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The Microfinance Opportunity in Pakistan 1 November 2006 Gregory Chen ShoreBank International Ltd Mehr Shah Pakistan Microfinance Network

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Page 1: The Microfinance Opportunity in Pakistan 1 November 2006 Gregory Chen ShoreBank International Ltd Mehr Shah Pakistan Microfinance Network

The Microfinance Opportunityin Pakistan

1 November 2006

Gregory Chen

ShoreBank International Ltd

Mehr Shah

Pakistan Microfinance Network

Page 2: The Microfinance Opportunity in Pakistan 1 November 2006 Gregory Chen ShoreBank International Ltd Mehr Shah Pakistan Microfinance Network

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1. Sizing the Credit Market

Estimated Adult Population

Non-Poor 14.5

Transitory Non-Poor 25.1

Transitory Vulnerable 14.3

Transitory Poor 13.3

Chronic Poor 6.6

Extremely Poor 0.9

Centre for Research on Poverty Reduction and Income Distribution (CRPRID) & Household Income and Expenditure Survey 2000 – 2001.

20.8

27.6

52.7

Household Income and Expenditure Survey: 2001Stratification by Consumption Levels

Page 3: The Microfinance Opportunity in Pakistan 1 November 2006 Gregory Chen ShoreBank International Ltd Mehr Shah Pakistan Microfinance Network

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1. Sizing the Credit Market

KIBOR = 9%

Informal Markets =100 – 1000%

Total Market Size: 10 Million Loan Balance Per Client: 30,000 ($500)Advances: 300 Billion ($5 Billion)Interest Rate: 30% Annual Revenue: 90 Billion ($1.5 Billion)

Page 4: The Microfinance Opportunity in Pakistan 1 November 2006 Gregory Chen ShoreBank International Ltd Mehr Shah Pakistan Microfinance Network

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2. Market Penetration – To Date

Active Borrowers Table

ACTIVE BORROWERS

-100,000200,000300,000400,000500,000600,000700,000800,000900,000

1,000,000

1999 2000 2001 2002 2003 2004 2005 2006

Years

Act

ive

Bo

rro

wer

s

Page 5: The Microfinance Opportunity in Pakistan 1 November 2006 Gregory Chen ShoreBank International Ltd Mehr Shah Pakistan Microfinance Network

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2. Market Penetration - Projected

2006

Borrowers 143,000

Loan Portfolio US$ Millions 30

2010

1,549,498

510

Yield on Portfolio 35%

- Operating Costs (30%)

- Financing Costs (10%)

Return on Assets (5%)

Net US$ Millions (1.5)

Sample of 3 High Growth Microfinance Providers

30%

(15%)

(10%)

5%

25

Page 6: The Microfinance Opportunity in Pakistan 1 November 2006 Gregory Chen ShoreBank International Ltd Mehr Shah Pakistan Microfinance Network

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3. Seizing the Opportunity

Vision

PhysicalInfrastructure

Capital

Staff Skillsand

Orientation

MgmtSystems

Technology

Enabling Regulation

Page 7: The Microfinance Opportunity in Pakistan 1 November 2006 Gregory Chen ShoreBank International Ltd Mehr Shah Pakistan Microfinance Network

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Seizing the Opportunity

MicrofinanceInstitutions

State Bankof

Pakistan

CommercialBanks

Capital

Mgmt SystemsTechnology

Physical Infrastructure

Staff SkillsOrientation

Enabling Regulation

VISION

Donors

ServiceProviders