Pakistan Microfinance Review 2013

Annual Assessment of the Microfinance Industry

2013

FINANCIAL SERVICES FOR ALL Produced by: Pakistan Microfinance Network Art Direction: Sumaira Sagheer Design & Layout: Uzma Toor Photocredits: Retroactive Studios Library Printed at: Pangraphics

Annual Assessment of the Microfinance Industry

FINANCIAL SERVICES FOR ALL EDITORIAL BOARD

Mr. Ghalib Nishtar Chairperson Editorial Board President, Khushali Bank

Mr. Syed Samar Hasnain Director, Agriculture Credit and Microfinance Department, State Bank of Pakistan

Mr. Blain Stephens COO and Director of Analysis Microfinance Information eXchange, Inc. (MIX)

Mr. Raza Khan Statistics & Results Adviser, Results & Evaluation Team- Economic Growth Group, Department for International Development (UK)

Mr. Yasir Ashfaq Group Head, Financial Services Group, Pakistan Poverty Alleviation Fund

Mr. Abrar Mir EVP and Group Head, Digital Money & Mobile Payments, United Bank Limited (UBL)

Mr. Masood Safdar Gill Director Program, Urban Poverty Alleviation Program, National Rural Support Programme

PMN TEAM

Aban Haq Advisor

Ali Basharat Author and Managing Editor

Ammar Arshad Author and Data Compilation

Zahra Khalid Author

Aimen Shahid Author ACRONYMS AND ABBREVIATIONS

AC & MFD Agriculture and Microfinance MFI Microfinance Institution Division MIS Management Information System ADB Asian Development Bank MO Micro-Options AMRDO Al-Mehran Rural Development NADRA National Database and Registration Organization Authority BPS Basis Points NGO Non-Governmental Organization CAR Capital Adequacy Ratio NFLP National Financial Literacy Program CIB Credit Information Bureau NMFB Network Microfinance Bank Limited CGAP Consultative Group to Assist the Poor NPLs Non-Performing Loans CNIC Computerized National Identity Card NRDP National Rural Development Program CPP Client Protection Principles NRSP National Rural Support Programme CPI Consumer Price Index OPD Organization for Participatory CPC Consumer Protection Code Development DFID Department for International OSS Operational Self Sifficiency Development, UK PAR Portfolio at Risk DPF Depositor’s Protection Fund PBA Pakistan Banks Association ECA Eastern and Central Europe PKR Pakistan Rupee EUR Euro PMN Pakistan Microfinance Network FIP Financial Inclusion Program PPAF Pakistan Poverty Alleviation Fund FMFB The First Microfinance Bank Ltd. PRISM Programme for Increasing Sustainable FSS Financial Self Sufficiency Microfinance FY Financial Year PRSP Punjab Rural Support Program GBP Great Britain Pound PTA Pakistan Telecom Authority GDP Gross Domestic Product ROA Return on Assets GLP Gross Loan Portfolio ROE Return on Equity GNI Gross National Income RSP Rural Support Programme GoP Government of Pakistan SBI Shore Bank International IAFSF Improving Access to Financial Services SBP State Bank of Pakistan Support Fund SC The Smart Campaign IFAD International Fund for Agricultural SDS SAATH Development Society Development SECP Securities and Exchange Commission of IFC International Finance Corporation Pakistan JIWS Jinnah Welfare Society SPTF Social Performance Task Force KBL Khushhali Bank Ltd. SME Small and Medium Enterprise KF Kashf Foundation SRSO Sindh Rural Support Organization KIBOR Karachi Inter-Bank Offering Rate SRDO Shadab Rural Development Organization KMFBL Kashf Microfinance Bank Ltd. SVDP Soon Valley Development Program KP Khyber Pakhtunkhwa TMFB Tameer Microfinance Bank Ltd MCGF Microfinance Credit Guarantee Facility UBL United Bank Limited MCR Minimum Capital Requirement USD United Sate Dollar MENA Middle East and North Africa USSPM Universal Standards for Social MFB Microfinance Bank Performance Management MFCG Microfinance Consultative Group VDO Village Development Organization MF-CIB Microfinance Credit Information Bureau WPI Wholesale Price Index MFP Microfinance Providers HIGHLIGHTS

YEAR 2009 2010 2011 2012 2013

Active Borrowers (in millions) 1.4 1.6 1.7 2. 0 2.4 Gross Loan Portfolio (PKR billions) 16.8 PKR 20.2 PKR 24.8 PKR 33.1 PKR 46.6 Active Women Borrowers (in millions) 0.6 0.8 0.9 1.3 1.4 Branches 1,221 1,405 1,550 1,460 1,606 Total Staff 11,557 12,005 14,202 14,648 17,456 Total Assets (PKR billions) 30.4 35.8 48.6 61.9 81.5 Deposits (PKR billions) 7.2 10.1 13.9 20.8 32.9 Total Debt (PKR billions) 23.2 27.5 38.3 24.9 26.9 Total Revenue (PKR billions) 6.4 7.5 10.1 12.5 17.3 OSS (percentage) 104.6 99.7 108.4 109.5 118.1 FSS (percentage) 86.8 81.7 100.5 107.5 116.5 PAR > 30 (percentage) 3.4 4.1 3.2 3.7 2.5 CONTENTS

SECTION 1: THE YEAR IN REVIEW

1.1. Macro-economy and the Microfinance Industry...... 10 1.2. Policy and Regulatory Environment...... 12 1.3. Microfinance Industry Initiatives ...... 14 1.4. Conclusion...... 20

SECTION 2: INDUSTRY PERFORMANCE

2.1. Industry Overview ...... 25 2.2. Scale and Outreach...... 26 2.3. Financial Structure...... 34 2.4. Funding Profile...... 36 2.5. Profitability and Sustainability...... 37 2.6. Efficiency and Productivity...... 40 2.7. Risk Analysis...... 42 2.8. Conclusion...... 43

SECTION 3: THE WAY FORWARD

3.1. Challenges...... 46 3.2. Opportunities...... 50

ANNEXURES

Annexure A-1: Performance Indicators-Industry Aggregate (2007-2011). . .56 Annexure A-2: Performance Indicators-Individual Institutions and Peer Groups (2012)...... 64 Annexure B: Regional Benchmarks 2010...... 94 Annexure C: Sources of Data 2012...... 96 Annexure D: Adjustments to Financial Data...... 106 Annexure E: Terms and Definitions...... 108

SECTION 1 The Year in Review SECTION 1 THE YEAR IN REVIEW

In the year 2013, microfinance industry in Pakistan witnessed another year of continued growth and expansion. The industry posted consistent increase in not only credit outreach and gross loan portfolio but also in micro-savings. Growth in Pakistan’s economy remained modest due to persistent energy shortages and security challenges. Some macroeconomic indicators turned relatively favorable such as inflation, which eased up to remain in single digits. Importantly, the year saw a smooth political transition in the country with one elected government transferring power to another. This not only kept the economy in general and the microfinance industry in particular safe from adverse A very important effects that could have resulted from a problematic political transition, but also buoyed investor highlight of the confidence in the country. year was the On the regulatory side micro-insurance regulations were launched by the Securities and Exchange Commission of Pakistan (SECP) in an effort to provide a framework for micro-insurance emergence of operations in Pakistan but also promote further development of this sector. leading MFPs Investors continued to show interest in the microfinance industry in Pakistan, leading to which can now another acquisition of a microfinance bank (MFB) by an international entity and importantly be clearly distin- placement of funds in an MFP by an international lender. MF-CIB -a key development for microfinance in the country - was rolled out nationally and opened for enquiries. A number of guished among new responsible finance initiatives were launched including Transparent Pricing Initiative in their peers. collaboration with Microfinance Transparency. A very important highlight of the year was the emergence of leading MFPs which can now be clearly distinguished among their peers. These MFPs can be distinguished by their market share, financial strength, profitability, experience curve and mature business models.

MACRO-ECONOMY AND MICROFINANCE INDUSTRY

Pakistan’s economy grew by 3.6 percent in 2013 as compared to 4.4 percent in the previous financial year. The economic outcome was below the target of 4.0 percent for the year. Although industrial sector showed recovery but it could not compensate for slower growth in the services and agriculture sector1. Despite the modest growth in the economy the microfinance industry in Pakistan grew by 20 percent in terms of outreach while GLP grew by 36 percent to close at PKR 52 billion2. This relationship is consistent with findings of a study conducted in 2008 which showed that GDP growth rate does not have any relation with the performance of microfinance providers. MFPs can perform well in terms of profitability, operational self-sufficiency and portfolio quality even in economic downturns and periods of slow economic growth.3 The investment rate, which has been already low in Pakistan, declined further in 2013. The investment to GDP ratio declined to 14.2 percent from 14.4 percent in the previous year as shown in the Exhibit 1.14. Persistent macro imbalances, structural bottleneck in the energy sector, and an uncertain security environment continue to impede investment. On the contrary microfinance industry continued to attract foreign investment both in terms of equity and debt. The year saw the acquisition of Kashf Microfinance Bank (KMFB) by FINCA International (see Box 1.1) and lending to NRSP Bank by ECO Trade and Development Bank.

1: Pakistan Economic Survey 2012-13, Ministry of Finance, Government of Pakistan 2: MicroWATCH, A Quarterly Update on Microfinance Outreach in Pakistan, Issue 30, Qtr 4, 2013. PMN. 3: Microfinance Performance and Domestic GDP Growth:Testing the Resiliency of Microfinance Institutions to Economic Change, Stanford University USA, J. Woolley, May 2008 4: Economic Survey of Pakistan, 2012-13, Ministry of Finance, Government of Pakistan 10 Copyrights © 2014 · Pakistan Microfinance Network Pakistan Microfinance Review - 2013 Annual Assessment of the Microfinance Industry

2013 saw a higher than anticipated drop BOX 1.1: ACQUISITION OF KMFB in inflation with the annual inflation dropping FINCA International, a global microfinance network, acquired majority to single digits for the first time in five years. shareholding in Kashf Microfinance Bank Limited (KMFB) through an equity This led to the lowering of the policy rate by investment of PKR 824.7 million. FINCA Microfinance Cooperative (UA), the the State Bank of Pakistan by 300 bps to 9.0 Netherlands-based investment arm of FINCA, acquired a majority holding with percent. Resultantly, the 6-months KIBOR also 82.8 percent of the shares in May 2013. fell to single digits as show in the Exhibit 1.2 FINCA, a global microfinance organization with operations in 22 countries across below. The drop in inflation was largely due to five continents was founded almost 30 years ago. It is considered a pioneer of subdued global commodity prices5. the modern microfinance industry and has been recognized throughout its history Despite the fall in interest rates loans to for innovation, efficiency, ethical practices, and focus on social performance. private sector businesses expanded by only 0.7 percent in 2013 – almost unchanged After six months of acquisition, KMFBL was formally renamed and rebranded as from the 0.8 percent growth seen in 2012. FINCA Microfinance Bank. This can be attributed to the continued heavy government borrowing in order to finance the budget deficit which stood at 8.0 percent Exhibit 1.1: Investment to GDP Ratio and Acquisition of MFBs of the GDP against a target of 4.76 percent. While this drop in interest rate will result in 20% the lowering of borrowing costs for the sector, MFPs are likely to find it difficult to raise loans 18% from commercial sources because of excessive government borrowing. 16%

14%

tio (%) POLICY AND REGULATORY 12% REQUIREMENTS

f KMFB

f RMFB

o 10%

GDP Ra t to

f KBL & NMFB Pakistan’s microfinance regulatory

tmen environment continues to be recognized as

Acquisition Acquisition 6% Acquisition 7

s ve one of the best internationally . This has led

4% Acquisition to the continued investor interest and growth of the industry. Efforts to further strengthen 2% the regulatory and policy framework are underway. State Bank of Pakistan has revised 0% Prudential Regulations for Microfinance Banks; 2009 2010 2011 2012 2013 SECP has developed regulations on micro- insurance as well as exploring the possible framework for regulating non-bank MFIs. The government launched number of lending Exhibt 1.2: Discount Rate, 6-Months KIBOR And CPI schemes with an aim to generate employment and alleviate poverty. In addition, a number of 25 new initiatives were announced in the budget for fiscal year 2014-15. 20

tage 5: Annual Report 2012-13 (State of the Economy),

cen 10 State Bank of Pakistan r Pe 6: Annual Report 2012-13 (State of the Economy), 5 State Bank of Pakistan 7: Global Microscope on the Microfinance Business 0 Environment 2013, The Economist FY 09 FY 10 Fy11 Fy12 Fy13 Discount Rate Consumer Price Inflation (Average) 6 Months KIBOR

FINANCIAL SERVICES FOR ALL 11 Micro-Insurance Regulations growth in future. Currently, there are ten MFBs operating in the country. Nearly all One of the key highlights of the year on the are well capitalized and owned by diverse policy and regulatory side was the approval of owners including mobile network operators the micro-insurance regulations by Securities (MNOs), commercial banks and international and Exchange Commission of Pakistan (SECP). microfinance institutions. PRs for MFBs In February 2014, the Policy Board of were first issued in the year 2002, and have the Securities and Exchange Commission of subsequently been revised and strengthened Pakistan (SECP) approved the Micro-insurance One of the key from time to time keeping in view evolution Rules, 2014. These rules were put out for and changing dynamics of the sector. highlights of the public opinion in June 2013. The drafting of The annual income ceiling for eligible year on the policy the regulations was preceded by release of a borrowers has been revised to incorporate and regulatory diagnostic study which not only highlighted the impact of inflation and expand market the micro-insurance potential in the country side was the space for MFBs from PKR 300,000 to PKR but also the need for a sound regulatory approval of the 500,000. The prudential regulations have been framework. categorized into risk (R), Risk (R), Corporate micro-insurance The micro-insurance regulations cover the Governance (G), Customer Due Diligence and regulations by following broad areas:- Anti Money Laundering (M), and Operations »» Contract and disclosure requirements Securities and (O). The revisions are briefly explained below:- »» Product features and submission Exchange Com- requirements Corporate Governance mission of Paki- »» Intermediation specifications Governance standards have been enhanced stan (SECP). »» Requirements for authorized risk takers for the MFBs. The revised regulations define »» Claims handling procedures role and responsibilities of board of directors, »» Complaints and grievance handling require induction of two independent mechanisms directors, and prescribe fit and proper test for the appointment of key executives of MFBs. »» Code of conduct and consumer protection »» Prudential regulation Customer Due Diligence and Anti Money »» Regulatory reporting and information Laundering (AML) sharing requirements. Customer due diligence and AML The regulations are quiet specific on the has been strengthened in light of FATF definition of the micro-insurance based on recommendations 2012, to avoid usage of MFB income levels of the clients and maximum channels for illegal activities. MFBs will have level for the sum insured. In addition, to implement comprehensive AML framework regulations ensure consumer protection by covering areas such as customer identification requiring clearly stated policies, specific and verification requirements, ongoing & compliance of codes of consumer protection enhanced due diligence, record retention, and and conduct of agents.8 cash & suspicious transactions reporting in line with the standards prescribed by Financial Revision of Prudential Regulations for Action Task Force (FATF). Microfinance Banks (MFBS) Consumer Protection SBP in June 2014 issued revised prudential Regulations pertaining to consumer regulations (PR) for MFBs. The aim of these protection have been revised from basic revisions is to improve their corporate instructions on transparency and client governance, consumer protection practices, education to a comprehensive set of and anti-money laundering (AML) policies instructions. MFBs are also required to improve of MFBs. It is hoped that that the revised their consumer protection policies through regulations will help MFBs to better position basic financial literacy programs, enhanced themselves for managing higher level of transparency & disclosures, fair debt collection

8: Full text of the Micro-insurance Rules, 2014 can be accessed at http://secp.gov.pk/notifi- cation/pdf/2014/SRO_116_Microinsurance_ Rules_20140219.pdf

practices, and effective complaint redressal can be extended under the scheme and 50 mechanism9. percent of the loans are earmarked for women borrowers. Given the overlap of conventional Government Sponsored Loan Schemes microfinance clients with the target market for these loans, PPAF and the sector has taken The current government soon after coming proactive measures to mitigate distortions in into power announced a number of initiatives the market. In order to safeguard the MFPs, to generate employment and alleviate interest free loans will only be extended poverty in the country. Two schemes have to those clients that have not been tapped been launched as part of these initiatives: by MFPs yet. Therefore, these loans will be Prime Minister (PM) Youth Loan Scheme and extended to borrowers in selected areas of Prime Minister (PM) Interest Free Loans. These 62 districts of the country which score low schemes particularly the latter can have Human Development Index (HDI) and have low important implications for the microfinance or no conventional microfinance. Managing industry. the scheme to avoid such distortions is critical PM Youth Loan Scheme at this stage when the industry has become sustainable and is shifting from subsidized Prime Minister’s Youth Loan Scheme aims to financing to commercial financing to meet it support sef employment within the country’s requirements for on-lending. youth. Under the scheme, loans of up to PKR 2.0 million may be given with tenure of up to 8 years (with first year as the grace period). The debt equity proportion will be maintained MICROFINANCE INDUSTRY at 90:10 and loans will be disbursed to SMEs INITIATIVES across the country. 50 percent of the loans are reserved for women whereas a 5 percent quota has been earmarked for disabled, Governance needs of the Microfinance Corporate gover- widows and families of shaheeds. Up to one Industry: A Customized Training nance is seen hundred thousand loans under the scheme Program shall be disbursed. The loans shall be priced as a key deter- at a below market rate. Small and Medium One of the key challenges faced by the minant in any Enterprise Development Authority has been industry in Pakistan is corporate governance. organization’s tasked with an advisory role in implementation Corporate governance is seen as a key success... of the loan scheme. SMEDA has provided determinant in any organization’s success, 55 pre feasibilities for referencing by loan whether it relates to transformation, applicants and lenders. reaching scale, attaining sustainability Despite the initial positive vibes, the or delivering against its social goals and scheme has only been able to attract two objectives. However, the issue has multiplied public sector banks namely, National Bank of in importance as the sector has shifted Pakistan (NBP) and First Women Bank Limited towards accessing commercial funding. Gaps (FWBL) with other commercial banks shying in risk management, financial transparency, away from the scheme. succession planning and the family’s role in business need to be addressed to improve PM Interest Free Loan Scheme (PMIFL) standards of corporate governance. Boards In order to address the issue of rising need to be made more effective, equipped poverty and unemployment in the country, with required and diverse skills, and be able to under this scheme interest free microloans operate independently. are being extended to poor and destitute Keeping the above in view the State who score of 0-40 on the poverty score card. Bank of Pakistan (SBP) awarded the Pakistan PKR 3.5 billion have been earmarked for Microfinance Network (PMN) the project the scheme and shall be routed through the titled “Governance needs of the microfinance national apex, PPAF. Up to PKR 50,000 loans industry: A Customized Training Program” under the Institutional Strengthening Fund 9: To access the revised prudential regulations text, (ISF) of the Financial Inclusion Program (FIP). please see the following link http://www.sbp. Implemented by Hikmah Consulting and org.pk/publications/prudential/index.htm supported by the Pakistan Poverty Alleviation FINANCIAL SERVICES FOR ALL 13 Exhibit 1.3: Entry of Branchless Banking Model 2009-13

Fund (PPAF), the program addresses the governance needs of the microfinance sector and also helps MFPs build their capacity for growth and to overcome the challenges ahead. Part of the objectives is to enhance the governance awareness and skill levels of Directors and senior management of Microfinance Institutions (MFIs) and Microfinance Banks (MFBs) while simultaneously increasing the ability of MFIs and MFBs to attract Directors with the relevant skills. Two trainings have been rolled out to date, with further offerings anticipated during 2014. Exhibit 1.4: Growth in Number and Value of Transactions Branchless Banking 250,000 54,100 60,000 With a firmly established 200,000 50,000 regulatory environment 51,911 44,760 and supporting institutional 40,000 150,000 41,130 framework, the branchless 35,319 30,000 banking sector of Pakistan 100,000 151,108 170,796 173,231 224,024 234,646 ansactions ('000)

f Tr

continued to excel on all fronts ansactions (in PKR Million) 20,000 in the calendar year 2013. Four Tr 50,000 of 10,000

new players emerged, and there Number

alue was staggering growth in the V - - number of branchless banking Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 transactions. Value (PKR Million) Number (in 000's) The new players include HBL Express, U-Paisa, Mobile Rozgar Microfinance Bank and can be managed via both Paisa and MCB Lite, bringing Limited), commercially launched Internet and ATM machines. the total number of branchless its branchless banking services Hence, a user can conduct banking deployments to eight under the brand name of U-Paisa. transactions through a Visa in the country. “HBL Express” is This is the first example of a Card and a Mobile Wallet. An a branchless banking solution Mobile Network Operator (MNO) MCB Lite user can pay utility provided by the largest private entering the market by acquiring ...the branch- and mobile phone bills, transfer sector bank in Pakistan - Habib 100% stake in an existing funds and shop online (local and Bank Limited (HBL). The model microfinance bank. Currently, less banking international). followed by HBL Express is similar U-Paisa offers three main sector of Paki- Warid Telecom in partnership to the one followed by UBL’s services which include utility bill stan continued with Bank Alfalah Limited OMNI i.e. one-to-many branchless payments, remittances and mobile to excel on all launched its Mobile Financial banking model. This essentially account. Service (MFS) by the name of means that HBL express can offer MCB Lite, a product of MCB fronts in the ‘Mobile Paisa’ in December 2013. branchless banking services to Bank, is another example of a calendar year Currently, Mobile Paisa is only customers of any mobile operator. commercial bank setting foot in 2013 offering services such as money Exhibit 1.3 highlights the timeline the branchless banking sector. transfer and utility bill payment and modus operandi of all the However, MCB Lite is slightly services to Warid customers branchless banking service different from conventional across Pakistan. It follows the providers in Pakistan. branchless banking service one-to-one model of branchless Ufone, in collaboration with providers; it is basically a mobile banking with Bank Alfalah as U Microfinance Bank (formerly account that supports VISA Card the partner financial institution

and branchless banking license Exhibit 1.5: Role of a Credit Bureau in the Decision making holder, and Warid as the telecom providing agent network. Process of a MFP The emergence of six branchless banking players within a period of two years has led to a sizable expansion on the supply ... successfully New Micro-credit Client side of the market. The influx of launched the new players is encouraging the Request a new (or renewal) loan market to offer innovation in nation-wide products and improved value in rollout of the MFP Loan Officer customers’ accounts. During the Microfinance MFP Loan Officer Makes decision to year under review, 192 million deny or accept credit Credit Infor- Consults credit based on credit bureau BB transactions worth PKR 802 mation Bureau bureau database information, loan billion were carried out across the (Enquiry) application and country – reflecting 59 percent (MF-CIB). Credit Bureau MFP policy - Provides actual more volume and 63 percent information higher value in comparison to - updates database 201210. Exhibit 1.4 highlights the -seeks new financial growth in branchless banking in and other relevant information the year 2013. Over the counter (OTC) transactions continue to dominate the BB landscape. OTC transactions are facilitated by an agent, rather than by the customer the nation-wide rollout of the being used for enquiry purposes. using their own mobile phone as Microfinance Credit Information For the partner organizations of in the case of mobile-wallets (see Bureau (MF-CIB). The project PPAF (23 in total), collaborations Box 1.1). Transactions through was launched with an aim of with their respective vendors m-wallets are only a fraction of institutionalizing MF-CIB in the have been made and the business the total transactions carried microfinance eco system to rules of the Bureau reporting out through OTC; 80 percent of facilitate the sector in managing format have been implemented the BB transactions performed credit risk and assessing the true at the vendor end. It is expected in the fourth quarter of 2013 credit worthiness of existing and that these organizations shall start were over the counter, whereas prospective micro-credit clients. reporting their data in the first only 14 percent were carried out The year 2013 saw some major quarter of 2014. through m-wallets. Albeit slow, developments and milestones Vis-à-vis enquiry generation, share of m-wallet transactions achieved in the nation-wide some institutions like PRSP, did rise from 12 percent to 14 implementation of MF-CIB. As of DAMEN, CSC, JWS, OLP, RCDS, percent during the year mainly NADRA verifica- Dec 2013, 50 MFPs (including SDF and TMFB have completely due to increased customer usage tion and data banks, microfinance institutions, operationalized the enquiries for utility bill payments, loan consolidation rural support programs and whereas others like FINCA MFB, repayments, and mobile top ups. smaller microfinance institutuions) , WF, FMFB, KB, KF, ASA Pakistan, has significant- have been registered. Collectively, Apna MFB and Asasah have Microfinance Credit ly increased the these organizations have partially operationalized their Information Bureau (MF-CIB) integrity of the submitted 4.1 million records out enquiries. Akhuwat, , BLCC, BRAC In the midst of 2012, PMN, repository... of which 3.1 million unique CNICs Pakistan, GBTI, NRSP, SRSO, SRSP, with the support of State Bank have been verified by NADRA. The TRDP and smaller MFIs (23) of Pakistan (SBP), Pakistan NADRA verified database is now have yet to implement enquiry Poverty Alleviation Fund (PPAF), up and live for enquiry purposes. procedures. Since enquiry Department for international NADRA verification and data generation requires change in Development (DFID) and consolidation has significantly SOPs of organizations, this activity International Finance Corporation increased the integrity of the is expected to gain full steam by (IFC), successfully launched repository as previously, non- the middle of next year. Already NADRA verified repository was there is a consistent increase in

FINANCIAL SERVICES FOR ALL 15 the number of enquiries being made per month, with the sector Exhibit 1.6: Enquiries per month crossing the 100,000 enquiries milestone in the month of May 110,000 2014 (see Exhibit 1.6). 90,000 A major achievement in 2013 was the finalization of the Bureau 70,000 Code of Conduct, delineating

f Enquiries 50,000 rights and obligations of MFPs o and Bureau. The finalized draft 30,000 would be presented to PMN Board

Number of Directors in January for final 10,000 approval. (10,000) Responsible Finance May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Initiatives

Pricing Transparency Initiative in collaboration with MFTransparency ‘designing appropriate products Box 1.2: OTC and M-Wallet PMN, in partnership with and delivery channels that suit Transactions MicroFinance Transparency client needs.’ Participating MFPs (MFTransparency) and with were able to make moderate Over-the-counter (OTC) support from the Financial to significant changes in their Transaction Inclusion Program (FIP), SBP, policies and operation to better A mobile money transaction UK-Aid and PPAF completed the comply with the Standards. where the customer does not first data publication under the have an electronic account, Transparent Pricing Initiative. Client protection assessments in collaboration with the Smart but simply hands over cash to Pricing information was collected Campaign A major achie- an agent who facilitates the and standardized calculation vement in 2013 transaction on the customer’s methods employed to calculate Externally client protection was the fina- behalf using their own mobile Annualized Percentage Rate (APR) assessments based on the Smart money account. interest rates for all products of Campaign’s assessment format lization of the Mobile Wallets Transaction the 31 participating MFPs. This (Smart Assessments) were carried Bureau Code of was the first sector-led move out for 10 MFPs during the year Conduct, deli- A payment service performed in review, covering about 60 by a consumer via an electronic towards greater transparency neating rights and standardization in pricing percent of the market. This was account held on their mobile calculations and disclosures in the made possible with support and obligations phone. The account can be used local industry. The results of the of SBP-FIP. These assessments of MFPs and to store and transfer money, initiative are discussed in detail in provided MFPs with a gap analysis Bureau. as well as, pay for services and Box 1.2. of their practices in comparison goods by means of a simple with globally accepted minimum SMS. Social Performance standards of client protection Implementation Fund and suggested recommendations Fourteen MFPs participated for institutional improvements in an 18 month long (2013-14) to better comply with these social performance management minimum standards. In addition, implementation drive to better training was conducted for local comply with the Universal technical assistance providers to Standards for Social Performance build local capacity to conduct Management (the Standards), such assessments in-country choosing areas such as ‘ensure going forward, with three Smart Board, management and employee Assessor accreditations received commitment to social goals’, for Pakistani assessors. ‘treating clients responsibly’ and

Box 1.3: Transparent Pricing Initiative for Pakistan, 2013- The following Exhibit B give similar information for some other microfinance 14* markets, namely India, Cambodia, Philippines, Uganda, Tanzania and Kenya for comparison. The Transparent Pricing initiative provided MFPs in the Pakistani market the platform to demonstrate their commitment to responsible and transparent pricing through the exchange of information and adoption of standard pricing practices. Prices for 31 MFPs from Pakistan are available by product at the MFTransparency website www.mftransparency.org The following Exhibit A shows the Pakistan pricing curve, with APR on the y-axis and loan sizes as a percentage of per capita Gross National Income (GNI). Each bubble shows one credit product, and the size of the bubble denotes the number of clients for the product.

Exhibit A: Comparison of APRs and Loan Sizes

In reviewing the pricing data, analysis on the Pakistan pricing data and comparison with other countries shows some significant findings: »» Loan products target very small loan amounts relative to the economic indicators of Pakistan. In other words, microcredit in Pakistan is much smaller in size than microcredit in other comparative countries. This means loans are targeted toward a needier population, and brings with that the financial challenges of providing extremely small loans. »» Pricing levels in Pakistan look to be ‘moderate’ to ‘low’ relative to other countries, and for the scale of loan amount, are much lower than most other countries. »» Loan product pricing is more transparent in Pakistan than in most countries, however there is room for improvement. Countries with higher transparency in comparison have in place legislation requiring more transparency in their pricing. * MFTransparency Country Pricing Report for Pakistan, 2013-14.

FINANCIAL SERVICES FOR ALL 17 CONCLUSION

The year saw continued growth and expansion in the microfinance industry in Pakistan. Overall, the industry seems well poised for continued expansion in the future. On the whole easing of inflation and subsequent reduction in policy rate by the SBP bodes well for the industry but external challenges remain, like energy shortages and adverse security situation in the country. Slower growth in private sector credit can be a challenge for MFPs as the look towards commercial sources for their funding needs. Approval of micro-insurance regulations would lead to product diversification, entry of new players and innovation in delivery models. Prudential regulations were revised for MFBs by the SBP with focus on corporate governance, anti money laundry and consumer protection. In addition, government launched two schemes to provide subsidized and interest free loans with an aim to alleviate poverty and generate employment. Also, the budget for fiscal year 2014-15 saw the announcement of number of initiatives including guarantee schemes for loans to small farmers and low cost housing and insurance for crop and livestock loans. Industry continues to generate investor interest especially for international lenders. It was evident from the acquisition of KMFB by FINCA International and loan extended to NRSP by international financial institution. It is likely that we would see further lending to MFPs by these global microfinance lenders. With over eight systems now deployed in branchless banking, it will lead to increase competition and product innovation with focus on M-wallets and G2P payments. MF-CIB was fully implemented last year and can play key role in improving credit decisions by MFPs and enhancing the quality of the microfinance portfolio. Among the responsible finance initiatives the most important was the Transparent Pricing Initiative in collaboration with MF Transparency. The endorsement of Transparent Pricing Initiative by the microfinance industry in Pakistan and subsequent findings from the data showed that loan pricing by MFPs was well in line with global benchmarks and standards. The initiative will likely have far-reaching effect by reducing the risk of political interference leading to arbitrary price caps and protect consumer rights

FINANCIAL SERVICES FOR ALL 19

SECTION 2 Industry Performance SECTION 2 INDUSTRY PERFORMANCE Analysis of the financial performance of Pakistan’s microfinance industry

This section provides a detailed analysis of the financial performance of Pakistan’s microfinance industry in 2013. Performance has been assessed on three levels: industry wise, across peer groups and institution wise.

The analysis is backed by 88 Box 2.1: Peer Groups financial indicators, calculated from the audited financial Microfinance Institution: A non-bank non-government organization (NGO) providing statements of the reporting microfinance services. Organizations in this group are registered under a variety of organizations. These indicators regulations, including the Societies Act, Trust Act, and the Companies Ordinance. The MFI have been compared across time peer group includes local as well as multinational NGOs such as BRAC-Pakistan and ASA- and regions to develop a reliable Pakistan. and fair assessment of sector. Microfinance Bank: A commercial bank licensed and prudentially regulated by the SBP to Detailed financial information exclusively service the microfinance market. The first MFB was established in 2000 under is provided in the Annex A-I and a presidential decree. Since then, seven MFBs have been licensed under the Microfinance A-II of the PMR. Aggregate data Institutions Ordinance, 2001. MFBs are legally empowered to accept and intermediate has been reproduced for five deposits from the public. Currently there are 10 MFBs operating in the country. years, whereas, the peer group Rural Support Programme: An NGO registered as a non-profit company under the Companies and institution specific data has Ordinance. An RSP is differentiated from the MFI peer group based on the purely rural focus been made available only for the of its credit operations. As a group, the RSPs are registered with and supervised by the year 2013. Securities and Exchange Commission of Pakistan (SECP). A total of 37 MFPs submitted their audited financial statements for PMR 2013. 15 new Exhibit 2.1 Distribution of respondents by peer groups respondents are included in this year’s dataset. For a complete list of reporting organizations refer to Annex B. A major achie- Industry players are vement in 2013 5 categorized into three groups for benchmarking and comparison was the fina- purposes: Microfinance Banks lization of the 8 (MFBs), Microfinance Institutions Bureau Code of 24 (MFIs) and Rural Support Conduct, deli- Programmes (RSPs). See Box 2.1 neating rights for detailed definitions. and obligations MFIs The distribution of of MFPs and respondents (number of reporting MFBs organizations) by peer group is Bureau. RSPs given in Exhibit 2.1. The MFI peer group is comprised of the largest number of respondents followed by MFBs and then RSPs.

SCALE AND OUTREACH: BREADTH This section focuses on outreach indicators to provide performance analysis of the industry in terms of the growth and composition of the different financial services (credit, deposits and insurance) , depth of outreach and gender.

Scale and Outreach: Breadth Exhibit 2.2: Growth in Number of Active Borrowers and GLP Microcredit outreach witnessed substantial growth in the year 3.00 50 2013 where the number of active 45 2.50 borrowers grew by 21percent to 40 touch 2.4 million and the sector 2.00 35 gross loan portfolio (GLP) grew by 30 1.50 a staggering 41percent to close at 25

ers in millions PKR 46.6 billion (Exhibit 2.2). It is 20 pertinent to mention here that the ow 1.00 15

inclusion of fourteen additional e borr 0.50 GLP in PKR Billions MFP’s in the current years report 10

Activ also has a noticeable impact 5 0.00 on the outreach figures – the 0 2009 2010 2011 2012 2013 fourteen MFPs collectively added Active Borrowsers GLP 0.95 million active borrowers and a GLP worth of PKR 3.0 billion in the current years dataset. Exhibit 2.3: Active Borrowers of Nine Largest MFPs Among the MFPs, growth in 55 borrowers was led by National TRDP 2012 2013 71 Rural Support Programme (NRSP) 63 PRSP whose borrowers increased by 73 46,000 from 345,000 in 2012 123 FMFB to 391,000 in 2013; NRSP-Bank, 130 KBL and TMFB also continued 127 NRSP Bank to witness excellent growth 172 147 by adding 45,000, 44,000 ASA-P 180 and 43,000 new borrowers TMFB 155 respectively. On the other hand, 198 BRAC – Pakistan saw its number 286 KF of borrowers declining (by 312 17percent) from 68,000 in 2012 345 NRSP to 56,000 in 2013. 391 366 KBL The industry in terms of 409 outreach was dominated by 50 100 150 200 250 300 350 400 450 nine MFPs that accounted for Active Borrowers in Thousands 81 percent of the outreach as shown in Exhibit 2.3. Khushhali Bank Limited (KBL) maintains its position as the largest provider of microcredit in terms of active

FINANCIAL SERVICES FOR ALL 23 borrowers with a client base of 409,000 borrowers followed by Exhibit 2.4: Share in Active Borrowers by Peer Group NRSP with 390,000 borrowers and KF with 312,000 borrowers. The 100% 37% 35% 28% 27% 25% reduction in the active borrowers 90% by BRAC-Pakistan resulted in its exit from the nine largest MFPs, 80% replaced by TRDP which has a client base of 71,000. 70% 35% 28% 34% When analyzed by peer group, 60% 25% the market continues to be 19% dominated by MFBs followed by 50% MFIs and RSPs. The market share 40% of MFBs and MFIs increased by a 44% 44% meager 1 percent, whereas, in the 40% 39% 40% same period the share of RSPs 30% decreased from 27 percent to 25 20% percent (see Exhibit 2.4). This shift can be attributed to the inclusion 10% of three additional MFBs and eleven additional MFIs reporting 0% in the current year. 2009 2010 2011 2012 2013 In terms of GLP, MFBs account RSP MFI MFB for 60 percent of the total GLP, followed by MFIs with a share of 22 percent and RSPs with a share Exhibit 2.5 A: GLP by Peer Group of 18 percent (Exhibit 2.5 A and Exhibit 2.5 B). The overall GLP 50 of the sector has increased by 45 PKR 8.3 billion to touch PKR 46.6 8.4 billion in 2013. MFBs witnessed 40 the largest increase in GLP (by PKR 10.2 9.3 billion) primarily on the back 35 of KBL, NRSP-B and TMFB as their 6.7 loan portfolios increased by PKR 30 3.0 billion, PKR 1.7 billion and PKR 25 28.1 1.6 billion respectively. Moreover, 7.6 5.3 the average loan sizes of MFBs PKR in Billions 20 remain the highest among peer 6.6 5.0 group (PKR 33,472), indicating 15 18.7 5.7 a greater GLP. Resultantly, the 3.9 14.6 share of loan portfolio of MFBs 10 2.5 9.8 increased from 57 percent to 60 8.6 percent in the year under review. 5

- 2009 2010 2011 2012 2013 RSP MFI MFB

Exhibit 2.5 B: Percentage change in GLP by Peer Group

100% 34% 33% 21% 20% 18% 90%

80% A major achie- 22% 20% 23% vement in 2013 70% was the fina- 60% 15% 19% lization of the 59% 60% 57% Bureau Code of 50% 51% Conduct, deli- 48% 40% neating rights and obligations 30% of MFPs and 20% Bureau.

10%

0% 2009 2010 2011 2012 2013 RSP MFI MFB

The average loan size of the Exhibit 2.6: Average Loan Size by Peer Group sector has increased from PKR 24,000 in 2012 to PKR 27,000 in 40 2013. The greatest increase in the 35 loan size came from the MFB peer group whose loan size increased 33.5 30 by 14 percent, going up from PKR 29,000 to PKR 33,000 (Exhibit 25 29.1 2.6). Among the MFBs, TMFB 22.7 23.3 has an average loan size of PKR 20 20.8 21.1 20.2 20.6 48,000 (highest among the peer 17.5 17.6 18.6 15 16.4 group), while at the same time, 15.1 17.2 14.6 KBL continues to see an increasing 10 trend in its average loan size,

In Thousands growing approximately 19 percent 5 from PKR 21,000 in 2012 to PKR 25,000 in 2013. This is a trend 0 that is likely to continue as the 2009 2010 2011 2012 2013 sector rationalizes its loan size in RSP MFI MFB Industry Average light of rising price levels in the country and MFBs begin entering the microenterprise market with bigger, individual loans.

FINANCIAL SERVICES FOR ALL 25 More than 80 percent of the industry’s GLP is accounted for by Exhibit 2.7: GLP by of Eight Largest MFPs nine MFPs (see Exhibit 2.7). In the 0.9 year under review, KBL surpassed 2013 SRSO 1.1 2012 TMFB to become the largest player 1.5 in terms of size of its portfolio ASA-P 1.9 which stands at PKR 8.9 billion as compared to PKR 8.3 billion FINCA 2.0 of TMFB. This is reflective of the 3.1 active borrowers of KBL (highest FMFB 3.5 in the sector) coupled with a shift 2.9 KF 3.5 towards higher average loan size. TMFB, the second largest player 3.1 NRSP Bank 4.8 in terms of portfolio size has a 4.4 GLP of PKR 8.3 billion despite a NRSP 5.6 market share of 8.2 percent in 6.7 terms of client outreach. This is TMFB 8.3 driven by TMFB’s above average 5.8 KBL loan size, primarily on the back 8.9 of secured financing products - 510 which constitute 80percent of its Billions total loan portfolio. Other sizeable players include the National Rural Support Program (NRSP), NRSP Bank and Kashf Foundation (KF). On the savings side, the Exhibit 2.8: Growth in deposits and number of depositors number of depositors grew by more than 24 percent, rising to 2.2 2,500 35 million in 2013 as compared to 1.7 million in 2012. The value of 2,000 30 deposits witnessed an even more 25 1,500 significant growth of 58 percent 20 from PKR 21 billion in 2012 to 1,000

15 tanding in billions

PKR 33 billion in the year under ors in thousands review (Exhibit 2.8). Resultantly, 500 10 deposits now represent 74 Deposit 5

0 Deposits outs percent of the total liabilities 0 of the MFB peer group – an 2009 2010 2011 2012 2013 increase from 66 percent in the Depositors Deposits Outstanding previous year. Deposits continue to outgrow the loan portfolio of MFBs, as is evident from the rise in deposits-to-gross loan portfolio ratio from 111 percent in 2012 to 117 percent in 2013.

The largest increase in the Exhibit 2.9: Deposit Growth by MFB number of depositors came from KBL which added 215,000 new depositors followed by 2012 2013 NRSP Bank which added 28,000 0.03 POMFB depositors. Similarly, KBL was 0.03 also the largest contributor to Ubank the value of deposits; by adding 0.21 PKR 3.1 billion worth of deposits AMFB 0.76 to increase its deposit base from PKR from PKR 4.0 billion in 2012 FINCA 2.74 to PKR 7.1 billion in 2013 (exhibit 1.83 NRSP-B 2.9). KBL was followed by TMFB 3.62 whose deposits grew by PKR 2.3 4.04 KBL billion to close its balance sheet 7.13 at PKR 10.6 billion deposits. 6.57 FMFB 7.81 In percentage terms, NRSP 8.37 TMFB Bank saw the greatest percentage 10.63 increase (98 percent) in the value 0 5 10 of deposits which had increased In PKR Billions from PKR 1.8 billion in 2012 to PKR 3.6 billion in 2013. The average deposit size of Exhibit 2.10: Average deposit size of MFBs the MFBs stood at PKR 15,000, an increase of 25 percent from 40.0 previous year. However, except for FMFB, NRSP Bank and AMFB, 35.0 average deposit size of MFBs is 30.0 33.4 below the industry average as 29.7 shown in the Exhibit 3.0. NRSP 25.0 Bank has the highest average 24.0 20.0 deposit size at PKR 33,400 followed by FMFB with PKR 15.0 13.6 29,700 showing a significant

In PKR Thousands amount of institutional deposits in 10.0 12.8 10.6 their mix. 10.0 5.0

0.0 1.5 KBL TMFB POMFB FMFB NRSP-B FINCA AMFB U-Bank Average Deposit Account Balance Industry Average

FINANCIAL SERVICES FOR ALL 27 The Deposit-to-GLP ratio has shown modest improvement for Exhibit 2.11A: Deposit-To-GLP Relation for MFBs MFBs; the ratio increased from 111 percent in 2012 to 117 35 140% percent in 2013 (Exhibit 2.11 A). The increase in the ratio depicts 30 120% MFBs heavy reliance on deposits

25 tio as a primary source of financing 100% as it keeps their cost funding at

20 GLP Ra reasonably low levels. During 80%

o - the year, the cost of funds of -t 15 MFBs stood at 7.3 percent as In PKR Billions 60% compared to an average of 9.5 10 Deposit 40% percent of non-bank MFIs. The liquidity position of MFBs can also 5 20% be determined by the deposit- 0 to-GLP ratio; a high ratio implies 0% that MFBs have excess funds at 2009 2010 2011 2012 2013 hand and are adequately liquid. Deposits GLP Deposit-to-GLP Moreover, the cost of funds has remained in single digits despite mobilizing deposits at above market rates. A comparison across MFBs Exhibit 2.11B: Deposit-To-GLP Relation for individual MFBs shows that U-Bank carried the high Deposit-to-GLP ratio of 496 12 percent (Exhibit 2.11 B). In a span 550% of one year, U-Bank has managed 10 tio 450% to attract a deposit base of PKR

8 GLP Ra 205 million as compared to a loan 350%

o - portfolio of only PKR 41 million. -t 6 It is important to mention here In PKR Billions 250%

that the value of deposits of five Deposit 4 MFBs (out of eight reporting MFBs) 150% is greater than the value of their 2 loan portfolios. This shows that 50% MFBs continue to be successful in 0 -50% tapping deposits. TMFB POMFB FMFB NRSP-B FINCA AMFB U-Bank Micro-insurance indicators Deposits GLP Deposit-to-GLP – number of policy holders and sum insured – continued to show a positive trend in the year 2013. The number of policy holders grew by 6.2 percent over the year, going from 2.8 million to 3.0 million, while the sum insured increased by 11.7 percent. It grew from PKR 36 billion in 2012 to PKR 40 billion at end of 2013. The greatest increase in micro- insurance came from the MFB peer group whose policy holders and sum insured increased by 15 percent and 40 percent

respectively. However, RSPs Exhibit 2.12: Growth in Number of Policy Holdersand Sum Insured reaming the largest providers of micro-insurance and hold 41 3.60 50 percent of the market share in 3.40 terms policy holders. Among 3.20 3.00 40 the types of insurance policies, 2.80 credit life insurance policies 2.60 30 constitute almost 61 percent of 2.40 total insurance policies followed

2.20 ed in PKR Billions 20 by health insurance policies at 39 2.00 percent. olicy Holders in millions 1.80

P 1.60 10 Sum Insur 1.40 SCALE AND OUTREACH: 1.20 0 2009 2010 2011 2012 2013 DEPTH Policy Holders Sum Insured The depth of outreach in microcredit operations is measured by a proxy indicator: average loan balance per borrower in proportion to per capita gross national income (GNI). A value of below 20 percent of GNI is assumed to mean that the MFP Exhibit 2.13: Depth of Outreach by Peer Groups is poverty focused (exhibit 2.13). Comparison across peer groups shows that MFBs tend to target 25% the upper end of the market through relatively larger loans,

er GDP 20% with a ratio of 20.2 percent e P whereas MFIs and RSPs are more 15% focused on the lower end, with ratios of 8.6 percent and 9.6

oan Balanc 10% percent respectively. Except for

age L five institutes (TMFB, NRSP Bank,

er 5%

Av FINCA, AMFB and U-Bank) all of 0% the other MFPs fall below the 2009 2010 2011 2012 2013 benchmark of 20 percent. RSP MFI MFB Industry Cut - off The ratio of average loan balance to per capita GNI witnessed a modest decline for RSPs and MFIs, while the ratio for MFBs remained stagnant at 20.2 percent. This could be interpreted as the sector continuing to target the poor but also has implications for appropriate loan sizes in the context of Pakistan’s inflationary environment. Erosion in the value of money means that a loan of a loan worth of PKR 30,000 in one year would be considerably lower in value in the following year.

FINANCIAL SERVICES FOR ALL 29 The different values for the ratio among the peer group point toward market segmentation as MFBs move towards upper segment of the microfinance market whereas non-bank MFPs including MFIs and RSPs target lower segment of the same market.

Lending Methodology Exhibit 2.14: Lending Methodology Majority of MFPs follow the group lending methodology – in 3,500 2013, 73 percent of the active borrowers represented group 3,000 lending (see Exhibit 2.14). Over 73% 2,500 the years, individual lending has gained momentum and its share 2,000 76% has increased from 10 percent 88% 78% in 2009 to 27 percent in 2013. ers In Thousands 1,500 90%

ow During the current year, Kashf

Foundation and TMFB were the e Borr 1,000

main drivers for the increase in Activ 27% 500 the share of individual borrowing 24% 22% from 24 percent in 2012 to 27 0 10% 12% percent in 2013. 2009 2010 2011 2012 2013 Gender Distribution Group Borrowing Individual Borrowing The proportion of women borrowers showed a slight decline in the current year, decreasing from 63.4 percent in 2012 to 60.3 Exhibit 2.15: Outreach to Women: Credits and Deposits percent in 2013 (exhibit 2.15). On the other hand, the percentage 70.0% share of women depositors saw a significant increase to 27.9 60.0% percent as compared to a 19.4

63.41% percent in 2012. The shift in 50.0% 60.3% proportions was a consequence 55.2%

40.0% 51.8% of KBL and NRSP Bank which were

45.6% one of the largest contributors to 30.0% active borrowers in the current year, and more than 70 percent 20.0% of their client base constitute of male borrowers. 10.0%

19.4%

27.9%

19.4%

16.9% Women borrowers remain

0.0% 8.4% an integral part of the Pakistan 2009 2010 2011 2012 2013 microfinance sector and lending Proportion of active women borrowers Proportion of active women depositors to women has been encouraged by various donor and regulatory bodies. The national apex – PPAF – provides funding to MFPs based on a commitment that at least 40 percent of the borrowers will

be women. Large players such as Exhibit 2.16: GenderDistribution ofCredit Outreach by PeerGroups ASA Pakistan, BRAC Pakistan and NRSP have portfolios that mostly 100% constitute of women borrowers, 90% 26% 90% 74% 60% whereas, Kashf Foundation only 80% 70% lends to women borrowers. 74% 60% MFIs and RSPs contribute the 50% most to female outreach. Only 40% 26 percent of the MFB clients are 30% 40% women (Exhibit 2.16). 20% 26% 10% 0% 10% Portfolio Distribution by Sector MFB MFI RSP Total The trading and agriculture Female Borrowers Male Borrowers sectors continue to dominate the sector-wise distribution of microcredit, together accounting Exhibit 2.17: Active borrowersbysector for 52 percent of borrowers in 2013 (Exhibit 2.17). These are 100% followed by livestock which makes 6% 8% 8% 9% 15% 90% 0% up 16 percent of the borrowers, 6% 0% 0% 0% 7% 9% 9% 0% while the manufacturing sector 80% 9% 11% 9% 7% continues to be a distant third by 36% 9% 8% accounting for only 9 percent of 70% 36% 38% 35% 30% the borrowers. However, during 60% the year portfolio distribution witnessed noteworthy change 50% with the trade sector lending which decreased from 35 40% 15% percent in 2012 to 30 percent in 14% 15% 30% 16% 16% 2013. The trade sector primarily comprises of general stores, 29% 20% 23% karyana shops, stall hawkers, fruit 23% 22% 22% vendors, etc. 10% The predominant share of 0% services and trade is reflective of 2009 2010 2011 2012 2013 the general trend in the country’s Agriculture Livestock/Poultry Trade Services economy where services sector Manufacturing/Production Housing Other has continued to account for over 50 percent of the GDP (see Exhibit 2.18). In addition, due Exhibit 2.18: Composition of GDPfrom 2010-2013 to persistent energy shortfall, manufacturing even at the micro 100% level is hardest hit. With MFBs 90% 53% 57% 57% 58% 58% 80% focusing on the microenterprises 70% we are likely to see the 60% continuation of increase in the 50% share of services and trade. 40% 25% 21% 21% 20% 21% 30% 40% 20% 22% 22% 22% 22% 10% 21% 0% 2009 2010 2011 2012 2013 Services Industry Agriculture

FINANCIAL SERVICES FOR ALL 31 Rural- Urban Lending Exhibit 2.19: Active Borrowersby Urban/Rural Areas The share of rural borrowers continues to dominate the 100% sector; out of total borrowers, 90% 55% 52% 46% 56% 58% 58 percent belong to rural areas 80% while 42 percent belong to 70% urban areas (Exhibit 2.19). In the 60% 50% year under review, the share of 54% 40% rural borrowers saw an increase 45% 48% 44% 30% 42% of 2 percent, primarily on the 20% back of NRSP, NRSP Bank and 10% KBL. As mentioned earlier, these 0% three institutions were the main 2009 2010 2011 2012 2013 drivers of growth in terms active Rural Urban borrowers, cumulatively adding 134,000 borrowers in 2013. Majority of the borrowers of these organizations belong to the rural segment of the population, resultantly increasing the share of rural borrowers. On the other hand, BRAC P, whose portfolio mostly consists of urban clients, witnessed a significant decrease in the number of borrowers in the current year.

FINANCIAL STRUCTURE This section focuses on the asset base and capital structure of the microfinance industry.

Exhibit 2.20: Total Asset Base of the Industry Asset Base The asset base of the industry stood at PKR 81.5 billion in 2013, up from PKR 60.5 billion in the previous year showing a growth of more than 34 percent. This 16% increase has been partially due to the inclusion in the dataset of FINCA MFB, AMFB, U Bank and 16% number of smaller non-bank MFIs 68% which accounted for PKR 7.8 billion increase in the asset base for the year.

MFB As shown in the Exhibit 2.20 RSP above, MFBs accounted for more than 68 percent of the total MFI assets of the industry followed by RSPs and MFIs with 16 percent share each. The asset size of MFBs continues to increase with time. In 2013, the asset base of Exhibit 2.21: Total asset base by peer group MFBs stood at PKR 55.4 billion as compared to PKR 39.7 billion 60.0 in the previous year (see Exhibit 2.21). This can also be attributed 50.0 to inclusion of data of FINCA MFB, 55.4 AMFB and U-Bank data. 40.0 The expansion in the RSP and

30.0 38.7 MFI peer group has been more

PKR in billions modest as compared to banks.

20.0 29.8 MFIs asset size stood at PKR 13.5

21.1 billion in 2013 as compared to 10.0

17.8 13.5 PKR 10.4 billion 2012. The asset

12.7

12.5

11.4

9.6

10.4

8.9 base of RSPs stood at PKR 12.7

6.4

5.2

0.0 3.8 billion up from 11.4 billion in the 2009 2010 2011 2012 2013 previous year. MFB MFI RSP Among the MFPs, TMFB continues to remain the largest player in terms of asset size with balance sheet of PKR 15.1 billion. This is closely followed by KBL whose asset base stood at PKR 13.2 billion. Among the MFIs, KF

FINANCIAL SERVICES FOR ALL 33 Exhibit 2.22: Asset base of larger MFPs

2012 2013 continues to have the largest 1.6 asset size with PKR 4.5 billion. The ASA-P 2.0 same hold for RSPs where NRSP 2.4 PRSP continues to hold the top position 2.8 with an asset base of PKR 7.3 FINCA billion. 4.0 3.8 Overall, the industry continues Kashf 4.6 to remain concentrated with 7.1 NRSP nine MFPs constituting up to 84 7.3 percent of the asset base of the 8.3 FMFB total industry. Five of these are 9.5 6.3 MFBs as shown in the Exhibit 2.22 NRSP Bank below. 9.8 10.0 KBL 13.3 13.3 Asset Composition TMFB 15.2 The asset utilization ratio for the industry stood at 54.5 percent, 0 10 20 In PKR Billions slightly lower than last years as shown in the Exhibit 2.23. The Exhibit 2.23: Asset utilization ratio 2009-13 trend over last five years shows that generally asset utilization 60.0% ratio has largely remained range bound. Among the peer groups, 50.0% the ratio shows great variation 56.7%

55.0%

54.7% 40.0% 54.5%

(see Exhibit 2.24). MFIs have 51.2% the highest ratio with 71.6 30.0% percent followed by RSPs with 52.9 percent and MFBs with the 20.0% lowest at 50.7 percent. Low asset utilization ratio for MFBs can be 10.0% attributed to lower GLP of large players like FMFB and FINCA and 0.0% secondly, due to recently acquired 2009 2010 2011 2012 2013 banks like U-Bank and AMFB. Asset Utilization Ratio

Exhibit 2.24: Asset utilization ratio by peer group

80.0%

70.0%

60.0% 71.6%

50.0%

40.0% 52.9%

50.7%

30.0%

20.0%

10.0%

0.0% MFBs MFIs RSPs Asset Utilization Ratio

Compared regionally, the asset Exhibit 2.25: Regionalcomparison of assetutilization ratio utilization ratio for the industry is low as shown the Exhibit 2.25 100% below and there is sufficient room 90% for improvement. 80% 70% Asset composition remained 60% 89.8% varied across the peer groups

79.4% 50% 76.4%

69.1% as shown in the Exhibit 2.26.

67.5% 40% 65.6% Overall, proportion of cash among 30% 54.5% all the peer groups witnessed a 20% 10% decline. This decline is largely 0% due to extended grace periods

sia sia being offered for loans offered

tan

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acifi

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Eur by national apex. Proportion of

akis

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America &

Middl

South Asia advances witnessed an increase

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Nort

& t

tin

Eas

The Caribbean in all of the peer groups which La is reflective of the growth being experienced by the industry. However, lower proportion of Exhibit 2.26: Assetcomposition by peer group advances among MFB peer group as compared to RSPs and MFIs shows despite increase 100% 90% 24% 18% 24% 21% 27% 16% in GLP there is surplus funds

ts available with them. Moreover, 80% 3% 4% 5% 70% 3% 5% 0% 2% 9% MFBs continue to hold significant 0% 6% 60% 20% 24%

tal Asse portfolio as investments, which 50%

f To witnessed an increase from 20 o 40% 53% 55% 71% 76% 65% 70% percent to 24 percent in 2013. 30% 20%

oportion

Pr 10% Funding Profile 0 2012 2013 2012 2013 2012 2013 Over past couple of years, MFBMFI RSP the funding structure of the Cash andBankBalance 24% 18% 24% 21% 27% 16% industry has been tilting towards Fixed assets 3% 3% 5% 4% 2% 5% deposits, whereas, the share Investments 20% 24% 0% 0% 6% 9% Advances 53% 55% 71% 76% 65% 70% of debt financing has been continuously declining (Exhibit 2.27). As mentioned earlier in the report, MFBs have been successful in mobilizing deposits over the Exhibit 2.27: Capital structure of microfinance industry 2009-13 year as part of their deposit led strategy to fund portfolios. This has resulted in an increase in the 100% deposit base of MFBs from PKR 21 90% 24% 28% 29% 37% 40% 80% billion in 2012 to PKR 33 billion 70% in 2013. The share of debt in the 53% 60% 48% 50% capital structure decreased from 44% 50% 39% 44 percent to 39 percent in the 40% current year, whereas, the share of 30% equity saw a slight increase of 1 20% 24% percent. 10% 23% 21% 20% 21% 0% 2009 2010 2011 2012 2013 Deposits Debt Equity

FINANCIAL SERVICES FOR ALL 35 The funding structure varies Exhibit 2.28: Funding profile by peer group significantly among the peer group as shown in Exhibit 2.28. The portion of equity remains 100% 90% low for MFIs with just 17 percent 80% of their capital structure. On the 70% other hand, the share of equity 60% for MFBs and RSPs remains at 50% a safe level of 20 percent and 40% 28 percent respectively. MFBs 30% remain adequately capitalized 20% 10% due to the Minimum Capital 0% Requirements (MCR) set by 2012 2013 2012 2013 2012 2013 the State Bank of Pakistan. MFBs MFIs RSPs Inadequate capitalization of MFIs Deposits Debt Equity can seriously impair the ability to access commercial finance and expand their outreach. In order to increase the equity of MFIs, Exhibit 2.29: Deposit to GLP relation PPAF, under its PRISM program, continued to place equity funds 12.0 in mid-sized MFPs to strengthen their balance sheets. 10.0 By the close of the current year, five MFBs, TMFB, FMFB, 8.0 FINCA, AMFB and U-bank had a 6.0 deposit base higher than their

total GLP (see Exhibit 2.29). The PKR in billions 4.0 overall Deposit-to-GLP ratio of the MFB peer group remains above 2.0 100 percent and in the year 2013, the stated ratio had increased 0.0 from 111 percent to 117 percent KBL TMFB POMFB FMFB NRSP-B FINCA AMFB U-Bank – indicating a greater increase Deposits Gross Loan Portfolio in deposits as compared to loan portfolio. The industry continued its transition to commercial financing Exhibit 2.30: Commercial liabilitiestototal debt with the ratio of commercial liabilities to total debt reaching 90% 81 percent in 2013 as compared 80% to 75 percent in the previous 70% year as seen in Exhibit 2.30. 60% Commercial debt currently 50% stands at PKR 22 billion for the 40% sector against PKR 5 billion 30% 20% subsidized debt. The increasing 10% trend of commercial liabilities is 0% likely to continue as commercial 2012 2013 2012 2013 2013 financial institutions (local and international) are opening up to Pakistan’s microfinance sector. The year 2013 witnessed

Box 2.1: International debt placement In September 2013, Economic Cooperation Organization (ECO) Trade and Development Bank (ETDB), a multilateral development bank with their Head Office in Turkey signed a Micro SME loan agreement with successful placement of funds by international lender. For NRSP Microfinance Bank Limited. The aim of the facility is to boost detail see Box 2.1. the microfinance services by providing Micro SME loans to the final This was the first successful deployment of debt by an beneficiaries in Pakistan. The facility worth USD 7.5 million has tenor international lender to a Pakistani microfinance provider of three years with a grace period of two years. and is reflection of its credit worthiness. A number of funds have been exploring the local market to extend debt over the last few years but pricing and hedging premiums became the stumbling blocks. It is anticipated that this transaction will be a prelude to other similar transactions in the future. Exhibit 2.31: OSS & FSS 2009-13 Furthermore, commercial banks, which have been heavily relying on government securities for generating 30.0% interest income, will be exploring new avenues of revenue as the country’s policy rate is expected to stay stable if not 20.0% decline. 10.0%

Profitability & Sustainability 0.0% 2007 2008 2009 2010 2011 2012 2013 The total revenue for the industry stood at PKR 17.3 billion at the close of the year showing an increase over Adjusted total expense / total assets 38 percent from PKR 12.6 billion in 2012. The net income Adjusted financial expense/ total assets Adjusted loan loss provision expense/ total assets from the industry stood at PKR 1.2 billion as compared to Adjusted operating expense/ total assets PKR 0.9 billion in the previous year. Unadjusted ROA stood at 2 percent showing a slight increase as compared to 1.9 percent in the same time period whereas ROE stood at 9.0 percent as against 9.7 percent in the previous year. The slight decline can be attributed to inclusion of the recent Exhibit 2.32: Yield on gross portfolio (nominal & real) 2009-13 acquired MFBs which have recently seen injection of equity running into billions. Operational Self Sufficiency (OSS) and financial self 350 sufficiency (FSS) for the sector continued to remain above 100 percent for the third year running as show in 300 the Exhibit 2.31 below. OSS for the industry showed a healthy increase to close at 118.1 percent as compared to 250 109.5 percent in the previous year. Similarly, FSS stood at 116.5 percent as against 107.5 percent in the same time 200 period. Out of 37 MFPs whose data has been reported in the review, 30 have an OSS above 100 percent. Among 150 the peer groups, RSPs have the highest OSS with 140.1 100 percent followed by MFIs and MFBs at 117.8 percent and

113.1 percent respectively. Continued improvement in OSS 50 is fuelled by increased income from loan portfolio on the back of increasing GLP as opposed to rising yields that was 0 witnessed few years ago. Key future drivers of profitability 2009 2010 2011 2012 2013 will be the increase in GLP which in turn would be a Loans per staff Depositors per staff Loans per Loan Officers function of expanding outreach and increasing loan sizes. Yield on the portfolio which peaked in 2011 has gradually been declining over the last two years as shown in the Exhibit 2.32. In 2013, the yield on portfolio declined

FINANCIAL SERVICES FOR ALL 37 to 33.5 percent from 34.3 percent in the previous year. Yield on portfolio in real terms increased slightly from 21.7 percent in the last year to 22.3 percent in 2013 due to lower inflation rate. Compared globally the yield on gross portfolio continues to be toward the higher side despite declining over the last two years as shown in Exhibit 2.33. The total revenues for the industry stood at PKR 17.3 billion. Out of this MFBs accounted for PKR 10.8 billion whereas MFIs and RSPs revenues stood at PKR 4.0 billion and PKR 2.5 billion respectively. Nearly 78 percent of the revenues come from income Exhibit 2.34: Revenue streams from loan portfolio as show in the Exhibit 2.34. However, the 20.0 18.0 percentage of the revenue from 16.0 financial services which includes 14.0 branchless banking is steadily 12.0 rising and closed at PKR 2.0 10.0 billion. Out of this, just PKR 0.6 8.0 billion is the revenues earned PKR in billions 6.0 by TMFB from its branchless 4.0 2.0 banking operations. Earnings from 0.0 branchless banking are likely to 2009 2010 2011 2012 2013 grow as other MNO owned banks Loan Portfolio FinancialServices FinancialAssets like U-Bank and Waseela expand their operations. Costs after declining over the last four years appear to plateau Exhibit 2.35: Expense to asset ratios in 2013 as shown in the Exhibit

2.35 below. The declining trend 30.0% was due to decrease in all three; financial expense, loan loss 20.0% provision expense and operating expense. However, in this year 10.0% operating expense witnessed a slight increase to close at 12.7 0.0% percent as compared to previous 2007 2008 2009 2010 2011 2012 2013 year’s 12.1 percent. Among the Adjusted total expense / total assets peer groups RSPs continue to Adjusted financial expense/ total assets have the lowest expense ratio Adjusted loan loss provision expense/ total assets with 15.2 percent, followed by Adjusted operating expense/ total assets MFBs with 20.8 percent and MFIs with 26.0 percent.

Compared globally, operating Exhibit 2.36: Regionalcomparison of operating costs expense continues to be on the higher side. Higher operating 20.0% costs can be attributed to 18.0% 16.0% comparatively smaller loan sized 14.0% being offered by the industry.

18.3% 12.0% 10.0% Operating expense to GLP

8.0% 13.4% continues to decline after peaking

12.7%

11.2% in 2010 (see Exhibit 2.37).

10.1%

6.0% 8.8% 4.0% Currently, it stands at 22.1 percent

7.2% 2.0% as compared to 23.3 percent in 0.0% the previous year. The decline

sia

t &

tan

ric

A f in the ratio is largely due to

frica

acifi

Eur

akis

h A

tr e E continued increase in the GLP for

America &

South Asia

tern

Nort & t the industry. A closer look shows

Middl

tin

Eas

The Caribbean

La the administrative expense has Operating Expense /Assets largely remained constant over time and decline has largely been Exhibit 2.37: Operating expense & personnel expense to GLP fuelled by decline in personnel expense. One reason for this 30% decline in personnel expense can be relatively lower average 25% salaries for the industry. Among the peer groups, RSPs have the 20% lowest operating expense with 15% 13.1 percent, followed by MFIs with 22.8 percent and MFBs with 10% 24.7 percent. Despite the declining trend 5% if we compare globally (Exhibit

0% 2.38), expense to GLP ratios for 2009 2010 2011 2012 2013 the industry are on the higher Operating expense / Gross loan portfolio end and there is room for further Personnel expense/ Gross loan portfolio improvement. Admin expense/ Gross loan portfolio

Exhibit 2.38: Regionalcomparison of operating expense & personnelexpense to GLP

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

sia

t &

tan

ric

frica

acifi

Eur

akis

e E

America &

South Asia

tern

North

& t

Middl

tin

Eas

The Caribbean

La Operating Expense /GLP PersonnelExpense /GLP

FINANCIAL SERVICES FOR ALL 39 Productivity Exhibit 2.39: Personnel allocation ratio 2009-13 The total staff for the industry stood at 15,673 in 2013 out of 70.0% which 6,892 are loan officers. The personnel allocation ratio for the 60.0% industry stood at 44.0 percent 50.0% %

as compared to 49.8 percent in 57.9

40.0% 50.5 the previous years. Overall, the %

49.8%

personnel allocation ratio for the 44.0% 30.0% 42.9 industry has been on a declining trend for the last three years as 20.0% shown in the Exhibit 2.39. This decline has largely been 10.0% due to the fall in the value of the ratio for the MFB peer group. One 0.0% 2009 2010 2011 2012 2013 of the reasons for this declining Personal allocation ratio trend can be the MFB’s focus on mobilizing deposits as shown by the following trend. Exhibit 2.40: Deposits and personnel allocation ratio trends Compared with other regions 35.0 as shown in the Exhibit 2.41, 60.00% personnel allocation ratio is 30.0 higher than few of the regions 50.00%

32.9 but there is potential for further 25.0 40.00% increase. 20.0 30.00% 15.0 20.8

PKR in billions 20.00% 10.0

13.9 10.00%

10.1 5.0

7.2 0.00%

0.0 0 2009 2010 2011 2012 2013 Deposits Personnel allocation ratio (MFBs)

Exhibit 2.41: Regionalcomparison of personnelallocation ratio

70.0% 60.0% 50.0% 40.0%

59.8%

30.0% 55.5%

46.2%

43.2% 20.0% 44.0%

38.4% 10.0% 35.9% 0.0%

sia

t &

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ric

frica

acifi

Eur

akis

h A

e E

America &

South Asia

tern

Nort

& t

Middl

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The Caribbean

La Personnelallocation ratio

Overall, all the main Exhibit 2.42: Productivity of MFPs productivity indicators continued to exhibit an improving trend (see Exhibit 2.42). Loans per staff stood 350 at 144 in 2013 as compared to 135 in the 2012. Loans per loan 300 officers stood at 327 up from 264 in the previous year. Also, 250 depositors per staff decreased slightly from 283 in previous 200 year to 269 in 2013. The ratios

150 vary among the peer groups and individual MFIs due to difference 100 in their lending methodologies. Compared to other regions as 50 show in the Exhibit 2.43 below, the industry is better placed 0 2009 2010 2011 2012 2013 than many but there is room for Loans per staff Depositors per staff Loans per Loan Officers improvement.

Risk Exhibit 2.43: Regionalcomparisons of productivity indictors Credit Risk 800 Overall, the Portfolio at Risk 700 > 30 days continued to remain 600 below 5 percent cut off which 500 400 reflects on the quality of the 300 microfinance portfolio in the 200 country. The PAR > 30 days for 100 the year stood at 2.5 percent 0 as opposed to 3.7 percent in

sia

t &

tan

ric

A A the previous year showing an

frica

acifi

Eur

akis

h A

e E improvement as shown in the

America &

South Asia

tern

Nort

& t Exhibit 2.44. Similarly, write

Middl

tin

Eas The Caribbean offs fell to 1.5 percent from 2.3

La Loans per StaffLoans per Loan OfficersDepositors per Staff percent in the same time period. In absolute terms the PAR > 30 days stood at PKR 1.1 billion against PKR 1.2 billion in the previous year. All these indicators point to improving portfolio quality.

FINANCIAL SERVICES FOR ALL 41 However, PAR > 30 days varies Exhibit 2.44: PAR >30 days & Write offs among the three per groups as shown in the Exhibit 45 below. 8.0% The PAR value was lowest for MFB peer groups at 1 percent, followed 7.0% by RSPs at 1.6 percent and MFIs at 3.6% 7.7 percent. Higher value among 6.0% 1.8% 2.3% MFI peer group was driven by 5.0% higher PAR value among leading MFIs like KF (17.5 percent), OPP 4.0% 2.6% 4.1% (17.6 percent) and BRAC-P (5.5 ers In Thousands 3.7% 3.0% 3.4%

percent). ow 1.5% 2.9% The risk coverage ratio e Borr 2.0%

remained stable in the year 2013 2.5% at 61.2 percent as compared Activ 1.0% to 61.6 percent in the previous year. The ratio varied among the 0.0% peer groups with RSPs having the 2009 2010 2011 2012 2013 highest value at 150.4 percent, Portfolio at Risk >30 days Write Off Cut off followed by MFBs at 96.3 percent and MFIs are 31.3 percent. The lower value of the risk coverage Exhibit 2.45: PAR > 30 days by peer group ratio is primarily due to higher PAR value for the MFI peer group. 9.0%

On the whole, with the PAR>30 8.0% days value remaining below 5 7.7% percent cut off point and slight 7.0% improvement over the year 6.0% reflects positively on the quality of the portfolio for the industry. 5.0% However, the lower value can also point towards risk averseness 4.0% among the players. 3.0% With the national roll out of MF-CIB and initiation of enquiries 2.0% by the practitioners, credit risk 1.6% will be further mitigated by 1.0% 1.0% identifying cases of multiple 0.0% borrowing and intentional MFBs MFIs RSPs defaulters. According to data Portfolio at Risk >30 days extracted from MF-CIB, initial findings show the occurrence of multiple borrowing up to 21 percent. The CIB is a new phenomenon for the sector but already service providers are using this information for their outreach expansion, and scaling up loans and managing delinquencies.

SOCIAL GOALS Review of Institutional Profiles and Services

Introduction Exhibit 2.46: MFPs' key statistics Microfinance in Pakistan is essentially a double-bottom Target Markets line industry – sustainability is not the end in itself; rather it is the means to achieving social goals. These goals can differ: some MFPs may have a vision of poverty alleviation, Other 8 others of women empowerment, while yet others may be Adolescents 9 working for increasing access to formal financial services. and youth Clients living in In order to better attain an institution’s intended goals, 32 urban areas microfinance stakeholders around the world now believe Clients living that unless an MFP’s systems, activities and outputs are 36 in rural areas deliberately geared towards its social vision, it is difficult Women 37 to make the impact that the institution is aiming at. For an MFP, therefore, performance management thus means 0 5 10 15 20 25 30 35 40 focusing simultaneously on its financial and social bottom No. of MFP responses lines. By peer group Analysis of the sector’s institutional profiles 40 The Microfinance Information eXchange (MIX), in 5 5 30 4 collaboration with the Social Performance Task Force (SPTF) 25 22 19 has developed a social performance reporting framework 20 for MFPs. This framework currently focuses on capturing

esponses information on an institution’s vision, target segments and 10 services. An analysis of selected self-reported1 indicators 9 9 0 1 8 6 2 MFP r of 7 from the 2013 institutional profiles of 39 reporting MFPs 0 1 1

No. from Pakistan follows.

eas

outh

omen

Other

al ar

and y

ts living in

ts living in rur Target Market

urban ar

Adolescen

Clien Clien Identifying their target markets helps to focus MFP RSPs MFIs MFBs efforts and optimize the limited resources available. Providing services that are relevant, client oriented and Top priorities effective in serving an organization’s mission requires a clear understanding of the population that an MFP aims 40 to reach. MFPs target markets are highlighted in Exhibit 36 30 2.46, panel 1, and a peer group wise breakdown is given in 34 30 Exhibit 2.46, panel 2. Generally, clients are targeted based 20 1: Reporting on social performance indicators is a new develop- esponses 18 17 10 ment in the global microfinance landscape. The indicators themselves, their collection and validation process and analyt-

MFP r of 7 0 ics are in evolution. Efforts have been made by PMN and MIX

No.

in in in in

p3) to validate the information provided by MFPs but it should be

op 3)

omen

living living living living

W kept in mind that it remains largely self reported.

tpriority)

s s s s

tpriority)

eas

nt nt nt nt

(1s ar 2: These include AGAHE, Akhuwat, AMFB, AMRDO, ASA, Asasah,

(1s

s (

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Clie Clie Clie Clie

eas ea BEDF, BRAC, CSC, DAMEN, FFO, FINCA MFB, FMFBP, GBTI, JWS,

rur

urban

al KBL, KF, Micro Options, MOJAZ Foundation, Naymet Trust,

rur urban Target Market NRDP, NRSP, NRSP-B, OCT, OLP, OPD, POMFB, PPCBL, PRSP, RCDS, SDF, SRSO, SRSP, SSF, SVDP, TMFB, TRDP, U-Bank, and WASIL.

FINANCIAL SERVICES FOR ALL 43 on gender and location, with a few MFPs also targeting youth Exhibit 2.47: Development goals by peer group as well as other groups such as government pensioners, religious 45 minorities and persons with 40 disabilities, and microenterprises 5 35 working with renewable energy. 5 25 Amongst the identified target 30 23 5 4 5 markets, a few were much more 25 21 popular amongst MFPs in Pakistan 17 21 3 than others. The top three priority 20 18 target groups were women, esponses 4 closely followed by clients living 15 2 12 12 in rural areas and clients living MFP r of 3 10 3 in urban areas, respectively (see No. 9 9 8 2 3 8 8 6 Exhibit 2.46 , panel 3). 5 6 5 4 4 2 2 2 Development Goals 0 2 1 0

t A look at mission statements t

t o

tion tion

tion

en's

erty

outh

of MFPs clearly shows that Y

ymen

emen

wth

access

Health

ter and

ermen

Pov

Housing

eduction

terprises

schooling

r nearly all MFPs have some social Childr

sanita

gener

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equality and

Emplo

eased

impr

Impr ideals built into their mission opportunities

ting businesses

Dev and there are common themes Incr

adult educa of

xis

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financial servic to across them. Interestingly, mission Gender

omen's empo statements of the microfinance w RSPs MFIs MFBs banks are relatively more focused on expanding access to quality financial services to low income population and as a result improve their quality of life, economically and socially. Themes of poverty alleviation, empowerment of the Exhibit 2.48: Poverty targets by peer group ‘marginalized’ and expanding economic opportunities emerged 40 as more common amongst the 35 30 non-bank MFPs, especially the esponses 25 multidimensional organizations. 20 Social mobilization and organizing 10

MFP r of the poor is a common goal of all 5

No. rural support programmes. A focus 0

ts ts

ific

ge on women is quite common in the oor

ome

clien

clien sector as well. clien

ery poor

w inc

No spec

erty tar

Lo These broad themes translate v into a range of development Poverty targets po RSPs MFIs MFBs objectives for service providers. The most common objective is poverty reduction, with all 39 reporting MFPs citing this as one of their objectives. This is followed by growth of existing businesses, employment generation, and gender equality and women’s empowerment as the most common development objectives across all peer groups (Exhibit 2.47).

Poverty Targeting Exhibit 2.49: Credit offerings by peer group In terms of poverty level of targeted clients, 70 percent 40 of institutions reported targeting more than one segment 35 5 of the poor. The most common target market for the sector 30 24 5 in terms of income is low income clients, closely followed 25 esponses 18 by poor clients. Eight non-bank institutions reported 20 targeting very poor clients. MFIs and RSPs are largely 15 targeting both poor and low income clients.

MFP r of 10 2

No. 5 3 5 9 8 5 6 2 1 0 5 1 3 2 2 3 Products and Services: Financial

r r r

fo fo fo

edit

tion

ck to

loans micro Microfinance refers to a range of financial services

Other

Housing

edit \f

oans oans oans

liv

terprises

L L L for the low income and poor households. These include

educa

SME loans

household

agricultur

cr Micro

onsump

c savings, insurance and money transfer services along with

loans

ther

cr Micro o credit. This sub-section summarizes the different financial

needs/ products offered by MFPs in Pakistan. Credit products offered RSPs MFIs MFBs Credit All reporting organizations offer microcredit services. Exhibit 2.50: Savings products offered, overall and However, the number and kinds of credit products by peer group vary across institutions. Due to the different needs of clients, it is important for MFPs to develop a product mix that accounts for these needs. In addition, increasing competition and maturing markets require MFPs to go beyond ‘cookie cutter’ approaches and differentiate their products to serve different market segments and customer demands. Exhibit 2.49 shows the range of activities for 10 which microcredit services are available in Pakistan. Loans for microenterprises are by far the most common, with 38 out of 39 reporting organizations offering these, 29 followed by agricultural microcredit, with 31 MFPs offering this. Other activities for which a limited number Yes of MFPs offer credit products include other household No and consumption needs, livestock, education, housing, alternative energy and community infrastructure. This range suggests that product differentiation in credit is under way and MFPs are beginning to offer products 12 beyond the typical microenterprise loan. However, while it

10 is important to offer a pertinent product mix to clients, it is 1 also important to maintain an optimal balance between the 8 9 9 range of products and the institution’s capacity to manage 8 information, clients and staff to ensure effective provision 6 of services to clients.

MFPs of 4 No. 4 Deposits 2 3 Only 10 out of 39 reporting MFPs offer savings services. The ability to offer this service is largely determined by 1 0 the legal status of an MFP: all MFBs, by virtue of being

ts al) regulated banks, are allowed to intermediate3 client

tary

vings

ter

oun

Other

oun

ed term deposits, and thus all nine reporting MFBs take deposits.

purpose

olun

deposits

olla

acc

Checking

Fix

Compulsory

vings acc

(cash c Special 3: Intermediation: Public deposits are used to finance an organi-

sa zation’s loan portfolio. Only the central bank -- State Bank of RSPs MFIs MFBs Savings product offered Pakistan (SBP) regulated institutions (includes MFBs only) can accept and intermediate deposits from the general public.

FINANCIAL SERVICES FOR ALL 45 Non-bank MFPs can only mobilize4 Exhibit 2.51: Insurance provisions by sector and peer groups deposits. Only one reporting RSP reported mobilizing deposits. Exhibit 2.50 depicts savings offerings by MFPs in Pakistan by sector and peer groups. All MFBs offer fixed term deposits as well as voluntary savings accounts, followed by 33% checking accounts. making this the most popular savings product 67% offered by them. On average, MFBs offer four kinds of savings services. There is room for MFBs to Yes further diversify kinds of savings No products on offer.

Insurance Offering micro insurance serves to protect vulnerable clients against risk of losses. Majority of 25 reporting MFPs offer insurance products to meet clients’ needs. 20 This indicator looks at compulsory 15 insurance, which is typically clubbed with credit products. Out esponses 10 of the 26 reporting MFPs offering R of

No. insurance products, the majority 5 of MFPs offer credit life insurance only, with limited MFPs offering 0

e other types of insurance such as al

tal

ance

ance health and agriculture etc. (see Other

edit lif

insur

Exhibit 2.51). However, over the acciden

Agricultur past few years, some MFIs have th insur introduced varied insurance dea products from only offering RSPs MFIs MFBs credit life insurance to offering Hospital and accidental death, livestock and agricultural insurance products as well. Generally, there is need to expand insurance services to cover a wider set of risks that vulnerable clients face.

4: Mobilization: MFPs not regulated by the SBP (includes MFIs, RSPs and Others) can neither hold nor intermediate deposits from the public. These organizations however, can mobilize savings from their clients to place onwards with licensed commercial banks.

Other Financial Services Exhibit 2.52: Provision of other financial services The provision of other financial 12 services is marginally low, with primary suppliers being MFBs. 10 2 However, some MFIs are now 8 offering clients the facility to 1 repay loan installments through esponses 6 7 branchless banking agents. 6 All MFBs in the data set offer MFP r of 4 one or more other financial

No. 2 3 3 service amongst the following 2 1 categories: debit/credit card, 0 1 mobile banking services, savings d facilitation, remittances services,

tion

edit

car

ough vings and micro leasing. As shown

thr

services

ts facilita in Exhibit 2.52, 10 MFPs offer

emittances

Debit/Cr

leasing Micro

Mobile banking savings facilitation services

ymen anchless banking and six MFBs offer remittances

epa R services to their clients. Three RSPs MFIs MFBs out of nine MFBs offer debit/ Other financial products/services offered credit cards and two offer mobile banking services.

Exhibit 2.53: Non-financial services Products and Services: Non- Financial To strengthen livelihoods of 25 vulnerable clients, MFPs offer non-financial services in addition 20 4 to financial products and services; 18 3 frequently supplied in partnership 15 4 16 with specialized public or private esponses 14 4 10 agencies. These services vary R of 11 according to the capacity and

No. 5 vision of the institution, but the purpose is to develop client’s 0 skills and/or provide basic t services that they are unable to

tion

omen's attain due to financial limitations.

ermen

terprise

services services

services

Educa En This can take the form of provision

empo of basic services like health and Services Offered Health services education or business and/or RSPs MFIs MFBs technical skills training. For the purpose of this analysis, such services are grouped into four main categories: enterprise, education, health and women’s empowerment. MFIs and RSPs are actively providing all four types of non- financial services in the market; especially those committed to a particular social mission (see Exhibit 2.53). While MFIs and RSPs

FINANCIAL SERVICES FOR ALL 47 are offering at least one (in some Exhibit 2.54: Poverty assessment tools used by MFPs cases multiple) non-financial service, only one MFB is offering education services to its clients Poverty Scorecard currently. Women’s empowerment provided by PPAF services are the most popular Per capita household expenditure non-financial service being Per capita offered by MFPs; this is not household income surprising since the majority of Grameen Progress out MFPs in Pakistan target women of Poverty Index (PPI) as their priority market, and their Participatory Wealth fundamental social mission relates Ranking (PWR) to women’s economic uplift. Such Own proxy poverty index services usually include women’s rights education/gender issues Housing index training and leadership training. Enterprise services, such as Means test enterprise skills development and Food security index business development services are also popular; followed by USAID Poverty education services like financial Assessment Tool (PAT) literacy education, child and 0 5 10 15 20 youth education and basic health/ No. of Responses nutrition education; and health RSPs MFIs MFBs services like basic medical and special medical services for women and children.

Tracking Poverty Transparency of Cost of regulations mandating all peer groups to follow a similar Client poverty level Globally the case of adopting methodology. assessments serve multiple the declining balance method purposes like guide client to calculate and display interest Out of 39 MFPs, 26 are using targeting and selection for rates to clients is widely accepted the flat interest rate method, 14 MFPs, establish baselines of as the ‘transparent’ way. While are using the declining balance client poverty for later impact Pakistani MFPs accept the method and two MFPs reported evaluations, appraisal of financial importance of employing the interest rates as not being services to better suit needs of declining balance method of applicable (n/a), having shifted clients and overall measurement calculation and disclose interest to Islamic products, as shown in of the program’s effectiveness. rates, the majority of the MFPs Exhibit 2.55. Out of the 14 MFPs 38 out of 39 reporting MFPs in Pakistan are still using the flat using declining balance interest measure client poverty levels. methodology, primarily due to rate disclosures, it is interesting While some MFPs employ one the simplicity in calculation and to note that six of these are non- method to measure poverty levels, marketing. As per State Bank of regulated entities, indicating a some use multiple assessment Pakistan’s regulations, however, positive step towards increased tools. As shown in Exhibit 2.54, MFBs under its regulatory transparency in displaying costs. the majority of MFIs use at least framework are bound to disclose However, there is considerable the Poverty Scorecard provided interest cost using the declining room for improvement to by Pakistan Poverty Alleviation balance method to clients. There switch to greater pricing Fund (PPAF) and designed by is some resistance by MFPs transparency to provide clients The World Bank, whereas the generally in switching from flat with a standardized disclosures majority of MFBs record per capita to declining balance interest methodology for easier household expenditure or per rate disclosures, fearing loss of understanding and comparison capita household income method clientele owing to a lack of level across products and MFPs for to gauge client poverty levels. playing field in the absence

Exhibit 2.55: Methods of stating service cost by sector decision-making. Box 1.3 in Section 1 gives findings and regional comparisons from a recent Pricing Transparency and peer groups Initiative conducted in Pakistan in collaboration with MFTransparency to publish standardized APRs5 of loan products across MFPs in Pakistan. 2

14 26 CONCLUSION

The microfinance industry continued to expand and grow over the last one year. The previous year witnessed the emergence of leading strong institutions which are well Flat interest Declining balance positioned to become engine of growth for the industry N/A based on their experience, size and financial strength. The industry witnessed another year of double digit growth in outreach. GLP reached all time high on the 30 back of continued increase in number of borrowers and increasing loan sizes. MFBs continued to experience 25 3 success in deposit mobilization. Overall, women borrowers 20 21 continue to dominate the market and groups lending continues to remain the methodology of choice. Credit life 15 continues to dominate the micro-insurance segment.

MFPs of 3

No. 10 Industry continues to remain sustainable with OSS 3 remaining above 100 percent. Yield on portfolio exhibited 5 8 declining trend with growth in the industry being future the key driver of profitability. Despite exhibiting a 0 2 2 declining trend, costs remain high and there remains room Flat interest Declining balance N/A for further improvement. Overall, productivity indicators continue to point toward improvement. PAR > 30 days RSPs MFIs MFBs declined further which reflects positively on the quality of the portfolio. The industry’s primarily social goal remains elimination of poverty. Women borrowers remain its principal clients and low income clients remains its main target market. In addition to microcredit, micro-insurance and saving products are being offered by MFPs and the focus is on holistic financial services at the base of the pyramid. Moreover, the industry took a big leap towards pricing transparency last year when its collaborated with MFT to publish standardized APRs of loan products across the country.

5: APRs for products of 31 MFPs in Pakistan can be accessed on the MFTransparency website at the following URL: http://www. mftransparency.org/microfinance-pricing/pakistan/

FINANCIAL SERVICES FOR ALL 49

SECTION 3 Way Forward SECTION 3 THE WAY FORWARD

With mature institutions, a sound regulatory and policy framework Pakistan’s microfinance sector appears to be entering a phase of growth, market segmentation and innovation. Key areas where growth and innovation can be expected in the near future are discussed here.

TOWARDS THE MISSING MIDDLE

SMEs account for more than 30 percent of the country’s GDP and make up 90 percent of all economic establishments in the country . They have the potential to generate employment, increase income and reduce poverty. Due to this, SME lending had been on the agenda of the policy makers for many years. One of the key constraints for SME growth is access to finance, and finding appropriate institutions to serve the SMEs has been a serious challenge for policy makers. There is now a clear view that SMEs need to be broken down into the ‘small’ and ‘medium’ in order to meet their needs effectively, as clubbing them together puts the smaller enterprises at a disadvantage. Stakeholders also seem to agree that it will be difficult to commercial banks to scale down to serve these small enterprises in the foreseeable future. The MFBs, on the other hand, seem well positioned to scale up from their current microfinance client base to also serve the small businesses. SBP through an amendment in the prudential regulations for MFBs now allows them to lend up to PKR 500,000 for enterprise lending. Several MFBs have started to prepare themselves to enter this market segment, with six MFBs at this time having sought SBP’s approval. That said, MFBs face a number of challenges in rolling out their financing solutions for microenterprises. Foremost are the capacity issues and financing required on-lending. Most of the players are of the view that the current human resources and infrastructure cannot effectively lend to the missing middle. This requires capacity building of staff and separate infrastructure for the enterprise lending. In addition, the loan sizes for these products will be multiple of the current loan size which would require additional funding. Strengthening of industry infrastructure in recent years through creation of a MF-CIB will be crucial in providing credit history of graduating microfinance borrowers who could qualify for the larger loans. MFBs are also looking at new areas such as agriculture value chain financing and linkages with other sectors (like low cost private schools - discussed separately below) as promising areas. Moreover, considerable support for tapping the missing middle is now available from leading donor like US AID and DFID in form of facilities for refinancing and technical advisory. The missing middle is a significant new opportunity for the sector but MFBs are moving carefully into this segment, recognizing that although the dynamics of lending to small and microenterprises may be similar to the typical microfinance, it is a different segment with its own risks that they are not completely familiar with.

Exhibit 3.1: Share of Branchless Banking Transactions BRANCHLESS BANKING The branchless banking sector of Pakistan has 100% witnessed tremendous growth since inception and has 6% 44% become a role model in the global branchless banking 14% 80% landscape. In a period of two years, the two-player market 80% for mobile financial services has expanded to eight players 60% and is now represented by the entire telecom sector, along 6% with a the leading commercial banks in the country. 40% 50% While the growth and uptake of the branchless banking 20% services are rapid, the focus of the consumer is tilted towards Over-the-Counter (OTC) transactions. This means 0% that the transaction must be facilitated by an agent, rather Volume of Transaction Value of Transaction than by the customer conducting the transaction himself Agent Transactions (liquidity management) M-Wallets OTC via his mobile phone. By the end of 2013, the share of OTC transactions in terms of volume and value were 80 percent and 50 percent respectively (Exhibit 3.1). Exhibit 3.2: Quarterly Growth in Branchless Banking Accounts With each year, the branchless banking industry is becoming more competitive and moving a step closer to maturity; however its biggest challenge remains moving 60% beyond money transfer and bill payments, and accelerating 50% the registration and usage of registered m-wallet accounts. Despite an increase in the number of branchless banking 40% players and transactions, the growth in the branchless banking accounts (M-wallet accounts) was dismal in the 30% year under review (Exhibit 3.2). 20% While OTC transactions were a very good entry level product for branchless banking, there is a need to increase 10% focus on transactions through mobile wallets. With a 0% mobile account, a customer can store and access funds Q1 2013 Q2 2013 Q3 2013 Q4 2013 round the clock; he can directly deposit and withdraw money from his account and conduct various transactions from his phone. In Pakistan an estimated 135 million1 people own Exhibit 3.3 a cell phone (75percent penetration rate), whereas, at an average, only 5percent of Pakistani households use mobile money, and only about 0.3percent of households have a registered mobile money account2(Exhibit 3.5). There is a huge market opportunity in this segment which branchless banking deployments can effectively tap by increasing awareness and introducing innovative products to incentivize consumers towards mobile accounts.

Central Switch Easypaisa has recently introduced two saving products (Khushaal Beema and Khushaal Munafa) to encourage customers to open a mobile account. Under Khushaal Beema, mobile account customers can get free life insurance by saving PKR 2,000 or more in their mobile One-to-One Model One-to-Many Model Many-to-Many Model accounts. On the other hand, Khushaal Munafa provides a return of up to 9 percent upon saving in mobile accounts. It is important that the success of the branchless banking sector should not restrict the players from losing sight of the broader financial inclusion agenda set forth by the State Bank of Pakistan. Currently, the bulk of activity is

FINANCIAL SERVICES FOR ALL 53 mostly in CNIC-to-CNIC money transfers (35 percent of total transactions). For branchless banking to really take off and bring about financial inclusion, however, providers need to move beyond over-the-counter transactions and promote mobile wallets. Exhibit 3.5: Use of Mobile Accounts The country comprises of 125,027 branchless banking agents as compared 40% to 13,097 branches3 of commercial banks 35% and microfinance providers combined. The presence and coverage of branchless banking 30% agents coupled with the impressive mobile ion rat 25% phone penetrations rate (75 percent ) is a et definite key to financial inclusion. en

y P 20%

Going forward, with the advent 3G network, one M 15% we expect to see new developments and growth in the branchless banking sector. Mobile 10% Nevertheless, the impact of 3G would be greater in urban areas where more people 5% have access to smart phones and the literacy rate is higher as compared to rural areas. 0% Pakistan Uganda Tanzania With greater speed, a wider range of financial services and more comprehensive offerings One m-money userinthe household Oneregistered m-money userinthe household can be offered to mobile account holders. Similarly, internet services would be available in far off areas with weak or no broadband infrastructure; this can facilitate branchless banking agents who can be provided with smart phones with built-in customized applications to enhance their efficiency. The true potential of the sector is set to unleash once the branchless banking business models evolve from “one-to-one” and “one- to-many” to “many-to-many”. The many-to- many model involves a central transaction switch that provides total interoperability, allowing multiple banks to offer services to the customers of multiple agent networks or MNOs (Exhibit 3.3). Interoperable systems will accelerate financial inclusion by allowing customers to use the infrastructure of multiple service providers to access their accounts.

MICRO-INSURANCE launched health insurance in important role here by stimulating collaboration with MicroEnsure innovation and experimentation Poor and low income in 2011 and is adding 4,500 through apportionment of their populations are often vulnerable clients per day. Pakistan, where development resources to support and ill equipped to handle there are now eight branchless programs in health and livelihood losses that catastrophic events banking providers operating, initiatives, augmented by micro- inflict upon them. They face can be another market where insurance. insurance outreach can be a number of risks including Key challenges being faced by expanded rapidly in short span illnesses, accidents, disability, micro-insurance are highlighted in of time. Donors can play an deaths, natural disasters – each the Box 3.1. having the potential to seriously damage any gains in income or assets the poor accumulate over Box 3.1: Challenges to Micro-insurance time. Micro-insurance can play The micro-insurance sector of Pakistan is still in its nascent stages and promising efforts a role in providing social and are being made by various stakeholders for its uplift. Though the sector has undergone financial protection against such decent growth since its take off, it has not achieved the desired momentum the micro losses by providing financial segment offers. shock absorbency to low-income households for predictable and The primary challenge faced by the industry is the lack of innovative products by insurance unpredictable risks. companies. In order to fully utilize the potential of the micro-insurance market mainstream insurance companies need to structure products that would cater to the requirements of the Micro-insurance has been a low income segment. Insurance companies are primarily relying on life and health insurance part of the microfinance equation products in the micro-insurance segment which generate high margins. in Pakistan since the take-off of microcredit, mainly in the form of The lack of innovation in products can be attributed to the fact that insurance companies credit-life insurance and health are not very informed of the dynamics of the low segment market and prefer to position insurance. However, growth and themselves in the higher end of the market. Hence, the insurance industry needs to be progress in micro-insurance had encouraged to understand the market potential and should devout its resources towards been hampered by the lack of market analysis. a clear policy framework. Now On the other hand, the reluctance to expand in this market by insurance companies with regulations coming into can be attributed to the high illiteracy rate of the target population and the unfamiliarity effect through the Microinsurance with insurance concepts, relatively high costs of operation and lack of actuarial data. Rules 2013, it is hoped there will Insurance companies reinsure their portfolios through reinsurance firms which are largely be further growth, especially in multinationals. However, most of these multinationals do not have much knowledge of the standalone insurance products for micro-insurance market and hence are less willing to reinsure products of the insurance the poor. companies. With regulations coming Insurance companies will have to address these challenges in order to gain a footing in into effect, there is a need to the micro-insurance industry. Their primary focus should be on market insight and analytics, forge partnership among the whereas, they also need to develop the capacity to design products tailored to meet the key stakeholders which include requirements of the low income segment. Nevertheless, the absence of innovative product insurance companies, MFPs, offerings from mainstream insurance companies provides an opportunity for new businesses donors and branchless banking to operate in this segment. providers. Technology providers can play an important role as the ticket size is small but the numbers can grow exponentially by harnessing technology. Examples of using technology to deliver micro-insurance products include Trustco Mobile from Zimbabwe which launched life insurance in 2010 and currently has more than two million subscribers. Another cellular operator Tigo in Ghana

FINANCIAL SERVICES FOR ALL 55 FINANCING LOW COST PRIVATE SCHOOLS (LCPS) THROUGH MICROFINANCE

A recent initiative taken by Foundation, loans are tied to In terms of the regulatory several MFPs has been to develop technical support in the form framework, there have been some sector-specific credit options of curriculum development, important developments, such for Low Cost Private Schools capacity building workshops for as the revision of loan amount (LCPS), based on evidence of the school-owners, teacher trainings ceilings, allowing MFBs to be increasing financing demands and other monitoring support to innovative in reaching out to of this rapidly expanding ensure improvements in overall new sectors. At the same time, sector. According to a study quality of education provided guarantee schemes have been set commissioned by the United by these schools. Tameer up to encourage MFBs for onward Kingdom’s Department for Microfinance Bank Ltd. (TMFB) lending, particularly to micro- and International Development (DFID), also piloted a specific product small-enterprises. The burgeoning the sector’s funding appetite for LCPS, which includes product LCPS sector in Pakistan holds exceeds PKR 77 billion for over parameters for ‘clean’ loans as enormous opportunities in 70,000 low cost private schools well as collateral-backed loans of this regard. There is potential currently operating in the country. up to PKR 150K for LCPS owners for donors to support a market The amount and sources of initial with relevant asset ownership based approach in which school investment for these existing (school property, gold, term owners are vested in improving schools are typical of the SME deposit certificates etc). the quality and scale of education sector, with a substantial number provision tied to microfinance In 2014, several MFPs of low cost private schools having loans. including Kashf Foundation, First initial investments of less than Microfinance Bank Ltd (FMFB) PKR 300. This initial investment and Khushhali Bank Ltd (KBL) amount falls within the revised began piloting a LCPS-specific guidelines for enterprise lending microcredit product based a set up by the State Bank of financial model proposed by the Pakistan (SBP), which allow DFID-commissioned study (see MFBs to lend up to PKR 500K above). The model proposes loan (previously PKR 150K). Returns on amounts to be calculated on the investments are projected to be basis of key variables including fairly high given the steady growth school fees, student teacher ratio in enrolment rates and low-cost (STR) and status of school building strategies employed by the LCPS ownership; while other prevalent sector. Moreover, the sector product features include a loan represents a rapidly growing tenure of 12 to 24 months, a grace market, with the number of period of three months to allow private schools having increased the school to acquire relevant 10 fold in the past decade, resources (equipment, staff and primarily in Punjab and Sindh. so on) for expansion and/or In 2013, the Pakistan Poverty improvement, and an effective Alleviation Fund (PPAF) supported interest rate (IR) of 27 percent. the provision of a microcredit While the model features comply product for low cost private with existing SBP regulations, they schools through one of its also call for greater investments partner organizations - Kashf from MFPs and perhaps flexibility Foundation. While this pilot was on SBP enterprise definitions centered in urban areas, the PPAF vis-à-vis number of employees plans to up-scale the product to  particularly for experienced more rural areas, particularly in enterprise owners with the South Punjab, through multiple capacity and willingness to partner organizations. In Kashf expand.

FUNDING

The microfinance sector of Pakistan started off with complete reliance on grants and subsidized Exhibit 3.4: Comparison of Subsidized Lending and debt to meet its funding Commercial Lending requirements. With the growth of the sector, the funding sources have become diversified and the 90% sector is currently being funded by a combination of commercial 80% debt, subsidized debt, deposits (in

70% case of MFBs) and debt obtained under the guarantee facilities. 60% However, over the past few years, the sector has witnessed 50% a visible change in the funding

40% landscape; an increasing number of microfinance providers are 30% shifting towards commercial sources of funding rather than 20% relying on subsidized financing from donors or the national apex. 10% On a sector level, the share of commercial debt to total liabilities 0% has been continuously rising 2010 2011 2012 2013 and has surpassed the share of Subsidized Debt-to-Total Debt Commercial Debt-to-Total Debt subsidized lending (Exhibit 3.4). Guarantee funds continue to play a vital role in facilitating MFPs to access funds from commercial Exhibit 3.5: Use of Mobile Accounts banks. Recent availability to MFBs of Credit Guarantee Scheme for 40% Small and Marginalized farmers which provides guarantee to 35% lenders up to 50 percent in case 30% of default provides an opportunity ion to expand credit outreach in rural rat 25% et areas. Similarly access to low en cost housing guarantee scheme

y P 20% which covers up to 40 of lender’s

one

M 15% exposure allows for MFBs to enter into low cost housing market.

Mobile 10% On an institutional level, MFPs 5% are continuously working to improve their credibility among 0% commercial financial institutions Pakistan Uganda Tanzania by forming strong corporate One m-money userinthe household Oneregistered m-money userinthe household governance structures, enhancing transparency and strengthening internal controls.

FINANCIAL SERVICES FOR ALL 57 Moving ahead, we expect the Box 3.2: Enterprise and Asset Growth Programme (EAGR) funding landscape to further improve as international lenders Department for International Development (DFID) UK has launched an initiative have started to take interest in Enterprise and Asset Growth (EAGR) for Pakistan which will help unlock the potential of Pakistan and are seeing Pakistan small entrepreneurs and businesses to drive growth, employment and trade; and address the as an attractive debt market. In particular needs of women and young people as entrepreneurs and job seekers. the current year, representatives DFID will provide a grant of up to £75.7 million from 2013/14 to 2023/24 to the of BlueOrchard Microfinance Enterprise and Asset Growth Programme (EAGR), through a newly established Special Fund and ResponsAbility Global Purpose Vehicle (SPV). EAGR will comprise of two primary components; Recyclable Capital Microfinance Fund explored the and Capacity Building. The bulk of funding (£40 million) will support a range of financial Pakistan microfinance sector and institutions through ‘recyclable capital’ instruments to finance small and growing businesses showed keen interest in future (SGBs). This will enable them to grow and, in doing so, create jobs for the poor who then can ventures. Similarly, ECO Trade build their assets. And Development Bank has successfully invested USD 7.5 million (debt financing) in NRSP The remaining funds (£35.7 million) will be used to build the capacity of financial and Bank and is currently finalizing a non-financial service providers; provide funding to commercial and financial intermediaries to similar deal with another leading develop innovative products, services and delivery channels; and develop a robust mechanist institution. for monitoring, evaluation and impact assessment, as well as, research and knowledge management. The biggest challenge international investors come In addition, other international and Pakistani partners are expected to invest approximately across while investing in Pakistan £200m in grant and commercial funds. In particular, the Bill and Melinda Gates Foundation is the hedging cost; foreign loans (BMGF) will provide US$15m (equivalent £9.3m) to support a Digital Financial Inclusion need to be converted into local Centre, bringing the total value of the programme to £85m. Contingent on a successful currency (PKR) and are hence startup and robust reviews of demand, DFID may consider up scaling its current level of exposed to foreign exchange rate funding from £75.7m to £200m. The additional funding is likely to be on returnable basis to risk. Hedging solutions exist but DFID. due to high country risk premium lead to increase the borrowing costs for MFPs. Deposit mobilization is the In order to bring down the Due to the high costs of main source of financing for cost of deposits, MFBs need deposits, MFBs will be exploring microfinance banks and at an focus on current and saving other cheaper financing options average, more than 70percent of accounts (CASA), which in turn to fund their portfolio’s which will MFBs funding requirements are would require clearing house include debt financing (local and met through deposits. Deposit memberships, access to ATMs and international), issuance of bonds growth in the current year did innovative products relevant to and term finance certificates. micro-depositors. not lose pace and hovered The industry will continue around 50percent as depicted in Going forward, the sector is to get donor assistance in Exhibit 3.5. It is important to note expected to see a rise in debt obtaining financing from financial that the increase is deposits is financing with very less or no institutions similar to previous primarily driven by two to three growth in equity financing. Equity programs like Financial Inclusion large MFBs which constitute more financing has not been successful Program (FIP) and IFAD’s PRISM. than 70 percent of the sectors in the Pakistan microfinance One such program is being deposit base. The growth in MFB sector, especially among MFI’s launched is Enterprise and Asset deposits comes at a cost of high who do not fall under any Growth Program (EAGR) which is interest rates; MFBs pay a higher regulatory framework. However, being funded by DFID (see Box interest rate on their deposits as only a handful of MFBs have 3.2). compared to commercial banks, been subject to equity financing whereas, deposit concentration transactions, with the most recent is skewed towards institutional taking place in 2013 - Kashf deposits within large firms which Microfinance Bank had been demand high returns. acquired by FINCA to form FINCA Microfinance Bank.

PPAF SPINOFF

The microfinance sector in Pakistan has evolved significantly over the past decade. The early stage growth phase is over and the industry has matured. Expanding financial inclusion requires more sophisticated approaches and strategies than those used in the past, and many microfinance providers (MFPs) now have the operational and managerial strength to achieve this. Given the needs of the Microfinance sector, keeping in mind the evolving nature of the industry, PPAF decided to spin-off the Financial Services Group into a new independent Microfinance Apex entity that will spur a resurgence of high quality growth of the microfinance sector, and substantially increase financial sector penetration for poor households and microenterprises. This decision has been endorsed by many stakeholders including the Donors, GoP and SBP. PPAF’s partner organizations (POs) have also expressed their support and heralded the decision as a necessary step to remove bottlenecks and constraints of the sector while increasing its robustness. To achieve this, PPAF commissioned a consultancy to guide the management through the process. An international firm of high repute was hired to undertake this assignment. After conducting a rigorous analysis of Pakistan’s microfinance market, the firm has suggested spin-off of PPAF’s microfinance department into an independent for profit entity in order to support the next phase of growth. PPAF is prepared to brave all challenges and ensure the provision of holistic and inclusive financial services to the needful across the nation. Going forward, there is little question that the microfinance wholesaling unit of PPAF will retain its role as the lead sector developer, acting as a guide and driver to the entire industry, propagating growth and strengthening product quality and the governance of MFPs.

FINANCIAL SERVICES FOR ALL 59 DISASTER RISK MANAGEMENT

Since 2005, Pakistan has faced multiple Exhibit 3.6: Losses due to Natural Disasters disasters. These include earthquake in 2005, IDP crisis in 2009 and floods in 2010 & 2011. The impact of these events on the microfinance Struck AJK and KPK the hardest; 3 districts affected sector is summarized in the Exhibit 3.6 below. Earthquake 73,000 people killed The hardest hit by these disasters are the 2005 Caused damages amounting to PKR 265 billion (US$5.2 billion) lower income strata. This segment of population Microfinance portfolio worth PKR38 million affected is the same as the one targeted by microfinance 5 district s & 2 agencies affected industry resulting in large losses to MFPs. With IDP Crisis PKR 97 billion (US $1.1 billion) in damages small capital base, MFPs have little capacity to 2009 Microfinance portfolio worth PKR 200 million affected absorb these losses leading to liquidity issues.

Moreover, as microfinance is a double bottom 60 districts affected line industry which tries to balance the social Floods 20 million people affected, with over 1,980 reported deaths and nearly 2,946 injured and 1.6 million rendered homeless and financial bottom lines, pursuing recoveries 2010 Microfinance portfolio worth PKR 2.6 billion affected from calamity stricken borrowers can create PKR 34 million worth of microfinance infrastructure damaged political and reputation risk. 60 districts affected 20 million people affected, with over 1,980 reported deaths In order to mitigate disaster risk effectively, Sindh Rains multifaceted efforts are needed. It requires and nearly 2,946 injured and 1.6 million rendered homeless 2011 Microfinance portfolio worth PKR 2.6 billion affected efforts on client, MFP and industry level. PKR 34 million worth of microfinance infrastructure damaged Clients can be secured by extending micro- insurance products coupled with micro-saving options. At meso level, MFPs need to diversify geographically and product wise. In addition, Exhibit 3.7: Meso Level there is a need to increase their equity to have cushion to absorb losses. MFPs located in Disaster Risk Mitigation disaster prone areas need to be better prepared for disasters by having necessary contingency plans in place (see Exhibit 3.7). Product Diversification At sector level, the SBP through its Micro Finance Consultative Group and its sub- Disaster Geographical committees is already exploring options for the Preparedness Spread sector. These include setting up a dedicated disaster fund for the sector and amending existing government backed insurance schemes High Equity for agriculture and livestock to meet needs of MFPs. However, there is a need to expand the government schemes like Crop Life Insurance Scheme (CLIS) and Livestock Insurance to cover entire sector and just not MFBs. However, issues remain in their implementation. In addition, instead of insuring borrowers these schemes should be targeted towards insuring the portfolios of the MFPs.

FINANCIAL SERVICES FOR ALL 61

ANNEXURES ANNEXURE A-1

PERFORMANCE INDICATORS

INDUSTRY AGGREGATE (2007-12)

INFRASTRUCTURE

2008* 2009** 2010** 2011** 2012 2013

Total assets (PKR 000) 33,193,784 30,473,198 35,826,211 48,569,411 61,928,036 81,557,894 Branches (including Head Office) 1,277 1,221 1,405 1,550 1,630 1,606 Total staff 11,499 11,557 12,005 14,202 15,153 17,456

GROWTH RATE Total assets 45.2% -8.2% 17.6% 35.6% 27.5% 31.7% Branches (including Head Office) 9.6% -4.4% 15.1% 10.3% 5.2% -1.5% Total staff 20.7% 0.5% 3.9% 18.3% 6.7% 15.2%

* Includes KF data, ** Without KF data

FINANCING STRUCTURE

2008* 2009** 2010** 2011** 2012 2013

Total assets (PKR 000) 33,193,784 30,473,198 35,826,211 48,569,411 61,928,036 81,557,894 Total equity (PKR 000) 8,018,344 7,297,847 8,359,260 10,314,307 11,679,373 17,049,706 Total debt (PKR 000) 25,175,440 23,175,352 27,466,951 38,255,104 25,876,598 26,913,359 Commercial liabilities (PKR 000) 6,252,075 2,577,741 4,910,265 12,332,456 19,361,179 21,662,200 Deposits (PKR 000)*** 4,111,730 7,161,634 10,132,332 13,908,759 20,840,990 32,925,558 Gross loan portfolio (PKR 000) 20,001,190 16,757,846 20,295,915 24,854,747 33,877,284 46,613,582

RATIOS Equity-to-asset ratio 24.2% 23.9% 23.3% 21.2% 18.9% 20.9% Commercial liabilities-to-total debt 24.8% 11.1% 17.9% 32.2% 74.8% 80.5% Debt-to-equity ratio 3.14 3.18 3.29 3.41 2.22 1.58 Deposits-to-gross loan portfolio 20.6% 42.7% 49.9% 56.0% 61.5% 70.6% Deposits-to-total assets 12.4% 23.5% 28.3% 28.6% 33.7% 40.4% Gross loan portfolio-to-total 60.3% 55.0% 56.7% 51.2% 54.7% 57.2% assets

Includes KF data, * Without KF data, ** Only MFB deposits included

OUTREACH

2008* 2009** 2010** 2011** 2012 2013

Active borrowers 1,695,421 1,409,657 1,567,355 1,661,902 2,040,518 2,392,874 Active women borrowers 803,795 643,392 811,520 917,058 1,275,387 1,442,197 Gross loan portfolio (PKR 000) 20,001,190 16,757,846 20,295,915 24,854,747 33,877,284 46,613,582 Annual per capita income (PKR)*** 81,000 86,000 105,300 107,505 118,085 143,808 Number of loans outstanding 1,791,688 1,409,657 1,547,197 1,661,902 2,040,518 2,401,849 Depositors**** 248,842 463,361 764,271 1,332,705 1,730,823 2,150,675 Number of deposit accounts 248,842 463,361 764,271 1,332,705 1,730,823 2,998,641 Number of women depositors 44,081 78,427 64,159 259,104 334,994 837,144 Deposits outstanding 4,111,730 7,161,634 10,132,332 13,908,759 20,840,990 32,925,559

Proportion of active women 47.4% 45.6% 51.8% 55.2% 62.5% 60.3% borrowers (%) Average loan balance per active 11,797 11,888 12,949 14,956 16,602 19,480 borrower (PKR) Average loan balance per active 13.78% 13.8% 12.3% 13.9% 14.1% 13.5% borrower/per capita income Average outstanding loan balance 11,163 11,888 13,118 14,956 16,602 19,407 (PKR) Average outstanding loan balance 13.8% 13.8% 12.5% 13.9% 14.1% 13.5% / per capita income Proportion of active women 17.7% 16.9% 8.4% 19.4% 19.4% 38.92% depositors (%) Average saving balance per active 16,523 15,456 13,258 10,436 12,041 15,309 depositor (PKR) Active deposit account balance 16,523 15,456 13,258 10,436 12,041 10,980 (PKR)

* Includes KF data ** Without KF data *** Source: http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/EconomicGrowth.pdf **** Only MFB deposits included

FINANCIAL SERVICES FOR ALL 65 FINANCIAL PERFORMANCE

2008* 2009* 2010** 2011** 2012 2013

Income from loan portfolio 4,202,506 4,352,648 6,122,154 7,998,956 10,040,720 13,542,893 Income from investments 831,602 1,087,106 870,809 1,203,306 1,774,610 1,742,975 Income from other sources 80,552 975,335 528,457 899,713 816,461 2,093,035 Total revenue 5,114,660 6,415,089 7,521,420 10,101,975 12,631,792 17,378,903 Less : financial expense 1,556,375 1,820,037 2,016,795 2,905,049 3,974,467 4,767,589 Gross financial margin 3,558,285 4,595,052 5,504,624 7,196,926 8,657,325 12,611,314 Less: loan loss provision 1,440,324 408,684 745,660 623,988 643,991 658,812 expense Net financial margin 2,117,962 4,186,368 4,758,964 6,572,938 8,013,334 11,952,503 Personnel expense 1,828,726 2,186,177 2,819,891 3,345,284 3,784,676 5,032,342 Admin expense 1,507,667 1,719,283 1,961,816 2,446,750 2,886,025 3,880,920 Other expense 3,336,393 3,905,460 4,781,707 5,792,035 1,342,633 8,913,262 Less: operating expense 257,651 380,993 Net income before tax (1,218,432) 280,908 (22,742) 780,903 1,084,982 2,658,248

Provision for tax (1,001) 5,353 (7,047) 116,314 152,380 503,118 Net income/(loss) (1,217,431) 275,555 (15,696) 664,589 932,602 2,155,130 Adjusted Financial Expense on 242,377 87,767 - 372,524 205,943 181,422 Borrowings Inflation Adjustment Expense 669,689 1,318,219 - (3,073) 870 1,152 Adjusted Loan Loss Provision 11,699 - - 357,688 49,456 18,743 Expense Adjusted Operating Expense 923,765 1,405,987 - 727,138 256,270 201,317 Total Adjustment Expense (2,141,195) (1,889,736) (15,696) (62,549) 676,332 1,953,814 Net Income/(Loss) After 27,996,183 29,363,269 30,399,088 42,282,393 57,182,714 70,192,281 Adjustments Average total assets 7,177,338 7,006,506 7,854,713 8,719,204 11,594,943 14,513,187 Average total equity 6,115,580 7,177,338 7,006,506 7,854,713 8,719,204 11,206,319

RATIOS Adjusted return-on-assets (7.6%+) (3.3%) (0.1%) (0.1%) 1.2% 2.8% Adjusted return-on-equity (29.8%) (14%) (0.2%) (0.7%) 5.8% 13.5% Operational self sufficiency (OSS) 80.8% 104.6% 99.7% 108.4% 109.4% 118.1% Financial self sufficiency (FSS) 70.5% 86.8% 81.7% 100.5% 107.0% 116.5%

* Includes KF data, ** Without KF data

OPERATING INCOME

2008* 2009** 2010** 2011** 2012 2013

Revenue from loan portfolio 4,202,506 4,352,648 6,122,154 7,998,956 10,040,720 13,542,893 Total revenue 5,114,660 5,804,616 7,521,420 10,101,975 12,631,792 17,378,903 Adjusted net operating income (2,113,788) (887,558) (22,742) 5,252 828,712 2,456,931 / (loss) Average total assets 27,996,183 29,363,269 30,399,088 42,282,393 57,182,714 70,192,281 Gross loan portfolio (opening 12,698,918 16,780,162 16,948,466 20,576,342 25,743,757 34,668,730 balance) Gross loan portfolio (closing 20,001,190 16,757,846 20,295,915 24,854,747 33,877,284 46,105,712 balance) Average gross loan portfolio 16,350,054 16,769,004 18,622,190 22,715,544 29,810,520 40,387,221 Inflation rate *** 12.0% 20.8% 15.0% 11.2% 10.4% 9.2%

Total revenue ratio (total revenue- 18.3% 19.8% 24.7% 23.9% 22.3% 24.8% to-average total assets) Adjusted profit margin (adjusted (41.3%) (24.6%) (0.3%) 0.1% 7.0% 14.1% profit/(loss)-to-total revenue) Yield on gross portfolio (nominal) 25.7% 26.0% 32.9% 35.2% 34.2% 33.5% Yield on gross portfolio (real) 12.2% 4.3% 15.5% 21.6% 21.6% 22.3%

* Includes KF data ** Without KF data *** Source: http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/IND.pdf

FINANCIAL SERVICES FOR ALL 67 OPERATING EXPENSE

2008* 2009* 2010** 2011** 2012 2013

Adjusted total expense 7,228,448 7,454,381 7,544,162 10,096,723 11,803,080 14,540,979 Adjusted financial expense 2,440,032 3,140,237 2,016,795 3,304,504 4,181,281 4,950,162 Adjusted loan loss provision 1,452,023 408,684 745,660 1,000,184 693,447 677,555 expense Adjusted operating expense 3,336,393 3,905,460 4,781,707 5,792,035 6,928,352 8,913,262 Adjustment expense 895,356 1,320,200 - 775,651 256,270 201,317 Average total assets 27,996,183 29,363,269 30,399,088 42,282,393 57,182,714 70,192,281

RATIOS Adjusted total expense-to- 25.8% 25.4% 24.8% 23.9% 20.6% 20.7% average total assets Adjusted financial expense-to- 8.7% 10.7% 6.6% 7.8% 7.3% 7.1% average total assets Adjusted loan loss provision 5.2% 1.4% 2.5% 2.4% 1.2% 1.0% expense-to-average total assets Adjusted operating expense-to- 11.9% 13.3% 15.7% 13.7% 12.1% 12.7% average total assets Adjusted personnel expense 6.5% 6.5% 9.3% 7.9% 6.6% 7.2% Adjusted admin expense 5.4% 5.8% 6.5% 5.8% 5.0% 5.5% Adjustment expense-to-average 3.2% 4.5% 0.0% 1.8% 0.4% 0.3% total assets

* Includes KF data ** Without KF data

OPERATING EFFICIENCY

2008* 2009** 2010** 2011** 2012 2013

Adjusted operating expense (PKR 3,336,393 3,905,460 4,781,707 5,792,035 6,928,352 8,913,262 000) Adjusted personnel expense (PKR 1,828,726 2,186,177 2,819,891 3,345,284 3,784,676 5,032,342 000) Average gross loan portfolio (PKR 16,350,054 16,769,004 18,622,190 22,715,544 29,810,520 40,387,221 000) Average number of active 1,685,382 1,387,670 1,567,355 1,661,902 2,040,518 2,350,650 borrowers Average number of active loans 1,635,342 1,423,467 1,567,355 1,661,902 2,040,518 2,359,625

Adjusted operating expense-to- 20.4% 23.3% 25.7% 25.5% 23.2% 22.1% average gross loan portfolio Adjusted personnel expense-to- 11.2% 13.0% 15.1% 14.7% 12.7% 12.5% average gross loan portfolio Average salary/gross domestic 2.0 2.20 2.23 2.19 2.12 2.0 product per capita Adjusted cost per borrower (PKR) 2,000 2,814 3,051 3,485 3,395 3,792 Adjusted cost per loan (PKR) 2,000 2,744 3,051 3,485 3,395 3,777

* Includes KF data ** Without KF data

FINANCIAL SERVICES FOR ALL 69 Figures in PKR ‘000

PRODUCTIVITY

2008* 2009* 2010** 2011** 2012 2013

Number of active borrowers 1,695,421 1,399,239 1,567,355 1,661,902 2,040,518 2,255,126 Number of active loans 1,791,688 1,399,239 1,567,355 1,661,902 2,040,518 2,263,432 Number of active depositors 248,842 463,361 764,271 1,332,705 1,730,823 1,897,872 Number of deposit accounts 248,842 463,361 764,271 1,332,705 1,730,823 2,707,872 Total staff 11,499 11,441 12,005 14,202 15,153 15,673 Total loan officers 6,916 6,619 5,148 7,165 7,541 6,892

Borrowers per staff 147 122 131 117 135 144 Loans per staff 156 122 131 117 135 144 Borrowers per loan officer 245 211 304 232 271 327 Loans per loan officer 259 211 304 232 271 328 Depositors per staff 22 41 64 94 114 121 Deposit accounts per staff 22 41 64 94 114 173 Personnel allocation ratio 60.1% 57.9% 42.9% 50.5% 49.8% 44.0%

* Includes KF data ** Without KF data

RISK

2008* 2009* 2010** 2011** 2012 2013

Portfolio at risk > 30 days 426,693 578,032 829,314 793,966 1,232,842 1,157,297 Portfolio at risk > 90 days 190,350 318,824 577,972 516,623 1,020,316 932,166 Adjusted loan loss reserve 1,680,846 477,785 733,338 623,988 759,621 708,355 Loan written off during year 299,986 602,421 335,463 592,429 675,835 615,293 Gross loan portfolio 20,001,190 16,757,846 20,295,915 24,854,747 33,877,284 46,105,712 Average gross loan portfolio 16,350,054 16,769,004 18,622,190 22,715,544 29,810,520 40,387,221

Portfolio at risk (>30)-to-gross 2.1% 3.4% 4.1% 3.2% 3.6% 2.5% loan portfolio Portfolio at risk(>90)-to-gross 1.0% 1.9% 2.8% 2.1% 3.0% 2.0% loan portfolio Write off-to-average gross loan 1.8% 3.6% 1.8% 2.6% 2.3% 1.5% portfolio Risk coverage ratio (adjusted loan 393.9% 82.7% 88.4% 78.6% 61.6% 61.2% loss reserve-to-portfolio at risk >30days)

* Includes KF data ** Without KF data

FINANCIAL SERVICES FOR ALL 71 ANNEXURE A-2

PERFORMANCE INDICATORS

INDUSTRY AGGREGATE (2008-13)

INFRASTRUCTURE

KBL TMFB POMFB FMFB NRSP-B FINCA AMFB U-Bank Sub

MFB Age 12 12 12 12 12 6 9 1 Total assets (PKR 13,289,657 15,190,699 879,096 9,514,042 9,804,015 3,978,864 1,313,383 1,381,510 55,351,266 000) Total equity (PKR 2,752,488 2,209,425 818,771 1,102,062 1,390,741 1,104,539 517,041 1,038,817 10,933,884 000)

Total liabilities 10,537,169 12,981,274 60,325 8,411,980 8,413,274 2,874,325 796,341 342,693 44,417,381 (PKR 000) Branches 110 49 16 87 54 34 11 17 378 (including Head Office) Personnel 2,293 2,198 182 1,122 1,247 797 209 250 8,298 OPP KASHF SAFCO DAMEN CSC GBTI FFO ASA-P BRAC-P JWS Sungi ORIX RCDS

MFI 5 6

Age 29 17 19 17 13 18 10 22 14 21 19

Total assets (PKR 000) 95,835 684,583 547,480 599,456 342,579 220,108 530,418 256,247 760,569 4,580,527 1,052,178 1,965,726 1,344,310 Continued in next table... in next Continued

Total equity (PKR 000) 16,972 70,215 43,285 (26,256) 394,805 100,994 146,083 204,809 182,746 303,419 810,308 216,596 210,624

Total liabilities (PKR 000) 39,160 25,620 289,778 401,397 847,369 416,710 203,135 313,823 212,962 549,945 4,479,533 1,155,419 1,370,566 5 8

Branches (including Head Office) 21 22 20 16 10 15 86 15 22 174 150

Personnel 97 72 51 55 254 193 155 118 918 996 168 248 1,858

INFRASTRUCTURE Agahe AMRDO MO Mojaz Naymet NRDP OPD SDS SRDO SVDP VDO Sub

MFI 7 5 6 9

Age 10 22 22 10 13 13 10

Total assets (PKR 000) 83,904 85,281 10,707 61,748 70,213 61,539 178,651 223,038 158,494 105,576 130,834 13,465,419 981

Total equity (PKR 000) 9,347 8,856 7,167 20,127 42,424 23,543 54,346 39,101 14,304 35,270 2,535,261

Total liabilities (PKR 000) 1,360 63,777 61,738 91,273 52,891 63,046 95,564 60,558 136,227 168,691 119,394 10,930,15 4 2 9 6 4 4 2 3 3

Branches (including Head Office) 12 10 602 25 79 19 18 38 24 18 40 20

Personnel 139 107 5,613

NRSP PRSP SRSP TRDP SRSO Sub

RSP Age 20 15 22 16 10 Total assets (PKR 000) 7,326,662 2,834,223 45,445 1,312,215 1,222,664 12,741,209 Total equity (PKR 000) 1,972,609 1,112,572 28,445 253,571 213,363 3,580,560 Total liabilities (PKR 000) 5,354,053 1,721,651 17,000 1,058,644 1,009,301 9,160,649 Branches (including Head 470 19 6 80 51 626 Office) Personnel 2,202 617 19 389 318 3,545

FINANCIAL SERVICES FOR ALL 73 INFRASTRUCTURE

MFB Sub MFI Sub RSP Sub Total

Age Total assets (PKR 55,351,266 13,465,419 12,741,209 81,557,894 000) Total equity (PKR 10,933,884 2,535,261 3,580,560 17,049,706 000) Total liabilities 44,417,381 10,930,158 9,160,649 64,508,189 (PKR 000) Branches 378 602 626 1,606 (including Head Office) Personnel 8,298 5,613 3,545 17,456

MFB Sub MFI Sub RSP Sub Total

Age Total assets (PKR 000) 55,351,266 13,465,419 12,741,209 81,557,894 Total equity (PKR 000) 10,933,884 2,535,261 3,580,560 17,049,706 Total liabilities (PKR 000) 44,417,381 10,930,158 9,160,649 64,508,189 Branches (including Head 378 602 626 1,606 Office) Personnel 8,298 5,613 3,545 17,456

Figures in PKR ‘000

FINANCING STRUCTURE 0.8 7.3% 19.8% 71.7% 59.5% 50.7% 117.3% Sub Avg. 8,990,434 2,546,106 6,444,328 55,351,266 10,933,884 32,925,558 44,417,381 28,072,495 Weighted Weighted U-Bank 1,381,510 1,038,817 - - - 205,178 342,693 41,381 75.2% 0.0% 0.0 495.8% 14.9% 0.6% 3.0% 1,313,383 517,041 - - - 762,026 796,341 341,838 39.4% 0.0% 0.0 222.9% 58.0% 6.9% 26.0% AMFB FINCA 3,978,864 1,104,539 - - - 2,735,464 2,874,325 2,036,069 27.8% 0.0% 0.0 134.4% 68.7% 7.8% 51.2% - 3.2 7.6% 14.2% 74.7% 36.9% 49.4% 100.0% NRSP-B 9,804,015 1,390,741 4,457,250 4,457,250 3,618,714 8,413,274 4,845,000 - 0.3 6.4% 11.6% 82.1% 36.8% 100.0% 223.3% FMFB 296,042 296,042 9,514,042 1,102,062 7,814,981 8,411,980 3,499,317 - - - 0.0 0.0% 3.3% 1.2% 93.1% 24.4% 13.4% 28,730 60,325 POMFB 879,096 818,771 117,931

- 0.7 8.5% 14.5% 70.0% 54.8% 100.0% 127.6% TMFB 2,209,425 1,491,036 1,491,036 8,331,554 15,190,699 10,627,546 12,981,274 1.0 7.3% 6.2% 20.7% 80.5% 53.7% 66.7% KBL 200,000 2,752,488 2,746,106 2,546,106 7,132,919 8,859,405 13,289,657 10,537,169 MFB assets Total equity Total debt Total - Subsidised debt* debt - Commercial deposits Total liabilities Total loan portfolio Gross ratio Equity-to-asset debt liabilities-to-total Commercial ratio Debt-to-equity loan portfolio Deposits-to-gross assets Deposits-to-total funds of Cost assets loan portfolio-to-total Gross *Below market rate

FINANCIAL SERVICES FOR ALL 75 FINANCING STRUCTURE OPP KASHF SAFCO DAMEN CSC GBTI FFO ASA-P BRAC-P JWS Sungi ORIX RCDS

MFI

Total assets 95,835 684,583 547,480 599,456 342,579 220,108 530,418 256,247 760,569 4,580,527 1,052,178 1,965,726 1,344,310

Total equity 16,972 70,215 43,285 (26,256) 394,805 100,994 146,083 204,809 182,746 303,419 810,308 216,596 210,624 Continued in next table... in next Continued

Total debt 27,288 18,000 254,949 379,601 842,891 400,733 191,292 933,418 305,661 210,663 518,662 4,203,062 1,042,143 - -

- Subsidised debt* 91,600 33,921 27,288 98,893 58,392 379,601 328,545 141,315 265,225 210,663 365,208 - - -

- Commercial debt 72,188 92,399 40,436 18,000 163,349 842,891 900,828 875,026 153,454 4,169,141

Total deposits ------

Total liabilities 39,160 25,620 289,778 401,397 847,369 416,710 203,135 313,823 212,962 549,945 4,479,533 1,155,419 1,370,566

Gross loan portfolio 50,763 89,582 507,870 413,875 750,530 293,493 125,333 884,295 319,169 233,715 444,610 3,543,155 1,896,801 Avg. Weighted Weighted

Equity-to-asset ratio 2.2% 7.7% -2.0% 57.7% 26.7% 19.5% 30.5% 88.6% 41.2% 40.8% 73.3% 16.9% 27.7%

Commercial liabilities-to-total debt 0.0% 0.0% 0.0% 64.1% 99.2% 18.0% 48.3% 86.4% 93.7% 13.2% 29.6% 100.0% 100.0%

Debt-to-equity ratio 0.6 2.6 4.1 2.2 0.1 1.3 1.4 0.3 4.9 2.5 41.6 11.3 -35.6

Deposits-to-gross loan portfolio ------

Deposits-to-total assets ------

Cost of funds 8.1% 9.5% 7.2% 5.6% 6.0% 5.3% 7.1% 9.3% 7.3% 9.2% 11.3% 10.9% 11.9%

Gross loan portfolio-to-total assets 77.4% 75.6% 71.3% 49.0% 14.8% 56.9% 96.5% 65.8% 60.2% 93.5% 91.2% 58.5% 74.2%

FINANCING STRUCTURE Agahe AMRDO MO Mojaz Naymet NRDP OPD SDS SRDO SVDP VDO Sub

MFI

Total assets 83,904 85,281 10,707 61,748 70,213 61,539 178,651 223,038 158,494 105,576 130,834 13,465,419 981

Total equity 9,347 8,856 7,167 20,127 42,424 23,543 54,346 39,101 14,304 35,270 2,535,261 -

Total debt 61,533 58,949 86,128 44,041 59,419 88,725 50,145 120,272 146,781 112,891 9,902,297 - - - - -

- Subsidised debt* 86,128 34,793 47,625 88,725 120,272 130,160 2,416,753 - - - -

- Commercial debt 9,248 61,533 58,949 16,621 11,794 50,145 112,891 7,485,545

Total deposits ------

Total liabilities 1,360 63,777 61,738 91,273 52,891 63,046 95,564 60,558 136,227 168,691 119,394 10,930,158

Gross loan portfolio 9,511 43,725 78,150 64,083 78,601 80,606 53,404 22,907 45,264 74,448 49,194 10,153,084 Avg. Weighted Weighted

Equity-to-asset ratio 1.6% 24.0% 23.7% 27.6% 24.4% 87.3% 24.7% 13.5% 14.3% 10.2% 27.0% 18.8%

Commercial liabilities-to-total debt 0.0% 0.0% 0.0% 0.0% 11.3% 21.0% 19.8% 75.6% 100.0% 100.0% 100.0% 100.0%

Debt-to-equity ratio 3.1 2.8 2.5 2.7 0.0 2.9 6.0 5.0 8.3 2.5 51.1 3.91

Deposits-to-gross loan portfolio ------

Deposits-to-total assets ------

Cost of funds 9.6% 6.9% 7.3% 4.0% 0.0% 7.5% 4.4% 5.8% 5.3% 8.1% 9.2% 10.2%

Gross loan portfolio-to-total assets 43.7% 75.1% 35.2% 88.8% 50.9% 50.6% 37.1% 64.5% 56.9% 79.9% 75.4% 52.1% FINANCIAL SERVICES FOR ALL 77

*Below market rate FINANCING STRUCTURE

NRSP PRSP SRSP TRDP SRSO Sub

RSP Total assets 7,326,662 2,834,223 45,445 1,312,215 1,222,664 12,741,209 Total equity 1,972,609 1,112,572 28,445 253,571 213,363 3,580,560 Total debt 5,017,919 1,023,375 15,000 976,033 988,300 8,020,628 - Subsidised debt* - - - - 288,300 288,300 - Commercial debt 5,017,919 1,023,375 15,000 976,033 700,000 7,732,328 Total deposits ------Total liabilities 5,696,084 1,338,216 10,096 522,172 969,263 9,160,649 Gross loan portfolio 5,584,405 903,664 32,174 789,789 1,077,973 8,388,003

Weighted Avg. Equity-to-asset ratio 26.9% 39.3% 62.6% 19.3% 17.5% 28.1% Commercial liabilities-to-total debt 100.0% 100.0% 100.0% 100.0% 70.8% 96.4% Debt-to-equity ratio 2.5 0.9 0.5 3.8 4.6 2.24 Deposits-to-gross loan portfolio ------Deposits-to-total assets ------Cost of funds 10.6% 7.1% 14.0% 11.2% 11.1% 10.0% Gross loan portfolio-to-total assets 76.2% 31.9% 70.8% 60.2% 88.2% 65.8%

*Below market rate

MFB Sub MFI Sub RSP Sub Total

Total assets 55,351,266 13,465,419 12,741,209 81,557,894 Total equity 10,933,884 2,535,261 3,580,560 17,049,706 Total debt 8,990,434 9,902,297 8,020,628 26,913,359 - Subsidised debt* 2,546,106 2,416,753 288,300 5,251,159 - Commercial debt 6,444,328 7,485,545 7,732,328 21,662,200 Total deposits 32,925,558 - - 32,925,558 Total liabilities 44,417,381 10,930,158 9,160,649 64,508,189 Gross loan portfolio 28,072,495 10,153,084 8,388,003 46,613,582

Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Equity-to-asset ratio 19.8% 18.8% 28.1% 20.9% Commercial liabilities-to-total debt 71.7% 75.6% 96.4% 80.5% Debt-to-equity ratio 0.8 3.91 2.24 1.58 Deposits-to-gross loan portfolio 117.3% - - 70.6% Deposits-to-total assets 59.5% - - 40.4% Cost of funds 7.3% 9.2% 10.0% 8.0% Gross loan portfolio-to-total assets 50.7% 75.4% 65.8% 57.2%

OUTREACH

KBL TMFB POMFB FMFB

MFB Active borrowers 409,230 197,811 4,803 130,397 Active women borrowers 110,492 67,729 1,174 44,521 Gross loan portfolio (PKR 000) 8,859,405 8,331,554 117,931 3,499,317 Annual per capita income (PKR)* 143,808 143,808 143,808 143,808 Number of loans outstanding 409,230 197,811 4,803 130,397

Depositors 674,061 833,313 18,735 263,437 table.. in next Continued Number of deposit accounts 674,061 1,643,313 18,735 263,437 Number of women depositors 166,787 568,429 5,103 72,672 Deposits outstanding 7,132,919 10,627,547 28,730 7,814,981

Weighted Avg. Proportion of active women borrowers (%) 27.0% 34.2% 24.4% 34.1% Average loan balance per active borrower (PKR) 21,649 42,119 24,554 26,836 Average loan balance per active borrower/per capita 15.1% 29.3% 17.1% 18.7% income Average outstanding loan balance (PKR) 21,649 42,119 24,554 26,836 Average outstanding loan balance / per capita income 15.1% 29.3% 17.1% 18.7% Proportion of active women depositors (%) 24.7% 68.2% 27.2% 27.6% Average saving balance per active depositor (PKR) 10,582 12,753 1,533 29,665 Active deposit account balance (PKR) 10,582 6,467 1,533 29,665

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/EconomicGrowth.pdf

FINANCIAL SERVICES FOR ALL 79 OUTREACH

NRSP-B FINCA AMFB U-Bank Sub

MFB Active borrowers 171,718 39,078 8,606 1,220 962,863 Active women borrowers 23,291 1,922 2,941 80 252,150 Gross loan portfolio (PKR 000) 4,845,000 2,036,069 341,838 41,381 28,072,495 Annual per capita income (PKR)* 143,808 143,808 143,808 143,808 143,808 Number of loans outstanding 171,718 39,692 8,606 1,220 963,477 Depositors 108,326 200,489 31,812 20,502 2,150,675 Number of deposit accounts 108,326 238,345 31,812 20,612 2,998,641 Number of women depositors 11,767 10,648 1,738 - 837,144 Deposits outstanding 3,618,714 2,735,464 762,026 205,178 32,925,559

Weighted Avg. Proportion of active women borrowers (%) 13.6% 4.9% 34.2% 6.6% 26.2% Average loan balance per active borrower (PKR) 28,215 52,103 39,721 33,919 29,155 Average loan balance per active borrower/per capita 19.6% 36.2% 27.6% 23.6% 20.3% income Average outstanding loan balance (PKR) 28,215 51,297 39,721 33,919 29,137 Average outstanding loan balance / per capita income 19.6% 35.7% 27.6% 23.6% 20.3% Proportion of active women depositors (%) 10.9% 5.3% 5.5% 0.0% 38.9% Average saving balance per active depositor (PKR) 33,406 13,644 23,954 10,008 15,309 Active deposit account balance (PKR) 33,406 11,477 23,954 9,954 10,980

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/EconomicGrowth.pdf

OUTREACH OPP KASHF SAFCO DAMEN CSC GBTI FFO ASA-P BRAC-P JWS Sungi ORIX RCDS

MFI

Active borrowers 4,837 42,224 38,762 35,185 18,578 10,753 56,359 21,323 10,670 16,322 31,715 312,182 179,588

Active women borrowers 4,489 10,556 18,606 35,185 18,578 10,619 54,497 20,686 10,670 15,546 29,101 312,182 178,121 Continued in next table... in next Continued

Gross loan portfolio (PKR 000) 50,763 89,582 507,870 413,875 750,530 293,493 125,333 884,295 319,169 233,715 444,610 3,543,155 1,896,801

Annual per capita income (PKR)* 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808

Number of loans outstanding 42,224 38,762 35,185 18,578 13,143 10,753 56,359 21,323 10,670 16,322 31,715 312,182 179,588

Depositors ------

Number of deposit accounts ------

Number of women depositors ------

Deposits outstanding ------Avg. Weighted Weighted

Proportion of active women borrowers (%) 100.0% 25.0% 100.0% 48.0% 100.0% 100.0% 92.8% 98.8% 99.2% 96.7% 97.0% 95.2% 91.8%

Average loan balance per active borrower (PKR) 8,396 12,028 11,350 10,677 21,331 15,798 10,495 11,656 10,562 15,690 14,968 14,319 14,019

Average loan balance per active borrower/per capita income 5.8% 8.4% 7.9% 7.4% 14.8% 11.0% 7.3% 8.1% 7.3% 10.9% 10.4% 10.0% 9.7%

Average outstanding loan balance (PKR) 8,396 12,028 11,350 10,677 21,331 15,798 3,862 11,656 10,562 15,690 14,968 14,319 14,019

Average outstanding loan balance / per capita income 5.8% 8.4% 7.9% 7.4% 14.8% 11.0% 2.7% 8.1% 7.3% 10.9% 10.4% 10.0% 9.7%

Proportion of active women depositors (%) ------Average saving balance per active depositor (PKR)

Active deposit account balance (PKR) ------

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/EconomicGrowth.pdf FINANCIAL SERVICES FOR ALL 81 OUTREACH Agahe AMRDO MO Mojaz Naymet NRDP OPD SDS SRDO SVDP VDO Sub

MFI

Active borrowers 3,828 9,821 3,558 4,606 2,500 4,799 4,312 3,611 2,000 3,552 4,033 825,118

Active women borrowers 629 3,762 4,806 1,617 2,620 1,300 2,791 2,832 1,562 1,318 2,108 744,181

Gross loan portfolio (PKR 000) 9,511 43,725 78,150 64,083 78,601 80,606 53,404 22,907 45,264 74,448 49,194 10,153,084

Annual per capita income (PKR)* 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808 143,808

Number of loans outstanding 3,828 9,821 3,558 4,606 2,500 4,809 4,312 3,611 2,045 3,552 4,033 833,479

Depositors ------

Number of deposit accounts ------

Number of women depositors ------

Deposits outstanding ------Avg. Weighted Weighted

Proportion of active women borrowers (%) 98.3% 48.9% 45.4% 56.9% 52.0% 58.2% 65.7% 43.3% 31.5% 37.1% 52.3% 90.2%

Average loan balance per active borrower (PKR) 7,957 3,804 6,344 11,423 18,011 17,065 16,797 12,385 22,632 20,959 12,198 12,305

Average loan balance per active borrower/per capita 9%

income 7.9% 5.5% 2.6% 8.6% 4.4% 8.5% 12.5% 11.9% 11.7% 15.7% 14.6%

Average outstanding loan balance (PKR) 7,957 3,804 6,344 11,423 18,011 17,065 16,762 12,385 22,134 20,959 12,198 12,182

Average outstanding loan balance / per capita income 7.9% 5.5% 2.6% 8.6% 4.4% 8.5% 8.5% 12.5% 11.9% 11.7% 15.4% 14.6%

Proportion of active women depositors (%) ------

Average saving balance per active depositor (PKR) ------

Active deposit account balance (PKR) ------

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/EconomicGrowth.pdf

OUTREACH

NRSP PRSP SRSP TRDP SRSO Sub

RSP Activeborrowers 390,995 72,631 3,838 71,114 66,315 604,893 Activewomenborrowers 307,681 34,816 3,406 42,666 57,297 445,866 Grossloanportfolio(PKR000) 5,584,405 903,664 32,174 789,789 1,077,973 8,388,003 Annualpercapitaincome(PKR)* 143,808 143,808 143,808 143,808 143,808 143,808 Numberofloansoutstanding 390,995 72,631 3,838 71,114 66,315 604,893 Depositors ------Numberofdepositaccounts ------Numberofwomendepositors ------Depositsoutstanding ------

Weighted Avg.

Proportionofactivewomenborrowers(%) 78.7% 47.9% 88.7% 60.0% 86.4% 73.7% Averageloanbalanceperactiveborrower(PKR) 14,283 12,442 8,383 11,106 16,255 13,867 Averageloanbalanceperactiveborrower/ 10% 9% 6% 8% 11% 10% percapitaincome Averageoutstandingloanbalance(PKR) 14,283 12,442 8,383 11,106 16,255 13,867 Averageoutstandingloanbalance/percapitaincome 9.9% 8.7% 6% 8% 11.3% 9.6% Proportionofactivewomendepositors(%) ------Averagesavingbalanceperactivedepositor(PKR) ------Activedepositaccountbalance(PKR) ------

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/EconomicGrowth.pdf

FINANCIAL SERVICES FOR ALL 83 OUTREACH

MFB Sub MFI Sub RSPSub Total

Active borrowers 962,863 825,118 604,893 2,392,874 Active women borrowers 252,150 744,181 445,866 1,442,197 Gross loan portfolio (PKR 000) 28,072,495 10,153,084 8,388,003 46,613,582 Annual per capita income (PKR)* 143,808 143,808 143,808 143,808 Number of loans outstanding 963,477 833,479 604,893 2,401,849 Depositors 2,150,675 - - 2,150,675 Number of deposit accounts 2,998,641 - - 2,998,641 Number of women depositors 837,144 - - 837,144 Deposits outstanding 32,925,559 - - 32,925,559

Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Proportion of active women borrowers (%) 26.2% 90.2% 73.7% 60.3% Average loan balance per active borrower (PKR) 29,155 12,305 13,867 19,480 Average loan balance per active borrower/per capita 20.3% 9% 10% 13.5% income Average outstanding loan balance (PKR) 29,137 12,182 13,867 19,407 Average outstanding loan balance / per capita income 20.3% 8.5% 9.6% 13.5% Proportion of active women depositors (%) 38.9% - - 38.92% Average saving balance per active depositor (PKR) 15,309 - - 15,309 Active deposit account balance (PKR) 10,980 - - 10,980

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/EconomicGrowth.pdf

FINANCIAL PERFORMANCE

KBL TMFB POMFB FMFB NRSP-B

MFB Income from loan portfolio 2,455,172 2,308,861 36,415 1,116,445 1,517,624 Income from investments 139,485 352,037 66,078 331,189 190,609 Income from other sources 267,508 804,483 4,986 58,510 69,755 Total revenue 2,862,166 3,465,381 107,479 1,506,144 1,777,989 Less : financial expense 615,348 1,035,159 332 518,283 617,778

Gross financial margin 2,246,818 2,430,222 107,148 987,861 1,160,211 table.. in next Continued Less: loan loss provision expense 169,123 11,390 20,986 124,759 65,522 Net financial margin 2,077,695 2,418,832 86,162 863,102 1,094,690 Personnel expense 859,682 906,836 74,977 430,869 360,870 Admin expense 663,152 851,700 45,709 407,229 396,149 Less: operating expense 1,522,834 1,758,536 120,686 838,098 757,019 Other Non operating expense 16,910 44,864 9,987 - - Net income before tax 537,951 615,432 (44,511) 25,004 337,671 Provision for tax 174,754 233,677 (16,023) (31,322) 93,423 Net income/(loss) 363,197 381,755 (28,489) 56,326 244,248 Adjusted Financial Expense on Borrowings 90,036 - - 23,585 - Inflation Adjustment Expense 205 139 63 78 95 Adjusted Loan Loss Provision Expense - - - - - Total Adjustment Expense 90,241 139 63 23,663 95 Net Income/(Loss) After Adjustments 272,956 381,616 (28,552) 32,663 244,153 Average total assets 11,621,636 14,270,282 812,947 6,287,955 8,068,764 Average total equity 2,612,782 2,024,341 759,513 551,511 1,289,133

Weighted Avg. Adjusted return-on-assets 2.3% 2.7% -3.5% 0.5% 3.0% Adjusted return-on-equity 10.4% 18.9% -3.8% 5.9% 18.9% Financial expense ratio 8.4% 13.8% 0.3% 15.8% 15.6% Operational self sufficiency (OSS) 123.1% 121.6% 70.7% 101.7% 123.4% Financial self sufficiency (FSS) 118.5% 121.6% 70.7% 100.1% 123.4%

FINANCIAL SERVICES FOR ALL 85 FINANCIAL PERFORMANCE

FINCA AMFB U-Bank Sub

MFB Income from loan portfolio 649,723 89,994 3,452 8,177,686 Income from investments 93,085 54,561 28,411 1,255,456 Income from other sources 70,580 10,847 85,405 1,372,075 Total revenue 813,388 155,401 117,268 10,805,217 Less : financial expense 212,456 52,355 1,306 3,053,016 Gross financial margin 600,932 103,047 115,963 7,752,201 Less: loan loss provision expense 16,260 30,607 363 439,008 Net financial margin 584,672 72,440 115,600 7,313,192 Personnel expense 311,737 64,830 119,265 3,129,066 Admin expense 278,066 59,730 99,123 2,800,858 Less: operating expense 589,803 124,560 218,388 5,929,924 Other Non operating expense - - - 71,761 Net income before tax (5,131) (52,120) (102,789) 1,311,507 Provision for tax (6,511) 1,201 (57,727) 391,472 Net income/(loss) 1,380 (53,321) (45,062) 920,035 Adjusted Financial Expense on Borrowings - - - 113,621 Inflation Adjustment Expense - 24 205 809 Adjusted Loan Loss Provision Expense - - - - Total Adjustment Expense - 24 205 114,430 Net Income/(Loss) After Adjustments 1,380 (53,345) (45,267) 805,605 Average total assets 2,566,064 1,064,100 1,247,296 45,939,046 Average total equity 552,412 413,240 1,061,348 9,264,281

Weighted Avg. Adjusted return-on-assets 0.1% -5.0% -3.6% 1.8% Adjusted return-on-equity 0.2% -12.9% -4.3% 8.7% Financial expense ratio 13.3% 22.4% 6.2% 12.7% Operational self sufficiency (OSS) 99.4% 74.9% 53.3% 113.8% Financial self sufficiency (FSS) 99.4% 74.9% 53.2% 112.5%

FINANCIAL PERFORMANCE

OPP KASHF SAFCO DAMEN CSC GBTI FFO

MFI Income from loan portfolio 60,052 1,072,131 115,549 259,611 115,908 13,282 31,494 Income from investments 12,888 88,295 6,160 28,854 10,711 26,560 1,124 Income from other sources 4,667 63,370 14,548 4,125 1,482 39,722 19,584 Total revenue 77,607 1,223,797 136,257 292,590 128,101 79,564 52,202 Less : financial expense 20,682 474,183 35,964 91,522 28,887 1,539 11,542

Gross financial margin 56,926 749,614 100,293 201,068 99,214 78,026 40,660 table.. in next Continued Less: loan loss provision expense 8,085 3,858 8,379 35,521 4,870 139 3,612 Net financial margin 48,840 745,756 91,914 165,547 94,344 77,887 37,048 Personnel expense 17,289 440,869 50,634 61,054 45,139 14,517 24,251 Admin expense 12,299 136,194 41,776 39,962 41,267 9,651 18,793 Less: operating expense 29,589 577,063 92,411 101,015 86,406 24,168 43,044 Other Non operating expense 2,040 56,991 - - 12 41,262 4,906 Net income before tax 17,212 111,703 (497) 64,532 7,926 12,457 (10,902) Provision for tax ------Net income/(loss) 17,212 111,703 (497) 64,532 7,926 12,457 (10,902) Adjusted Financial Expense on Borrowings 321 - 1,622 - 6,109 375 3,839 Inflation Adjustment Expense 31 (31) 12 14 4 27 - Adjusted Loan Loss Provision Expense 48,865 - 18,743 - - - - Total Adjustment Expense 49,217 (31) 20,377 14 6,113 402 3,839 Net Income/(Loss) After Adjustments (32,005) 111,734 (20,874) 64,518 1,813 12,055 (14,741) Average total assets 761,869 4,207,499 562,146 980,172 479,524 324,314 173,076 Average total equity 373,015 13,827 146,331 186,543 122,784 297,191 9,443

Adjusted return-on-assets -4.2% 2.7% -3.7% 6.6% 0.4% 3.7% -8.5% Adjusted return-on-equity 8.6% 808.1% -14.3% 34.6% 1.5% 4.1% -156.1% Financial expense ratio 0.1% 14.6% 9.5% 12.9% 11.5% 3.5% 0.7% Operational self sufficiency (OSS) 128.5% 110.0% 99.6% 128.3% 106.6% 118.6% 82.7% Financial self sufficiency (FSS) 70.8% 110.0% 86.7% 128.3% 101.4% 117.9% 78.0%

FINANCIAL SERVICES FOR ALL 87 FINANCIAL PERFORMANCE

ASA-P BRAC-P JWS Sungi ORIX RCDS Agahe

MFI Income from loan portfolio 710,791 363,217 109,461 29,385 63,911 157,556 11,670 Income from investments 6,048 120 6,610 821 - 20,859 - Income from other sources 10,208 270,717 14,355 50 2,284 2,301 3,006 Total revenue 727,046 634,054 130,426 30,256 66,195 180,717 14,676 Less : financial expense 54,834 65,822 28,516 2,140 15,360 47,879 5,933

Gross financial margin 672,212 568,232 101,910 28,115 50,835 132,838 8,743 table.. in next Continued Less: loan loss provision expense 31,013 55,311 8,232 418 14,619 3,251 - Net financial margin 641,200 512,921 93,678 27,698 36,216 129,586 8,743 Personnel expense 175,181 244,536 46,693 5,060 17,637 44,320 4,920 Admin expense 74,194 263,273 30,410 9,431 18,033 25,713 3,026 Less: operating expense 249,375 507,809 77,103 14,491 35,670 70,033 7,946 Other Non operating expense 74,878 - - - - 3,211 - Net income before tax 316,947 5,113 16,574 13,206 545 56,342 797 Provision for tax 108,624 2,716 - - - - - Net income/(loss) 208,323 2,397 16,574 13,206 545 56,342 797 Adjusted Financial Expense on Borrowings - 20,231 2,982 - 9,479 - - Inflation Adjustment Expense 57 (15) 8 2 4 14 - Adjusted Loan Loss Provision Expense ------Total Adjustment Expense 57 20,216 2,990 2 9,483 14 - Net Income/(Loss) After Adjustments 208,266 (17,819) 13,584 13,204 (8,938) 56,328 797 Average total assets 1,770,292 1,233,658 501,331 86,160 295,513 685,542 58,801 Average total equity 719,384 (80,852) 158,308 45,643 44,960 191,204 12,828

Adjusted return-on-assets 11.8% -1.4% 2.7% 15.3% -3.0% 8.2% 1.4% Adjusted return-on-equity 29.0% -22.0% 8.6% -28.9% -19.9% 29.5% 6.2% Financial expense ratio 3.2% 7.7% 9.1% 1.0% 7.2% 12.3% 16.6% Operational self sufficiency (OSS) 177.3% 100.8% 114.6% 177.5% 100.8% 145.3% 105.7% Financial self sufficiency (FSS) 177.3% 97.7% 111.6% 177.4% 88.1% 145.3% 105.7%

FINANCIAL PERFORMANCE

AMRDO MO Mojaz Naymet NRDP OPD SDS

MFI Income from loan portfolio 22,948 10,389 25,140 1,676 26,925 18,184 7,857 Income from investments - - - - - 1,443 - Income from other sources 7,815 3,831 121,699 6,522 3,414 5,189 969 Total revenue 30,763 14,220 146,839 8,198 30,339 24,815 8,826 Less : financial expense 8,323 4,291 5,798 - 8,445 8,749 1,952

Gross financial margin 22,440 9,929 141,041 8,198 21,894 16,066 6,875 table.. in next Continued Less: loan loss provision expense 2,554 636 2,605 346 1,485 664 865 Net financial margin 19,886 9,293 138,435 7,852 20,409 15,402 6,009 Personnel expense 12,200 5,267 8,264 2,952 5,244 7,664 1,883 Admin expense 6,642 3,689 7,091 4,280 9,119 6,367 2,454 Less: operating expense 18,842 8,956 15,355 7,233 14,363 14,032 4,337 Other Non operating expense - - 120,966 - - - - Net income before tax 1,044 337 2,115 619 6,047 1,370 1,673 Provision for tax - - - - - 306 - Net income/(loss) 1,044 337 2,115 619 6,047 1,065 1,673 Adjusted Financial Expense on Borrowings 1,003 236 4,091 - - - 2,857 Inflation Adjustment Expense 2 - 1 1 (2) (3) - Adjusted Loan Loss Provision Expense ------Total Adjustment Expense 1,005 236 4,092 1 (2) (3) 2,857 Net Income/(Loss) After Adjustments 39 101 (1,977) 618 6,049 1,067 (1,184) Average total assets 139,731 70,455 155,396 10,724 106,477 79,936 65,564 Average total equity 29,402 14,938 40,789 9,038 24,400 5,702 8,543

Adjusted return-on-assets 0.0% 0.1% -1.3% 5.8% 5.7% 1.3% -1.8% Adjusted return-on-equity 0.1% 0.7% -4.8% 6.8% 24.8% 18.7% -13.9% Financial expense ratio 12.4% 7.4% 9.4% 0.0% 15.6% 19.3% 7.1% Operational self sufficiency (OSS) 103.5% 102.4% 101.5% 108.2% 124.9% 105.8% 123.4% Financial self sufficiency (FSS) 100.1% 100.7% 98.7% 108.2% 124.9% 105.9% 88.2%

FINANCIAL SERVICES FOR ALL 89 FINANCIAL PERFORMANCE

SRDO SVDP VDO Sub

MFI Income from loan portfolio 5,732 17,070 7,420 3,197,307 Income from investments - - - 197,605 Income from other sources 4,100 8,130 4,251 611,672 Total revenue 9,832 25,200 11,671 4,006,584 Less : financial expense 3,456 4,707 4,055 913,898 Gross financial margin 6,376 20,493 7,615 3,092,686 Less: loan loss provision expense 2,264 1,829 3,165 185,636 Net financial margin 4,112 18,664 4,450 2,907,050 Personnel expense 2,370 8,089 3,390 1,232,133 Admin expense 3,117 9,995 2,997 767,477 Less: operating expense 5,488 18,084 6,387 1,999,610 Other Non operating expense - - - 302,226 Net income before tax (1,376) 580 (1,937) 605,214 Provision for tax - - - 111,645 Net income/(loss) (1,376) 580 (1,937) 493,569 Adjusted Financial Expense on Borrowings 1,128 1,837 90 55,879 Inflation Adjustment Expense - 1 - 96 Adjusted Loan Loss Provision Expense - - - 18,743 Total Adjustment Expense 1,128 1,838 90 74,718 Net Income/(Loss) After Adjustments (2,504) (1,258) (2,027) 418,851 Average total assets 55,706 92,110 53,404 12,187,529 Average total equity 6,603 22,481 1,950 2,031,439

Weighted Avg. Adjusted return-on-assets -4.5% -1.4% -3.8% 3.4% Adjusted return-on-equity -37.9% -5.6% -104.0% 20.6% Financial expense ratio 8.9% 8.1% 10.2% 10.4% Operational self sufficiency (OSS) 87.7% 102.4% 85.8% 117.8% Financial self sufficiency (FSS) 79.7% 95.2% 85.2% 115.3%

FINANCIAL PERFORMANCE

NRSP PRSP SRSP TRDP SRSO Sub

MFB Income from loan portfolio 1,561,271 158,137 4,989 224,420 219,084 2,167,900 Income from investments 204,115 65,800 - - 20,000 289,914 Income from other sources 22,617 23,553 19,356 34,436 9,326 109,288 Total revenue 1,788,002 247,490 24,345 258,856 248,410 2,567,102 Less : financial expense 532,231 72,164 2,107 84,632 109,540 800,674 Gross financial margin 1,255,771 175,326 22,238 174,224 138,870 1,766,428 Less: loan loss provision expense 17,678 9,648 - 6,841 - 34,167 Net financial margin 1,238,093 165,678 22,238 167,383 138,870 1,732,261 Personnel expense 504,654 34,152 6,519 50,237 75,582 671,143 Admin expense 212,199 20,887 5,686 29,126 44,687 312,585 Less: operating expense 716,854 55,038 12,205 79,363 120,269 983,728 Other Non operating expense - - - 7,006 - 7,006 Net income before tax 521,239 110,639 10,033 81,015 18,601 741,527 Provision for tax ------Net income/(loss) 521,239 110,639 10,033 81,015 18,601 741,527 Adjusted Financial Expense on Borrowings - - - - 11,922 11,922 Inflation Adjustment Expense 133 81 2 15 16 247 Adjusted Loan Loss Provision Expense ------Total Adjustment Expense 133 81 2 15 11,938 12,169 Net Income/(Loss) After Adjustments 521,106 110,558 10,031 81,000 6,663 729,358 Average total assets 7,235,057 2,595,295 40,981 1,004,172 1,190,201 12,065,706 Average total equity 1,709,989 1,065,362 27,433 213,764 200,919 3,217,467

Weighted Avg. Adjusted return-on-assets 7.2% 4.3% 24.5% 8.1% 0.6% 6.0% Adjusted return-on-equity 30.5% 10.4% 36.6% 37.9% 3.3% 22.7% Financial expense ratio 10.6% 8.6% 7.6% 12.7% 10.8% 10.6% Operational self sufficiency (OSS) 141.1% 180.8% 170.1% 145.6% 108.1% 140.6% Financial self sufficiency (FSS) 141.1% 180.7% 170.1% 145.5% 102.8% 139.7%

FINANCIAL SERVICES FOR ALL 91 FINANCIAL PERFORMANCE

MFB Sub MFI Sub RSPSub Total

Income from loan portfolio 8,177,686 3,197,307 2,167,900 13,542,893 Income from investments 1,255,456 197,605 289,914 1,742,975 Income from other sources 1,372,075 611,672 109,288 2,093,035 Total revenue 10,805,217 4,006,584 2,567,102 17,378,903 Less : financial expense 3,053,016 913,898 800,674 4,767,589 Gross financial margin 7,752,201 3,092,686 1,766,428 12,611,314 Less: loan loss provision expense 439,008 185,636 34,167 658,812 Net financial margin 7,313,192 2,907,050 1,732,261 11,952,503 Personnel expense 3,129,066 1,232,133 671,143 5,032,342 Admin expense 2,800,858 767,477 312,585 3,880,920 Less: operating expense 5,929,924 1,999,610 983,728 8,913,262 Other Non operating expense 71,761 302,226 7,006 380,993 Net income before tax 1,311,507 605,214 741,527 2,658,248 Provision for tax 391,472 111,645 - 503,118 Net income/(loss) 920,035 493,569 741,527 2,155,130 Adjusted Financial Expense on Borrowings 113,621 55,879 11,922 181,422 Inflation Adjustment Expense 809 96 247 1,152 Adjusted Loan Loss Provision Expense - 18,743 - 18,743 Total Adjustment Expense 114,430 74,718 12,169 201,317 Net Income/(Loss) After Adjustments 805,605 418,851 729,358 1,953,814 Average total assets 45,939,046 12,187,529 12,065,706 70,192,281 Average total equity 9,264,281 2,031,439 3,217,467 14,513,187

Weighted Weighted Weighted Weighted Avg. Avg. Avg. Avg. Adjusted return-on-assets 1.8% 3.4% 6.0% 2.8% Adjusted return-on-equity 8.7% 20.6% 22.7% 13.5% Financial expense ratio 12.7% 10.4% 10.6% 11.8% Operational self sufficiency (OSS) 113.8% 117.8% 140.6% 118.1% Financial self sufficiency (FSS) 112.5% 115.3% 139.7% 116.5%

OPERATING INCOME

KBL TMFB POMFB FMFB NRSP-B

MFB Revenue from loan portfolio 2,455,172 2,308,861 36,415 1,116,445 1,517,624 Total revenue 2,862,166 3,465,381 107,479 1,506,144 1,777,989 Adjusted net operating income / (loss) 447,710 615,293 (44,574) 1,341 337,576 Average total assets 11,621,636 14,270,282 812,947 6,287,955 8,068,764 Gross loan portfolio (opening balance) 5,805,576 6,700,230 119,165 3,056,662 3,057,045

Gross loan portfolio (closing balance) 8,859,405 8,331,554 117,931 3,499,317 4,845,000 table.. in next Continued Average gross loan portfolio 7,332,490 7,515,892 118,548 3,277,990 3,951,023 Inflation rate * 9% 9% 9% 9% 9%

Total revenue ratio (total revenue-to-average total 24.6% 24.3% 13.2% 24.0% 22.0% assets) Adjusted profit margin (adjusted profit/(loss)-to-total 15.6% 17.8% -41.5% 0.1% 19.0% revenue) Yield on gross portfolio (nominal) 33.5% 30.7% 30.7% 34.1% 38.4% Yield on gross portfolio (real) 22.2% 19.7% 19.7% 22.8% 26.7%

FINCA AMFB U-Bank Total

MFB Revenue from loan portfolio 649,723 89,994 3,452 8,177,686 Total revenue 813,388 155,401 117,268 10,805,217 Adjusted net operating income / (loss) (5,131) (52,144) (102,994) 1,197,077 Average total assets 2,566,064 1,064,100 1,247,296 45,939,046 Gross loan portfolio (opening balance) 1,152,299 125,859 763 20,017,598 Gross loan portfolio (closing balance) 2,036,069 341,838 41,381 28,072,495 Average gross loan portfolio 1,594,184 233,848 21,072 24,045,047 Inflation rate * 9% 9% 9% 9%

Weighted Avg. Total revenue ratio (total revenue-to-average total 31.7% 14.6% 9.4% 23.5% assets) Adjusted profit margin (adjusted profit/(loss)-to-total -0.6% -33.6% -87.8% 11.1% revenue) Yield on gross portfolio (nominal) 40.8% 38.5% 16.4% 34.0% Yield on gross portfolio (real) 28.9% 26.8% 6.6% 22.7%

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf

FINANCIAL SERVICES FOR ALL 93 OPERATING INCOME

OPP KASHF SAFCO DAMEN CSC GBTI

MFI Revenue from loan portfolio 60,052 1,072,131 115,549 259,611 115,908 13,282 Total revenue 77,607 1,223,797 136,257 292,590 128,101 79,564 Adjusted net operating income / (loss) (32,005) 111,734 (20,874) 64,518 1,813 12,055 Average total assets 761,869 4,207,499 562,146 980,172 479,524 324,314 Gross loan portfolio (opening balance) 470,392 2,948,994 345,010 664,281 207,964 36,978

Gross loan portfolio (closing balance) 507,870 3,543,155 413,875 750,530 293,493 50,763 table.. in next Continued Average gross loan portfolio 489,131 3,246,075 379,442 707,405 250,728 43,871 Inflation rate * 9% 9% 9% 9% 9% 9%

Total revenue ratio (total revenue-to-average total 10.2% 29.1% 24.2% 29.9% 26.7% 24.5% assets) Adjusted profit margin (adjusted profit/(loss)-to-total -41.2% 9.1% -15.3% 22.1% 1.4% 15.2% revenue) Yield on gross portfolio (nominal) 12.3% 33.0% 30.5% 36.7% 46.2% 30.3% Yield on gross portfolio (real) 2.8% 21.8% 19.5% 25.2% 33.9% 19.3%

FFO ASA-P BRAC-P JWS Sungi ORIX

MFI Revenue from loan portfolio 31,494 710,791 363,217 109,461 29,385 63,911 Total revenue 52,202 727,046 634,054 130,426 30,256 66,195 Adjusted net operating income / (loss) (14,741) 316,890 (15,103) 13,584 13,204 (8,938) Average total assets 173,076 1,770,292 1,233,658 501,331 86,160 295,513 Gross loan portfolio (opening balance) 86,927 1,501,810 820,199 305,451 71,161 190,705

Gross loan portfolio (closing balance) 125,333 1,896,801 884,295 319,169 89,582 233,715 table.. in next Continued Average gross loan portfolio 106,130 1,699,305 852,247 312,310 80,371 212,210 Inflation rate * 9% 9% 9% 9% 9% 9%

Total revenue ratio (total revenue-to-average total 30.2% 41.1% 51.4% 26.0% 35.1% 22.4% assets) Adjusted profit margin (adjusted profit/(loss)-to-total -28.2% 43.6% -2.4% 10.4% 43.6% -4.7% revenue) Yield on gross portfolio (nominal) 29.7% 41.8% 42.6% 35.0% 36.6% 30.1% Yield on gross portfolio (real) 18.8% 29.9% 30.6% 23.7% 25.1% 19.2%

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf

OPERATING INCOME

RCDS Agahe AMRDO MO Mojaz Naymet

MFI Revenue from loan portfolio 157,556 11,670 22,948 10,389 25,140 1,676 Total revenue 180,717 14,676 30,763 14,220 146,839 8,198 Adjusted net operating income / (loss) 56,328 797 39 101 (1,977) 618 Average total assets 685,542 58,801 139,731 70,455 155,396 10,724 Gross loan portfolio (opening balance) 336,300 27,779 55,767 51,356 44,159 9,807

Gross loan portfolio (closing balance) 444,610 43,725 78,150 64,083 78,601 9,511 table.. in next Continued Average gross loan portfolio 390,455 35,752 66,959 57,720 61,380 9,659 Inflation rate * 9% 9% 9% 9% 9% 9%

Total revenue ratio (total revenue-to-average total 26.4% 25.0% 22.0% 20.2% 94.5% 76.4% assets) Adjusted profit margin (adjusted profit/(loss)-to-total 16.7% 2.9% 0.1% 0.2% -4.5% 6.3% revenue) Yield on gross portfolio (nominal) 40.4% 32.6% 34.3% 18.0% 41.0% 17.4% Yield on gross portfolio (real) 28.5% 21.5% 23.0% 8.1% 29.1% 7.5%

NRDP OPD SDS SRDO SVDP VDO Total

MFB Revenue from loan portfolio 26,925 18,184 7,857 5,732 17,070 7,420 3,197,307 Total revenue 30,339 24,815 8,826 9,832 25,200 11,671 4,006,584 Adjusted net operating income / (loss) 6,049 1,373 (1,184) (2,504) (1,258) (2,027) 530,497 Average total assets 106,477 79,936 65,564 55,706 92,110 53,404 12,187,529 Gross loan portfolio (opening balance) 27,911 37,193 32,255 32,246 41,373 30,260 7,905,886 Gross loan portfolio (closing balance) 80,606 53,404 22,907 45,264 74,448 49,194 9,645,214 Average gross loan portfolio 54,259 45,298 27,581 38,755 57,910 39,727 8,775,550 Inflation rate * 9% 9% 9% 9% 9% 9% 9%

Weighted Avg. Total revenue ratio (total revenue-to-average total 28.5% 31.0% 13.5% 17.7% 27.4% 21.9% 32.9% assets) Adjusted profit margin (adjusted profit/(loss)-to-total 21.7% 3.7% -3.7% -7.8% -3.0% -6.7% 13.2% revenue) Yield on gross portfolio (nominal) 49.6% 40.1% 28.5% 14.8% 29.5% 18.7% 36.4% Yield on gross portfolio (real) 37.0% 28.3% 17.7% 5.1% 18.6% 8.7% 24.9%

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf

FINANCIAL SERVICES FOR ALL 95 OPERATING INCOME

NRSP PRSP SRSP TRDP SRSO Sub

RSP Revenue from loan portfolio 1,561,271 158,137 4,989 224,420 219,084 2,167,900 Total revenue 1,788,002 247,490 24,345 258,856 248,410 2,567,102 Adjusted net operating income / (loss) 521,106 110,558 10,031 81,000 6,663 729,358 Average total assets 7,235,057 2,595,295 40,981 1,004,172 1,190,201 12,065,706 Gross loan portfolio (opening balance) 4,446,827 780,600 22,928 547,420 947,472 6,745,246 Gross loan portfolio (closing balance) 5,584,405 903,664 32,174 789,789 1,077,973 8,388,003 Average gross loan portfolio 5,015,616 842,132 27,551 668,604 1,012,723 7,566,625 Inflation rate * 9% 9% 9% 9% 9% 9%

Weighted Avg. Total revenue ratio (total revenue-to-average total 24.7% 9.5% 59.4% 25.8% 20.9% 21.3% assets) Adjusted profit margin (adjusted profit/(loss)-to-total 29.1% 44.7% 41.2% 31.3% 2.7% 28.4% revenue) Yield on gross portfolio (nominal) 31.1% 18.8% 18.1% 33.6% 21.6% 28.7% Yield on gross portfolio (real) 20.1% 8.8% 8.2% 22.3% 11.4% 17.8%

MFB Sub MFI Sub RSP Sub Total

Revenue from loan portfolio 8,177,686 3,197,307 2,167,900 13,542,893 Total revenue 10,805,217 4,006,584 2,567,102 17,378,903 Adjusted net operating income / (loss) 1,197,077 530,497 729,358 2,456,931 Average total assets 45,939,046 12,187,529 12,065,706 70,192,281 Gross loan portfolio (opening balance) 20,017,598 7,905,886 6,745,246 34,668,730 Gross loan portfolio (closing balance) 28,072,495 9,645,214 8,388,003 46,105,712 Average gross loan portfolio 24,045,047 8,775,550 7,566,625 40,387,221 Inflation rate * 9% 9% 9% 9%

Weighted Weighted Weighted Weighted Avg. Avg. Avg. Avg. Total revenue ratio (total revenue-to-average total 23.5% 32.9% 21.3% 24.8% assets) Adjusted profit margin (adjusted profit/(loss)-to-total 11.1% 13.2% 28.4% 14.1% revenue) Yield on gross portfolio (nominal) 34.0% 36.4% 28.7% 33.5% Yield on gross portfolio (real) 22.7% 24.9% 17.8% 22.3%

* http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf

KBL TMFB POMFB FMFB NRSP-B FINCA AMFB U-Bank Sub

MFB Adjusted total expense 2,397,546 2,805,224 142,067 1,504,803 1,440,413 818,519 207,545 220,262 9,536,378 Adjusted financial expense 705,589 1,035,298 395 541,946 617,873 212,456 52,379 1,511 3,167,446 Adjusted loan loss provision 169,123 11,390 20,986 124,759 65,522 16,260 30,607 363 439,008 expense Operating expense 1,522,834 1,758,536 120,686 838,098 757,019 589,803 124,560 218,388 5,929,924 Adjustment expense 90,241 139 63 23,663 95 - 24 205 114,430 Average total assets 11,621,636 14,270,282 812,947 6,287,955 8,068,764 2,566,064 1,064,100 1,247,296 45,939,046

Weighted Avg. Adjusted total expense-to- 20.6% 19.7% 17.5% 23.9% 17.9% 31.9% 19.5% 17.7% 20.8% average total assets Adjusted financial expense-to- 6.1% 7.3% 0.0% 8.6% 7.7% 8.3% 4.9% 0.1% 6.9% average total assets Adjusted loan loss provision 1.5% 0.1% 2.6% 2.0% 0.8% 0.6% 2.9% 0.0% 1.0% expense-to-average total assets Adjusted operating expense-to- 13.1% 12.3% 14.8% 13.3% 9.4% 23.0% 11.7% 17.5% 12.9% average total assets Adjusted personnel expense 7.4% 6.4% 9.2% 6.9% 4.5% 12.1% 6.1% 9.6% 6.8% Adjusted admin expense 5.7% 6.0% 5.6% 6.5% 4.9% 10.8% 5.6% 7.9% 6.1% Adjustment expense-to-average 0.8% 0.0% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.2% total assets

OPP KASHF SAFCO DAMEN CSC GBTI FFO ASA-P

MFI Adjusted total expense 107,573 1,055,072 157,131 228,073 126,276 26,247 62,038 335,278 Adjusted financial expense 21,034 474,152 37,598 91,536 35,000 1,941 15,381 54,891 Adjusted loan loss provision 56,950 3,858 27,122 35,521 4,870 139 3,612 31,013 expense Operating expense 29,589 577,063 92,411 101,015 86,406 24,168 43,044 249,375 Adjustment expense 49,217 (31) 20,377 14 6,113 402 3,839 57 Continued in next table.. in next Continued Average total assets 761,869 4,207,499 562,146 980,172 479,524 324,314 173,076 1,770,292

Adjusted total expense-to- 14.1% 25.1% 28.0% 23.3% 26.3% 8.1% 35.8% 18.9% average total assets Adjusted financial expense-to- 2.8% 11.3% 6.7% 9.3% 7.3% 0.6% 8.9% 3.1% average total assets Adjusted loan loss provision 7.5% 0.1% 4.8% 3.6% 1.0% 0.0% 2.1% 1.8% expense-to-average total assets Adjusted operating expense-to- 3.9% 13.7% 16.4% 10.3% 18.0% 7.5% 24.9% 14.1% average total assets Adjusted personnel expense 2.3% 10.5% 9.0% 6.2% 9.4% 4.5% 14.0% 9.9% Adjusted admin expense 1.6% 3.2% 7.4% 4.1% 8.6% 3.0% 10.9% 4.2% Adjustment expense-to-average 6.5% 0.0% 3.6% 0.0% 1.3% 0.1% 2.2% 0.0% total assets

FINANCIAL SERVICES FOR ALL 97 OPERATING EXPENSE

BRAC-P JWS Sungi ORIX RCDS Agahe AMRDO MO

MFI Adjusted total expense 649,158 116,841 17,051 75,132 121,177 13,879 30,723 14,120 Adjusted financial expense 86,038 31,506 2,142 24,843 47,893 5,933 9,328 4,527 Adjusted loan loss provision 55,311 8,232 418 14,619 3,251 - 2,554 636 expense Operating expense 507,809 77,103 14,491 35,670 70,033 7,946 18,842 8,956 Adjustment expense 20,216 2,990 2 9,483 14 - 1,005 236 Continued in next table.. in next Continued Average total assets 1,233,658 501,331 86,160 295,513 685,542 58,801 139,731 70,455

Adjusted total expense-to- 52.6% 23.3% 19.8% 25.4% 17.7% 23.6% 22.0% 20.0% average total assets Adjusted financial expense-to- 7.0% 6.3% 2.5% 8.4% 7.0% 10.1% 6.7% 6.4% average total assets Adjusted loan loss provision 4.5% 1.6% 0.5% 4.9% 0.5% 0.0% 1.8% 0.9% expense-to-average total assets Adjusted operating expense-to- 41.2% 15.4% 17% 12.1% 10.2% 13.5% 13.5% 12.7% average total assets Adjusted personnel expense 19.8% 9.3% 5.9% 6.0% 6.5% 8.4% 8.7% 7.5% Adjusted admin expense 21.3% 6.1% 10.9% 6.1% 3.8% 5.1% 4.8% 5.2% Adjustment expense-to-average 1.6% 0.6% 0.0% 3.2% 0.0% 0.0% 0.7% 0.3% total assets

Mojaz Naymet NRDP OPD SDS SRDO SVDP VDO Sub

MFB Adjusted total expense 27,850 7,580 24,290 23,442 10,011 12,336 26,458 13,698 3,173,862 Adjusted financial expense 9,890 1 8,442 8,746 4,809 4,584 6,545 4,145 969,873 Adjusted loan loss provision 2,605 346 1,485 664 865 2,264 1,829 3,165 204,379 expense Operating expense 15,355 7,233 14,363 14,032 4,337 5,488 18,084 6,387 1,999,610 Adjustment expense 4,092 1 (2) (3) 2,857 1,128 1,838 90 74,718 Average total assets 155,396 10,724 106,477 79,936 65,564 55,706 92,110 53,404 12,187,529

Weighted Avg. Adjusted total expense-to- 17.9% 70.7% 22.8% 29.3% 15.3% 22.1% 28.7% 25.7% 26.0% average total assets Adjusted financial expense-to- 6.4% 0.0% 7.9% 10.9% 7.3% 8.2% 7.1% 7.8% 8.0% average total assets Adjusted loan loss provision 1.7% 3.2% 1.4% 0.8% 1.3% 4.1% 2.0% 5.9% 1.7% expense-to-average total assets Adjusted operating expense-to- 9.9% 67.4% 13.5% 17.6% 6.6% 9.9% 19.6% 12.0% 16.4% average total assets Adjusted personnel expense 5.3% 27.5% 4.9% 9.6% 2.9% 4.3% 8.8% 6.3% 10.1% Adjusted admin expense 4.6% 39.9% 8.6% 8.0% 3.7% 5.6% 10.9% 5.6% 6.3% Adjustment expense-to-average 2.6% 0.0% 0.0% 0.0% 4.4% 2.0% 2.0% 0.2% 0.6% total assets

NRSP PRSP SRSP TRDP SRSO Sub

RSP Adjusted total expense 1,266,896 136,932 14,314 170,850 241,747 1,830,739 Adjusted financial expense 532,364 72,245 2,109 84,647 121,478 812,843 Adjusted loan loss provision expense 17,678 9,648 - 6,841 - 34,167 Operating expense 716,854 55,038 12,205 79,363 120,269 983,728 Adjustment expense 133 81 2 15 11,938 12,169 Average total assets 7,235,057 2,595,295 40,981 1,004,172 1,190,201 12,065,706

Weighted Avg. Adjusted total expense-to-average total 17.5% 5.3% 34.9% 17.0% 20.3% 15.2% assets Adjusted financial expense-to-average total 7.4% 2.8% 5.1% 8.4% 10.2% 6.7% assets Adjusted loan loss provision expense-to- 0.2% 0.4% 0.0% 0.7% 0.0% 0.3% average total assets Adjusted operating expense-to-average 9.9% 2.1% 29.8% 7.9% 10.1% 8.2% total assets Adjusted personnel expense 7.0% 1.3% 15.9% 5.0% 6.4% 5.6% Adjusted admin expense 2.9% 0.8% 13.9% 2.9% 3.8% 2.6% Adjustment expense-to-average total assets 0.0% 0.0% 0.0% 0.0% 1.0% 0.1%

MFB Sub MFI Sub RSP Sub Total

Adjusted total expense 9,536,378 3,173,862 1,830,739 14,540,979 Adjusted financial expense 3,167,446 969,873 812,843 4,950,162 Adjusted loan loss provision expense 439,008 204,379 34,167 677,555 Operating expense 5,929,924 1,999,610 983,728 8,913,262 Adjustment expense 114,430 74,718 12,169 201,317 Average total assets 45,939,046 12,187,529 12,065,706 70,192,281

Weighted Avg. Adjusted total expense-to-average total 20.8% 26.0% 15.2% 20.7% assets Adjusted financial expense-to-average total 6.9% 8.0% 6.7% 7.1% assets Adjusted loan loss provision expense-to- 1.0% 1.7% 0.3% 1.0% average total assets Adjusted operating expense-to-average 12.9% 16.4% 8.2% 12.7% total assets Adjusted personnel expense 6.8% 10.1% 5.6% 7.2% Adjusted admin expense 6.1% 6.3% 2.6% 5.5% Adjustment expense-to-average total assets 0.2% 0.6% 0.1% 0.3%

FINANCIAL SERVICES FOR ALL 99 OPERATING EFFICIENCY

KBL TMFB POMFB FMFB NRSP-B FINCA AMFB U-Bank Sub

MFB Operating expense (PKR 1,522,834 1,758,536 120,686 838,098 757,019 589,803 124,560 218,388 5,929,924 000) Personnel expense (PKR 859,682 906,836 74,977 430,869 360,870 311,737 64,830 119,265 3,129,066 000) Average gross loan 7,332,490 7,515,892 118,548 3,277,990 3,951,023 1,594,184 233,848 21,072 24,045,047 portfolio (PKR 000) Average number of active 409,230 197,811 4,803 130,397 171,718 39,078 8,606 1,220 962,863 borrowers Average number of active 409,230 197,811 4,803 130,397 171,718 39,692 8,606 1,220 963,477 loans

Weighted Avg. Adjusted operating 20.77% 23.4% 101.8% 25.6% 19.2% 37.0% 53.3% 1036.4% 24.7% expense-to-average gross loan portfolio Adjusted personnel 11.72% 12.1% 63.2% 13.1% 9.1% 19.6% 27.7% 566.0% 13.0% expense-to-average gross loan portfolio Average salary/gross 2.6 2.9 2.9 2.7 2.0 2.7 2.2 3.3 2.6 domestic product per capita Adjusted cost per 3,721 8,890 25,127 6,427 4,409 15,093 14,474 179,007 6,159 borrower (PKR) Adjusted cost per loan 3,721 8,890 25,127 6,427 4,409 14,859 14,474 179,007 6,155 (PKR)

OPERATING EFFICIENCY OPP KASHF SAFCO DAMEN CSC GBTI FFO ASA-P BRAC-P JWS Sungi ORIX RCDS

MFI

Operating expense (PKR 000) 29,589 92,411 86,406 24,168 43,044 77,103 14,491 35,670 70,033 577,063 101,015 249,375 507,809

Personnel expense (PKR 000) 5,060 17,289 50,634 61,054 45,139 14,517 24,251 46,693 17,637 44,320 440,869 175,181 244,536 Continued in next table. in next Continued

Average gross loan portfolio (PKR 000) 43,871 80,371 489,131 379,442 707,405 250,728 106,130 852,247 312,310 212,210 390,455 3,246,075 1,699,305

Average number of active borrowers 4,837 42,224 38,762 35,185 18,578 10,753 56,359 21,323 10,670 16,322 31,715 312,182 179,588

Average number of active loans 42,224 38,762 35,185 18,578 13,143 10,753 56,359 21,323 10,670 16,322 31,715 312,182 179,588

Adjusted operating expense-to-average gross loan 6.0%

portfolio 17.8% 24.4% 14.3% 34.5% 55.1% 40.6% 14.7% 59.6% 24.7% 18.0% 16.8% 17.9%

Adjusted personnel expense-to-average gross 3.5% 8.6% 6.3% 8.3%

loan portfolio 13.6% 13.3% 18.0% 33.1% 22.8% 10.3% 28.7% 15.0% 11.4%

Average salary/gross domestic product per capita 1.2 1.6 1.4 2.2 2.0 1.4 1.4 1.3 1.7 1.9 0.7 2.2 1.2

Adjusted cost per borrower (PKR) 701 1,848 2,384 2,871 4,651 4,996 4,003 1,389 9,010 3,616 1,358 2,185 2,208

Adjusted cost per loan (PKR) 701 1,848 2,384 2,871 4,651 1,839 4,003 1,389 9,010 3,616 1,358 2,185 2,208

FINANCIAL SERVICES FOR ALL 101 OPERATING EFFICIENCY Sub Agahe AMRDO MO Mojaz Naymet NRDP OPD SDS SRDO SVDP VDO

MFI

Operating expense (PKR 000) 7,946 8,956 7,233 4,337 5,488 6,387 18,842 15,355 14,363 14,032 18,084 1,999,610

Personnel expense (PKR 000) 4,920 5,267 8,264 2,952 5,244 7,664 1,883 2,370 8,089 3,390 12,200 1,232,133

Average gross loan portfolio (PKR 000) 9,659 35,752 66,959 57,720 61,380 54,259 45,298 27,581 38,755 57,910 39,727 8,775,550

Average number of active borrowers 3,828 9,821 3,558 4,606 2,500 4,799 4,312 3,611 2,000 3,552 4,033 782,894

Average number of active loans 3,828 9,821 3,558 4,606 2,500 4,809 4,312 3,611 2,045 3,552 4,033 791,255 Avg. Weighted Weighted

Adjusted operating expense-to-average gross loan

portfolio 22.2% 28.1% 15.5% 25.0% 74.9% 26.5% 31.0% 15.7% 14.2% 31.2% 16.1% 22.8%

Adjusted personnel expense-to-average gross 9.1% 9.7% 6.8% 6.1% 8.5%

loan portfolio 13.8% 18.2% 13.5% 30.6% 16.9% 14.0% 14.0%

Average salary/gross domestic product per capita 1.4 1.1 1.9 0.4 1.1 0.3 1.4 0.5 0.9 1.4 1.2 1.5

Adjusted cost per borrower (PKR) 2,076 1,918 2,517 3,334 2,893 2,993 3,254 1,201 2,744 5,091 1,584 2,554

Adjusted cost per loan (PKR) 2,076 1,918 2,517 3,334 2,893 2,987 3,254 1,201 2,684 5,091 1,584 2,527

OPERATING EFFICIENCY

NRSP PRSP SRSP TRDP SRSO Sub

Operating expense (PKR 000) 716,854 55,038 12,205 79,363 120,269 983,728 Personnel expense (PKR 000) 504,654 34,152 6,519 50,237 75,582 671,143 Average gross loan portfolio (PKR 000) 5,015,616 842,132 27,551 668,604 1,012,723 7,566,625 Average number of active borrowers 390,995 72,631 3,838 71,114 66,315 604,893 Average number of active loans 390,995 72,631 3,838 71,114 66,315 604,893

Weighted Avg. Adjusted operating expense-to-average gross loan 14.3% 6.5% 44.3% 11.9% 11.9% 13.0% portfolio Adjusted personnel expense-to-average gross loan 10.1% 4.1% 23.7% 7.5% 7.5% 8.9% portfolio Average salary/gross domestic product per capita 1.6 0.4 2.4 0.9 1.7 1.3 Adjusted cost per borrower (PKR) 1,833 758 3,180 1,116 1,814 1,626 Adjusted cost per loan (PKR) 1,833 758 3,180 1,116 1,814 1,626

MFB Sub Total MFI Sub Total RSP Sub Total Total

Operating expense (PKR 000) 5,929,924 1,999,610 983,728 8,913,262 Personnel expense (PKR 000) 3,129,066 1,232,133 671,143 5,032,342 Average gross loan portfolio (PKR 000) 24,045,047 8,775,550 7,566,625 40,387,221 Average number of active borrowers 962,863 782,894 604,893 2,350,650 Average number of active loans 963,477 791,255 604,893 2,359,625

Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Adjusted operating expense-to-average gross loan 24.7% 22.8% 13.0% 22.1% portfolio Adjusted personnel expense-to-average gross loan 13.0% 14.0% 8.9% 12.5% portfolio Average salary/gross domestic product per capita 2.6 1.5 1.3 2.0 Adjusted cost per borrower (PKR) 6,159 2,554 1,626 3,792 Adjusted cost per loan (PKR) 6,155 2,527 1,626 3,777

FINANCIAL SERVICES FOR ALL 103 PRODUCTIVITY

KBL TMFB POMFB FMFB NRSP-B FINCA AMFB U-Bank Sub

MFB Number of active borrowers 409,230 197,811 4,803 130,397 171,718 39,078 8,606 1,220 913,959 Number of active loans 409,230 197,811 4,803 130,397 171,718 39,692 8,606 1,220 913,959 Number of active depositors 674,061 833,313 18,735 263,437 108,326 200,489 31,812 20,502 1,897,872 Number of deposit accounts 674,061 1,643,313 18,735 263,437 108,326 238,345 31,812 20,612 2,707,872 Total staff 2,293 2,198 182 1,122 1,247 797 209 250 7,042 Total loan officers 480 596 62 535 624 274 87 31 2,297

Weighted Avg. Borrowers per staff 178 90 26 116 138 49 41 5 130 Loans per staff 178 90 26 116 138 50 41 5 130 Borrowers per loan officer 853 332 77 244 275 143 99 39 398 Loans per loan officer 853 332 77 244 275 145 99 39 398 Depositors per staff 294 379 103 235 87 252 152 82 270 Deposit accounts per staff 294 748 103 235 87 299 152 82 385 Personnel allocation ratio 20.9% 27.1% 34.1% 47.7% 50.0% 34.4% 41.6% 12.4% 32.6%

PRODUCTIVITY OPP KASHF SAFCO DAMEN CSC GBTI FFO ASA-P BRAC JWS AKHUWAT ORIX RCDS

MFI

Number of active borrowers 4,837 42,224 38,762 35,185 18,578 10,753 56,359 21,323 10,670 16,322 31,715 312,182 179,588

Number of active loans 42,224 38,762 35,185 18,578 13,143 10,753 56,359 21,323 10,670 16,322 31,715 312,182 179,588 Continued in next table in next Continued

Number of active depositors ------

Number of deposit accounts ------

Total staff 97 72 51 55 254 193 155 118 918 996 168 248 1,858 26 80 55 26 40 74 37 31

Total loan officers 935 123 563 319 140

Borrowers per staff 67 91 57 435 168 153 182 120 196 127 209 297 128

Loans per staff 91 57 435 168 153 182 120 183 196 127 209 297 128

Borrowers per loan officer 334 315 440 338 186 269 319 177 288 288 527 227 1,624

Loans per loan officer 334 315 440 338 506 269 319 177 288 288 527 227 1,624

Depositors per staff 0 0 0 0 0 0 0 0 0 0 0 0 0

Deposit accounts per staff 0 0 0 0 0 0 0 0 0 0 0 0 0

Personnel allocation ratio 26.8% 50.3% 48.4% 41.5% 35.5% 36.1% 33.9% 61.3% 32.0% 44.0% 72.5% 56.4% 56.5%

FINANCIAL SERVICES FOR ALL 105 PRODUCTIVITY Agahe AMRDO MO Mojaz Naymet NRDP OPD SDS SRDO SVDP VDO Sub

MFI

Number of active borrowers 3,828 9,821 3,558 4,606 2,500 4,799 4,312 3,611 2,000 3,552 4,033 736,274

Number of active loans 3,828 9,821 3,558 4,606 2,500 4,809 4,312 3,611 2,045 3,552 4,033 744,580

Number of active depositors ------

Number of deposit accounts ------

Total staff 25 79 19 18 38 24 18 40 20 139 107 5,086 8 4 6 8 Total loan officers 12 32 15 11 17 10 15 2,423 Avg. Weighted Weighted

Borrowers per staff 33 45 89 153 124 187 139 113 150 111 202 145

Loans per staff 33 45 89 153 124 187 139 113 150 114 202 146

Borrowers per loan officer 319 307 445 307 625 436 254 361 333 237 504 304

Loans per loan officer 319 307 445 307 625 437 254 361 341 237 504 307 - Depositors per staff 0 0 0 0 0 0 0 0 0 0 0 - Deposit accounts per staff 0 0 0 0 0 0 0 0 0 0 0

Personnel allocation ratio 48.0% 40.5% 42.1% 10.8% 22.2% 10.3% 44.7% 41.7% 33.3% 37.5% 40.0% 47.6%

PRODUCTIVITY

NRSP PRSP SRSP TRDP SRSO Sub

RSP Number of active borrowers 390,995 72,631 3,838 71,114 66,315 604,893 Number of active loans 390,995 72,631 3,838 71,114 66,315 604,893 Number of active depositors ------Number of deposit accounts ------Total staff 2,202 617 19 389 318 3,545 Total loan officers 1,842 64 6 230 30 2,172

Weighted Avg. Borrowers per staff 178 118 202 183 209 171 Loans per staff 178 118 202 183 209 171 Borrowers per loan officer 212 1,135 640 309 2,211 278 Loans per loan officer 212 1,135 640 309 2,211 278 Depositors per staff ------Deposit accounts per staff ------Personnel allocation ratio 83.7% 10.4% 31.6% 59.1% 9.4% 61.3%

MFB Sub Total MFI Sub Total RSP Sub Total Total

Number of active borrowers 913,959 736,274 604,893 2,255,126 Number of active loans 913,959 744,580 604,893 2,263,432 Number of active depositors 1,897,872 - - 1,897,872 Number of deposit accounts 2,707,872 - - 2,707,872 Total staff 7,042 5,086 3,545 15,673 Total loan officers 2,297 2,423 2,172 6,892

Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Borrowers per staff 130 145 171 144 Loans per staff 130 146 171 144 Borrowers per loan officer 398 304 278 327 Loans per loan officer 398 307 278 328 Depositors per staff 270 - - 121 Deposit accounts per staff 385 - - 173 Personnel allocation ratio 32.6% 47.6% 61.3% 44.0%

FINANCIAL SERVICES FOR ALL 107 RISK

KBL TMFB POMFB FMFB NRSP-B FINCA AMFB U-Bank Sub

MFB Portfolio at risk > 30 days 69,651 49,489 5,587 31,361 15,149 13,200 94,687 22 279,146 Portfolio at risk > 90 days 24,883 3,602 2,149 10,716 13,046 1,195 27,286 22 82,900 Adjusted loan loss reserve 102,510 20,426 2,801 48,899 54,644 16,260 22,821 342 268,703 Loan Portfolio written off 155,157 22,466 20,805 160,792 46,868 10,739 11,857 341 429,025 during year Gross loan portfolio 8,859,405 8,331,554 117,931 3,499,317 4,845,000 2,036,069 341,838 41,381 28,072,495 Average gross loan portfolio 7,332,490 7,515,892 118,548 3,277,990 3,951,023 1,594,184 233,848 21,072 24,045,047

Weighted Avg. Portfolio at risk (>30)-to-gross 0.8% 0.6% 4.7% 0.9% 0.3% 0.6% 27.7% 0.1% 1.0% loan portfolio Portfolio at risk(>90)-to-gross 0.3% 0.0% 1.8% 0.3% 0.3% 0.1% 8.0% 0.1% 0.3% loan portfolio Write off-to-average gross 2.1% 0.30% 17.5% 4.9% 1.2% 0.7% 5.1% 1.6% 1.8% loan portfolio Risk coverage ratio (adjusted 147.2% 41.3% 50.1% 155.9% 360.7% 123.2% 24.1% 1552.6% 96.3% loan loss reserve-to-portfolio at risk >30days)

RISK OPP KASHF SAFCO DAMEN CSC GBTI FFO ASA-P BRAC-P JWS Sungi ORIX RCDS

MFI

- -

Portfolio at risk > 30 days 930 1,437 1,024 8,925 1,545 89,210 13,586 11,913 48,798 16,787 619,556

- - 43

Portfolio at risk > 90 days 509 911 856 7,442 7,529 79,599 13,260 42,101 16,240 615,057 Continued in next table in next Continued -

Adjusted loan loss reserve 434 6,256 1,344 14,777 53,141 11,717 37,526 14,695 23,630 24,144 16,310 16,101

- - -

Loan Portfolio written off during year 839 423 528 141 9,537 2,172 19,297 17,215 48,474 60,195

Gross loan portfolio 50,763 89,582 507,870 413,875 750,530 293,493 125,333 884,295 319,169 233,715 444,610 3,543,155 1,896,801

Average gross loan portfolio 43,871 80,371 489,131 379,442 707,405 250,728 106,130 852,247 312,310 212,210 390,455 3,246,075 1,699,305

Portfolio at risk (>30)-to-gross loan portfolio 3.3% 1.6% 0.5% 0.0% 0.8% 0.5% 5.5% 0.3% 0.0% 7.2% 0.3% 17.6% 17.5%

Portfolio at risk(>90)-to-gross loan portfolio 3.2% 1.0% 0.0% 0.0% 0.4% 0.4% 4.8% 0.3% 0.0% 6.9% 0.2% 15.7% 17.4%

Write off-to-average gross loan portfolio 0.0% 0.6% 0.0% 2.4% 0.3% 0.0% 0.4% 2.9% 7.1% 0.2% 0.2% 4.5% 0.6%

Risk coverage ratio (adjusted loan loss reserve-to- 8.6% 0.0% 2.6% 16.6% 86.2% 49.5%

portfolio at risk >30days) 315.0% 611.2% 264.8% 100.0% 1022.6% 1753.0% 1042.5%

FINANCIAL SERVICES FOR ALL 109 RISK Agahe AMRDO MO Mojaz Naymet NRDP OPD SDS SRDO SVDP VDO Sub

MFI - - - 19

Portfolio at risk > 30 days 265 6,729 1,838 1,519 1,024 1,071 2,955 739,920 - - - -

Portfolio at risk > 90 days 263 868 993 4,985 1,662 1,032 1,366 715,118

Adjusted loan loss reserve 346 2,186 4,039 3,204 3,930 2,652 1,003 1,037 2,255 3,407 2,356 231,713 - - - - - 108 171 200

Loan Portfolio written off during year 1,101 1,552 1,380 163,336

Gross loan portfolio 9,511 43,725 78,150 64,083 78,601 80,606 53,404 22,907 45,264 74,448 49,194 9,645,214

Average gross loan portfolio 9,659 35,752 66,959 57,720 61,380 54,259 45,298 27,581 38,755 57,910 39,727 8,775,550 Avg. Weighted Weighted

Portfolio at risk (>30)-to-gross loan portfolio 0.0% 8.6% 0.0% 0.0% 0.0% 0.3% 3.4% 6.6% 2.3% 1.4% 6.0% 7.7%

Portfolio at risk(>90)-to-gross loan portfolio 0.0% 6.4% 0.0% 0.0% 0.0% 0.3% 3.1% 3.8% 2.3% 1.3% 2.8% 7.4%

Write off-to-average gross loan portfolio 0.0% 1.6% 0.0% 0.0% 0.0% 0.0% 3.4% 0.4% 0.4% 0.3% 3.5% 1.9%

Risk coverage ratio (adjusted loan loss reserve-to- 100% 60.0% 54.6% 68.3% 79.7% 31.3%

portfolio at risk >30days) 100.0% 100.0% 220.3% 318.2% 1001.9% 11505.3%

RISK

NRSP PRSP SRSP TRDP SRSO Sub

RSP Portfolio at risk > 30 days 83,262 1,624 - 19,718 33,627 138,230.67 Portfolio at risk > 90 days 81,018 1,405 - 19,374 32,350 134,148.12 Adjusted loan loss reserve 75,255 79,814 - 629 52,241 207,939 Loan Portfolio written off during year 20,983 - 20 - 1,930 22,932.28 Gross loan portfolio 5,584,405 903,664 32,174 789,789 1,077,973 8,388,003 Average gross loan portfolio 5,015,616 842,132 27,551 668,604 1,012,723 7,566,625

Weighted Avg. Portfolio at risk (>30)-to-gross loan portfolio 1.5% 0.2% 0.0% 2.5% 3.1% 1.6% Portfolio at risk(>90)-to-gross loan portfolio 1.5% 0.2% 0.0% 2.5% 3.0% 1.6% Write off-to-average gross loan portfolio 0.4% 0.0% 0.1% 0.0% 0.2% 0.3% Risk coverage ratio (adjusted loan loss reserve-to- 90.4% 4915.0% 0.0% 3.2% 155.4% 150.4% portfolio at risk >30days)

MFB Sub Total MFI Sub Total RSP Sub Total Total

Portfolio at risk > 30 days 279,146 739,920 138,230.67 1,157,297 Portfolio at risk > 90 days 82,900 715,118 134,148.12 932,166 Adjusted loan loss reserve 268,703 231,713 207,939 708,355 Loan Portfolio written off during year 429,025 163,336 22,932.28 615,293 Gross loan portfolio 28,072,495 9,645,214 8,388,003 46,105,712 Average gross loan portfolio 24,045,047 8,775,550 7,566,625 40,387,221

Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Portfolio at risk (>30)-to-gross loan portfolio 1.0% 7.7% 1.6% 2.5% Portfolio at risk(>90)-to-gross loan portfolio 0.3% 7.4% 1.6% 2.0% Write off-to-average gross loan portfolio 1.8% 1.9% 0.3% 1.5% Risk coverage ratio (adjusted loan loss reserve-to- 96.3% 31.3% 150.4% 61.2% portfolio at risk >30days)

FINANCIAL SERVICES FOR ALL 111 ANNEXURE C

SOURCES OF DATA (2013)

MICROFINANCE BANKS (MFBS)

APNA Microfinance Bank Ltd (AMFB) »» The related party transactions have been properly disclosed in notes to the financial statements. »» AMFB provided PMN with its audited accounts. The »» The grant income has been properly disclosed in numbers reported in the PMR match these reports. financial statements as well as there is a proper Riaz Ahmad and Co. audited the annual accounts of disclosure on grants in notes to the financial AMFB for the year ending at 31st December 2013. statements. »» The financial statements have been presented as per »» The following numbers have been taken from FINCA’s the requirements of the State Bank of Pakistan. MIS: i). rural-urban clients; ii). male-female clients; »» All necessary adjustments to FMFBL data have been iii). Number of staff; iv). Number of credit officers; made in order to remove subsidies. Adjustments were and v). Number of branches (also available in audited not made for loan loss provisioning expense, since accounts). FMFBL is aggressive in its policies, as required by the »» As per the CGAP requirements, portfolio quality, SBP. sustainability/profitability and asset/liability »» The related party transactions have been properly management ratios should be presented to represent disclosed in notes to the financial statements. the true and fair picture to stakeholders. »» The grant income has been properly disclosed in financial statements as well as there is a proper disclosure on grants in notes to the financial Khushhali Bank Ltd (KBL) statements. »» KBL provided PMN with its audited accounts. The »» The following numbers have been taken from AMFB’s numbers reported in the PMR match these reports. MIS: i). rural-urban clients; ii). male-female clients; A.F. Ferguson audited the annual accounts of KBL for iii). Number of staff; iv). Number of credit officers; the year ending at 31st December 2013. and v). Number of branches (also available in audited »» The financial statements have been presented as per accounts). the requirements of the State Bank of Pakistan. »» As per the CGAP requirements, portfolio quality, »» All necessary adjustments to the KBL data have been sustainability/profitability and asset/liability made in order to remove subsidies. Adjustments management ratios should be presented to represent were not made for loan loss provisioning expense, the true and fair picture to stakeholders. since KBL is aggressive in its policies, as required by the SBP. FINCA Microfinance Bank Ltd (FINCA) (Formerly »» KBL prepares its accounts on historical cost basis Kashf Microfinance Bank Ltd) using the accrual system of accounting. »» The related party transactions have been properly »» FINCA provided PMN with its audited accounts. The disclosed in notes to the financial statements. numbers reported in the PMR match these reports. »» The grant income has been properly disclosed in M. Yossuf Adil Saleem and Co. audited the annual financial statements as well as there is a proper accounts of FINCA for the year ending at 31st disclosure on grants in notes to the financial December 2013. statements. »» The financial statements have been presented as per »» The following numbers have been taken from KBL’s the requirements of the State Bank of Pakistan. MIS: i). rural-urban clients; ii). male-female clients; »» Adjustments were not made for loan loss provisioning iii). Portfolio aging; iv). Number of staff; v). Number expense, since FINCA is aggressive in its policies as of credit officers; and vi). Number of branches (also required by the SBP. Adjustment for cost of borrowing available in audited accounts). was not made since it was entirely commercial »» As per the CGAP requirements, portfolio quality, borrowing. FINCA prepares accounts on historical cost sustainability/profitability and asset/liability basis using the accrual system of accounting. management ratios should be presented to represent the true and fair picture to stakeholders. 112 Copyrights © 2014 · Pakistan Microfinance Network Pakistan Microfinance Review - 2013 Annual Assessment of the Microfinance Industry

The First Microfinance Bank Ltd (FMFBL) financial statements as well as there is a proper disclosure on grants in notes to the financial »» FMFB provided PMN with its audited accounts. The statements. numbers reported in the PMR match these reports. »» The following numbers have been taken from NRSP- KPMG audited the annual accounts of FMFBL for the B’s MIS: i). rural-urban clients; ii). male-female clients; year ending at 31st December 2013. iii). Number of staff; iv). Number of credit officers; »» The financial statements have been presented as per and v). Number of branches (also available in audited the requirements of the State Bank of Pakistan. accounts). »» All necessary adjustments to FMFBL data have been »» As per the CGAP requirements, portfolio quality, made in order to remove subsidies. Adjustments were sustainability/profitability and asset/liability not made for loan loss provisioning expense, since management ratios should be presented to represent FMFBL is aggressive in its policies, as required by the the true and fair picture to stakeholders. SBP. »» FMFBL prepares accounts on historical cost basis using the accrual system of accounting. Pak Oman Microfinance Bank Ltd (POMFB) »» The related party transactions have been properly »» POMFB reported its audited accounts in newspapers, disclosed in notes to the financial statements. from whence the accounts were obtained. The »» The grant income has been properly disclosed in numbers reported in the PMR match these reports. financial statements and there is proper disclosure on M. Yossuf Adil Saleem and Co. audited the annual grants in notes to the financial statements. accounts of POMFB for the year ending at 31st »» There is a proper disclosure regarding the loan December 2013. portfolio and write-offs. »» The financial statements have been presented as per »» The following numbers have been taken from FMFB’s the requirements of the State Bank of Pakistan. MIS: i). rural-urban clients; ii). male-female clients; iii). »» All necessary adjustments to the POMFB data Portfolio Aging and Write-offs (verified from audited have been made in order to remove subsidies. No accounts); iv). Number of staff; v). Number of credit adjustments were made to financial cost since officers; and vi). Number of branches (also available in POMFB was not using any concessional or commercial audited accounts). borrowing during the reported period. POMFB is »» As per the CGAP requirements, portfolio quality, aggressive in its policies, as required by the SBP. sustainability/profitability and asset/liability »» POMFB prepares accounts on historical cost basis management ratios should be presented to represent using the accrual system of accounting. the true and fair picture to stake holders. »» The related party transactions have been properly disclosed in notes to the financial statements. National Rural Support Programme »» The grant income has been properly disclosed in Microfinance Bank (NRSP-B) financial statements as well as there is a proper disclosure on grants in notes to the financial »» NRSP-B provided PMN with its audited accounts. The statements. numbers reported in the PMR match these reports. »» The following numbers have been taken from M. Yossuf Adil Saleem and Co. audited the annual POMFB’s MIS: i). rural-urban clients; ii). male-female accounts of NRSP-B for the year ending at 31st clients; iii). Portfolio Aging and Write-Offs (verified December 2013. from audited accounts); iv). Number of staff; v). »» The financial statements have been presented as per Number of credit officers; and vi). Number of the requirements of the State Bank of Pakistan. branches (also available in audited accounts). »» Adjustments were not made for loan loss provisioning »» As per the CGAP requirements portfolio quality, expense, since NRSP-B is aggressive in its policies as sustainability/profitability and asset/liability required by the SBP. Adjustment for cost of borrowing management ratios should be presented to represent was not made since it was entirely commercial the true and fair picture to stakeholders. borrowing. NRSP-B prepares accounts on historical cost basis using the accrual system of accounting. »» The related party transactions have been properly disclosed in notes to the financial statements. »» The grant income has been properly disclosed in

FINANCIAL SERVICES FOR ALL 113 Tameer Microfinance Bank Ltd (TMFB) U Microfinance Bank Ltd (U-bank)

»» TMFB provided PMN with its audited accounts. The »» FINCA provided PMN with its audited accounts. The numbers reported in the PMR match these reports. numbers reported in the PMR match these reports. Ernst and Young Ford Rhodes Sidat Hyder and Co. A.F. Ferguson. audited the annual accounts of FINCA audited the annual accounts of TMFB for the year for the year ending at 31st December 2013. ending at 31st December 2013. »» The financial statements have been presented as per »» The financial statements have been presented as per the requirements of the State Bank of Pakistan. the requirements of the State Bank of Pakistan. »» Adjustments were not made for loan loss provisioning »» All necessary adjustments to TMFB data have been expense, since FINCA is aggressive in its policies as made in order to remove subsidies. Adjustment for required by the SBP. Adjustment for cost of borrowing cost of borrowing was not made since it was entirely was not made since it was entirely commercial commercial borrowing. TMFB prepares accounts borrowing. FINCA prepares accounts on historical cost on historical cost basis using the accrual system of basis using the accrual system of accounting. accounting. »» The related party transactions have been properly »» The related party transactions have been properly disclosed in notes to the financial statements. disclosed in notes to the financial statements. »» The grant income has been properly disclosed in »» The grant income has been properly disclosed in financial statements as well as there is a proper financial statements as well as there is a proper disclosure on grants in notes to the financial disclosure on grants in notes to the financial statements. statements. »» The following numbers have been taken from FINCA’s »» The following numbers have been taken from TMFB’s MIS: i). rural-urban clients; ii). male-female clients; MIS: i). rural-urban clients; ii). male-female clients; iii). Number of staff; iv). Number of credit officers; iii). Number of staff; iv). Number of credit officers; and v). Number of branches (also available in audited and v). Number of branches (also available in audited accounts). accounts). »» As per the CGAP requirements, portfolio quality, »» As per the CGAP requirements, portfolio quality, sustainability/profitability and asset/liability sustainability/profitability and asset/liability management ratios should be presented to represent management ratios should be presented to represent the true and fair picture to stakeholders. the true and fair picture to stakeholders.

MICROFINANCE INSTITUTION (MFI)

ASA Pakistan limited charged during the year is disclosed on the income statement. »» ASA provided PMN with its audited accounts. The »» The related party transactions have been properly numbers reported in the PMR match these reports. disclosed in notes to the financial statements. Ernst and Young Ford Rhodes Sidat Hyder and Co has »» As per the CGAP requirements, portfolio quality, audited the annual accounts of ASA-P for the year sustainability/profitability and asset/liability ending at 31st December 2013. management ratios should be presented to represent »» ASA prepares its financial statements under the the true and fair picture to stakeholders. historical cost convention and in conformity with accepted accounting practices. »» Adjustments were not made to loan loss provisioning Agahe expense as ASA is aggressive in its policies. »» Agahe provided PMN with its audited accounts. The »» The following numbers have been taken from the numbers reported in the PMR match these reports. organization’s MIS: i). rural-urban clients; and ii). male- Uzair Hammad Faisal & Co. has audited the annual female clients; accounts of Agahe for the year ending at 31st »» There is proper disclosure on the balance sheet December 2013. of loan portfolio, and loan loss provision; expense »» Agahe prepares its financial statements under

the historical cost convention, in conformity with »» BRAC is an integrated program and, therefore, accepted accounting practices. prepares separate financial accounts for all its »» All necessary adjustments to Agahe data have been programs. The audit is done and a consolidated made in order to remove subsidies. No adjustment audit report is prepared with clear differentiations of was made to loan loss provisioning expense as Agahe both revenue and costs for each program in light of is aggressive in its policies. accounting standards. »» The related party transactions have been properly disclosed in notes to the financial statements. Community Support Concern (CSC) »» The grant income has been properly disclosed in financial statements. Additionally, there is proper »» CSC provided PMN with its audited accounts. The disclosure on grants in notes to the financial numbers reported in the PMR match these reports. statements. Riaz Ahmad & Co. audited the annual accounts of CSC »» As per the CGAP requirements, portfolio quality, for the year ending at 30th June 2013. sustainability/profitability and asset/liability »» All necessary adjustments to CSC data have been management ratios should be presented to represent made in order to remove subsidies. No adjustment the true and fair picture to stakeholders. was made to loan loss provisioning expense as CSC is aggressive in its policies. Al-Mehran Rural Development Organization »» CSC prepares its financial statements under the historical cost convention and in conformity with (AMRDO) accepted accounting practices. »» The following numbers have been taken from the »» AMRDO provided PMN with its audited accounts. The organization’s MIS: i). rural-urban clients; ii). male- numbers reported in the PMR match these reports. female clients; iii). Aging on number of loans and Hafizullah & Co. has audited the annual accounts of value of portfolio (verifiable from audited accounts); AMRDO for the year ending at 30th June 2013. iv). Number of staff; v). Number of credit officers; and »» AMRDO prepares its financial statements under vi). Number of offices. the historical cost convention, in conformity with »» The grant income has been properly disclosed in accepted accounting practices. financial statements and there is proper disclosure on »» All necessary adjustments to data have been made in grants in notes to the financial statements. order to remove subsidies. No adjustment was made »» As per the CGAP requirements portfolio quality, to loan loss provisioning expense as the institute is sustainability/profitability and asset/liability aggressive in its policies. management ratios should be presented to represent »» The related party transactions have been properly the true and fair picture to stakeholders. disclosed in notes to the financial statements. »» The grant income has been properly disclosed in financial statements. Additionally, there is proper Farmers Friend Organization (FFO) disclosure on grants in notes to the financial statements. »» FFO provided PMN with its audited accounts. The »» As per the CGAP requirements, portfolio quality, numbers reported in the PMR match these reports. sustainability/profitability and asset/liability Tariq Abdul Ghani Maqbool & Co audited the annual management ratios should be presented to represent accounts for FFO for the year ending at 30th June the true and fair picture to stakeholders. 2013. »» All necessary adjustments to FFO data have been made in order to remove subsidies. There is no BRAC-Pakistan adjustment on loan loss provisioning expense as FFO is aggressive in its policies. »» BRAC-Pakistan provided PMN with its audited »» FFO prepares its financial statements under the accounts. The numbers reported in the PMR match historical cost convention and in conformity with these reports. KPMG (Taseer Hadi and Co) has audited accepted accounting practices. the annual accounts of BRAC-Pakistan for the year »» The following numbers have been taken from the ending at 31st December 2013. organization’s MIS: i). rural-urban clients; ii). male- »» BRAC prepares its financial statements under the female clients; iii). Aging on number of loans and historical cost convention and in conformity with value of portfolio iv). Number of staff; v). Number of accepted accounting policies.

FINANCIAL SERVICES FOR ALL 115 credit officers; and vi). Number of offices. »» The financial statements have been presented as per »» The grant income has been properly disclosed in the requirements of the State Bank of Pakistan. financial statements. Additionally, there is proper »» All necessary adjustments to KF data have been made disclosure on grants in notes to the financial in order to remove subsidies. Adjustments were not statements. made for loan loss provisioning expense, since KF »» As per the CGAP requirements portfolio quality, is aggressive in its policies as required by the SBP. sustainability/profitability and asset/liability Adjustment for cost of borrowing was not made since management ratios should be presented to represent it was entirely commercial borrowing. KF prepares the true and fair picture to stakeholders. accounts on historical cost basis using the accrual system of accounting. »» The related party transactions have been properly Development Action for Mobilization and disclosed in notes to the financial statements. Emancipation (DAMEN) »» The grant income has been properly disclosed in financial statements as well as there is a proper »» DAMEN provided PMN with its audited accounts. The disclosure on grants in notes to the financial numbers reported in the PMR match these reports. statements. Grant Thornton (Anjum Asim Shahid Rehman) audited »» The following numbers have been taken from KF’s the annual accounts for DAMEN for the year ending at MIS: i). rural-urban clients; ii). male-female clients; 31st December 2013. iii). Number of staff; iv). Number of credit officers; »» As DAMEN is a multi-dimensional development and v). Number of branches (also available in audited organization accounts for its microfinance function accounts). are kept separate. »» As per the CGAP requirements, portfolio quality, »» There is no adjustment on cost of borrowing since sustainability/profitability and asset/liability DAMEN’s actual cost is higher than the adjusted management ratios should be presented to represent cost. Similarly, no adjustment was made to loan loss the true and fair picture to stakeholders. provisioning expense; DAMEN is aggressive in its policies. »» DAMEN prepares its financial statements under the Ghazi Barotha Taraqiati Idara (GBTI) historical cost convention and in conformity with accepted accounting practices. »» GBTI provided PMN with its audited accounts. The numbers reported in the PMR match these reports. »» The grant income has been properly disclosed in KPMG (Taseer Hadi and Co) audited the annual financial statements. Additionally, there is proper accounts for GBTI for the year ending at 30th June disclosure on grants in notes to the financial 2013. statements. »» GBTI prepares its financial statements under the »» The following numbers have been taken from the historical cost convention and in conformity with organization’s MIS: i). rural-urban clients; ii). male- accepted accounting practices. Revenue is recognized female clients; iii). Aging on number of loans and on receipt basis. value of portfolio (verifiable from audited accounts); iv). Breakup for the number of loans doubtful; v). »» GBTI prepares its financial statements under the Number of staff; vi). Number of credit officers historical cost convention and in conformity with accepted accounting practices. »» As per the CGAP requirements, portfolio quality, sustainability/profitability and asset/liability »» The following numbers have been taken from the management ratios should be presented to represent organization’s MIS: i). rural-urban clients; ii). male- the true and fair picture to stakeholders. female clients; iii). Aging on number of loans and value of portfolio (not verifiable from audited accounts); iv). Number of staff; v). Number of credit Kashf Foundation (KF) officers; and vi). Number of offices. »» There is proper disclosure on the balance sheet »» KF provided PMN with its audited accounts. The of loan portfolio, and loan loss provision; expense numbers reported in the PMR match these reports. charged during the year is disclosed on the income KPMG (Taseer Hadi and Co) audited the annual statement. accounts for KF for the year ending at 30th June »» The grant income has been properly disclosed in 2013. financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. 116 Copyrights © 2014 · Pakistan Microfinance Network Pakistan Microfinance Review - 2013 Annual Assessment of the Microfinance Industry

»» The related party transactions should be presented in »» As per the CGAP requirements, portfolio quality, notes to the financial statements. sustainability/profitability and asset/liability »» As per the CGAP requirements portfolio quality, management ratios should be presented to represent sustainability/profitability and asset/liability the true and fair picture to stakeholders. management ratios should be presented to represent the true and fair picture to stakeholders. Mojaz Foundation (Mojaz)

Jinnah Welfare Society (JWS) »» Mojaz provided PMN with its audited accounts. The numbers reported in the PMR match these reports. »» JWS provided PMN with its audited accounts. The Ibmhim, Shaikh & Co has audited the annual accounts numbers reported in the PMR match these reports. of Mojaz for the year ending at 30th June 2013. Tariq Abdul Ghani Maqbool & Co. audited the annual »» Mojaz prepares its financial statements under accounts for JWS for the year ending at 30th June the historical cost convention, in conformity with 2013. accepted accounting practices. »» JWS prepares its financial statements under the »» All necessary adjustments to data have been made in historical cost convention and in conformity with order to remove subsidies. No adjustment was made accepted accounting practices. Revenue is recognized to loan loss provisioning expense as the institute is on receipt basis. aggressive in its policies. »» The following numbers have been taken from the »» The related party transactions have been properly organization’s MIS: i). rural-urban clients; ii). male- disclosed in notes to the financial statements. female clients; iii). Aging on number of loans and »» The grant income has been properly disclosed in value of portfolio (verified from audited accounts); financial statements. Additionally, there is proper iv). Number of staff; v). Number of credit officers; and disclosure on grants in notes to the financial vi). Number of branches (also available in audited statements. accounts). »» • As per the CGAP requirements, portfolio »» The related party transactions have been properly quality, sustainability/profitability and asset/liability disclosed in notes to financial statements. management ratios should be presented to represent »» As per the CGAP requirements, portfolio quality, the true and fair picture to stakeholders. sustainability/profitability and asset/liability management ratios should be presented to represent the true and fair picture to stake holders. Naymet Trust (Naymet)

»» Naymet provided PMN with its audited accounts. The Micro Options (MO) numbers reported in the PMR match these reports. Izhar & Co has audited the annual accounts of »» MO provided PMN with its audited accounts. The Naymet for the year ending at 30th June 2013. numbers reported in the PMR match these reports. »» Naymet prepares its financial statements under Baker Tilly Mehmood Idrees Qamar has audited the the historical cost convention, in conformity with annual accounts of MO for the year ending at 31st accepted accounting practices. December 2013. »» All necessary adjustments to data have been made in »» MO prepares its financial statements under the order to remove subsidies. No adjustment was made historical cost convention, in conformity with to loan loss provisioning expense as the institute is accepted accounting practices. aggressive in its policies. »» All necessary adjustments to data have been made in »» The related party transactions have been properly order to remove subsidies. No adjustment was made disclosed in notes to the financial statements. to loan loss provisioning expense as the institute is »» The grant income has been properly disclosed in aggressive in its policies. financial statements. Additionally, there is proper »» The related party transactions have been properly disclosure on grants in notes to the financial disclosed in notes to the financial statements. statements. »» The grant income has been properly disclosed in »» As per the CGAP requirements, portfolio quality, financial statements. Additionally, there is proper sustainability/profitability and asset/liability disclosure on grants in notes to the financial management ratios should be presented to represent statements. the true and fair picture to stakeholders.

FINANCIAL SERVICES FOR ALL 117 National Rural Development Program (NRDP) Orangi Charitable Trust (OCT)

»» NRDP provided PMN with its audited accounts. The »» OCT provided PMN with its audited accounts. The numbers reported in the PMR match these reports. numbers reported in the PMR match these reports. Izhar & Co has audited the annual accounts of NRDP Tanzeem & Co. has audited the annual accounts of for the year ending at 30th June 2013. OCT for the year ending at 30th June 2013. »» NRDP prepares its financial statements under »» OCT prepares its financial statements under the the historical cost convention, in conformity with historical cost convention, in conformity with accepted accounting practices. accepted accounting practices. »» All necessary adjustments to data have been made in »» All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is to loan loss provisioning expense as the institute is aggressive in its policies. aggressive in its policies. »» The related party transactions have been properly »» The related party transactions have been properly disclosed in notes to the financial statements. disclosed in notes to the financial statements. »» The grant income has been properly disclosed in »» The grant income has been properly disclosed in financial statements. Additionally, there is proper financial statements. Additionally, there is proper disclosure on grants in notes to the financial disclosure on grants in notes to the financial statements. statements. »» As per the CGAP requirements, portfolio quality, »» As per the CGAP requirements, portfolio quality, sustainability/profitability and asset/liability sustainability/profitability and asset/liability management ratios should be presented to represent management ratios should be presented to represent the true and fair picture to stakeholders. the true and fair picture to stakeholders.

Organization for Participatory Development Orix Leasing Pakistan Ltd. (OLP) (OPD) »» OLP has provided its audited accounts for the »» OPD provided PMN with its audited accounts. The reporting period to PMN. numbers reported in the PMR match these reports. »» However, given that OLP’s audited accounts do not Izhar & Co has audited the annual accounts of OPD disclose figures related to its Microfinance Division for the year ending at 30th June 2013. (MFD), the data reported in the PMR is not verifiable »» OPD prepares its financial statements under the with audited accounts. historical cost convention, in conformity with »» OLP has separate staff and offices for microfinance. accepted accounting practices. OLP’s MFD has provided data specific to its »» All necessary adjustments to data have been made in microfinance operations. order to remove subsidies. No adjustment was made »» OLP prepares its financial statements under the to loan loss provisioning expense as the institute is historical cost convention in using accrual system of aggressive in its policies. accounting. »» The related party transactions have been properly »» Adjustments to the data have been made as per the disclosed in notes to the financial statements. PMN’s adjustment policies. These adjustments are in »» The grant income has been properly disclosed in line with international practices being followed by financial statements. Additionally, there is proper The MIX. disclosure on grants in notes to the financial statements. Rural Community Development Society (RCDS) »» As per the CGAP requirements, portfolio quality, sustainability/profitability and asset/liability »» RCDS provided PMN with its audited accounts. The management ratios should be presented to represent numbers reported in the PMR match these reports. the true and fair picture to stakeholders. Ijaz Tabassum & Co. audited the annual accounts for RCDS for the year ending at 30th June 2013. »» RCDS prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. Revenue is recognized on receipt basis. 118 Copyrights © 2014 · Pakistan Microfinance Network Pakistan Microfinance Review - 2013 Annual Assessment of the Microfinance Industry

»» The following numbers have been taken from the »» All necessary adjustments to data have been made in organization’s MIS: i). rural-urban clients; ii). male- order to remove subsidies. No adjustment was made female clients; iii). Aging on number of loans and to loan loss provisioning expense as the institute is value of portfolio (verified from audited accounts); aggressive in its policies. iv). Number of staff; v). Number of credit officers; and »» The related party transactions have been properly vi). Number of branches (also available in audited disclosed in notes to the financial statements. accounts). »» The grant income has been properly disclosed in »» There should be proper disclosure on movement in financial statements. Additionally, there is proper portfolio, loan loss provisioning, and write-offs. disclosure on grants in notes to the financial »» The related party transactions have been properly statements. disclosed in notes to financial statements. »» As per the CGAP requirements, portfolio quality, »» As per the CGAP requirements, portfolio quality, sustainability/profitability and asset/liability sustainability/profitability and asset/liability management ratios should be presented to represent management ratios should be presented to represent the true and fair picture to stakeholders. the true and fair picture to stakeholders.

Shadab Rural Development Organization (SRDO) SAFCO Support Fund (SAFCO) »» SRDO provided PMN with its audited accounts. The »» SAFCO provided PMN with its audited accounts. The numbers reported in the PMR match these reports. numbers reported in the PMR match these reports. Tanwir Arif & Co. has audited the annual accounts of Grant Thornton (Anjum Asim Shahid Rehman) audited SRDO for the year ending at 30th June 2013. the annual accounts for SAFCO for the year ending at »» SRDO prepares its financial statements under the 30th June 2013. historical cost convention, in conformity with accepted »» Income and expense are booked on an accrual basis. accounting practices. »» All necessary adjustments to SAFCO data have been »» All necessary adjustments to data have been made in made in order to remove subsidies. order to remove subsidies. No adjustment was made »» SAFCO prepares its financial statements under the to loan loss provisioning expense as the institute is historical cost convention and in conformity with aggressive in its policies. accepted accounting practices using the principles of »» The related party transactions have been properly fund accounting. disclosed in notes to the financial statements. »» The following numbers have been taken from the »» The grant income has been properly disclosed in organization’s MIS: i). rural-urban clients; ii). male- financial statements. Additionally, there is proper female clients; iii). Aging on number of loans and value disclosure on grants in notes to the financial of portfolio (not verifiable from audited accounts); iv). statements. Number of staff; and v). Number of credit officers. »» As per the CGAP requirements, portfolio quality, »» The grant income has been properly disclosed in sustainability/profitability and asset/liability financial statements. Additionally, there is proper management ratios should be presented to represent disclosure on grants in notes to the financial the true and fair picture to stakeholders. statements. »» As per the CGAP requirements, portfolio quality, sustainability/profitability and asset/liability Soon Valley Development Program (SVDP) management ratios should be presented to represent »» SVDP provided PMN with its audited accounts. The the true and fair picture to stakeholders. numbers reported in the PMR match these reports. Zahid Jamil & Co. has audited the annual accounts of Saath Development Society (SDS) SVDP for the year ending at 30th June 2013. »» SVDP prepares its financial statements under the »» SDS provided PMN with its audited accounts. The historical cost convention, in conformity with accepted numbers reported in the PMR match these reports. accounting practices. Tanwir Arif & Co. has audited the annual accounts of »» All necessary adjustments to data have been made in OCT for the year ending at 30th June 2013. order to remove subsidies. No adjustment was made »» SDS prepares its financial statements under the to loan loss provisioning expense as the institute is historical cost convention, in conformity with accepted aggressive in its policies. accounting practices. FINANCIAL SERVICES FOR ALL 119 »» The related party transactions have been properly »» VDO prepares its financial statements under the disclosed in notes to the financial statements. historical cost convention, in conformity with »» The grant income has been properly disclosed in accepted accounting practices. financial statements. Additionally, there is proper »» All necessary adjustments to data have been made in disclosure on grants in notes to the financial order to remove subsidies. No adjustment was made statements. to loan loss provisioning expense as the institute is »» As per the CGAP requirements, portfolio quality, aggressive in its policies. sustainability/profitability and asset/liability »» The related party transactions have been properly management ratios should be presented to represent disclosed in notes to the financial statements. the true and fair picture to stakeholders. »» The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial Villagers Development Organization (VDO) statements. »» As per the CGAP requirements, portfolio quality, »» VDO provided PMN with its audited accounts. The sustainability/profitability and asset/liability numbers reported in the PMR match these reports. management ratios should be presented to represent Tanwir Arif & Co. has audited the annual accounts of the true and fair picture to stakeholders. VDO for the year ending at 30th June 2013.

RURAL SUPPORT PROGRAMME (RSP)

National Rural Support Programme (NRSP) sustainability/profitability and asset/liability management ratios are presented in the notes to »» NRSP has provided its audited accounts for the financial statements. reporting period to PMN and the figures tally with the reported data. Ernst & Young Ford Rhodes Sidat Hyder and Co. audited the annual accounts for NRSP Punjab Rural Support Programme (PRSP) for the year ending at 30th June 2013. »» PRSP has provided its audited accounts for the »» All necessary adjustments to NRSP data have been reporting period to PMN. Ernst & Young Ford Rhodes made in order to remove subsidies. Adjustment Sidat Hyder and Co. audited the annual accounts for for cost of borrowing was not made since it was PRSP for the year ending at 30th June 2013. entirely commercial borrowing. Similarly, there is no adjustment on loan loss provisioning expense, since »» Since PRSP is an integrated programme, the following NRSP is aggressive in its policies and all loans > 90 resource allocation process was followed: days past due are 100% provisioned for. i) The identified accounts for credit and non- »» NRSP prepares its financial statements under the credit functions were directly transferred to the historical cost convention, in conformity with respective programs. accepted accounting practices. ii) All other accounts that were common to the »» Data on distribution of clients in terms of the institution were transferred in the ratio of 60% to urban-rural mix is not provided in the disclosures. credit and 40% to non-credit functions. However, given that NRSP has a separate program for iii) 60% of PRSP’s investment income was credited to urban areas and rural areas and their information is its credit operations available separately, the disaggregation can be made »» All necessary adjustments to PRSP data have been quite accurately. The data on gender segregation was made in order to remove subsidies. Adjustment taken from the MIS and is not available in notes to for cost of borrowing was not made since it was the accounts. entirely commercial borrowing. Similarly, there is no »» Data on the number of total staff, loan officers and adjustment on loan loss provisioning expense, since branches has been drawn from audited accounts. PRSP is aggressive in its provisioning policies. »» The related party transactions have been properly »» PRSP prepares its financial statements under the disclosed in notes to financial statements. historical cost convention, in conformity with »» As per the CGAP requirements, portfolio quality, accepted accounting practices.

»» Data on distribution of clients in terms of the urban- Thardeep Rural Development Programme rural mix is not provided in the disclosures. However, (TRDP) given that PRSP only works in rural Punjab the information can be accurately deduced. The data on »» TRDP has provided its audited accounts for the gender segregation was taken from the MIS and is not microfinance program (inclusive of credit and non- available in notes to the accounts. credit functions). Grant Thornton (Anjum Asim Shahid »» Data on number of staff for PRSP as a whole is Rehman) audited the annual accounts for TRDP for available. These numbers have been allocated the year ending at 30th June 2013. between credit and non-credit functions of PRSP on »» All necessary adjustments to TRDP data have been the basis mentioned above. Data for credit officers made in order to remove subsidies. has been obtained from the organization’s MIS. »» TRDP prepares its financial statements under »» The grant income has been properly disclosed in the historical cost convention in conformity with financial statements as well as there is a proper accepted accounting practices. disclosure on grants in notes to the financial »» The following numbers have been taken from the statements. organization’s MIS: i). rural-urban clients; ii). male- »» The related party transactions have been properly female clients; iii). Number of staff; and iv). Number of disclosed in notes to financial statements. credit officers. »» As per the CGAP requirements, portfolio quality, »» The ageing of portfolio (in rupee value and number of sustainability / profitability and asset/liability loans) is taken from audited accounts. management ratios should be presented to represent the true and fair picture to stakeholders. Sindh Rural Support Organization (SRSO)

Sarhad Rural Support Programme (SRSP) »» SRSO has provided its audited accounts for the microfinance program (inclusive of credit and non- »» SRSP has provided its audited accounts for the credit functions). Ernst & Young Ford Rhodes Sidat reporting period to PMN. KPMG (Taseer Hadi and Co) Hyder and Co. audited the annual accounts for SRSO audited the annual accounts for SRSP for the year for the year ending at 30th June 2013. ending at 30th June 2013. »» All necessary adjustments to PRSP data have been »» SRSP is a multi-dimensional development made in order to remove subsidies. There is no organization. It has provided its integrated audited adjustment on loan loss provisioning expense, since accounts for the reporting period to PMN and has also PRSP is aggressive in its provisioning policies. extracted accounts for its microfinance operations »» SRSO prepares its financial statements under from the consolidated audited statements. the historical cost convention in conformity with »» All necessary adjustments to SRSP data have been accepted accounting practices. made in order to remove subsidies. There is no »» The following numbers have been taken from the adjustment on loan loss provisioning expense, since organization’s MIS: i). rural-urban clients; ii). male- SRSP is aggressive in its policies and all loans > 90 female clients; iii). Number of staff; and iv). Number of days past due are 100% provisioned for. credit officers. »» SRSP prepares its financial statements under »» The ageing of portfolio (in rupee value and number of the historical cost convention in conformity with loans) is taken from audited accounts. accepted accounting practices. »» The ageing of portfolio in rupee value is not verifiable from audited accounts. Both ageing on number of loans and value of portfolio was obtained from the MIS. However, there is proper disclosure on the movement in portfolio and write-offs. It will be valuable if SRSP could provide separate disclosure on movement in provisioning of portfolio as suggested previously. »» Data on the number of total staff, loan officers and branches has been drawn from audited accounts.

FINANCIAL SERVICES FOR ALL 121 ANNEXURE D

ADJUSTMENTS TO FINANCIAL DATA

RATIONALE

Adjustments to financial statements are made when Net inflation adjustment expense doing benchmark analysis. Adjustments are made for two Subtract the Inflation Adjustment Revenue from the primary reasons: Inflation Adjustment Expense »» To give an institution a more accurate picture of its financial position, by accounting for factors unique to Formula: an MFP including the predominance of below-market- rate funding sources. Such factors distort an MFP’s INFLATION ADJUSTED REVENUE – INFLATION ADJUSTED on-going performance. EXPENSE »» To make the data of various MFPs comparable. Thus, adjustments are made in order to bring organizations operating under varying conditions and with varying B. Subsidies adjustment levels of subsidy onto a level playing field. Adjustments for three types of subsidies are made: The following adjustments are made to data used for the »» A cost-of-funds subsidy from loans at below-market PMR: rates »» Current year cash donations to fund portfolio and A. Inflation adjustment cover expenses »» In-kind subsidies, such as rent-free office space or the Inflation adjustment adjusts for the effect of inflation on services of personnel not paid by the MFP and thus an MFP’s equity and non-monetary assets i.e., fixed assets. not reflected on its income statement. Inflation decreases the real value of an MFP’s equity. Fixed Additionally, for multipurpose MFPs, an attempt to isolate assets are capable of tracking the increase in price levels; the performance of the financial services program is made their monetary value is increased. The net loss (or gain) is by removing the effect of any cross-subsidization. Cash considered to be a cost of funds, and results in a decrease donations flowing through the income statement are (or increase) in net operating income. accounted for by reclassifying them below net operating income on the income statement. Thus, adjustments for Calculation of inflation adjustment cash donations are not made since these are handled through a direct reclassification on the income statement. Inflation adjustment revenue This year no MFP has disclosed receipt of in-kind subsidy. Multiply the prior year’s Net Fixed Assets by the current year’s average annual inflation rate (Average Core CPI for B.1 Cost-of-funds subsidy current financial year) The cost-of-funds adjustment reflects the impact of soft Formula: loans on the financial performance of an MFP. The analyst needs to calculate the difference between what an MFP NET FIXED ASSETS (PRIOR YEAR) X AVERAGE ANNUAL actually paid in interest on its subsidized liabilities and INFLATION RATE (CURRENT FINANCIAL YEAR) a shadow market rate for each country. This difference Inflation adjustment expense represents the value of the subsidy, considered an additional financial expense. Only funds received as loans Multiply the prior year’s Equity by the current year’s need to be adjusted. Client deposits are not adjusted. average annual inflation rate, (Average Core CPI for current Only loans that have a finite (1-5 years) term length are year) adjusted. Subordinated debt and other quasi-equity Formula: accounts are reclassified as ‘other equity’ on the balance sheet. EQUITY (PRIOR YEAR) X AVERAGE ANNUAL INFLATION RATE The analyst must be careful in the choice of an (CURRENT YEAR) appropriate shadow rate thus, PMN has used the KIBOR rate on outstanding loans as reported by the State Bank of Pakistan on its website (12.5%) to make this adjustment.

Calculation of cost-of-funds subsidy Note: The analyst must use his/her judgment in deciding whether or not the in-kind donation represents a key input 1. Calculate average balance for all borrowings. to the on-going operations of the MFP. An appropriate Borrowings do not include deposits or “other basis for valuation is important. This could include liabilities”. If an MFI has given an average balance, selecting a percentage of the total cost and attributing it see if this is more appropriate to use; if not, calculate to program expense. The percentage may be selected on average from last year’s ending balance. the basis of sales proportion, management input, etc. 2. Multiply the average balance by the shadow market rate Calculation of in-kind subsidy 3. Compare with the amount actually paid in interest and fees. If less “market” rate, impute the difference Sum of in-kind subsidies by operating expense account, (market price minus Financial Expense paid on added to unadjusted numbers for each account. Borrowings) to the Subsidized Cost of Funds Adjustment Expense C. Loan loss provisioning

B.2 Cash donations PMN standardizes loan loss provisioning for MFPs to a Funds donated to cover operational costs constitute minimum threshold or risk. MFPs vary tremendously in a direct subsidy to an MFP. The value of the subsidy is accounting for loan delinquency. Some count the entire therefore, equal to the amount donated to cover expenses loan balance as overdue the day a payment is missed. incurred in the period reported. Some donations are Others do not consider a loan delinquent until its full term provided to cover operating shortfall over a period has expired. Some MFPs write off bad debt within one year greater than one year. Only the amount spent in the year of the initial delinquency, while others never write off bad is recorded on the income statement as revenue. Any loans, thus carrying forward a default that they have little amount still to be used in subsequent years appears chance of ever recovering. as a liability on the balance sheet (deferred revenue). The analyst applies a standard loan loss provisioning This occurs because theoretically, if an MFP stopped to all MFPs and adjusts, where necessary, to bring them to operations in the middle of a multi-year operating grant, the minimum threshold. In some cases, these adjustments it would have to return the unused portion of the grant to may not be precise. Portfolio aging information may only the donor. The unused amount is therefore, considered as be available on different aging scales. a liability. Funds donated to pay for operations should be Calculation of loan loss provisioning reported on the income statement separately from the revenue generated by lending and investment activities. Step 1: This practice is meant for accurately reporting the earned Multiply the PAR age categories by the following reserve revenue of an MFP. Donated funds are deducted from factors: revenue or net income prior to any financial performance PAR up to 89 days no provisioning analysis because they do not represent revenue earned PAR 91 – 180 x 0.50 from operations. PAR 181 – 360 x 1.00 Renegotiated loans x 0.50 Note: Costs incurred to obtain donor funds (fundraising costs) should also be separated from operating expenses, Step 2: because the benefit of receiving the funds is not included. Sum above reserve calculations. If sum is more than current reserves make calculated reserve new Loan Loss B.3 In-kind subsidy Reserve. If not, keep current reserves.

Imputed cost (book value) of donated/loaned-out Step 3: vehicles, machinery and buildings need to be included in operating expenses. Expatriate staff salaries paid by donor Add the Unadjusted Loan Loss Provision Expense to the or parent company, or other technical assistance, need to difference between the Adjusted Net Loan Portfolio and be accounted for. Here, imputed salaries are used instead the Unadjusted Net Loan Portfolio. This is the Adjusted of salaries actually received by them i.e., the salary range Loan Loss Provision Expense. that a local hire would get for the same level of work-load/ position is used.

FINANCIAL SERVICES FOR ALL 123 ANNEXURE E

TERMS AND DEFINITIONS

Age Adjusted Portfolio at Risk > (30, 60, 90 Days) Number of years an organization has been functioning as Indicates the credit risk of a borrower above the specified a microfinance provider (MFP). number of days (30, 60, 90) past his/her due date for installment payment. Active Saving Account Balance Formula: It is the average balance of savings per account (not per depositor). Outstanding balance, loans overdue > (30 or 60 or 90) Days Adjustment Expense Adjusted Gross Loan Portfolio Total adjustment cost related to inflation, subsidized cost of borrowing, loan loss provisioning and in-kind subsidies. Adjusted Cost per Borrower In case of loan size differentials, generally operating Adjusted Financial Expense Ratio expense ratio is lower (more efficient) for institutions with higher loan sizes, ceteris paribus. This indicator discounts It is calculated by using standardized ageing-of-portfolio the effect of loan size on efficient management of loan technique. The principle of conservatism is used which is portfolio. why loan loss provision in audited accounts is greater than the amount computed by the analyst. Formula: Adjusted Operating Expense Adjusted Loan Loss Reserve Average Number of Active Borrowers Formula: Adjusted Cost per Loan Adjusted Financial Expense Adjusted Average Total Assets Formula: Adjusted Operating Expense Adjusted Operating Expense Average Number of Active Loans Also included in operating expense: »» Imputed cost (book value) of donated/loaned vehicles, machinery and buildings Adjustment Expense Ratio »» Expatriate staff salaries paid by donor or parent Formula: company Net inflation, in kind, loan loss provision and »» Other technical assistance paid for with donations subsidized cost-of-funds adjustment expense NOTE: Imputed salaries should be used instead of salaries Adjusted Average Total Assets actually received by such persons. For imputation, the salary range that a local hire would get for the same level Adjusted Financial Expense of work-load/position should be used. Judgment is used It includes actual cost of borrowing and shadow cost of to decide whether or not the in-kind donation represents subsidized funding. a key input to the on-going operations of the MFP

Formula: Adjusted Financial Expense on Borrowing Personnel Expense + Administrative Expense The cost-of-funds adjustment reflects the impact of soft Adjusted Operating Expense Ratio loans on the financial performance of the institution. The analyst calculates the difference between what the Formula: MFP actually paid in interest on its subsidized liabilities Adjusted Operating Expense and what it would have paid at a shadow market rate for Adjusted Average Total Assets each country. This difference represents the value of the subsidy, considered an additional financial expense.

Adjusted Loan Loss Provision Expense Ratio Adjusted Return on Equity

Formula: Formula: Adjusted Net Loan Loss Provision Expense Adjusted Net Operating Income, net of taxes Adjusted Average Total Assets Average Total Equity

Adjusted Loan Loss Provision Expense Adjusted Total Expense Loan loss provision expense calculated with standardized Includes all actual and adjusted expenses related to ageing-of-portfolio technique. It is however ensured that operations, cost of borrowings, loan losses and inflation if the actual loan loss provision expense is higher than the adjustment. adjusted then the conservatism principle is followed. Adjusted Total Expense Ratio Adjusted Operating Expense It includes actual operational expenses and in-kind Formula: subsidy adjustments. Adjusted (Financial Expense + Net Loan Loss Provision Expense + Operating Expense) Cost Adjusted Operating Expense Ratio Average Total Assets It indicates efficiency of an MFP’s loan portfolio. Average Gross Loan Portfolio Formula: Average of opening and closing balance of Gross Loan Adjusted Operating Expense Portfolio (GLP). Average Gross Loan Portfolio Average Loan Balance per Active Borrower Adjusted Personnel Expense Indicates average loan balance outstanding. Includes actual personnel expenses (salaries and benefits), and in-kind subsidy adjustments. Average Loan Balance per Active Borrower to Per Capita Income Adjusted Personnel Expense Ratio Used to measure depth of outreach. The lower the ratio the more poverty-focused the MFP. Formula: Adjusted Personnel Expense Average Number of Active Borrowers Average Gross Loan Portfolio It is average of opening and closing balance of active borrowers. Adjusted Profit Margin Formula: Formula: [Active Borrowers (Opening Balance) Adjusted Net Operating Income + Active Borrowers (Closing Balance)] Adjusted Financial Revenue 2

Adjusted Return on Assets Average Number of Active Loans Average of opening and closing balance of active loans Formula: Adjusted Net Operating Income, net of taxes Average Outstanding Balance Average Total Assets It indicates the average balance of loans outstanding.

Formula: Adjusted Gross Loan Portfolio Adjusted Number of Loans Outstanding

FINANCIAL SERVICES FOR ALL 125 Average Outstanding Balance to Per Capita Income Deposit-to-Gross Loan Portfolio Ratio It measure of depth of outreach. The lower the ratio the It is inverse of the advance-to-deposit ratio. more poverty-focused the MFP. Formula: Formula: Deposits Average Outstanding Balance Gross Loan Portfolio Per Capita Income Deposit-to-Total Asset Ratio Average Saving Balance per Saver Indicates the percentage of assets financed through It indicates average amount of saving balance per saver. deposits.

Formula: Average Total Assets It is average of opening and closing balance of total assets. Deposits Total Assets Average Total Equity It is average of opening and closing balance of total Equity-to-Asset Ratio equity. This is a simple version of the capital adequacy ratio as it does not take in to account risk weighted assets. This Borrowers per Loan Officer ratio indicates the proportion of a company’s equity that is accounted for by assets. It measure of loan officer productivity. It indicates the number of borrowers managed by a loan officer. Formula: Formula: Total Equity Total Assets Number of Active Borrowers Number of Loan Officers Financial Expense Borrowers per Staff It is total of financial expense on liabilities and deposits. It measure of staff productivity. It indicates the number of borrowers managed by the staff on average. Financial Revenue It is total of revenue from loan portfolio and other Formula: financial assets, as well as other financial revenue from Number of Active Borrowers financial services. Number of Total Personnel Financial Revenue from Other Financial Assets Commercial Liabilities It is net gains on other financial assets. It is principal balance of all borrowings, including overdraft accounts, for which the organization pays a nominal rate Financial Revenue from Loan Portfolio of interest that may be greater than or equal to the local It is total interest, fees and commission on loan portfolio. commercial interest rate. Financial Revenue Ratio Commercial Liabilities-to-Gross Loan Portfolio Ratio Indicates the efficiency with which an MFP is utilizing its It indicates efficiency of an MFP’s loan portfolio. assets to earn income from them.

Formula: Formula: All liabilities with “market” price Financial Revenue Gross Loan Portfolio Average Total Assets

Deposits Financial Self-Sufficiency Demand deposits from the general public and members Formula: (clients) held with the institution. These deposits are not conditional to accessing a current or future loan from the Financial Revenue MFP and include certificates of deposit or other fixed term Adjusted (Financial Expense + Net Loan Loss Provision deposits. Expense + Operating Expense + Inflation Adjustment) 126 Copyrights © 2014 · Pakistan Microfinance Network Pakistan Microfinance Review - 2013 Annual Assessment of the Microfinance Industry

Gross Loan Portfolio Net Adjusted Loan Loss Provision Expense It is the outstanding principal for all outstanding client It is the sum of loan loss provision expense and recovery loans, including current, delinquent and restructured on loan loss provision. MFPs vary tremendously in loans. It does not include: accounting for loan delinquency. Some count the entire »» Loans that have been written-off loan balance as overdue the day a payment is missed. »» Interest receivable Others do not consider a loan delinquent until its full term »» Employee loans has expired. Some MFPs write off bad debt within one year of the initial delinquency, while others never write off bad For accounting purposes GLP is categorized as an asset. loans, thus carrying forward a defaulting loan that they have little chance of ever recovering. Gross Loan Portfolio-to-Total Asset Ratio Indicates the efficiency of assets deployed in high yield Number of Active Borrowers instruments/core business of an MFP. Number of borrowers with loan amount outstanding. Formula: Gross Loan Portfolio Number of Active Loans Total Assets The number of loans that have been neither fully repaid nor written off, and thus that are part of the MFP’s gross Inflation Adjustment Expense loan portfolio. Inflation decreases the real value of an MFP’s equity. Fixed assets are considered to track the increase in price levels, Number of Active Women Borrowers and their value is considered increased. The net loss (or Number of women borrowers with loan amount gain) is treated as a cost of funds, is disclosed on the outstanding. income statement, and decreases net operating income. Number of Active Women Borrowers to total Active Inflation Rate Borrowers Latest annualized consumer price index (CPI) as reported It indicates percentage of women borrower to total active by the State Bank of Pakistan. borrowers.

Liabilities-to-Equity Ratio (debt-equity ratio) Number of Loans Outstanding It is the number of loans outstanding at the end of the Formula: reporting period. Depending upon the policy of an MFP Total Liabilities one borrower can have two loans outstanding; hence, Total Equity the number of loans could be more than the number of borrowers. Loan Loss Provision Expense It is the sum of loan loss provision expense and recovery Number of Savers on loan loss provision. It is the number of depositors maintaining voluntary demand deposit and time deposit accounts with an MFP. Loans per Loan Officer Number of Saving Accounts Formula: One depositor can have more than two deposit accounts. Number of Active Loans Hence, the number of deposit accounts could be more Number of Loan Officers than the number of depositors.

Loans per Staff Number of Women Savers It is the number of women savers with voluntary demand Formula: deposit and time deposit accounts. Number of Active Loans Number of Personnel Offices The total number of staffed points of service (POS) and administrative sites (including head office) used to deliver or support the delivery of financial services to microfinance clients. FINANCIAL SERVICES FOR ALL 127 Operating Expense Savers per Staff It is total of Personnel Expense and Administrative Expense. Formula: Number of Savers Operational Self-Sufficiency Number of Personnel

Formula: Loan Loss Provision Expense Financial Revenue It is the sum of loan loss provision expense and recovery (Financial Expense + Net Loan Loss Provision Expense + on loan loss provision. Operating Expense) Loans per Loan Officer Per Capita Income It is average income per person. Formula: Adjusted Loan Loss Reserve Percentage of Women Savers to Total Savers PAR > 30 Days It indicates the percentage of women in the total saving portfolio. Total Assets Total net asset accounts i.e., all asset accounts net of Personnel any allowance. The one exception to this is the separate It is the number of individuals actively employed by disclosure of the gross loan portfolio and loan loss an MFP. This number includes contract employees and reserve. advisors who dedicate the majority of their time to the organization, even if they are not on the MFP’s roster Total Equity of employees. This number is expressed as a full-time Equity represents the worth of an organization net of what equivalent, such that an advisor who spends 2/3 of his/ it owes (liabilities). Equity accounts are presented net of her time with the MFP is accounted for as 2/3 of a full- distributions, such as dividends. time employee. Formula: Personnel Allocation Ratio Total Assets – Total Liabilities The higher the indicator the more lean the head office structure of the organization. This indictor is used to Total Liabilities measure organizational efficiency. Liabilities represent the borrowings of an organization i.e., the amount owed. Examples of liabilities include loans, Formula: and deposits. This number includes both interest and non- Loan Officers interest bearing liabilities of an MFP. Total Staff Total Number of Loan Officers Risk Coverage Ratio The number of staff members who dedicate the majority Indicates the provision created by an MFP against its of their time to direct client contact. Front office staff credit risk. include more than those typically qualified as credit or loan officers. They may also include tellers, personnel who Formula: open and maintain accounts—such as savings accounts— Adjusted Loan Loss Reserve for clients, delinquent loan recovery officers, and others PAR > 30 Days whose primary responsibilities bring them in direct contact with microfinance clients. Saving Outstanding Total value of demand deposit and time deposit accounts. Loan Written Off during Year It is the value of loans written off during the year.

Write-Off Rate

Formula: Loans written off during the year Average Gross Loan Portfolio

Yield on Gross Portfolio (Nominal) Indicates the yield on an MFPs loan portfolio and is usually used as a proxy to look at MFPs (realized) effective interest rate.

Formula: Financial Revenue from Loan Portfolio Average Gross Loan Portfolio

Yield on Gross Portfolio (Real) It is the number of depositors maintaining voluntary demand deposit and time deposit accounts with an MFP.

Formula: (Yield on Gross Portfolio (nominal) - Inflation Rate) (1 + Inflation Rate)

FINANCIAL SERVICES FOR ALL 129 Goals Type of clients of Type Women Clients living in areas rural Clients living in areas urban Poverty reduction Employment generation Growth of existing Gender equality and women's empowerment Increased access to financial services of Development start-up enterprises Youth opportunities PPCBL 1 2 1 1 1 1 2 3 3 3 Declining interest

Ranking Ranking Goals Type of clients of Type Clients living in areas rural Clients living in areas urban Increased access to financial services Growth of existing businesses Poverty reduction Gender equality and women's empowerment Employment generation U-Bank 1 2 1 2 3 4 5 Declining interest Flat interest

Ranking Ranking . Goals Type of clients of Type Women Clients living in areas urban Clients living in areas rural Increased access to financial services Poverty reduction Employment generation Growth of existing businesses Gender equality and women's empowerment 1 2 3 1 2 3 4 5 FINCA MFB FINCA Declining interest

Ranking Ranking Goals Type of clients of Type Clients living in areas rural Clients living in areas urban Poverty reduction Employment generation of Development start-up Growth of existing businesses Housing Increased access to financial services Improvement of education adult Youth opportunities Children's schooling Health improvement AMFB 4 1 1 1 1 2 3 4 4 4 1 2 Flat interest

Ranking Ranking Goals Type of clients of Type Women Clients living in areas rural Clients living in areas urban Poverty reduction Increased access to financial services of Development start-up Growth of existing businesses NRSP-B 1 2 1 2 3 4 3 Declining interest

Ranking Ranking Goals Type of clients of Type Women Clients living in areas rural Clients living in areas urban Other: Government pensioners and Adolescents youth (below 18) Increased access to financial services Poverty reduction Growth of existing of Development start-up enterprises Employment generation Children's schooling Health improvement Housing FMFBP 1 2 4 5 1 2 3 4 5 6 7 8 3 Declining interest

Ranking Ranking

Goals Type of clients of Type Women Clients living in areas urban Clients living in areas rural Growth of existing businesses Poverty reduction Increased access to financial Employment generation POMFB 1 3 1 2 3 4 2 Declining interest

Ranking Ranking Goals Type of clients of Type Women Clients living in areas urban Clients living in areas rural Poverty reduction Increased access to financial services Growth of existing Gender equality and women's empowerment TMFB 1 2 1 2 3 4 3 Declining interest

Ranking Ranking Goals Type of clients of Type Women KBL Clients living in areas rural Clients living in areas urban Increased access to financial services Poverty reduction 1 2 1 2 3 Declining interest

Ranking Ranking

Target Target market Development goals Indicators Social Performance Indicators Microfinance Banks 2.0 1.0

130 Copyrights © 2014 · Pakistan Microfinance Network Pakistan Microfinance Review - 2013 Annual Assessment of the Microfinance Industry Goals Type of Clients BEDF Women Clients living in rural areas Clients living in urban areas Development of start-up enterprises Gender equality and women's empowerment Growth of existing businesses Employment generation Youth opportunities Poverty reduction 2 3 4 5 6 1 1 3 2

Ranking Ranking Goals Type of Clients NRDP Women Clients living in rural living rural in Clients areas Development of start- up enterprises Growth of existing businesses Employment generation Increased access to financial services Gender equality and women's empowerment Youth opportunities Poverty reduction 2 3 4 5 6 7 1 1 2

Ranking Ranking Goals Type of Clients Other: Both and men women Poverty reduction 1 1 NAYMET TRUST

Ranking Ranking Goals Type of Clients Women Clients living in rural living rural in Clients areas Clients living in urban areas Other: Medium enterprises Adolescents and youth (below 18) Increased access to financial services Employment generation Growth of existing businesses Gender equality and women's empowerment Youth opportunities Poverty reduction Health improvement Water sanitation and AMRDO 2 3 5 6 4 1 7 8 1 3 4 5 2

Ranking Ranking Goals Type of Clients SVDP Women Clients living in rural living rural in Clients areas Other: Agriculture, livestock, small size business, renewable energy Employment generation Gender equality and women's empowerment Development of start- up enterprises Growth of existing businesses Youth opportunities Poverty reduction 2 3 4 5 6 1 1 3 2

Ranking Ranking Goals Type of Clients Women Other: Persons with disabilities living rural in Clients areas Clients living in urban areas Adolescents and youth (below 18) Poverty reduction Increased access to financial services Gender equality and women's empowerment Growth of existing businesses Development of start- up enterprises Employment generation Children's schooling Health improvement Water sanitation and Youth opportunities 1 3 5 6 7 8 2 9 4 2 3 4 5 1 10 MOJAZ FOUNDATION MOJAZ

Ranking Ranking Goals Type of Clients Women Clients living in rural living rural in Clients areas Clients living in urban areas Adolescents and youth (below 18) Increased access to financial services Poverty reduction Growth of existing businesses Gender equality and women's empowerment Development of start- up enterprises Employment generation Improvement of adult education Children's schooling Youth opportunities Water sanitation and Health improvement Housing 1 1 1 1 2 3 7 1 5 6 8 4 1 2 1 2 MICRO-OPTIONS

Ranking Ranking Goals Type of Clients OPD Women Clients living in urban areas Gender equality and women's empowerment Growth of existing businesses Development of start- up enterprises Poverty reduction 1 2 3 4 2 1

Ranking Ranking Goals Type of Clients AGAHE Women Clients living in rural areas Clients living in urban areas Increased access to financial services Growth of existing businesses Development of start-up enterprises Gender equality and women's empowerment Poverty reduction Water sanitation and Employment generation Health improvement Youth opportunities 1 1 2 2 5 3 3 1 4 2 3 1 Ranking Ranking

Goals Type of Clients WASIL Women Clients living in rural living rural in Clients areas Employment generation Increased access to financial services Growth of existing businesses Gender equality and women's empowerment Poverty reduction 1 2 2 3 1 2 1

Ranking Ranking Goals Type of Clients SDF Women Clients living in rural living rural in Clients areas Gender equality and women's empowerment Employment generation Development of start- up enterprises Growth of existing businesses Poverty reduction Health improvement 1 2 4 5 3 6 1 2

Ranking Ranking Goals Type of Clients SSF Women Clients living in rural living rural in Clients areas Clients living in urban areas Gender equality and women's empowerment Increased access to financial services Growth of existing businesses Poverty reduction 1 3 4 2 1 2 3

Ranking Ranking Goals Type of Clients Women RCDS Other: urban Semi Clients living in rural living rural in Clients areas Clients living in urban areas Adolescents and youth (below 18) Increased access to financial services Poverty reduction Growth of existing businesses Gender equality and women's empowerment Employment generation Youth opportunities Water sanitation and Development of start- up enterprises Health improvement Improvement of adult education Housing Children's schooling 4 1 1 1 2 2 2 4 5 5 1 3 1 1 1 2 3 Ranking Ranking

Goals Type of Clients OLP Women Clients living in rural living rural in Clients areas Clients living in urban areas Increased access to financial services Growth of existing businesses Employment generation Development of start- up enterprises Poverty reduction 1 2 3 2 4 1 3 2

Ranking Ranking Goals Type of Clients OCT Women Clients living in rural living rural in Clients areas Clients living in urban areas Development of start- up enterprises Employment generation Poverty reduction 1 3 2 2 3 1

Ranking Ranking Goals KF Type of Clients Women Clients living in urban areas Increased access to financial services Gender equality and women's empowerment Employment generation Poverty reduction 2 3 4 1 2 1

Ranking Ranking Goals Type of Clients JWS Women Clients living in urban areas living rural in Clients areas Increased access to financial services Growth of existing businesses Employment generation Poverty reduction 2 4 3 1 2 3 1

Ranking

Ranking Goals Type of Clients GBTI Women Clients living in rural living rural in Clients areas Clients living in urban areas Employment generation Health improvement Gender equality and women's empowerment Water sanitation and Growth of existing businesses Development of start- up enterprises Children's schooling Poverty reduction 1 1 1 1 2 2 2 1 2 3 1

Ranking

Ranking Goals Type of Clients FFO Women Clients living in rural living rural in Clients areas Clients living in urban areas Other: Minorities and persons with disabilities Increased access to financial services Gender equality and women's empowerment Growth of existing businesses Employment generation Development of start- up enterprises ofCapacity building community and institutions Youth opportunities Poverty reduction 2 3 4 7 8 5 1 6 2 3 4 1

Ranking

Ranking Goals Type of Clients Women DAMEN Clients living in rural living rural in Clients areas Growth of existing businesses Increased access to financial services Gender equality and women's empowerment Children's schooling Poverty reduction Health improvement 2 4 5 1 3 6 2 1

Ranking Ranking Goals Type of Clients CSC Women Clients living in rural living rural in Clients areas Clients living in urban areas Growth of existing businesses Gender equality and women's empowerment Development of start-up enterprises Poverty reduction Health improvement Employment generation 2 4 1 3 5 6 2 3 1

Ranking Ranking Goals Type of Clients BRAC Women Clients living in rural living rural in Clients areas Clients living in urban areas Gender equality and women's empowerment Increased access to financial services Growth of existing businesses Development of start-up enterprises Poverty reduction Children's schooling Employment generation Health improvement 1 3 5 6 2 4 8 7 2 3 1

Ranking Ranking

Goals Type of Clients ASASAH Women Clients living in urban areas living rural in Clients areas living Other: Clients below the national poverty line Adolescents youth and (below 18) Increased access to financial services Poverty reduction Growth of existing businesses Youth opportunities Gender equality and women's empowerment Development of start-up enterprises Health improvement 1 1 1 1 1 3 3 1 1 1 2 1

Ranking Ranking Goals Type of Clients ASA-P Women Increased access to financial services Growth of existing businesses Employment generation Poverty reduction 1 2 2 1 1 Ranking

Ranking Goals Type of Clients AKHU Women Poverty reduction Clients living in urban areas Adolescents youth and (below 18) Clients living in rural areas Development of start-up enterprises Growth of existing businesses Gender equality and women's empowerment Housing Health improvement Children's schooling Employment generation 1 5 2 3 4 6 7 8 2 1 3 4

Ranking Ranking

Indicators Target Market Target Goals Development Social Performance Indicators Performance Social Microfinance Institutions 1.0 2.0

FINANCIAL SERVICES FOR ALL 131 BEDF Education services Flat interest Flat Enterprise services Enterprise None offered None No Very Poor Clients No Yes Poor Clients Clients Low Income Microcredit loans for microenterprises empowerment Women services Poverty Scorecard provided by Pakistan Poverty Alleviation Fund (PPAF) Loans for agriculture NRDP Education services services Health Flat interest Flat Enterprise services Enterprise None offered No Poor Clients No Yes Low Income Clients Low Income Microcredit loans for microenterprises Loans for agriculture empowerment Women services Poverty Scorecard provided by Pakistan Poverty Alleviation Fund (PPAF) NAYMET TRUST Education services services Health Flat interest Flat Enterprise services Enterprise None offered No Low income clients Yes Yes Credit life insurance life Credit Microcredit loans for microenterprises empowerment Women services Grameen Progress out of Poverty Index (PPI) AMRDO Flat interest Flat Education services None offered No Poor clients No Yes Low income clients Microcredit loans for microenterprises Microcredit for other household needs/consumption education Loans for empowerment Women services Housing index Scorecard Poverty provided by Pakistan Poverty Alleviation Fund (PPAF) Loans for agriculture SVDP None offered Flat interest Flat None offered None No Very poor clients Yes Yes Agricultural insurance Poor clients Low income clients Microcredit loans for microenterprises livestock for Loans Other: Other: Loans for handicrafts renewable Loans for Other: energy value- Livestock Other: insurance added of out Progress Grameen Poverty Index (PPI) household capita Per expenditure Scorecard Poverty provided by Pakistan Poverty Alleviation Fund (PPAF) interest balance Declining Loans for agriculture MOJAZ FOUNDATION Enterprise services Enterprise Education services None offered None Flat interest Flat No Poor clients Yes Yes Credit life insurance life Credit Low income clients Microcredit loans for microenterprises empowerment Women services Poverty Scorecard provided by Pakistan Poverty Alleviation Fund (PPAF) Loans for agriculture MICRO-OPTIONS None offered Flat interest Flat No Poor clients No Yes Microcredit loans for microenterprises Other: Loans for solar energy empowerment Women services Poverty Scorecard provided by Pakistan Poverty Alleviation Fund (PPAF) Other: Loans for biogas Loans for agriculture Other: Loans for livestock for Loans Other: Loans for education Loans for OPD None offered Flat interest Flat No Low income clients No offered None Yes Microcredit loans for microenterprises household capita Per expenditure household capita Per income Housing index Own proxy poverty index Loans for agriculture AGAHE Education services None offered None Flat interest Flat No Poor clients Yes services Enterprise Yes Credit life insurance Low income clients Microcredit loans for microenterprises empowerment Women services Scorecard Poverty provided by Pakistan Poverty Alleviation Fund (PPAF) WASIL Education services services Health None offered None Flat interest Flat No Poor clients No services Enterprise Yes Low income clients Microcredit loans for microenterprises Loans for agriculture empowerment Women services household capita Per income SDF Education services services Health None offered Flat interest Flat No Poor clients Yes services Enterprise Yes Credit life insurance Low income clients Microcredit loans for microenterprises Microcredit for other household needs/consumption empowerment Women services Grameen Progress out of Poverty Index (PPI) Wealth Participatory Ranking (PWR) Loans for education Loans for Loans for agriculture SSF None offered Flat interest Flat No Poor clients No None offered Yes Low income clients Microcredit loans for microenterprises Loans for agriculture Scorecard Poverty provided by Pakistan Poverty Alleviation Fund (PPAF) Other: Loans for livestock for Loans Other: RCDS Education services services Health Flat interest Flat No Poor clients Yes services Enterprise Yes Low income clients Credit life insurance Microcredit loans for microenterprises Microcredit for other household needs/consumption death Client Other: coverage Repayments Other: branchless through banking empowerment Women services Grameen Progress out of Poverty Index (PPI) Wealth Participatory Ranking (PWR) Scorecard Poverty provided by Pakistan Poverty Alleviation Fund (PPAF) Loans for agriculture Other: Loans for livestock for Loans Other: OLP Flat interest Flat No Poor clients Yes None offered Yes Low income clients Credit life insurance Microcredit loans for microenterprises Microleasing Own proxy poverty index Loans for agriculture SME loans OCT None offered Flat interest Flat No Low income clients No services Enterprise Yes Microcredit loans for microenterprises empowerment Women services Grameen Progress out of Poverty Index (PPI) Loans for education Loans for Loans for agriculture Other: Loans for livestock for Loans Other: KF Flat interest Flat Education services No Low income clients Yes services Enterprise Yes Credit life insurance Microcredit loans for microenterprises Repayments Other: branchless through banking empowerment Women services household capita Per expenditure household capita Per income JWS Other: Health insurance Health Other: interest Flat None offered services Health No Low income clients Yes services Enterprise Yes Credit life insurance Microcredit loans for microenterprises Scorecard Poverty provided by Pakistan Poverty Alleviation Fund (PPAF) Loans for agriculture GBTI Health services Health None offered Education services interest balance Declining No Very poor clients Yes services Enterprise Yes Other: Health insurance Health Other: Poor clients Low income clients Microcredit loans for microenterprises livestock for Loans Other: empowerment Women services Scorecard Poverty provided by Pakistan Poverty Alleviation Fund (PPAF) Loans for agriculture FFO Flat interest Flat No Very poor clients Yes services Enterprise Yes Credit life insurance Poor clients Low income clients Microcredit loans for microenterprises Loans for agriculture Other: Financial support to through banks village linescredit Savings facilitation services empowerment Women services Scorecard Poverty provided by Pakistan Poverty Alleviation Fund (PPAF) DAMEN Health services Health Declining balance interest interest balance Declining None offered Education services No Poor clients Yes services Enterprise Yes Credit life insurance Low income clients Microcredit loans for microenterprises empowerment Women services Poverty Scorecard provided by Pakistan Poverty Alleviation Fund (PPAF) CSC Health services Health None offered Education services Flat interest Flat No Poor clients Yes services Enterprise Yes Credit life insurance Microcredit loans for microenterprises empowerment Women services Poverty Scorecard provided by Pakistan Poverty Alleviation Fund (PPAF) BRAC Health services Health None offered Education services Flat interest Flat No Very poor clients No services Enterprise Yes Poor clients Low income clients SME loans Microcredit loans for microenterprises Microcredit for other household needs/consumption empowerment Women services household capita Per expenditure household capita Per income Wealth Participatory Ranking (PWR) Loans for agriculture ASASAH N/A No Very poor clients Yes None offered Yes Credit life insurance Poor clients Other: IslamicOther: products in beema Khushhal Telenor with partnership Repayments Other: branchless through banking Grameen Progress out of Poverty Index (PPI) ASA-P Flat interest Flat No Poor clients No None offered None offered Yes Low income clients Microcredit loans for microenterprises Poverty Scorecard provided by Pakistan Poverty Alleviation Fund (PPAF) AKHU N/A No Very poor clients No None offered services Health Yes Poor clients Loans for agriculture Housing loans Microcredit loans for microenterprises Microcredit for other household needs/consumption empowerment Women services Grameen Progress out of Poverty Index (PPI) household capita Per expenditure Loans for education Loans for Health services Health Yes Education services Very poor clients Other Yes Other Card Debit/Credit Other services Enterprise Yes interest balance Declining interest Flat No accounts Checking Poor clients No Credit life insurance No Agricultural insurance Low income clients target poverty specific No SME loans Loans for education Loans for Microcredit loans for microenterprises Microcredit for other household needs/consumption Loans for agriculture Housing loans Other Voluntary savings accounts savings Compulsory accounts (cash collateral) Fixed deposits term Special purpose savings accounts services banking Mobile Savings facilitation services services Remittance Microleasing empowerment Women services Grameen Progress out of Poverty Index (PPI) USAID Poverty Tool (PAT) Assessment household capita Per expenditure household capita Per income Wealth Participatory Ranking (PWR) Housing index Food index security test Means Own proxy poverty index Poverty Scorecard provided by Pakistan Poverty Alleviation Fund (PPAF) Indicators Poverty target Poverty Credit products/services offered savings takes MFP If If yes, savings products offered Compulsory insurance of type yes, If compulsory insurance required financial Other offered services Non-financial offered services Does MFP measure poverty poverty yes, If tool measurement Transparency of cost of services to Social Performance Indicators Microfinance Institutions 3.0 4.0 5.0 5.1 6.0 6.1 7.0 8.0 9.0 9.1 ###

132 Copyrights © 2014 · Pakistan Microfinance Network Pakistan Microfinance Review - 2013 Annual Assessment of the Microfinance Industry Goals Type ofType clients SRSO Women Health improvement Water and sanitation Clients living in urban areas rural in living Clients areas Employment generation Development start- of up enterprises Growth of existing businesses Gender equality and women's empowerment Increased access to services financial Housing Children's schooling Poverty reduction opportunities Youth 3 3 1 1 1 1 2 4 3 1 2 2 1 3

Ranking Ranking Goals Type ofType clients TRDP Women Clients living in rural in living Clients areas Clients living in urban areas Growth of existing businesses Development start- of up enterprises Increased access to services financial Employment generation Gender equality and women's empowerment Health improvement Poverty reduction Housing 2 3 4 5 8 1 6 7 1 2 3

Ranking Ranking Goals Type ofType clients SRSP Women Clients living in rural in living Clients areas Clients living in urban areas Increased access to services financial Gender equality and women's empowerment Development start- of up enterprises Growth of existing businesses Poverty reduction 2 3 4 5 1 2 3 1

Ranking Ranking Goals Type ofType clients PRSP Women Clients living in rural in living Clients areas Gender equality and women's empowerment Employment generation Growth of existing businesses Increased access to services financial Improvement of education adult Water and sanitation Poverty reduction Children's schooling Health improvement 2 3 4 5 9 1 6 7 8 1 2

Ranking Ranking Goals Type ofType clients NRSP Women Clients living in rural in living Clients areas Other: Members of community organizations Clients living in urban areas Poverty reduction Employment generation Increased access to services financial Growth of existing businesses Improvement of education adult opportunities Youth Children's schooling Health improvement Gender equality and women's empowerment Water and sanitation Community Other: productive physical infrastructure 1 2 3 3 3 3 3 3 3 3 3 1 3 4 2

Ranking Ranking

Indicators Target Market Development Goals 2.0 Social Performance Indicators Rural Support Programmes 1.0

FINANCIAL SERVICES FOR ALL 133 SRSO Yes Poor clients Yes Low income clients Microcredit loans for microenterprises agriculture for Loans Voluntary savings accounts TRDP No Low income clients Yes Microcredit loans for microenterprises Microcredit for other household needs/consumption Other: Loans for livestock Loans for agriculture for Loans SRSP No Very poorVery clients No Poor clients Low income clients Microcredit loans for for loans Microcredit microenterprises Microcredit for other household needs/consumption Loans for agriculture for Loans PRSP No No specific poverty target Yes Microcredit loans for for loans Microcredit microenterprises Other: Small integrated infrastructure enterprise Loans for agriculture for Loans Other: Loans for livestock NRSP No Poor clients Yes Low income clients Microcredit loans for for loans Microcredit microenterprises agriculture for Loans Community Other: infrastructure productive schemes (lift irrigation and land leveling) Other: Loans for livestock Yes Very poorVery clients Other Yes No No Checking accounts Poor clients No specific poverty target Low income clients SME loans Microcredit loans for microenterprises Microcredit for other household needs/consumption Voluntary savings accounts savings Compulsory accounts (cash collateral) Fixed term deposits Special purpose savings accounts Loans for education Housing loans Other Loans for agriculture for Loans Indicators Poverty Target Poverty Credit products/services offered savings takes If MFP yes, If savings products offered Compulsory insurance Social Performance Indicators Rural Support Programmes 3.0 4.0 5.0 5.1 6.0

134 Copyrights © 2014 · Pakistan Microfinance Network Pakistan Microfinance Review - 2013 Annual Assessment of the Microfinance Industry Flat interest Declining balance interest Health services Credit life insurance Enterprise services Yes Education services Other: Community Community Other: (CIF) Fund Investment Other: Income Generating (IGG) Grant Women empowerment services Poverty Scorecard provided Pakistan by Poverty Alleviation Fund (PPAF) Flat interest None offered Health services Credit life insurance Enterprise services Yes Education services Other: Micro-health Micro-health Other: insurance Women empowerment services Per capita household income Poverty Scorecard provided Pakistan by Poverty Alleviation Fund (PPAF) Flat interest None offered Yes Savings facilitation services Poverty Scorecard provided Pakistan by Poverty Alleviation Fund (PPAF) Credit life insurance None offered Education services Yes Health services Declining balance interest Women empowerment services Poverty Scorecard provided Pakistan by Poverty Alleviation Fund (PPAF) Enterprise services Yes Education services Health services Declining balance interest Other: Life (accidental death) and health (hospitalization) insurance Savings facilitation services Women empowerment services Participatory Wealth Ranking (PWR) Declining balance interest Flat interest Credit life insurance Agricultural insurance Other Debit/Credit Card Other Enterprise services Yes Education services No Health services Means test Means Own proxy poverty index Poverty Scorecard provided Pakistan by Poverty Alleviation Fund (PPAF) Mobile banking Mobile services Savings facilitation services Remittance services Microleasing Women empowerment services Grameen Progress out of (PPI) Index Poverty USAID Poverty Assessment Tool (PAT) Per capita household expenditure Per capita household income Participatory Wealth Ranking (PWR) Housing index Food security index

Transparency of cost clients to of services If yes, type of of type If yes, compulsory required insurance financial Other offered services Non-financial offered services measure Does MFP poverty poverty yes, If measurement tool 10.0 6.1 7.0 8.0 9.0 9.1

FINANCIAL SERVICES FOR ALL 135 www.pmronline.info