative in the UAE and in the Gulf in general for that matter - with some rare exceptions. Indeed, most of the local individuals here are well off, thanks to the countries' national resources or economic and tourism initiatives amongst others.

This being said, we all know and some of you have experienced with me the plight of local ladies who were widowed, divorced or simply had a husband who was not earning enough to sustain the whole family. For such women, working is a necessity to bring in income but they would not like to leave the safety of their homes in order to generate that income.

These women are not looking for charity that can be given to them and quickly dispensed of without a second thought. They are looking for and deserve a long term solution and while in some emirates there are charitable institutions that go beyond the concept of charity to actually give them dignity and a means to make money, this is not a generally spread initiative.

Besides, my personal belief is that any additional help is always useful because we do not want to be counting on our fingers the number of women helped but want to see a sea of women growing in their houses to become more responsible and active citizens, becoming better models for their children and being more able, more capable of explaining the world to their children.

What are the major hurdles in establishing MENA Microfinance as a legal entity in the UAE?

Given that Microfinance is not a largely diffused notion in this part of the world, there is no legal framework in place that would enable it to simply be created as a structure without further hassles. There are only two ways of going about categorising it:

1) There is the option of setting up as a financial institution but this is an exhorbitant choice that would eat away most if not all of the monies put by the founder for this project (100,000 AED) from her own money

2) There is the option of setting up as a charity but in that case, it cannot be a self-sustaining business that provides loans (even forgivable loans or non-interest bearing loans to individual women to set-up their own business). Additionally, all charities have to be approved by Emiri Decree or have to have existed in the country of the founder for two years before being able to get a licence here. This means that any new initiatives are simply not possible to establish as legal entities.

Why is it so difficult and what are the purposes of MENA Microfinance?

MENA Microfinance's founder believes that the money should not be simply given to the women concerned because

1) this would not allow MENA Microfinance to be a self-sustaining initiative that would therefore then crumble leaving no options for the women identified or for other women

2) the fact of receiving the money as a gift or similar donation rather than as a loan (albeit with simplified and easy conditions that conform to sharia principles) would not only make such advance of money seem like charity to women and therefore reduce their sense of dignity in working on the project but it would also not give the drive and boost required to the women to make them perceive the matter in an active and responsible way.

Indeed, it would take away the perception that this is a business proposal. If they know about banks in general they would probably know that they are getting a loan that normally no bank will give them but they would still be glad to be given a chance to prove themselves worthy of trust in their reimbursement capacities.

MENA Microfinance's main objective is to provide the women not only with a job in the safety of their home, but also with a coaching on how to sustain themselves in the long run.

We intend to educate women on how to manage a business, starting from the simple points of debit and credit in understanding accounting (money coming in and going out - how to manage it) to move on to more complex notions of financing the business when the time is ripe.

We create networks and educate the women on how to establish or use an existing network of service providers and buyers in order to ensure that their market savvy skills grow from the simple home to home sale to an actual home to market sale.

We coach the women on how to cope with the work-life balance in the best way possible as they would be working mainly from home.

We take either women who already have a craft or women who are thirsty for acquiring a particular skill in order to enhance their household income by themselves, for themselves, in dignity, in felicity.

Where there is a man in the household, we make sure that the woman is able to show her value to her husband and, by bringing in an additional income to help increase the financial capacity of the household, truly proves that women and men are indeed brought to this earth to be a solace for each other and a pillar of strength to build together a better future.

Where there is no man in the household, for whatever reason, we make sure that the woman finds the man in her to be both pillars for her children and for herself so her children may look up to her and be inspired to become better citizens themselves.

Beyond the committment to reimburse the loans and share profits in a very balanced way, each woman helped has to commit to help three other women and foster their growth within a year. As for sharing of profits, it is done in the fairest way possible and in a way that would ensure a regular income to the women that is proportionate to their production and therefore stimulates their activity.

Indeed, the Musharakah model proposed and agreeable to the ladies encountered is that MENA Microfinance would provide the loan for the machinery required (sewing maching, embroidery machine, beading maching) as well as for the material (forgivable loan only for the material part of the loan) and would commit to first buy the produce from the local ladies for a price agreed by them, would repackage, create added value by branding, marketing and have it resold at an increased price. From that increased price, 60% would be given to the lady and therefore represent a bonus over the price she set for her initial produce and 40% would go back into MENA Microfinance's funds. These funds are used for ensuring that the entity is self-sustaining and can help other women.

The ultimate objective of MENA Microfinance is to become a MENA cooperative, run by women, helping women and preserving women while allowing them to grow in today's world. The first cooperative, that we would like to become a pan Emirates cooperative, could be situated in Dubai, Abu Dhabi, Ras Al Khaimah, Sharjah or Fujairah, depending on which Emirates allows MENA Microfinance to establish first within it, in an appropriate legal way.

I had disclosed in a previous blog how the loans within MENA Microfinance were intended to operate, i.e. mainly forgivable loans if the woman is in dire need and does not make enough money to repay but barely makes enough money to remain afloat, short-term or medium term loans with repayments that do not include interest but include the model of Musharakah in dividing the profits derived from the sale of the produce, etc. The above should give a better description of the type of Musharakah envisaged.

We had identified 10 women all in all, 4 in Muhaisnah (Dubai) and 6 in Sharjah. Despite the agreement on how to initiate the work together, the founder had to stall the project for issues relating to legalities as mentioned above.

Hopefully, this new possibility with Lamia will lead to something bright for these 10 ladies. God truly works in mysterious ways and we have to leave things up to him sometimes. Who would have thought that while going to a charity Iftar meant for Pakistan, I would be - by pure coincidence, the other words for divine intervention - sitting right next to the lady who could, potentially, help me solve my current legal issue and get on with the project?

Heartened by this new possibility and hoping that the spirit of Ramadan - whether you are Muslim or not - remains alive in you and increases your desire to reach out and help all those who are in need, I bid you a good iftar tonight until the next time we meet to virtually, talk.

Coming soon, I hope, the realisation of the good news.

A special thanks to all of you who personally asked about how things were going on for this project and a hearty hug to all of you who care, want to help but are just caught up until things are cleared out.

Best.

Geetha