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  • PAKISTAN MICROFINANCE REVIEW 2015 ANNUAL ASSESSMENT OF THE MICROFINANCE INDUSTRY F I N A N C I A L S E R V I C E S F O R A L L

  • Produced by Pakistan Microfinance Network Design and Layout by O3 Interfaces

    www.o3interfaces.com

  • ANNUAL ASSESSMENT OF THE MICROFINANCE INDUSTRY

    PAKISTAN MICROFINANCE REVIEW 2015

  • Financial Services for all

    Pakistan Microfinance Review 2015

    i

    EDITORIAL BOARD

    Mr. Ghalib Nishtar Chairperson, Editorial Board, President, Khushhali Bank Limited (KBL)

    Mr. Yasir Ashfaq Group Head, Financial Services Group, Pakistan Poverty Alleviation Fund (PPAF)

    Syed Samar Husnain Executive Director, Development Finance Group, State Bank of Pakistan (SBP)

    Mr. Azfar Jamal Executive Vice President, Head Payment Services & E-Banking, National Bank of Pakistan (NBP)

    Mr. Blain Stephens COO and Director of Analysis, Microfinance Information eXchange, Inc. (MIX)

    Mr. Masood Safdar Gill Director Programme, Urban Poverty Alleviation Pro- gramme, National Rural Support Programme (NRSP)

    Ms. Gemma Stevenson Private Sector Development Advisor, Finance, Markets and Jobs Team, Economic Growth Group, Department for International Development (UK)

  • Annual Assessment of the Microfinance Industry

    Financial Services for all ii

    PMR TEAM

    Mr. Ali Basharat Author and Managing Editor

    Ms. Saquiba Aziz Data Collection

    Mr. Ammar Arshad Co-Author and Data Collection

    Ms. Saba Abbas Co-Author and Data Collection

  • Financial Services for all

    Pakistan Microfinance Review 2015

    iii

    ACRONYMS AND ABBREVIATIONS

    AC&MFD Agriculture and Microfinance Division

    ADB Asian Development Bank

    AMRDO Al-Mehran Rural Development Organization

    AML Anti-Money Laundering

    BPS Basis Points

    CAR Capital Adequacy Ratio

    CIB Credit Information Bureau

    CDD Customer Due Diligence

    CGAP Consultative Group to Assist the Poor

    CNIC Computerized National Identity Card

    CPP Client Protection Principles

    CPI Consumer Price Index

    CPC Consumer Protection Code

    DFI Development Financial Institution

    DFID Department for International Development, UK

    DPF Depositor’s Protection Fund

    ECA Eastern and Central Europe

    ESM Environment and Social Management

    EUR Euro

    FATF Financial Action Task Force

    FIP Financial Inclusion Program

    FMFB The First Microfinance Bank Ltd.

    FSS Financial Self Sufficiency

    FY Financial Year

    G2P Government to Person

    GBP Great Britain Pound

    GDP Gross Domestic Product

    GLP Gross Loan Portfolio

    GNI Gross National Income

  • Annual Assessment of the Microfinance Industry

    Financial Services for all ivAcronyms and Abbreviations

    GoP Government of Pakistan

    IAFSF Improving Access to Financial Services Support Fund

    IFAD International Fund for Agricultural Development

    IFC International Finance Corporation

    JIWS Jinnah Welfare Society

    KBL Khushhali Bank Ltd.

    KF Kashf Foundation

    KIBOR Karachi Inter-Bank Offering Rate

    KMFBL Kashf Microfinance Bank Ltd.

    KP Khyber Pakhtunkhwa

    MCGF Microfinance Credit Guarantee Facility

    MCR Minimum Capital Requirement

    MENA Middle East and North Africa

    MFB Microfinance Bank

    MFCG Microfinance Consultative Group

    MF-CIB Microfinance Credit Information Bureau

    MFP Microfinance Providers

    MFI Microfinance Institution

    MIS Management Information System

    MSME Micro, Small and Medium Enterprises

    MIV Microfinance Investment Vehicle

    MO Micro-Options

    NADRA National Database and Registration Authority

    NGO Non-Governmental Organization

    NFLP National Financial Literacy Program

    NMFB Network Microfinance Bank Limited

    NPLs Non-Performing Loans

    NRDP National Rural Development Program

    NRSP National Rural Support Programme

    OPD Organization for Participatory Development

    OSS Operational Self Sufficiency

    P2P Person to Person

    PAR Portfolio at Risk

    PBA Pakistan Banks Association

    PKR Pakistan Rupee

    PMN Pakistan Microfinance Network

    PO Partner Organization

    PPAF Pakistan Poverty Alleviation Fund

  • Financial Services for all

    Pakistan Microfinance Review 2015

    v

    PRISM Programme for Increasing Sustainable Microfinance

    PRSP Punjab Rural Support Program

    PTA Pakistan Telecom Authority

    ROA Return on Assets

    ROE Return on Equity

    RSP Rural Support Programme

    SBP State Bank of Pakistan

    SC The Smart Campaign

    SDS SAATH Development Society

    SECP Securities and Exchange Commission of Pakistan

    SPTF Social Performance Task Force

    SME Small and Medium Enterprise

    SRSO Sindh Rural Support Organization

    SRDO Shadab Rural Development Organization

    SVDP Soon Valley Development Program

    TMFB Tameer Microfinance Bank Ltd

    UBL United Bank Limited

    USD United State Dollar

    USSPM Universal Standards for Social Performance Management

    VDO Village Development Organization

    WPI Wholesale Price Index

  • Annual Assessment of the Microfinance Industry

    Financial Services for all viHighlights

    HIGHLIGHTS Year 2011 2012 2013 2014 2015 Active Borrowers (in millions) 1.7 2. 0 2.4 2.8 3.6

    Gross Loan Portfolio (PKR billions) 24.8 33.1 46.6 61.1 90.2

    Active Women Borrowers (in millions)

    0.9 1.3 1.4 1.6 2.0

    Branches 1,550 1,460 1,606 1,747 2,754

    Total Staff 14,202 14,648 17,456 19,881 25,560

    Total Assets (PKR billions) 48.6 61.9 81.5 100.7 145.1

    Deposits (PKR billions) 13.9 20.8 32.9 42.7 60.0

    Total Debt (PKR billions) 38.3 24.9 26.9 31.1 31.1

    Total Revenue (PKR billions) 10.1 12.5 17.3 24.3 32.8

    OSS (percentage) 108.4 109.5 118.1 120.6 124.1

    FSS (percentage) 100.5 107.5 116.5 119.6 121.0

    PAR > 30 (percent- age) 3.2 3.7 2.5 1.1 1.5

  • Financial Services for all

    Pakistan Microfinance Review 2015

    vii

    PAKISTAN MICROFINANCE REVIEW 2015 ANNUAL ASSESSMENT OF THE MICROFINANCE INDUSTRY Financial services for all

  • Annual Assessment of the Microfinance Industry

    Financial Services for all viii

    CONTENTS THE YEAR IN REVIEW

    SOCIAL PERFORMANCE

    ANNEXURES

    FINANCIAL PERFORMANCE REVIEW

    CHALLENGES AND OPPORTUNITIES

    01

    41

    73

    17

    61

    Macro-Economy and The Microfinance Industry

    02

    Policy and Regulatory Environment 03

    Microfinance Industry Initiatives 05

    Conclusion 13

    Introduction 41

    Analysis of The Sector’s SP Indicators

    42

    Target Market 43

    Development Goals 43

    Poverty Measurement Tools 45

    Governance & HR 46

    Products and Services: Financial 49

    Products and Services: Non- Financial

    53

    Transparency of Cost 54

    Client Protection 56

    Environmental Policies 57

    AI – Performance Indicators of Industry 2015

    73

    AII – Performance Indicators of Individual MFPs 2015

    83

    Scale and Outreach 18

    Financial Structure 27

    Profitability and Sustainability 31

    Productivity 35

    Risk 36

    Conclusion 37

    Role of Microfinance in Financial Inclusion In Pakistan

    61

    Mainstreaming Non-Bank Microfinance Players

    62

    Credit Scoring 63

    Mobile Wallets 63

    Exploring New Horizons: Serving New Markets

    64

    Deposit Protection Fund: Moving Towards A Secure Financial Landscape

    67

    Deposits Mobilization: Untying Gordian’s Knot

    68

    Funding 68

    Setting Up of Pakistan Microfinance Investment Company Limited (PMIC)

    69

  • SECTION 1

    THE YEAR IN REVIEW

  • Section 1 Financial Services for all

    Pakistan Microfinance Review 2015

    1

    The microfinance industry witnessed continued growth and expansion in outreach in the year 2015. There were also notable developments in the poli- cy environment which can lead to strengthening of players such that the sector will be positioned to play a crucial role in furthering the agenda of finan- cial inclusion in the country.

    Major developments were witnessed on the policy and regulatory fronts such as the launch of the Na- tional Financial Inclusion Strategy (NFIS) and the in- troduction of a regulatory framework for Non-Bank Microfinance Institutes (NBMFI) by the Securities & Exchange Commission of Pakistan (SECP). In addi- tion, results of the second Access to Finance Survey were launched. With the launch of NFIS, a road- map for achievement of financial inclusion in the country has been laid out. A key challenge facing the microfinance industry has been the absence of a regulatory framework for non-bank microfinance players. Now with the introduction of the rules and regulations for NBMFI a level playing field has been created in the industry and provides an opportunity for non-bank players to scale up their businesses.

    The improving security situation, low inflation and subsequent reduction in the policy rate by the cen- tral bank

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