KASB Bank enters into microfinance business

May 21 - 27, 2007

KASB Bank has acquired the majority shares of the First Network Micro Finance Bank Limited, one of the six full-fledged microfinance banks, at a simple signing ceremony last week.

Though all major commercial banks were also engaged in micro-financing as a part of government agenda to use micro-financing for poverty alleviation, yet only six microfinance banks are fully involved in this dedicated area. These microfinance banks are: First Network Micro Finance Bank, Khushhali Bank, Rozgar Micro Finance Bank, Pak-Oman Micro Finance Bank and Tamer Micro Finance Bank.

The acquisition of Network Micro Finance Bank (NMB) by KASB Bank is being looked at as a significant happening in the microfinance banking on the back of their vision to use this mode of financing primarily for the level of satisfaction and not for making money. In fact, they have a passion to repeat the success story of Gramin Bank in Pakistan. Even if the bank succeeds in elevating the status of one person to the level of economic independence, it would add to the credit of the bank's new team.

The new management with their experience in this field as they claimed to be oldest in Pakistan, KASB team plans to reach to the areas so far neglected, such as micro-leasing for livestock and rural handicraft. Talking to Pakistan & Gulf Economist, Chairman NMB Asif Siddiqi cited the example of 'buffalo' leasing. One buffalo costs around Rs 25,000 but can be used more productively as it produces milk worth Rs 700 to Rs 1000 a day. The bank would prefer to extend this micro-leasing facility to womenfolk in the rural areas of the country.

Asif Siddiqi, Chairman Network Micro Finance Bank (NMB) and Syed Majidullah Hussaini of KASB signed the transfer agreement on behalf of their respective organizations. Asif Siddiqi, however, will continue to be the chairman of the bank, while Syed Majidullah Hussaini will be the CEO-designate of the bank.

Talking to media after the ceremony, Syed Majidullah Hussaini stated that the Security & Exchange Commission of Pakistan has already approved the acquisition of 55 percent shares worth Rs800 million.

It may be mentioned that KASB has acquired all the three operations of the NMB, which include micro-financing, micro-leasing and Modarba.

Initially, the new management would focus on micro-leasing both in urban and rural areas with an initial fund of Rs200 million with a passion to combat the issue of unemployment, especially amongst the womenfolk with an ultimate goal to alleviate poverty from the country.

The focus of the micro-leasing operations would be enabling the people to create self employment in an array of small business and jobs for which the current ceiling has been fixed at Rs.100,000, however, the general range of amount would be between Rs25000 to Rs30,000.

Taking lead from the success story of Gramin Bank of Bangladesh, Hussaini said besides using the branch network of KASB Bank, our teams of field workers would reach the deserving people to offer the facility.

Replying to a question regarding collateral and other documentation required for striking deals with the people, he said as you know the target clients would be the bottom line of the society, naturally question of collateral does not arise, however, personal guarantee and recommendations from the people of the community would naturally be required, however the documentation process has been kept as the simple as possible.

Regarding Gramin experience, he said mostly Gramin Bank operates in the rural areas as the world 'Gramin' stands for village or rural area, but in our case it would be meant both for urban and rural based population. Besides that the bank would not confine itself to group lending, as individuals would also be welcomed.

Actually, it was the level of satisfaction that made the KASB Bank engage itself in the micro-leading or financing; it is not a lucrative business otherwise. When asked about the average mark-up rates, Hussaini disclosed that it would be ranging between 22 to 23 percent.

He did not agree with a question that the mark-up rate sounds on the higher side, saying that actually the cost of management, sending teams and the span for lending is so small and cannot be brought down further.

He also narrated an interesting story regarding a woman at Clifton beach working for a vendor of shell jewelry. She used to earn Rs1 per peace after hard work of making one jewelry piece of seashell. One day she came to know about micro-leasing and contacted NMB for a loan of only Rs10,000 that the bank obliged. That lady used the fund so professionally that in a short span of time she developed her own business of seashell jewelry and started earning her bread and butter honorably.

On the same pattern, the KASB would encourage such womenfolk currently engaged in handicraft work in the city or in the rural areas with an objective to give them respectable source of earning and to live honorably in society, he remarked.