May 12 - 18, 2008

Established in August 11, 2000 Khushhali Bank Ltd is the largest microfinance bank of Pakistan. It was ranked as 32nd largest microfinance bank in the world on the basis of its outreach in 2007. The bank is providing microfinance services via its network of 113 branches across Pakistan and AJK.

Managing Director of Khushhali Bank, Mr. Ghalib Nishtar, a well known name in the banking circles told page in an exclusive interview in his office last week. He gave a detailed account of his bank, its establishment, its gradual developments how it achieved its present position and its future plans to expend its activities.

He said microfinance is all about providing financial services to those who have the desire to work but do not have the opportunity and resource to do so. Microfinance is not a formal sector and MFB's are working with customers, who do not have a credit history, hence, we have devised our internal consumer screening mechanisms which guide us in making the right selection of the customer. Secondly, we have a large and strongly committed filed force, which works day and night to identify and measure the economic conditions of the potential customer, thus verifying and endorsing the collected data.

Khushhali Bank, in its endeavor to reduce and alleviate poverty from the country, reversed the conventional banking practice by removing the need of collateral and created a banking system based on mutual trust, accountability and participation. The loans are given in groups. These groups are familiar to each other, and each member of a group guarantees the smooth loan repayment of the other group members. However, the key source in the recovery of loans leis in the relationship of the Business Development Officer with his client. These officers visit their customers regularly, develop a strong relationship of mutual trust with them and hence minimize the chance of a delay or default of the part of the customer. That is why the repayment rate of this sector is commendable, and the cases of default are seen only in case of a natural calamity which is beyond the control of the customer.

Pakistan is one of the first countries form the developing world, to have put in place, a policy framework conducive to the development and growth of the microfinance sector. The policy framework adopted has the following attributes:

* It recognizes microfinance as a part of the broader financial system.

* It encourages the emergence of microfinance institutions to increase outreach to the poor especially women.

* The framework recognizes the need to direct investments in order to build social capital and mitigate risks faced by the poor.

* The policy promotes cross sector linkages between microfinance institutions specializing in financial intermediation to provide financial and non financial services to individuals as well as groups.

* It also restricts state's direct role and intervention to policy support and promotes public-private partnerships and private sector led initiatives.

* It improves the profile of microfinance institutions among policy makers and mainstream's core attributes of microfinance best practices and governance.

Mr. Ghalib said our major portfolio comprises of rural population. We are covering all the four provinces and the earthquake affected areas of Kashmir, along with the five agencies of FATA. Khushhali Bank is providing microfinance services to the marginalized areas of the country, with an objective to take financial services to the territories which have been marked non-bankable by the Commercial banks.

Khushhali Bank focuses on women and to provide them financial services we have deployed women Business Development Officers in all parts of the country. This not only provides easy access to the deserving women but also creates opportunities of employment and growth for the local women, who not only improve their own lives but also the lives of many others by providing them access to microfinance for business and thereby contribution in the overall development of the country.

Our strength is our young field force and they are extensively involved with their clients and have regular meeting in order to get insight on the progress and utilization of the micro credit. Moreover, our loans are booked and given directly to the women to avoid male intervention in the utilization of loans.

Microfinance is a very cost effective weapon to fight poverty. Hence, the efforts and investments have been undertaken with an implicit promise in Pakistan to build a financial system that reaches out to the poor and provides them with quality services to better manage their precious lives. We are now committed to supporting and contributing to the initiatives for the growth and prosperity of the global microfinance community. What is required now is a quantum leap, in terms of the scope and scale of microfinance services and removal of any obstacles that hamper the growth of the sector in order to effectively meet the needs of the poor. This can be achieved only through sustained commitment to growth, and political and popular support for the poor.

Despite all the positive developments taking place in the microfinance sector, there are certain challenges that microfinance sector needs to deal with in order to operate on a fully productive basis. Pakistan is a country which has an agriculture-based economy and majority of our labour force lack opportunities of education and access to information. Hence, it poses a major challenge to the industry with respect to educating the masses and making the potential clientele aware of the availability of microfinance and how it can lead them on the way to prosperity.

Another challenge of microfinance industry in Pakistan is that majority of our population is living below the subsistence level and therefore have a high tendency of using these loans for consumption purposes. Hence, microfinance institutions have to monitor and ensure that the loans taken by the poor households are used for productive purposes and not consumed for the basic necessities of life.

In addition to the above microfinance sector also faces a challenge in terms of its global commitment to the cause of alleviation of poverty and framing of fiscal and regulatory policies conducive and supportive of Microfinance Industry in Pakistan. Khushhali Bank has 113 branches and a total of 130 outlets; we have serviced nearly 1,500,000 clients with an estimated active client base of nearly 300,000. The bank emphasized on infrastructure and out reach expansion as these were the main priorities of the bank in order to make customers accustomed to the environment and the presence of microfinance banks.

Khushhali Bank's initial loans range form Rs.3,000 to Rs.150,000. However, for every new customer the loan limit is Rs.10,000. On the successful repayment of a loan the customer can apply for another loan with an increased amount of upto 20% of the previous loan. Hence, on each successful repayment the client is eligible to an increment of 20% for the next loan. The MD said that we have five different products in micro credit, namely, Asset Purchase Loan, Working Capital Loan, Agriculture Loan, Livestock Loan and New Business Loan. We also offer basic micro insurance, which is a loan default insurance in case of death or permanent disability. Khushhali Bank has very actively participated in the "Earthquake Livelihood and Rehabilitation Program" and we are offering subsidized micro credit of better livelihood in these areas.

Similarly we have taken different initiatives, one of them being the Khushali Bank USAID Scholarship Program, under with we have so far awarded 88 scholarships, to the students of interior Sind, Baluchistan and FATA. Theses scholarships have been awarded for higher education at country's most prestigious universities like Lahore University of Management Sciences (LUMS), Lahore, Institute of Business Administration, Karachi, Institute of Business Administration, Sukkur, Shaheed Zulfikar Ali Bhutto Institute of Science and Technology, Karachi, University of Peshawar, Peshawar, Institute of Management Sciences, Peshawar, City University Peshawar, and Baluchistan University of Information Technology and Sciences, Quetta.

A public private initiative we have collaborated with Ministry of Women Development for "Jafakash Aurat Project; which is basically a "Supporting Skills and Enterprise Development Program" for the women of Gwadar. A training center has been set up where we train the local Gwadar women in enhancing and developing diversified skills. After the completion of the program these women are motivated either to acquire micro credit to start up or enhance their businesses or encouraged to take up jobs which would facilitate them in increasing their household income.

We will be soon launching another training program branded as "Distance Learning Program" which will be a unique model of on the job training for communities. We are also looking at different product possibilities and are affirmative to launch some of them very soon as innovative product development is the need of the day, to make microfinance banks sustainable and financially self sufficient, he added.