khushhali bank

Project of NBFC

6/3/2011University of the Punjab

Khushhali Bank

Project of NBFC

Submitted to:

Sir Ehtsham

Submitted by:

Attiq ur rehman MC09128

Yasir Ayub MC09103

Abdul Baki

Asim nisar

Khushhali Bank

Dedication

Our group dedicates this project to our parents who encourage us & help us in every field

of life & of course our teacher without whom we could not able to make this project. May

they live long.

(Aamin)

Khushhali Bank

Acknowledgment

First of all we thank our Almighty ALLAH who has blessed us the courage, energy to

complete our final project.

This course work project which is the assignment of our M.com program is dedicated

unanimously to our Sir. What we have learnt from this program is not the gift of our course

books but is the relentless hard work and skill of our instructor. Whatever benefit we will

get by this course in our personal life is one thing but the quality of the knowledge that has

been delivered to us will remain with us.

We are also thankful to all those who helped us to collect the data without which my report

would not have been completed

Khushhali Bank

Executive Summary

Founded in the year 2000, Khushhali Bank Limited was a part of the Government of Islamic

Republic of Pakistan's Poverty Reduction Strategy and its Microfinance Sector

Development Program (MSDP). MSDP was developed with the facilitation of Asian

Development Bank (ADB). With its headquarters based in Islamabad.

It deals in no of microfinance and full banking services product like agri, new business,

working capital needs,livestock loan and full banking product constitutes of current

account, term deposits certificates and remittance facilites. it got a good depositor and

borrower base as compared to other micro finance institution in the field and lead the

industry in key financial indicators. the bank also involves in non financial performance

such as employee training and recognition. khushali bank provide their employee a good

working envoirment, It also contribute towards the commercial and developmental role.

Khushali bank looking forward to have some improvement in their HR department IT

department and conversion of its branches to full banking facility’s n short Khushali bank is

playing a vital role in the economic development of the country by increasing the

productivity and reducing the poverty which is the main problem of our country.

Khushhali Bank

Table of contentProject of NBFC........................................................................................................................2

Submitted to:.......................................................................................................................2

Submitted by:......................................................................................................................2

Dedication...............................................................................................................................3

Acknowledgment....................................................................................................................4

Executive Summary.................................................................................................................5

Table of content......................................................................................................................6

Need and importance of assignment.......................................................................................8

Selection of specialized financial institution with strong reason...............................................8

Overview of organization........................................................................................................9

Vision......................................................................................................................................9

Mission....................................................................................................................................9

Values.....................................................................................................................................9

No of branches and head office..............................................................................................10

Shareholders.........................................................................................................................11

Historical Back ground...........................................................................................................12

Development and commercial role........................................................................................13

Earthquake livelihood restoration program......................................................................13

Small infra structure projects............................................................................................13

Management Supports Women.........................................................................................14

Distance learning programs..............................................................................................14

Scholarship program.........................................................................................................14

Jafakash Aurat Program....................................................................................................15

Product line...........................................................................................................................15

Khushhali Bank

Micro credit products........................................................................................................15

Agriculture loans............................................................................................................15

Live stock loan................................................................................................................17

Asset purchase loan.......................................................................................................17

Working capital need.....................................................................................................18

New business loan..........................................................................................................19

Micro insurance products..............................................................................................20

Current account.............................................................................................................20

Product success and failure....................................................................................................21

Future outlook of the organization........................................................................................22

Human Resource...............................................................................................................22

IT department....................................................................................................................23

Full banking services.........................................................................................................23

Financial performance of khushali bank.................................................................................23

Comparative analysis with other banks.................................................................................25

Credit Rating of Khushali Bank Limited............................................................................25

Non financial performance....................................................................................................27

Client’s loyalty...................................................................................................................27

Job knowledge test............................................................................................................27

Employee recognition........................................................................................................27

Refresher trainings............................................................................................................27

Recommendations.................................................................................................................28

Bibliography..........................................................................................................................29

Khushhali Bank

Need and importance of assignment

Pakistan is a poor country most of people living their lives below the poverty line. In this

condition micro finance bank is last hope for the revival. Micro finance bank provide short

term loan to investors so that they can spend in a useful purposes and can earn a useful

return from them. specially as we know that success of each country depends upon the

strong footings of the hosue and cottage industry(eg china).so in a country like Pakistan

where there is a high inflation and high intrest rates there must be a institution which

provide loan to the people at low cost.so that theycan save themselves from sahukars.

As far as we people are concerned this assignment is very important for us.As,this will

provide us with a better understanding of NBFC with refrence to micro finance.this will

provide us with some subjective information which we will implement practically in near

future

Selection of specialized financial institution with strong reason

Poverty—the malignant malady ailing today’s world—has posed a major challenge to

emerging nations in their pursuit of economic growth and social development. And rightly

so, because macro-economic growth does not always filter down to the last legs of society.

And millions are left to suffer poverty, trapped without spite. Even with Pakistan averaging

an impressive GDP growth rate of over 7.5 per cent over the last several years,

unemployment has rated above 5 per cent while literacy is estimated at only 54 per cent.

Every fourth Pakistani is surviving below the poverty line.

Tackling these deep-rooted issues is beyond the very structure and scope of mainstream

commercial banking and that’s not even their objective. About 80 per cent of Pakistan’s

population does not at all have access to financial services by the commercial banks. Hence

microfinance is a targeted strategy to bring about change in the lives of millions for whom

it is by far the only true hope of improving their lives. Khushhali Bank Limited—one

microfinance institution that is convincingly dispelling this misconception through its

pioneering performance. With initial funding from the Asian Development Bank, and the

paid-up capital subscribed by 16 commercial banks, Khushhali Bank Limited was

established in August

Khushhali Bank

Backed by a strong banking expertise and an in-depth knowledge of the emerging socio-

economic markets, and driven by a deep and compassionate understanding of the poverty

factor, Khushhali Bank Limited is today the largest microfinance institution in Pakistan in

terms of coverage. Its operations and impact span across all the four provinces of the

country, Jammu and Kashmir and the Federally Administered Tribal Areas. And being a

pioneer, born and bred on a solid home ground, Khushhali Bank Limited is fully prepared to

offer viable answers to how poverty can be alleviated and optimistically.

Overview of organization

Founded in the year 2000, Khushhali Bank Limited was a part of the Government of Islamic

Republic of Pakistan's Poverty Reduction Strategy and its Microfinance Sector

Development Program (MSDP). MSDP was developed with the facilitation of Asian

Development Bank (ADB). With its headquarters based in Islamabad, Khushhali Bank

Limited operates under the supervision of the State Bank of Pakistan (SBP) and many

central (commercial) banks are its shareholders. The mandate remains to retail

microfinance services and to act as a catalyst in stabilizing the country's newly formed

microfinance sector.

Vision

To be a premier financial Institution in the microfinance Industry.

Mission

To strengthen the economic base of low Income populace across

Pakistan by improving their accessibility to financial services. By

supporting a diverse product suite with exemplary service and by

Khushhali Bank

deploying cost efficient next generation delivery systems, we intend

achieving our core objective of outreach and sustainability.

Values

Empower Excel Ethics

No of branches and head office

Northen region 2

Eastern region 27

Central region 31

Southern region 35

Total No of branches: 114

Head office: Islamabad, blue area.

Khushhali Bank

Shareholders

The shareholders of the Bank are as follow:

National Bank of Pakistan

Habib Bank Limited

MCB Bank Limited

United Bank Limited

Allied Bank Limited

Standard Chartered Bank (Pakistan) Limited

Askari Bank Limited

Bank Al Habib Limited

Khushhali Bank

Soneri Bank Limited

Habib Metropolitan Bank Limited

Faysal Bank Limited

KASB Bank Limited

Silk Bank Limited

Mybank Limited

Citibank N. A. Pakistan Operations

Historical Back ground

The history of microfinancing can be traced back as long to the middle of the 1800s when

the theorist Lysander Spooner was writing over the benefits from small credits to

entrepreneurs and farmers as a way getting the people out of poverty. But it was at the end

of World War II with the Marshall plan the concept had an big impact.

The today use of the expression microfinancing has it roots in the 1970s when

organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer

Mohammad Yunus, where starting and shaping the modern industry of microfinancing.

Another pioneer in this sector is Akhtar Hameed Khan. At that time a new wave of

microfinance initiatives introduced many new innovations into the sector. Many pioneering

enterprises began experimenting with loaning to the underserved people. The main reason

why microfinance is dated to the 1970s is that the programs could show that people can be

relied on to repay their loans and that it´s possible to provide financial services to poor

people through marketbased enterprises without subsidy. Shorebank was the first

microfinance and community development bank founded 1974 in Chicago .

Khushhali Bank

An economical historian at Yale named Timothy Guinnane has been doing some research on

Friedrich Wilhelm Raiffeisen´s village bank movement in Germany which started in 1864

an by the year 1901 the bank had reached 2million rural farmers. Timothy Guinnane means

that already then it was proved that microcredit could pass the two tests concerning

peoples paybackmoral and the possibility to provide the financial service to poor people.

Another organization, The caisse populaire movement grounded by Alphone and Dorimène

Desjardins in Quebec , was also concerned about the poverty, and passed those two tests.

Between 1900 to 1906 when they founded the first caisse, they passed a law governing

them in the Quebec assembly , they risked their private assets and must have been very

sure about the idea about microcredit.

Today the World Bank estimates that more than 16 million people are served by some 7000

microfinance institutions all over the world. CGAP experts means that about 500 million

families benefits from these small loans making new business possible. In a gathering at a

Microcredit Summit in Washington DC the goal was reaching 100 million of the world´s

poorest people by credits from the world leaders and major financial institutions.

Development and commercial role

Earthquake livelihood restoration program

The objective of ELRP was to provide substantial and immediate response to the poor in

the nine districts declared as disaster affected areas with an objective to restore income

flows, reduce dependence on relief, revive local economies and provide shelter whilst

undertaking livelihoods. To achieve these objectives Khushhali Bank with its extensive

network of branches was the designated implementing agency. KBL used its own

organizational structures and personnel and coordinated with service providers for

immediate outreach to affected households. For immediate response, State Bank of

Pakistan (SBP) issued licenses and KBL in addition to its existing branches in Abbottabad &

Khushhali Bank

Muzaffarabad established six new branches in the affected districts of Neelum Bagh and

Poonch in AJK province and Batagram, Kohistan and Shangla in NWFP.

Small infra structure projects

The objective of Small Infrastructure Projects (SIP’s) was to increase access of poor

communities to infrastructure for improving their livelihoods through efficient and

productive use of local resources. For this purpose a Community Investment Fund (CIF)

was established to finance the Small Infrastructure Projects through participatory process.

The involvement of local stakeholders in identifying, planning, executing & monitoring

community infrastructure projects greatly empowered them

The Small Infrastructure Projects were undertaken on equity participation of 40% from the

Community Organization against the total project cost while 60% cost was funded through

the Community Investment Fund (CIF). A Service Provider was engaged to work on

technical side of the projects and as a result 1569 SIP’s were completed during the period

of Fund. These projects include Roads & Bridges (122), Farm irrigation (689), Domestic

Water Supply (164), Drainage & Sewerage (27), School Building (49), Rural Electrification,

Computer Centers, PCO’s and Community Halls (518).

Management Supports Women

KB’s female orientation is reflected not only in the clients they serve, but in their hiring

policy as well. More than 30% of KB’s staff are women, with 2 women occupying seats in

the board of directors to ensure gender orientation in policy making.

Distance learning programs

Khushhali Bank

Distance Learning programs’ (DLP) objective was to spread business development services

and corporate image building materials by mobile training units that were well equipped

with media technologies, raising the confidence of existing and potential borrowers and

communities at large thus enabling the Bank to develop its’ market and client loyalty.

Scholarship program

In line with overall strategy of Khushhali Bank Limited (KBL) to strengthen its’ role and

brand image in marginalized territories and attract to promote education and enhance

accessibility to educational institutions as part of its social corporate responsibility

mandate, KBL commenced Khushhali Bank Scholarship Scheme (KBSS) in 2005.

A total of 332 scholarships amounting to PKR 76,890,465 have been awarded as of

September 30, 09, to domicile holders of Sindh, Balochistan and FATA, of which 244

scholarships valuing PKR 52,548,012 were awarded to domicile holders of tribal areas. A

total of 62 students have completed their degrees as of September 09.

Jafakash Aurat Program

kB started a unique project for women folk who only believes in hard work but also

confidence themselves. The purpose of this project is to generate income for the poor

women by developing and strengthening their skills. The project was started in Gawadar

that was a itself a challenge because unavailability of school and college and second

accessibility and availability of raw material. When KBL covered initial problems then it

started Training Need Assessment (TNA). After finding potential lucrative and most

demanded skills KBL started short courses e.g. beautician, cooking on commercial basis,

designing and computer literacy etc. this project was successfully running and now total

trained 4500 women. 695 women enjoys the micro credit loans.

Product line

Micro credit products

Agriculture loans Details

Product Features Details

Product Name Agriculture Loan

Product Type/Category Group Based

Product DescriptionFor the purchase of seed, fertilizer,

pesticides. For irrigation, rental of

agricultural equipment, transportation

etc.

Loan Eligibility Criteria

Age: 18 – 58 years, Maximum for repeat

clients: 65 years

Income: Total annual income is less than

Rs.300,000

Permanent resident of the locality for 2

years

NADRA NIC Holder

2 years experience

Loan Amount PKR 3,000 / 15,000

Tenure/Repayment Options 3-12 Months

Quarterly/Semiannual/Annually

Guarantors Cross Guarantees

Collateral None

Khushhali Bank

Product

Features

Product Name Live Stock Loan

Product

Type/CategoryGroup Based

Product

DescriptionFor the purchase of livestock

Loan Eligibility

Criteria

Age: 18 – 58 years, Maximum for

repeat clients: 65 years

Income: Total annual income is less

than Rs.300,000

Permanent resident of the locality

for 2 years

NADRA NIC Holder

2 years experience


Tenure/

Repayment

Options

3-12 Months

Monthly/Quarterly/Semiannual/Annu

ally


Collateral None

Live stock loan

Khushhali Bank

Asset purchase loan


Product Name Asset Purchase Loan

Product Type/Category Group Based

Product Description

For the purchase of new assets

having minimum useful life of one

year.


Age: 18 – 58 years, Maximum for

repeat clients: 65 years

Income: Total annual income is less

than Rs.300,000

Permanent resident of the locality

for 2 years

NADRA NIC Holder

2 years experience


Tenure/Repayment

Options

3-12 Months

Monthly/Quarterly/Semiannual/Annu

ally


Collateral None

Khushhali Bank

Working capital need

Product

FeaturesDetails

Product Name Working Capital Loan

Product

Type/CategoryGroup Based

Product

DescriptionFor managing a running business

Loan Eligibility

Criteria

Age: 18 – 58 years, Maximum for repeat

clients: 65 years

Income: Total annual income is less than

Rs.300,000

Permanent resident of the locality for 2 years

NADRA NIC Holder

2 years experience


Tenure/

Repayment

Options

3-12 Months

Bullet/Quarterly/Semiannual/Annually


Collateral None

Khushhali Bank

New business loan

Product FeaturesDetails

Product Name New Business LoansProduct Type/Category Group Based for both rural and urbanProduct Description For establishment of new business.


Age: 18 – 58 years, Maximum for repeat clients: 65 yearsIncome: Total annual income is less than Rs.300,000 Permanent resident of the locality for 2 yearsResident for 2 yearsNADRA NIC Holder


Tenure/Repayment Options 3-6 MonthsEqual Monthly Installments

Guarantors Cross GuaranteesCollateral None

Rates & Fees StructurePlease refer to our current schedule of charges

Micro insurance products


Product Name KBL Micro loan insurance Scheme Product Description Credit Life Insurance

Insurance Coverage ofDeath / Permanent Disability of Borrower

Eligibility All eligible borrowers Period Covered Equal to loan term Sum Insured Outstanding Loan Amount

Khushhali Bank

Current account


Product NameKhushhali Bank Current Account

Product DescriptionCurrent Account (non-interest bearing)

Cheque BooksAvailable (conditions apply)

Eligibility Criteria Age: 18 years and aboveNADRA NIC Holder/Valid Pakistani Passport2 Passport Size Photographs, terms apply

Account Opening Charges Rs.50.Minimum Balance Required

Rs. 500

Fees & ChargesPlease refer to our current schedule of charges

Khushhali Bank

Product success and failure

Agriculture products are more successful because our country is a agricultural country.

people need loan for there short term needs to purchase seeds and fertilizer etc. mostly

they earn revenue through this agriculture products. we can say that their major part of

loan portfolio is consisted of the Agri loan. ZTBL is the specially based organization fot the

development of Agriculture sector but we cannot deny the role played by khushali and

other micro finance banks

Entrepreneur loan is provided to the small investor who want to start their new business in

a new way.this is the second most popular and successful product of the khushali bank.

people meaty need working capital loan to meet their regular expenses of their business.

moreover there is no guarantee required other than the cross guarantee.

The third successful product of khushali bank is the loan for new assets purchase. it is

popular because this is the era of technology. one has to install new machines if he want to

be competitive. khushali bank provides such opportunity to it potential clients so that they

can increase their productivity and increase overall GDP. this loan is provided on a lenient

conditions and borrower doesn’t have to toil to much as in the case of other loan specially

from the commercial banks. in Pakistan small and cottage industry is flourishing these day

that’s why its wastage is increasing day by day in the loan portfolio of Khushali bank

Livestock loan, this is the type of loan which is not so popular and successful loan of the

KB. the big reason behind this is that in Pakistan livestock is not popular with respect to

the agriculture sector in the country. the livestock industry in Pakistan is confined to some

backward areas such as cholistan and some of the tribal areas. Although Khushali bank

have no such cluster of branches in such areas .the failure of loan may be due to the low

development of the livestock sector in Pakistan.

Khushhali Bank

New products such as term deposit certificate have been introduced by the Khushali bank

as a step forward to full banking service. its offers a good rate of return on the TDR

certificates. the edge that khushali bank gets over the commercial banks in this regard is

the minimum amount through which a term deposit certificate can be purcahsed. this

product has a very good future.

Future outlook of the organization

Human Resource

Perusing the business objective hr strategy for 2011 as under employee selection strategy focusing on person job fit and a person organization fit Employee management strategy changing from controlling self management and

empowerment. Employee motivation strategy built around creating family like environment supported by

reward and recognition culture. Reinforce timely communication of the performance obj periodic reviews completion of annual

appraisals and compensation reviews. Align induction policy of branch retail staff from local need perspective, quality and minimum

time to hire. Manage staff performance through automated HRMS Build people management capacities at supervisory and managerial cadre with emphasis on

customer services and leadership development. Reinforce work life balance so that people enjoy working for khushali bank.

IT department

IT team has a challenging role in term of role out of integrated banking application acroos network.

Khushhali Bank

Plans include conversion of 2/3rd of our network on an integrated banking application system in 2011 while remaining branches would follow in the next year.

Full banking services

Khushal bank is going to start full service banks in Pakistan.now the KB has some branches

offering products like commercial banks.this is the main objective of the Khushali bank for

the future.

Financial performance of khushali bankindicator 2010

(000)

2009

(000)

2008

(000)

2007

(000)

Outreach Active

Borrowers

325,523 329,421 312,851 283,965

Number of Savers 205,962 74,995 3,477 -

GLP PKR 3,722,152,79

7

3,630,204,658 3,093,335,635 2,652,915,785

Amount of Savings

PKR

1,000,328,62

5

190,032,590 18,168,500 -

Total Revenue

PKR

1,471,489,80

9

1,318,331,158 1,013,196,990 813,828,031

Total Revenue

PKR

1,471,489,80

9

1,318,331,158 1,013,196,990 813,828,031

Khushhali Bank

Net Profit/(Loss)

PKR

188,138,462 252,004,780 60,911,974 156,306,062

Average ROA

% ---

0.8% 0.4% 4.9% 3.9%

Average ROE

% ---

2.6% 1.3% 17.9% 14.8%

Operational Self

Sufficiency (OSS)

105.0% 98.6% 75.5% 80.5%

Operating

Expense/GLP %

28.0% 29.3% 31.6% 31.9%

Personnel

Expense/GLP

%

13.7% 14.0% 13.3% 14.1%

Borrowers per

Staff

150 165 156 152

Savers per Staff 95 37 2 -

Comparative analysis with other banks

SBP has published the stretigic framework for the MFIs for 2011 reflecting microfinance

bank progressKB stands on the top of all.

MFBs Branches Borrowers Advances Deposits Asset Borrowing Equity NPL%

KBL 114 352743 4129635 198782 6620837 4019160 2230746 1.96

FMFB 83 204301 3181759 5291011 6051049 - 523428 4.97

Khushhali Bank

Tameer 40 104726 2835506 2296135 4136529 513379 1089686 0.92

Kashf 27 18142 449178 474050 1271234 300000 402065 3.65

Pak

oman

17 8113 109214 28125 719455 - 677300 9.09

Network 5 6224 84251 40686 278122 - 230747 38.51

Rozgar 4 14 726 23221 122826 - 96963 64.46

Total 290 694263 10790269 8352010 19200052 4832539 5250975 3.00

Credit Rating of Khushali Bank Limited

JCR-VIS Credit Rating Company Limited (JCR-VIS) upgrades the entity ratings of Khushhali

Bank Limited which is as follows:

Medium to long-term A (Single A) from A-

(Single A Minus)

Short-term A-1 (A One) from

A-2 (A-Two)

We recorded a profit before tax of PKR 188 million forthe year 2010 which is lower than

last year’s of PKR 252 million primarily as a result of fall in non-core grant Income from

PKR 250 million to PKR 98 million.

The bank continues to pursue a sustainable growth strategy with reliance on core business

reducing grants/subsidies and the overall sustainability indicators reflect improvement

from 99% last year to 105% in 2010.The devastating floods of August 2010 affected a large

Khushhali Bank

part of the branches and business in some of the most potential areas of the country, and

correspondingly suppressed growth in portfolio and revenues.

However, a comprehensive risk mitigation mechanism is in place to monitor and address

the situation and was successful in curtailing the impact to a large extent in 2010 and

efforts will continue in the next year as well. The conversion of branches to full service

banking continues as per plan while simultaneously moving onto a new core banking

platform providing capability to develop new products & services and pursue new business

avenues. This is supplemented by strengthening of our business faculties resulting in

upsurge in retail deposits that will provide funding at competitive costs for future growth

and profitability.

Non financial performance

Client’s loyalty

For khushali bank client’s loyalty is the long term financial success. KB has the strong

customer base with some of their regular customers. it also offer some benefits for their

regular customers. clients who are loyal to the organization create good word of mouth for

the organization which will increase customers for the KB.KB main focus through the start

of its operation is to create the loyalty of the customer

Job knowledge test

Job knowledge test of all branch retail staff was conducted in two phases in phase 1 middle

managers were tested, whereas officers cadres were tested in phase 2, this will increase

the efficiency of employees and provide them opportunity to weigh themselves on a yard

Khushhali Bank

stick. f further this will be recognized. This will increase the non financial performance of

the organization

Employee recognition

In khushali bank there is a culture of appraising employees on regular basis. in addition to

the recognition at the site, it also publish a newsletter outreach on a quarter basis.KBL

management congratulates their employees on their well deserved promotion

Refresher trainings

Khushali bank offers regular training programs for their employees, which will increase

efficiency and thus effect the overall profitability of the organization. the best example is

the certified bank teller program.specially with the FSB program emergence it is the need

of the hour to have your employees trained.All the ROM and OM were trained as master

trainers

Recommendations

Open the branches in rural areas Support the community based loans Formulate incentive program for their employees There are many alliances of KB it must reduce its dependency on others Providing employees to latest technology so that they can urge potential customers in a proper

way.(for E.G videos on large screen such as success stories)

Khushhali Bank

Bibliography

http://www.microfinanceinfo.com/history-of-

microfinance/

http://www.microfinanceconnect.info/au_history.php

http://www.microfinanceconnect.info/au_history.php

http://www.microfinanceinfo.com/history-of-microfinance/

http://www.microfinanceinfo.com/history-of-microfinance/

Khushhali Bank

khushhali bank

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