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ISF backs microfinance providers

KARACHI, Dec 5: Kazi Abdul Muktadir, Deputy Governor, State Bank of Pakistan, said on Wednesday that the International Strengthening Fund (ISF) has so far approved Rs632 million for 13 microfinance providers, including top and middle tier micro-finance banks (MFBs) and micro-finance institutions (MFIs).

Inaugurating the sixth Pakistan micro-finance conference in Karachi, he said under the ISF arrangement (a UK grant of 10m pounds facility), ISF has supported 20 projects for investment in key areas, such as human resources, information technology, product development, risk management systems, business plans and branchless banking development.

The Pakistan Microfinance Network (PMN) was also provided funding support under the ISF to conduct research and develop industry’s infrastructure, such as testing of microfinance Credit Information Bureau (CIB) in Lahore and its expansion to national level, he added.

He said that the Microfinance Credit Guarantee Facility (MCGF), a 10m pound guarantee facility, has so far mobilised commercial funding of Rs6,325m to four microfinance providers for onward lending to around 200,000 new micro borrowers.

“Going forward, the facility will aim to raise commercial debt from non-bank sources, diversifying sources of commercial capital for microfinance providers,” he said.

He said the Financial Innovation Challenge Fund (FICF), which is also a 10m pound facility, would provide new ways of meeting the larger demand for financial services.

He said that the first round of the fund which was held to promote “government-to-persons (G2P) payments” has now been successfully completed by deciding to award Rs505m to six projects being undertaken by the applicant institutions.

Mr Muktadir said that now four branchless banking providers are operating with full range of services.

He said that the brick and mortar retail network of the entire financial industry stands at around 11,000 outlets after 65 years whereas within a short span of two-and-a-half years, branchless banking retails agents’ network has grown beyond 30,000 agents.

With almost 1.8m mobile banking accounts, branchless banking customers conducted more than 28.4m transactions worth Rs115.3bn during the quarter ending June 2012, he said, adding that average size of transaction is Rs4,065 which shows that the technology is helping financial access of the un-banked.

The SBP deputy governor said that mobile phone banking has emerged as new market niche for both banks and mobile network operators and added that the existing growing agent network would rapidly expand to reach all rural and remote geographic locations across the country.

Currently, micro credit is reaching to only 2.3m borrowers which is less than 10 per cent of a target market that is estimated to be around 30m, he added.

Nadeem Hussain, president & CEO of Tameer Microfinance Bank in his keynote address stated that there was a misconception in the financial market that a low income population is not credit-worthy.

The fact is that these small scale diligent entrepreneurs have proven to be prudent as they ensure the lowest default ration.

He further said that financial exclusion is a major cause of poverty in developing countries like Pakistan. However, Mr Hussain said that Pakistan has created the enabling blocks to tackle this problem and become the first country to meet the poverty challenge in Asia. The advantages of telecom and branchless banking, he added, are creating numerous livelihood opportunities at the bottom of the economic pyramid.