BEIRUT — At Al-Qard Al-Hasan in Beirut’s Salim Salam area, one has the impression of being inside a typical bank: there are counters and long lines of customers coming to deposit or withdraw money.
But this establishment, which employs nearly 500 people and has some 30 branches across the country, operates completely outside the financial system.
Affiliated with Hezbollah, Al-Qard Al-Hasan has been sanctioned by the US Treasury since 2007. Yet this has not prevented it from becoming the largest microcredit organization in the country.
The collapse of the traditional banking sector in a country rocked by an economic crisis for over a year has only made this establishment all the more attractive to customers.
Founded in 1983 and registered as a non-governmental organization since 1987, Al-Qard Al-Hasan collects non-interest-bearing deposits in accordance with Islamic banking principles, which prohibit the collection of interest, in US dollars or Lebanese lira, and grants microloans.
“We grant interest-free microloans, capped at $5,000 [in fresh dollars] to cover marriage expenses, financing a project or other personal plans,” explains Adel Mansour, the association’s executive director.
In order to benefit from a zero-interest loan, repayable over a maximum period of 30 months, customers must be sponsored by a depositor [at the association], or mortgage an object or gold jewelry. They also have to pay administrative costs of about $3 per month, in fresh dollars or lira at the black-market rate, and any fees incurred for gold storage. They must also deposit $12 per month in a non-interest-bearing account.
Nearly four out of five loans, especially those granted in dollars, are backed by gold, according to Mansour. “The loan cannot exceed 70 percent of the value of the mortgage, which helps protect us from any risks,” he explains. So even in the midst of the crisis, the association is not suffering from an increase in bad debts or a lack of liquidity.
“We are extremely patient with our customers. In the event of difficulties [in repaying the loan], we reduce the value of monthly installments and extend the term of the loan. Those who can no longer pay off their debt ask us to sell their gold in order to repay it and recover the rest in dollars,” says Mansour, without mentioning any figures and stressing that it is this model that has kept the association running successfully.
“Our depositors are confident that their savings will not disappear, as [opposed to] the case at Lebanese banks, which allows thousands of people to get out of their precarious financial situation. This risk-free environment, which contributes to social well-being, has created a dynamic of migration from the traditional [financial] system to our institution,” Mansour explains.
“Our deposits have at least doubled since 2019,” he says confidently.
But is the financial crisis alone behind this migration? “US pressure on the allies of the Islamic resistance may also push some customers toward us in order to avoid unfair sanctions,” Mansour says.
Whatever the reasons, Al-Qard al-Hasan has never been so active.
“I still do not have the numbers for 2020. But in 2019, we granted no less than 200,000 loans with an average value of $2,500, and a total [value] of $500 million,” he adds, expecting a new record this year.
Mansour went on to say that the association launched new loans in October aimed at small agriculture, handicraft and industrial projects.
“These loans, valued at up to LL80 million, are repayable over 60 months after a three-month grace period, with lower administrative costs,” the association’s director explains.
This reality comes much to the dismay of other microcredit institutions in Lebanon.
“It’s simple. Al-Qard Al-Hasan grants as many loans as the other 11 microfinance institutions put together,” says a source from the financial sector who asked not to be named.
“[Financial] activity is restricted by the banking crisis, which imposes a de facto capital control. But this is not the case for Al-Qard Al-Hasan, which operates outside the financial system,” explains the source.
So, does this come to the benefit of Shiite customers in particular and consequently strengthen Hezbollah’s grip on its community?
“Anyone who wants to mortgage gold can get a loan in less than an hour. We give money to all people of all sects, and even all nationalities, without any discrimination,” Mansour says.
But for Joseph Daher, a researcher and author of the book “Hezbollah: The Political Economy of the Lebanon's Party of God,” this is certainly not the case.
“If you look at the geographical distribution of the association’s branches, it is clear that services are mainly targeting a particular community, even if a few branches are located in mixed areas,” he says.
According to the aforementioned anonymous source, in the world of microfinance, things are more subtle — and in this sector, like any other, there is an unfortunate “natural” segregation of the market.
“There are microcredit establishments for every community. The Al-Tamkeen institution, for instance, mainly serves the Druze community and the Lebanese Development Cooperative offers services for Christians. In fact, people are naturally more inclined toward institutions that resemble them,” says the source, stressing that these types of establishments allow political parties to change from being “shareholders of a failed state into development agents.”
Daher, for his part, gets straight to the point. “The Hezbollah propaganda machine promotes Al-Qard Al-Hasan, which is part of its network of organizations and associations serving mainly as tools in the party’s strategy of political domination and promoting its vision of society within the Shiite community,” he says.
“This is not a special case since all parties do the same, but not with the same social impact at the level of mass influence.”
This article was originally published in French in Le Commerce du Levant. Translation by Sahar Ghoussoub.
BEIRUT — At Al-Qard Al-Hasan in Beirut’s Salim Salam area, one has the impression of being inside a typical bank: there are counters and long lines of customers coming to deposit or withdraw money.But this establishment, which employs nearly 500 people and has some 30 branches across the country, operates completely outside the financial system.Affiliated with Hezbollah, Al-Qard Al-Hasan has...