They disburse loans without collaterals and based on a cash flow analysis of the borrower. Now it is up to the microfinance practitioners and banks to derive benefits from this regulatory environment.
These loans are collected in monthly installments.
Since we make smaller loans and our cost of doing business and managing these loans is generally high, that is why we have to charge a rate which is slightly higher than commercial banks. We visit the business or household and, with due diligence, check the reputation of the borrower.
For the last 5 years, the State Bank of Pakistan has been ranked one of the top three microfinance regulators in the world. There is a commonly prevalent paradigm amongst people that starting a business requires heavy financing and unless they have that money, the business cannot be initiated.
My professional background includes 14 years of commercial banking experience. What advice would you like to give to small entrepreneurs who wish to start a business? A group of people apply for a loan and get an equal amount individually, and if one person defaults, then everyone is collectively responsible for it.
Since Pakistan microfinance sector analysis inception of the bank, we have disbursed loans worth of Rs 7 billionamong 20, people. It is a self sustainable model, without relying on any external debt. The actual problem in Pakistan is the access to finance; not the cost of obtaining it.
This can be done by increasing the average loan size. The remaining one-third of the market comprises of individual loans. However, in urban markets, small enterprises require larger loans and are mostly reliable and sophisticated.
How much work force do you have? We are part of the one-link ATM network. FINCA is a global organization of microfinance operating in 22 countries and 5 continents.
We are also aiming to achieve a higher tier for enterprise lending where we can lend larger amounts. Can you tell us something about your banking operations? Although, I am working in the banking sector, I am an entrepreneur in spirit.
There is a misconception that low income entrepreneurs cannot afford this loan. It has a very nominal growth market.
It is a unique organization as other banking organizations go wherever there is an opportunity; however, FINCA has a track record of establishing itself in places where there is a need of microfinance. Elaborating on the disbursement procedure, our sales force goes all out to market our products.
Once the value is created, you will find it easier to find funding. Also the loan amounts in urban areas are more significant which is why they cannot be given in groups. There was a microfinance ordinance issued by the State Bank in under which we acquire licenses. Instead, they have aspirations, ambitions and skills.
We are a regular bank, open for all. What changes, if any, have you made in the management after the acquisition? It had the resources, similar values and even a global track record of best practices. FINCA is the only microfinance bank in Pakistan with an average loan size of Rs and its entire loan portfolio comprises of enterprise loans and individual loans.
There are three main principles of lending: We should increase the loan size and start giving bigger loans to the agricultural sector.
Based on your experience, what are the differences in the banking sector of the United States and Pakistan? The only addition was a couple of international colleagues that joined us. What can you tell us about your loans and the procedures of disbursement?
We do not engage in group lending. In Pakistan, the State Bank does not control the interest rates. The repayment capacity of borrower Ensuring that the loan is consumed for same purpose which the borrower had mentioned The overall general reputation of the borrower Taking these principles into consideration, your loan has a poor chance of becoming a bad debt unless in the case of an unavoidable, external factor like floods, earthquakes etc.
We also teach our borrowers about savings and managing their finances effectively. The other half is purely an individual loan, without any collateral, which is given to small entrepreneurs who are running non-agricultural businesses.
FINCA was founded 30 years ago and currently has a very robust presence in developing countries.The Pakistan Microfinance Network (PMN) in an event unveiled the “Pakistan Microfinance Review (PMR) ” at a local hotel in Karachi.
PMR is an annual state of the microfinance sector report based on financial and social performance analysis of microfinance providers. The program aims to bring together a diverse group of professionals across Pakistan from Microfinance Banks and Non-Bank Microfinance companies, donors, regulators and investors under one roof a week to attend various sessions and immerse themselves in the peer-learning experience.
This report reviews the developments in Pakistan's microfinance sector in It also provides a detailed analysis of the financial performance of the sector at three levels: industry. Published: Mon, 26 Feb The aim of this study refers to highlighting the key challenges and prospects for the microfinance sector of Pakistan.
Being practiced since last few years, microfinance is considered to be an imperative financing practiced by financial institutions for the development of country’s economy.
PAKISTAN MICROFINANCE REVIEW ANNUAL ASSESSMENT OF THE MICROFINANCE INDUSTRY COO and Director of Analysis Microfinance Information eXchange, Inc. (MIX) Mr. Raza Khan Support the financial sector, especially retail financial service providers, to enhance their scale, quality, diversity.
The microfinance sector in Pakistan is still at an early stage. The CGAP CLEAR report of provided a roadmap for all microfinance stakeholders in Pakistan, identifying ways to intervene and.Download