Download - Microfinance in Pakistan
The Microfinance
Abdul Sattar17261Syed Ghalib17330
Thursday-December 12, 2012 i.e.(20-12-2012)
Dr. Yunus once said in an interview,“All human beings are born entrepreneurs Some get the opportunity to find this out, but some never get this opportunity. A small loan can be a ticket to exploration of personal ability. All human beings have a skill- the survival skill. The fact that they are alive proves this. Just support this kill and see how they will choose to use it.”
Methodologies
Individual Lending Peer Lending
Solidarity Group Community Based Organizations Grameen
Latin Village BankingAmerican
Four Microcredit Methodologies
Four Microcredit Methodologies Individual Lending, is defined as the provision
of credit to individuals who are not members of a group that is jointly responsible for loan repayment.
Frequent and close contact (Character based lending)
Credit tailored to specific need of business
Successful for larger urban-based business
Collateral/Guarantee (Assets pledged) required
Interest rate higher Detailed financial analysis
Four Microcredit Methodologies
Grameen Solidarity Group Lending, peer group of five ,self formed unrelated members, each borrower receives an individual loan, through the mechanism of the group.
No collateral is required
Group members guarantee each other’s loanGroup save prior to receive loanGroup fund is managed by groupNo further loans are available if loans are not repaid on time
Four Microcredit Methodologies
Latin American Solidarity Group Lending, peer group of five ,self formed unrelated members, each borrower receives an individual loan of equal amount, group leader receives loans of group then distributes to members..Minimum economic analysisGroup members guarantee each other’s loanInterest rates are high and charge feesEstablish emergency fund.
Village Banking (CBO ), are community managed credit and savings associations in rural areas, ranges 30-50 self-selected members.Group members have democratic controlConsist of management committee and membershipAll member offer collective guarantee to lending MFILoans from internal account (saving, interest earning) set their own terms.
Four Microcredit Methodologies
Loan ParametersGrameen Bank Individual LendingVillage Banking Latin American Repayment Period:
Usually 12 monthsNo flexibility within group, as each client in group must repay loan over same period
Can be tailored to the individual client needs, from 1 to 24 months
Loans to Bank from lending institution made in cycles, with cycles range from 3 to 12 months each
Very short term, generally not exceeding 6 months.
Repayment Frequency:
Weekly Usually monthly Loans made from internal funds can be repaid weekly or monthly
Weekly, bi-weekly or monthly
Loan Amount: Limited to fairly small loans because clients need to guarantee each other’s loans – initial loan amounts generally from $50 to $100No flexibility in amount, as each client in group receives same loan amount
Can be tailored to the individual client needs, usually from $100 to $3,000
Amount of loan to Village Bank from lending institution based on the aggregate ’savings, with individual loans usually starts at $50 or $100 and growing up to $300
Fairly small loans; clients guarantee for eachother’s loans – Initial amounts generally from $100 to $150. Small Increase in loan amounts often follows a strict series of loan cycles
Interest Rate: Often quite low – equal to or slightly higher than commercial rates
Usually higher than commercial rates. Interest may be vary with purpose of loan
Loan from lending institution to Bank made at commercial rates.
Usually significantly higher than commercial rates
Four Microcredit Methodologies
The Client: Value, reliable service, reasonable Price
The Product: Responsive to Client’s needs
The Delivery Methodology: Mitigates Risk, Reduces Transactional Costs
The Microfinance Provider: Manage Risk and Achieve Financial Sustainability
Some Key Principles to analyze Microcredit Methodology
Undertake regular market researchOffer pro-poor dynamic productsMonitor operations systematicallyEstablishing and maintaining operational
standardsEnsuring verified and regular information
on key indicators
Generating social capital via solidarity lending, good client lender interaction.
Coupling microfinance with social transformation strategies
Steps for the Improvements in Methodology(s)
11
Niche Market
Microfinance (Credit, Deposit, Insurance
and Remittances)
Non-Poor
Transitory Vulnerable
Transitory Poor
Transitory Non-Poor
Chronic Poor
Extremely Poor Safety Net Programs
Micro Credit
Foot print is spread across Pakistan
Access Strand
The Formally Served The Informally Served The Financially Excluded
The Financial Market Development Frontier
Pakistan amongst 36 countries that has a National Strategy for
Microfinance…….Focus on Growth
3M active borrowers by 2010 and
10M by 2015
Growth Driverso Institutional Robustness and
Sustainabilityo Availability of funds from
diversified sourceso Investment in Human resources
Different institutional Models
Industry Players and their
market share
Clients
1.8 M
MFB38%
MFI 26%
NGO
5%
RSP31%
Infrastructure
• 8 Microfinance Banks (MFBs)
• 4 Rural Support Programs (RSPs)
• 5 Specialized Microfinance Institutions (MFIs)
• 31 NGOs• Staff: 10,700*• Outlets: 1,480*
*Source: MicroWATCH (Jan-Mar 2009). Pakistan Microfinance Network, Islamabad. June 2009
Micro Credit Clients
Outreach Rural and Urban
2008-Q4 2009-Q1 2009-Q2 2009-Q30
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
42% 43% 44% 44%
58% 57% 56% 56%
Active Borrowers by Urban/Rural
RuralUrban
Quarter
No.
Acti
ve B
orr
oow
ers
The Way Forward - agriculture financePromoting Livelihoods and Ensuring food
security! 67% of Pakistan’s population lives in rural areas 76% of rural manpower is engaged in
agriculture/livestock 21% is the share of agriculture and livestock in
GDP Food shortage MF helps poor farmers to rent small pieces
of land (1 to 2 Acres) and buy timely quality inputs
Cash flows Outreach capability and a tested rural finance
product Agri MF is market driven
Based on commercial rates Is financially sustainable
Agriculture finance
Livestock financing
Rural enterprise financing
Diversified services(credit, deposit, insurance and remittance
)
Rural Financ
e
About Rural Microfinance
Industrial Trends in Pakistan Microfinance Operations (From June 2008 to June 2009)
Savings
1. Consistent Growth
2. Moved from 2nd to 1st biggest product.
Insurance
3. Emerged as fastest growing product.
4. Moved from 3rd biggest product to second
5. Affected due to Linking with Micro credit.
6. Moved from Individual to Client plus mode
Credit
7. Lost its position amongst products from number 1 to number 3rd
8. Two Major Players suffered . One face Liquidity constraints, other faced portfolio quality challenges
Jun-
08
Sep-
08
Dec-0
8
Mar-0
9
Jun-
090
1000000
2000000
Micro In-surance
Jun-
08
Sep-
08
Dec-0
8
Mar-0
9
Jun-
091650000
1750000
1850000
Micro Credit
Jun-
08
Sep-
08
Dec-0
8
Mar-0
9
Jun-
090
1000000
2000000
Micro Saving
Jun-
08
Oct-0
8
Feb-
09
Jun-
090
500000
1000000
1500000
2000000
2500000
Micro CreditMicro SavingMicro In-surance
Top Four Players with Product Clients
Jun-
08
Aug-0
8
Oct-0
8
Dec-0
8
Feb-
09
Apr-0
9
Jun-
090
200000
400000
600000
800000
1000000
1200000
NRSP
PRSP
TRDP
FMFBL
TMFB
Jun-
08
Sep-
08
Dec-0
8
Mar-0
9
Jun-
090
100000
200000
300000
400000
500000
600000
700000
NRSP
KB
Kashf
FMFBL
Jun-
08
Aug-0
8
Oct-0
8
Dec-0
8
Feb-
09
Apr-0
9
Jun-
090
100000
200000
300000
400000
500000
600000
700000
800000
900000
1000000
NRSP
Kashf
KB
FMFBL
TRDP
Micro Saving Micro InsuranceMicro Credit
Constraints/Potential and the way forward
89% of Pakistanis are unbanked Expansion of micro credit restricted
due to financing constraints Micro deposits a good source but
only Banks are allowed to raise deposits
Need for specialized microfinance provider with a focus on rural areas
Success is not final, failure is not fatal: it is the courage to continue that counts. Winston
Churchill
Thank You!