Ghalib Nishtar is the
Chief Executive Officer of Khushhalibank at present. Earlier he has
worked for National Bank of Pakistan. He has been assigned the
difficult task of providing credit to those most of whom are not
conversant with traditional banking system prevailing in the country.
Even the bigger challenge was to extend fund without collateral and to
also ensure recovery. The common saying is, small borrowers hardly
default, and it has proved correct in the case of Khushhalibank.
By SHABBIR H. KAZMI
July 01 - 07, 2002
The GOP is promoting small and medium enterprises, what has been the
role of your bank?
In Pakistan, almost one third of the population, lives below the
poverty line. The Government of Pakistan has taken a conscious
decision to bring poverty alleviation to the center stage of economic
policy making. The strategy includes access to sustainable
microfinance services to the poor for enhancement of their income as
one of the primary objective. The GoP launched the Microfinance Sector
Development Programme in late 2000 to reduce poverty in the country.
The purpose was to induce private investments for fostering growth of
new microfinance institutions to efficiently provide a range of
financial and social service to the poor, especially women. The GoP
initiated policy actions for development of the sector. These
included: (1) developing an enabling policy framework for microfinance
growth, (2) establishment of Khushhalibank, and (3) development of a
legislative and regulatory framework to encourage establishment of
private sector microfinance institutions. Khushhalibank
institutionalized the basic attributes of microfinance policy,
specialized operating procedures and established industry benchmarks.
The private sector participants in microfinance sector can take
advantage of the institutional and operating infrastructure developed
the GOP and/or international financial institutions helped in raising
the seed money?
Khushhalibank is owned by 3 public Sector, 11 private sector and 2
foreign banks which have contributed US $ 30 million or Rs. 1.7
billion towards the capital of the bank. In addition to this, the GoP
has solicited a loan of US $ 150 million through the Asian Development
Bank which comprises, US $ 70 million for on-lending to Khushhalibank,
US $ 10 million for its capacity building and the remaining US $ 70
million comprises sectoral funds through endowment created at the
State Bank of Pakistan.
There are three banks now that are catering to this segment, does this
The SME Bank focuses on a higher tier of clientele whereas the
Khushhalibank and the recently established First Micro Finance Bank
cater to the requirements of the small borrowers of the country.
However, given the number of 6 million poor households and as per our
initial feasibility study, the estimated requirement of funds is about
US $ 2 billion annually. There is hardly any competition within the
formal sector and the major challenge will be to set up an efficient
delivery channel for affordable financial services to the poor.
What is being done to create enabling environment?
Stakeholder consultations and feasibility study undertaken by the
Asian Development Bank (ADB) converged on a financial system
development approach to create a broad based system anchored with the
ongoing financial sector reforms that emphasize autonomy, good
governance, privatization, and sustainability. These arrangements have
twin objectives, first to ensure an orderly development of the micro
finance sector and second, to protect the financial assets of the
poor. NGOs and their sponsors can now graduate into micro finance
banks and provide a full range of services to the poor.
What has been the experience with regard to loan payments by the
The bank has established its network across 30 of the poorest
districts of the country and extended credit over Rs. 500 million
which comprises 50,000 small loans averaging Rs 10,000. Planned,
focused and structural policies resulted in recovery rates around 98
per cent while ensuring that over 30 per cent of our clients are
What is being done to develop entrepreneurial skills?
We aim at strengthening the social capital of the poor — increasing
opportunities for their participation in the working of the society
where social cohesion is weak and poor suffer from systematic
exclusion. Increasing economic opportunities and creating
participatory institutions/mechanisms are required to enhance social
capital. These funds support capacity building of community based
organization in terms of social awareness and selection and management
of income generating activities, developing skills and providing basic
training to leaders of community organizations These interventions
will strengthen the community organizations, which serve as a delivery
point for financial and social services, and promotes social and