Interview: Mr. Amer Siddiqui, SEVP Commercial and Retail Banking Group, NBP.

May 21 - 27, 2007

NBP is the largest bank of Pakistan with the customer base of over 10 million account holders. It has the largest borrower base exceeding one million customers. NBP has recently launched NBP Karobar which is a brand name of a full range of products developed by NBP under the President's Rozgar Scheme. PAGE met the Senior Executive Vice President, Commercial and Retail Banking Group of NBP, Mr. Amer Siddiqui to find the hind sight of the scheme.

PAGE: Give us a bit background of the Karobar scheme, how did it happen and what was the basic purpose behind it?

AS: Actually it was the merging of two strategies, one was the Pakistan government and the other was the National Bank of Pakistan, as approved by the board of governors. The synergy works well for both departments and as per the President's vision National Bank has just taken the lead by launching its first under the brand name of 'NBP Karobar'. National Bank's strategy is to enhance its customer base; we already have over 10 million customers and will double it in the next five years. Obviously in order to achieve this target, it has to go into the un-accessed areas. National Bank's strategy is to always serve the nation, it's the largest bank in Pakistan and is internationally acclaimed as one of the world's strongest banks as mentioned in the 'Bankers' magazine. And it has been the single largest bank to work towards philanthropy, social work; in fact when the earthquake occurred, NBP like all other banks was collapsed in those areas but it was the only bank that was made operational within three working days, so obviously it counts as otherwise the management of Azad Kashmir would have collapsed in those affected areas.

Karobar offers the simple products under the President's Rozgar Scheme to anybody aged between 18-45 years, has a valid CNIC, is not a defaulter (as we check with the electronic CIB of the State Bank) and has lived in the same area for the last two years. We have outsourced this verification to an international rating agency which gives us physical verification of the person and his/her physical and metaphor addresses in a certain number of working days. And we just demand references as guarantors and there is no need of any collateral. The references were also verified by the agency and they give us a report about that person so that we should know that the loan is going to the right person. Another thing is that we have all our branches electronically connected to NADRA. As soon as the application comes in, CNIC goes from our system to NADRA system and all the particulars are verified. Same is the case with the electronic CIB of the State Bank. Today it's all automated and more than thousand of our branches are connected through a network.

PAGE: Tell us a bit about the products being offered through your bank in this scheme?

AS: Well, we have started with six products and about nine partners but we are expanding the criteria for the selection of these products and partners through market research and then with the help of our own analysis. Based on our analysis, we realized that we could not go into those sectors where there is not enough supply of goods available so we went into the telecom sector where there is enough supply. We have signed a contract with Intel Corporation of USA. We have a product as a telecentre which can scale up to six PCs along with connection for the PCs like net to phone, VOIP, etc. We have also worked on the use of the telecentre for the rural areas as a health centre. These are the following products we offer through this scheme.

i) NBP Karobar Utility Store (under a franchise with Utility Stores Corporation)

ii) NBP Karobar Mobile General Store (without USC franchise)

iii) NBP Karobar Transport

iv) NBP Karobar PCO

v) NBP Karobar Tele-center

i) NBP Karobar Utility Store (Under USC Franchise): The product has been designed in collaboration with 'Utility Stores Corporation Of Pakistan (USC) to provide financing facility of an average amount of Rs.100,000/- for a maximum period of five years with grace period of three months. This is available to all eligible citizens of Pakistan for setting-up small-scale Retail Outlet or Mobile Utility Store. The USC will give its franchise to qualifying Pakistani citizens.

Following two financing options are available under this product:

NBP KAROBAR Utility Store (Shop): Financing facility available to set-up a small scale Retail Outlet (Utility Store in a shop) for purchase of furniture & fixtures. This is also applicable on payment of security deposit / advance rent under franchise from the USC. However, stocks will be purchased by the customer.

NBP KAROBAR MOBILE UTILITY STORE: Financing facility available to purchase a 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto Scooter / Motorcycle Rickshaw) with attached Loader body (Thehla type) under franchise from the USC to carry utility goods for retail sale ideally in areas where accessibility to conventional utility stores is difficult.

ii) NBP KAROBAR MOBILE GENERAL STORE (WITHOUT USC FRANCHISE): This financing program has been designed on the similar pattern of Mobile Utility Store. The only difference is that the borrower will have the liberty of procuring stock/supplies/grocery items from open market. Under this product the average loan size of Rs.100,000/- will be given for a maximum period of five years with a grace period of three months.

iii) NBP KAROBAR TRANSPORT: The NBP Karobar Transport is designed to finance 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto Scooter / Motorcycle Rickshaw) to the eligible citizens of Pakistan for providing less expensive environment friendly transport facility. Under this product average loan size of Rs.100,000/- will be provided for a maximum period of five years with a grace period of three months.

iv) NBP KAROBAR PCO: This product is designed to finance setting-up a PCO. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection, Credit Balance. The average amount of financing under this product will be Rs.5,000/- for a maximum period of two years with a grace period of three months.

v) NBP KAROBAR TELE-CENTER: This product is specially designed to finance setting-up a Tele-center. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection, Computer, Printer and Fax machine cum Photocopier etc. to establish tele-center on a rented shop or owned premises. The average amount of financing under this product will be Rs.50,000/- for a maximum period of two years with a grace period of three months.

The scheme will be offered to eligible young and literate citizens of Pakistan, falling within an age group of 18-40 years having a minimum qualification of Matriculation (except for females in the PCO/Tele-center product). The eligible borrowers will be required to make a down payment of 15%.

PAGE: How does NBP Karobar differ from other microfinance schemes?

AS: Karobar, unlike consumer financing or micro financing, is basically a small business. It's a public-private partnership and it generates the income. As our President Syed Ali Raza keeps on repeating 'Karobar' adds to an unemployed person's income in a way that he can earn alike or a bit more than what he can earn through the job. I give you one example of a Larkan-based person who did his Masters from Karachi University and remained unemployed for six years. Then he got rickshaw through this Karobar scheme and was interviewed by CNBC where he said he is happier today as he earns thousand rupees a day of which he spends eighty rupees on him, the loan of 3000 rupees is not a problem for him. He said he did not need any employment for being a self employed person now. Hence this scheme adds up to the value of their lives as they first raise their standard to the lower middle class and later to the middle class.

PAGE: As this scheme is a joint venture between the government and the NBP but as a bank you can't deny that it has to look into the benefit of the scheme so what benefits are there for the National Bank in launching this scheme?

AS: NBP has an experience in introducing new ideas like the one of advance salaries; today we are touching a base of 100 billion rupees in a sector where no one wants to give money earlier. Today we have million borrowers in just four years. We have an experience in agriculture also. In Karobar scheme we give products which will be on our name till the time the borrower repays the whole loan. Asset and Life & Disability insurances will be mandatory under this scheme. The 15% down payment will include 1st year's asset insurance premium. However, the cost of life and disability insurance will be borne by Government of Pakistan (GoP). The mark-up rate for the 1st year will be 12% and for the subsequent years it will be 1 year KIBOR + 2%. Fifty percent of this rate will be paid by the customer i.e. 6% and the balance of 6% will be borne by GoP. Additionally, first 10% of the losses under the scheme will be taken up by GoP. The good point for the bank is that we are building up our customer base and we are also having all the securities covered by the government. In the future when these people will be independent in expanding their businesses they will do the banking with us. It's a good banking sense for us to have loyal customers.

PAGE: Now tell us a bit about the fund allocation and the total disbursement under this scheme?

AS: We have our own funds. We have an approved budget for this scheme from our board of directors of about 110 billion rupees to be used in the next five years. We will target around 2 million customers under the first five-year plan. If we will give our products to two million people then it's obvious that it will create direct/ indirect employment for about 6 million people. Even if we provide employment to five million people we are supporting around four crore people taking the size of the household on an average of eight. In that way we are talking about 2.5 % people going above the poverty line in our country. About fund disbursement, from the time of its launch in April, we have processed almost 17500 applications, 95% of the applications are approved. 1.5 billion rupees have been given in a month. We are receiving 400 applications every day. We did a massive media campaign for awareness in the general public. By our full launch I mean that we have this scheme available through all of our branches throughout the country. We have our toll free number (0800-800-80) on which you can find out the details and you can also leave your address and our sales representative will reach you through that address. We are also selling this scheme through our vendors like Mobilink, Qinqi, Ng Autos etc. we are using all the channels to spread the awareness for this scheme.

PAGE: If we talk about rural penetration, how successful is it?

AS: We are the largest rural bank. We have our branches in almost every part of Pakistan even in remote areas like Gawadar where we have 23 branches; we have our branches in Punjgoor, Kallat, Chaghi, Barh Khan, etc. As we use to supply the salaries of the forces so we are almost lying at every part of Pakistan.

PAGE: Do you think your products are feasible for both urban and rural areas as what might be workable in urban areas may not be applicable in rural side?

AS: If you use tele-centre as a fax machine, it is good for urban area, but if you use the same as health centre it is good for rural area.

PAGE: But still these products are quite complex for rural people.

AS: Then let me answer you another way. 68% of our products are sold in rural areas, so we must be doing something right.

PAGE: Are there any legal requirements or documentation needed for the products?

AS: There is a very simple documentation. The customer has to sign a finance agreement; other requirements would be done by our dealers. Customer has to apply, get the product, get the training, run the business and pay the loan. We have 1100 dealers of Qinqi, 5000 dealers of Intel, 6000 dealers of Mobilink, etc. When they give their product, they give the training right away through their dealers. We have an agreement with them; if they don't give the training we will cash their guarantee.

PAGE: How would you compare this model with the Grameen Bank of Bangladesh?

AS: Grameen Bank started way back in 1973; they got the Noble Prize in 2007. We will not wait that long. Since the time of inception they remained able to make almost 1 million clients; we will make 2 million clients in coming five years, InshaAllah. Our inspiration is our President's vision to give the loan to the right one. With our team at National Bank, we have laid the foundation for history.

PAGE: How do you see its effect on the economy as a whole and what if the government will change in the coming years?

AS: Well, through this project economy will get the benefits by 80 times. As it has a multiplier effect, the more people buy our product, the more of our industries will grow. We need a consistent approach as far as the government is concerned, if the government will change, it will definitely have an affect on this scheme.

PAGE: Any message to the general public?

AS: Well, the product is available, they can call us on our toll free number and we would be happy to help them raise their standard of living. And if you work honestly in using this product, it will definitely work for the betterment of your family.