NBP LEADS AGRICULTURE FINANCING IN PAKISTAN
AN INTERVIEW WITH MR. SHAHERYAR QAISRANI
EVP / DIVISIONAL HEAD, AGRICULTURAL BUSINESS DIVISION, NATIONAL BANK OF PAKISTAN
SAAD ANWAR HASHMI
Aug 6 - 12, 2012
PAGE: PLEASE TELL US SOMETHING ABOUT YOURSELF AND YOUR CAREER PROGRESSION?
SHAHERYAR QAISRANI: I joined NBP in 1975 as a Trainee Office and was later posted in various branches in Punjab including Kashmir. Gaining firsthand experience of branch banking and sales, I was elevated to Zonal Chief Manger, Bannu in 1997. In year 2001, I was elevated to Regional Operating Chief Abbottabad, a position I held upto year 2005. In year 2006, I became the Regional Business Chief for D.I. Khan. In the year 2010, I became the Wing Head, System and Internal Controls (S&ICW) in capacity of EVP. Since April 2011, I hold the position as EVP and Divisional Head, Agricultural Business Division at NBP. With 37 years of banking experience, I have received multiple performance, excellence and achievement awards more than any other employee serving at NBP. I am married and have three children. My eldest son is married and working at NBP in capacity of AVP. My second son has done an MBA and is moving to Scotland to pursue MSC in Petroleum Economics whereas my daughter is also married.
PAGE: DESCRIBE THE BUSINESS PERFORMANCE OF NBP IN COMPARISON TO OTHER BANKS AS ON FY12?
SHAHERYAR QAISRANI: NBP is the lead bank and holds the highest market share in terms of disbursements in comparison to any other bank in Pakistan. We achieved the disbursement target allocated by SBP with disbursements of PKR 45.789 billion in FY12 against target of PKR 43.20 Billion translating into target achievement of 106% more than any other bank. Our disbursement in FY12 was also 8 percent higher than FY11 which again is highest in the industry. Among the large 5 banks, the outstanding for NBP as on June 2012 was PKR 41.517 billion whereas the aggregate outstanding of all the large 5 banks was PKR 71.863 billion, NBP holding a share of 58 percent. If we take into account all the banks in the country including Microfinance banks, Domestic Private Banks and Large 5 banks, NBP holds a share of 15.5 percent. I must also highlight that NBP Agriculture Financing has been growing consistently since 2007 increasing disbursements from PKR 29.118 billion in FY08 to PKR 45.789 billion in FY12 which shows exceptional growth.
PAGE: WHAT HAS BEEN THE BUSINESS STRATEGY BEHIND NBP'S PERFORMANCE AND GROWTH?
SHAHERYAR QAISRANI: NBP has a strategic advantage of having branches in rural areas which makes it easier to approach farmers. We currently have 876 branches used for Agriculture Financing all over the country with officers designated to book agricultural loans. We have been consistent with our long term strategy to grow the business and focus on quality assets. Our NPL ratio was only 5% in December 2011 lower than any other banks which increased to 7.6% in FY12 due to the impact of flooding and rain experienced in Sindh region. Since the agriculture loans are secured and insured through crop insurance, the impact is minimum whereas recovery is swift. What makes NBP different from other banks in the country and reason for our consistent performance is to focus on booking new accounts whereas other banks focus on few accounts with high rollover. If we compare NBP with other large 5 banks, NBP is the only bank which has substantially increased the outstanding from PKR 30.450 billion in FY11 to PKR 41.527 billion in FY12 June 2012. I must also mention that the performance of NBP in Agriculture Financing is due to dynamic leadership, supervision and guidance of Mr. Asif Brohi, Group Chief Commercial and Retail Banking Group.
PAGE: HOW DOES NBP ENSURE THAT NEW ACCOUNTS ARE CONSTANTLY BOOKED WITH HIGH OUTSTANDING AND DISBURSEMENTS?
SHAHERYAR QAISRANI: NBP has a designated team of Field Officers who are allocated branches responsible for booking accounts. The performance of the Field Officers is dependent on the business and accounts booked. In order to ensure target achievement, a report is submitted by each field officer to report performance every 15 days monitored at the headoffice and regional level. The Field Officers have a degree in Agriculture and are provided with further training to ensure that competence level remains at the highest. We have been able to increase the number of accounts from 239,875 in December 2011 to 252,645 in FY12. The reason why NBP is able to keep a close tap on business performance and increase in accounts booked is through consistent monitoring of accounts and formulating immediate strategies to make corrective decisions.
PAGE: WHAT IS THE CURRENT MARKET POTENTIAL AND HOW WILL YOU ENSURE ALL FARMERS IN NEED OF FINANCING ARE REACHED?
SHAHERYAR QAISRANI: Since Pakistan is an agriculture based economy, farmers are in constant need of financing. It is estimated that the market size is approximately PKR 750 billion whereas the banking system has disbursed PKR 293.84 billion in FY12 which means that the market is largely untapped due to rural penetration and farmer training. We are making significant efforts to reach all farmers, however, there is a significant quantum of farmers who obtain loans through an informal network with interest rates above 25% requiring no documentation. We are making efforts through regional offices and Field Officers to increase knowledge of the farmers so that they move away from the informal network and obtain loans through NBP.
PAGE: IT HAS BEEN OBSERVED THAT MICROFINANCE BANKS HAVE NOT MET TARGETS ALLOCATED BY SBP. WHAT DO YOU THINK ARE THE REASONS?
SHAHERYAR QAISRANI: Microfinance banks do not have the geographic reach that NBP or any other large bank has. Additionally, microfinance banks charge an interest rate higher than that of commercial banks which is unattractive for the borrowers. Another reason why the banks have not been able to achieve SBP targets on a collective basis is the fact that microfinance banks refrain to lend clean whereas commercial banks are more open to clean lending.
PAGE: INCASE OF A DEFAULT, HOW DOES NBP ENSURE RECOVERY?
SHAHERYAR QAISRANI: We keep a close watch on problematic accounts through constant reporting by North, South and Central regions. Remainders, phone calls and personal visits are conducted regularly. Incase recovery is not made possible through internal efforts, litigation is considered. Considering that the ticket size of NBP is between PKR 150,000 to PKR 180,000, the amount to be recovered is not as significant and recovery efforts are generally fruitful. Collateral which includes personal guarantees are considered where required also giving us an added advantage to ensure swift recovery.
PAGE: WHAT GIVES NBP A STRATEGIC ADVANTAGE OVER OTHER BANKS?
SHAHERYAR QAISRANI: As I have already discussed, the core advantage of NBP is the branch network which can reach the most remote localities and farmers residing in those locations. NBP offers an interest rate to the farmers which is minimum 300 bps lower than what other banks are offering which makes our pricing very competitive. Among commercial banks all over Pakistan, NBP is the only bank which offers financing against collateral that can be held against Gold and has been very popular. A farmer who has little to no collateral with the exception of land always has as gold in their holding which is used as collateral. Each branch is supported by a goldsmith who ensures the quality of the gold in a turnaround of less than 24 hours. NBP again has an advantage with the product offering where agriculturalists can obtain a loan for almost any need be it for land, seeds, fertilizers, crops etc which helps them cultivate the land. The agriculturalists approach us with their need and we accommodate with the financing need on best effort basis.
PAGE: SINCE FARMERS ARE LESS EDUCATED AND FIND IT DIFFICULT TO UNDERSTAND THE COMPLEXITY OF BANK DOCUMENTATION, PRICING OR REPAYMENTS, HOW DO YOU ENSURE THE REPAYMENT CAPACITY OF THE BORROWER?
SHAHERYAR QAISRANI: Assessing the repayment capacity is always a challenge since farmers do not have any formal documentation to ensure the return on crops neither can we expect them to do any financial modeling or projections. When it comes to collateral, we ensure that the land ownership is checked through the Passbook and Parwari. Additionally physical inspection are done frequently by the Field Officers who ensure that the crop for which the loan is given is cultivated including estimates of sales from the crop after harvesting.
PAGE: PLEASE TELL US SOMETHING ABOUT CROP INSURANCE AND HOW WILLING ARE INSURANCE COMPANIES TO INSURE CROPS?
SHAHERYAR QAISRANI: SBP has encouraged all banks to ensure five crops which includes Sugarcane, Rice, Maize, Cotton, Wheat having mandatory insurance with maximum pricing at 2 percent. NBP has its own panel of insurance companies used to insure crops. Furthermore and in line with SBP directives, farmers who own less than 12.5 acres in Punjab and Sarhad, 16 acres in Sindh and 32 acres in Baluchistan are provided insurance backed by the government whereas the remaining farmers with land holding more than what is mentioned have to arrange for insurance on their own. We at NBP always insure crops and make sure that the insurance is provided by insurance companies on NBPs approved panel.
PAGE: WHAT IS THE FUTURE OF THE AGRICULTURE BUSINESS OF NBP AND WHAT STRATEGIES DO YOU FORESEE FOR BUSINESS GROWTH?
SHAHERYAR QAISRANI: In order to make full use of the branch network and keeping with wide potential in the market where the informal network has thrived, we are making efforts to employ more field officers who would ensure more coverage and disbursements through booking of new accounts. These efforts will help increase outstanding and will ensure borrowers to move from an informal network to NBP.