MICRO FINANCE BANKS
Need to have Organisational Culture matching their objectives
By AKRAM KHATOON
Former president, First Women Bank
Feb-11 - 17, 2002
The conventional commercial Banks, commanding almost 95% of total banking sector assets in the country are operating with a peculiar culture of sophistication, grandeur and a totally profit driven approach and the image thus created prevents general public to have an easy access to these financial institutions. The design and layout of the branches, the atmosphere created through various deterrents used for security purpose, the way the staff deals and above all the complicated procedure for acquiring different services spelled out through innumerable brochures and leaflets provided on one's entry into a Bank branch make the poor person feel as if he or she has entered a maze.
The launching of Micro Finance Banks in recent past, both in public and private sector is for the sole purpose of promoting Micro businesses among disadvantaged segments of population by making available banking services matching their peculiar needs. Accordingly these banks must develop a culture conducive to total welfare of their clients and must create such enabling environment whereby clients may avail desired banking services with total confidence and feeling at home.
The cultural environment of an organisation is a composite of various ingredients like its management philosophy, nature of business, targeted clients, systems and procedures, its human resource development policy and of course design and layout of its premises. The Micro Finance Banks which ultimately aim for empowering poor economically by providing micro loans for setting up micro businesses and at the same time inculcating saving habit among them to ensure viability and sustainability of their business for all times to come, the total cultural composition of these banks must be poor friendly.
•It is imperative for these banks to pay greater attention on ensuring accessibility of their services to targeted clients and an image of candor and friendliness should be conveyed to them. As such branches of these banks must be located in easily accessible areas and housed in buildings with simple design and layout. The person entering Micro Finance Bank should be made to feel welcome in an environment that sets him/her at ease that his/her expectations will be met.
•The management philosophy should be geared to ensure maximum out reach of Bank's service to targeted communities. As such decentralisation or delegation of decision making powers down the line should be the very basis of management policy. Unlike conventional Banks policy should be to provide Banking services at door step of the client with reasonable cost. In fact micro financing is all about keeping economic mechanism of poor communities smooth and efficient. As such all efforts should be geared towards continuous prosperity of the down trodden and ultimately of the country as a whole. However to ensure sustainability of the operations pricing of services should be done keeping in view relevant market and also affordability of targeted community in general.
•Since in terms of Micro Finance Ordinance of 2002 major functions of Micro Finance Banks are deposit taking and financing micro businesses, they need to develop such products (saving as well as credit schemes) which offer maximum satisfaction to the targeted segment of client. Besides ongoing efforts are desired for continuous improvement of the products to cater to the changing needs of the clients. In this regard propensity and capacity to save, general nature of businesses in vogue with relevant segments of population, size and duration of the credit required and general economic conditions should be the deciding points while developing a new product or making improvement on existing products. As such alongside development of new products/services, Research and Development work on continuous basis is the utmost requirement. It is essential that persons inducted for R&D must put social vision in command firmly while at work.
•Since human resources play an important role in development and success of an organization, the micro-finance Banks like other Financial institutions must have focus on vital role of human resources in the development and growth of organization through wide spread marketing of its services to targeted segment of population both in urban and rural sector. The entire human force should be injected a cultural mirage of helping poor by creating enabling environment for them to take charge of their destiny. As such apart from providing training in procedures, methodology of lending and collecting deposits sufficient exposure should be provided to the entire work force in specialised behavioural skills to deal with disadvantaged groups of communities. Further staff must gear their efforts to encourage community building thereby motivating clients to save and build their own community/group mutual fund. In this context it is essential that field staff is provided opportunity to have diversified exposure in community development programme so that they may guide the clients in practical matters such as health, education, family planning, disease prevention and treatment, crop production, animal husbandry and children mobilisation to schools.
•Unlike conventional banks in Pakistan, micro-finance banks have equal focus on mainstreaming women in economic process. As such staff of these banks should be gender sensitised.
•In order to attract qualified and dynamic young men and women to this specialised field of banking, Management needs to inculcate consultative and participatory style of management for creating a sense of belongingness among the employees. This develops automatically when decentralization is the guiding principle and employees' growth and career progression is taken care of. It is only the sense of belongingness which prompts the workers to go out of their way to work for their organisation.
•Since the clientele of these banks come from poor communities where rate of literacy is very low, it is essential that systems and procedures including documentation process should be very simple and affordable for the clients. In view of growing interest of youth even from low income group in information technology, the micro finance banks should not only have proper management information system in place for smooth and efficient operations of the bank but also it should be able to provide computerised record of clients transactions in order to ensure transparency and satisfaction of the clients.
•The present regulatory framework offered through Micro Finance Banks ordinance 2002 (for Banks in private sector) contains some clauses which are either ambiguous in their interpretation or of such a restrictive nature that banks are likely to face constraints while rendering even conventional banking services.
In terms of eligibility criteria set by the ordinance one can borrow if his/her income is below taxable limit. The ambiguity of this criteria is imminent in marginal cases where possibility exist for their upgradation to taxable income level during the tenancy of the existing loans allowed to such customer. Secondly in the absence of a national level data base on individual's income it is very difficult to ascertain the income of an individual.
The said ordinance also states that Micro Finance banks will not be the part of the State Bank of Pakistan's Clearing system. This would hamper smooth and efficient offering of even basic services like deposit taking and transfer of funds etc. Their dependency on conventional Banks for availing this service would not only enhance their operational cost, but also facilitate invasion of culture of conventional Banks directly and indirectly. It would be appropriate if these problems are looked into by State Bank of Pakistan at this initial stage to ensure smooth functioning of these banks.