First financial institution to introduce biometric ATM's at its branches

SHABBIR H. KAZMI, Special Correspondent
May 28 - Jun 03, 2007

Roughly one third of Pakistan's population lives below the poverty line. Though, the government is making efforts for poverty alleviation, distributing charity could not resolve the issue. Self sustaining SMEs and micro entities to be developed but this objective could not be realized without providing finance to these micro entities. One of the unique institutions is Tameer Microfinance Bank, headed by Nadeem Hussain. In an exclusive interview with PAGE Nadeem Hussain explained the concept of microfinance and operations of Tameer.

PAGE: Tell us briefly history of Tameer Microfinance Bank.

NADEEM HUSSAIN: Tameer Microfinance Bank (TMFB) in the brainchild of four ex-bankers who wanted to come back to Pakistan and start an institution which would specifically address the needs of the un-banked population of Pakistan. It obtained its license in September 2005 and commenced operations on 1st January 2006. It is capitalized at Rs 600,000 and has a national license. Currently it has 18 branches, over 25,000 active loan and deposit customers.

PAGE: What is the difference between Tameer and other institutions offering micro finance facility?

NADEEM: TMFB and the other microfinance banks have three main differences: 1) TMFB is majority owned by its management. Hence, unlike institutional funding, senior management has invested its life savings in this institution. 2) TMFB is currently the only microfinance bank which is providing loans on an individual as opposed to a group-lending basis. This has resulted in its average loan size being three times the industry. This will also allow its customer base greater economic empowerment. 3) TMFB has focused on the savings needs of its customers as well. 4) Customers can open accounts with as little as Rs 100 with no minimum balance requirements or monthly charge. TMFB has also been the first financial institution to introduce biometric ATM's at its branches.

PAGE: Does Tameer also involve NGOs in carrying out its operations?

NADEEM: Currently, Tameer is an urban-based microfinance bank. As it moves out to rural areas it will establish strategic partnerships with the appropriate NGO's.

PAGE: What are the benefits and disadvantages of involving NGOs in credit disbursement?

NADEEM: The clear benefit of working with an existing NGO is that it is already in the field. Has an existing distribution base and understands the behavior of its customer base. The issue becomes of credit quality. Most NGO's have not scaled their operations. Hence if they are to scale, they must be able to share in the potential portfolio risk which will be generated. Unfortunately, other than a handful the bulk of the NGO's do not have the capital to provide risk sharing

PAGE: If Tameer offers full-fledged commercial banking facilities, why is it called micro finance bank?

NADEEM: The Microfinance Ordinance was created to establish a special category of banks which would cater for the needs of those customers that commercial banks were and are not willing to address. Taking into account the needs of this customer's base, microfinance banks can make unsecured loans up to a maximum of Rs 150,000 to an individual customer, they can take deposits from any customer, and they can sell insurance products and make domestic remittances. However, since their customer base does not require, letters of credit, guarantees, project finance, foreign exchange and other financial derivatives they are precluded from conducting this activity. They also can operate nationally with a smaller authorized capital. Hence, financial institutions which have obtained a license under the Microfinance Ordinance are called microfinance banks

PAGE: What are maximum and minimum financing limits?

NADEEM: The ordinance does not stipulate any minimum limit. However, for business reasons we do not lend under Rs 10,000. The maximum limit allowed is Rs 150,000. However, an institution's portfolio above Rs 100,000 cannot exceed 20 % of its total portfolio.

PAGE: Does existing prudential regulations fully support micro finance or there is need for some amendments?

NADEEM: There have been several changes to the original Ordinance, keeping in mind ground realities. Several changes, like Tier 2 capital, timing of reserve recognition, maximum loan size is also under consideration by State Bank of Pakistan.

PAGE: What are the major areas/sectors of exposure?

NADEEM: Tameer has not imposed concentration limits at this early of its portfolio. Our geographical exposure is in Karachi, Hyderabad and Lahore. Our sector exposure is in the service, manufacturing and trading.

PAGE: What process is being followed for sanctioning loan?

NADEEM: An applicant must be one year in business. Have a valid computerized national identity card. Place of business and Residence must be verified. If the loan is below Rs 25,000 one guarantor is required, if above Rs 25,000 two guarantors are required. A simple application form is required in Urdu to be filled by the applicant

PAGE: What is the number and location of branches?

NADEEM: Tameer has a network of total 18 branches. Out of these 14 are in Karachi: two in Orangi Town, Baldia, North Karachi, Godra, Taiser Town, Malir, Korangi, Landhi, Manzoor Colony, KCM society and Lyari. Lahore and Hyderabad has two branches each.

PAGE: Why the concentration of branches is in Karachi?

NADEEM: The rationale was to test the proof of concept before expanding countrywide. A nascent organization faces span of control issues if it expands too fast on a geographical basis. Now that our technology, products, distribution have been tested, we are expanding nationally.