Hajar Abdullah, a 49-year-old school teacher in Tripoli, has become famous for organizing a type of interest free loan using deposits from subscribers – called a monthly cooperative fund (MCF)— in her community the last 15 years. Her strictness and precision have actually attracted more subscribers.
The MCF is an arrangement through which members pay monthly installments and each month, the entire collected amount is given to one member on a rotating basis. Installments are collected at the beginning of each month when people receive their salaries.
Hajar Abdullah, a 49-year-old school teacher in Tripoli, has become famous for organizing a type of interest free loan using deposits from subscribers – called a monthly cooperative fund (MCF)— in her community the last 15 years. Her strictness and precision have actually attracted more subscribers.
The MCF is an arrangement through which members pay monthly installments and each month, the entire collected amount is given to one member on a rotating basis. Installments are collected at the beginning of each month when people receive their salaries.
Most Islamic preachers believe that MCFs are legitimate. In fact, it is an old practice that used to be called the ‘Jom’a’ (weekly) since installments were collected on a weekly basis. MCF’s are on the rise as it is a solution to a lack of liquidity in Libya.
Abdullah requires that subscribers sign monthly receipts to avoid cheating. “The new subscribers are dubious until they prove otherwise, when they pay their installments on time and comply with the loan terms,” she said.
A temporary solution to Libyans’ liquidity issues
MCFs are one viable solution for the myriad of financial problems facing Libyans in the absence of bank loans. Two years ago the General National Congress (GNC) banned bank interest on loans, which came into effect at the beginning of this year.
“Banks are forced to comply with this law until a contrary law is issued,” said Issam Awl, spokesperson of the Central Bank of Libya.
Until that happens, many need an alternative to getting quick cash. Mohamed Sa’eed, 35, is planning to use the money to buy a taxi as a second income.
Fatima Montaser, a woman in her seventies, says she and her daughter, an economics student, joined a women’s-only MCF. They have paid a joint installment to get a sum large enough to maintain their kitchen and sanitation in their home as “they have become very poor.”
MCFs address problems
MCFs have started to address many banking problems including delays in distributing monthly salaries which, says Abdullah, has led other MCF organizers to suspend their activities.
Another complicated problem facing MCFs, especially longer lasting ones involving larger sums of money, is the death of a subscriber and the refusal of inheritors to pay the loan. In this case, the MCF organizer would cover that amount. As a result, organizers have started to demand tangible guarantees that assure inheritors will pay back the subscriber’s loan amount or continue paying the installments for the remaining duration of the MCF.
Cooperative loans for the rich
The MCF size depends on the members’ status. The total capital of non-employee MCFs, which include everyone from businesspeople and lorry drivers, can reach up to 100,000 Libyan dinars (US $738). Their motivations are not so different from the poorer MCFs, however, the way they spend the money differs. The monthly installment can reach up tol 10,000 Libyan dinars (US $73.80).
Ahmed Salem, a trader who imports clothes and bags from China, says he joins MCFs only to help those in need- in other words, he deposits money in an open account in exchange for nothing.
