Pakistan’s central banking authority, the State Bank of Pakistan (SBP), has reportedly stated that the value of deposits at microfinance banks (MFBs) in the country decreased from PKR 10.3 billion (USD 120 million) as of December 31, 2010, to PKR 8.9 billion (USD 104 million) as of March 31, 2011. Over the same quarter, the value of outstanding loans increased by 6.9 percent and the number of borrowers declined by 1 percent. MFBs did see an increase in the deposit base of 28.4 percent over the year, from PKR 6.93 billion (USD 82 million) in March 2010 to PKR 8.9 billion (USD 104 million) in March 2011.
MFBs have been adversely affected by the floods that struck Pakistan in July 2010, leading to a higher proportion of non-performing loans and write-offs. Khushhali Bank and First Microfinance Bank, two prominent MFBs, reportedly have been forced to limit new lending as they struggle to recover older loans.
The analysis from SBP reportedly indicates that the financial profile of most MFBs is beginning to improve as they are able to recover more loans in flood-affected areas and that portfolio quality “remains positive” after controlling for the floods. SBP expects that the launch of the National Rural Support Program (NRSP) Microfinance Bank, an MFB that grew out of the nonprofit NRSP, will contribute to an improved standing for the MFB sector.
By Rohan Trivedi, Research Associate
About the State Bank of Pakistan (SBP):
Established in 1956, the State Bank of Pakistan (SBP) is the nation’s central banking authority. SBP is responsible for the following primary functions: to regulate and supervise the nation’s financial system, to carry out monetary policy and to manage public debt. In addition, SBP performs the following non-traditional functions: developing the financial framework of the country, providing credit to priority sectors and furthering the Islamization of the banking system.
About Khushhali Bank:
Khushhali Bank is a Pakistani microfinance bank that was founded in 2000 as part of Pakistan’s Poverty Reduction Strategy and its Microfinance Sector Development Program (MSDP). Initially operated by the State Bank of Pakistan, the country’s central banking authority, Khushhali Bank was converted into a public limited company on April 1, 2008. Its shareholders now include Habib Bank Limited, MCB Bank Limited, United Bank Limited and Allied Bank Limited. As of December 31, 2010, Khushhali Bank reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 84.5 million, a gross loan portfolio of USD 43.4 million, return on assets (ROA) of 1.1 percent, return on equity (ROE) of 3.53 percent and 325,000 active borrowers.
About First Microfinance Bank Limited Pakistan (FMFB-P):
First MicroFinance Bank Limited Pakistan (FMFB-P) is a microfinance institution (MFI) based in Islamabad. It is owned by the Aga Khan Development Network, a group of private development institutions that work in sub-Saharan Africa, Central and South Asia, and the Middle East. FMFB-P was founded in 2002 and offers loans, savings, insurance and fund transfer services. In January 2009, it began a three-year partnership with the Pakistan Post Office (PPO) to deliver microfinance services through PPO sub-offices. As of December 31, 2010, FMFB-P reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 74 million, a gross loan portfolio of USD 27.7 million, return on assets (ROA) of -2.73 percent, return on equity (ROE) of -25.1 percent and 152,000 active borrowers.
About National Rural Support Program Microfinance Bank (NRSP MFB):
Founded in 1991, NRSP is a Pakistani nonprofit microfinance bank (MFB) that seeks to improve the quality of life for rural people by giving them the tools to implement various development programs on their own. NRSP conducts its operations through four sectors: microfinance, human resource development, physical infrastructure and technology development and social sector services. In 2008, NRSP internally approved the transformation of its microfinance operations into a regulated microfinance bank and was officially licensed in 2009. NRSP holds a 52 percent stake in the microfinance bank. Other investors include International Finance Corporation; Acumen Fund; and KfW, a German public-law institution. As of 2011, NRSP Microfinance Bank has operations in 46 districts in Pakistan, approximately 576,000 active borrowers and a savings base of PKR 600 million (USD 7 million). As of June 30, 2010, NRSP reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 81.5 million, a gross loan portfolio of USD 65.8 million, return on assets (ROA) of 2.31 percent and return on equity (ROE) of 16.3 percent.
Sources and Additional Resources:
[1] The News: “Microfinance banks deposits fall by 13.9pc”, http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=62578&Cat=3
MicroCapital.org story, June 13, 2011: “MICROCAPITAL BRIEF: Reporting Tepid Growth, State Bank of Pakistan (SBP) Permits Microfinance Institutions (MFIs) to Accept Gold as Collateral”, https://www.microcapital.org/microcapital-brief-reporting-tepid-growth-state-bank-of-pakistan-sbp-permits-microfinance-institutions-mfis-to-accept-gold-as-collateral/
MicroCapital.org story, March 25, 2011: “MICROCAPITAL BRIEF: Pakistan’s National Rural Support Program (NRSP) Microfinance Bank Received Permission to Operate as Regulated Entity”, https://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-sbp-upgrades-license-of-national-rural-support-program-nrsp-microfinance-bank-from-district-to-nationwide-level-2/
MicroCapital.org story, January 31, 2011: “MICROCAPITAL BRIEF: Citi Foundation, Pakistan Microfinance Network Launch Flood Relief Efforts for Microfinance Industry in Pakistan”https://www.microcapital.org/microcapital-brief-citi-foundation-pakistan-microfinance-network-launch-flood-relief-efforts-for-microfinance-industry-in-pakistan/
MicroCapital Universe Profile: State Bank of Pakistan (SBP), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=State+Bank+of+Pakistan+%28SBP%29
MicroCapital Universe Profile: First Microfinance Bank Limited Pakistan (FMFB-P), http://microcapital.org/microfinanceuniverse/tiki-index.php?page=First+MicroFinance+Bank+Limited+Pakistan+%28FMFB-P%29
MicroCapital Universe Profile: Khushhali Bank, http://microcapital.org/microfinanceuniverse/tiki-index.php?page=Khushhali+Bank
MicroCapital Universe Profile: National Rural Support Program Microfinance Bank (NRSP MF Bank), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=National+Rural+Support+Program+Microfinance+Bank+%28NRSP+MF+Bank%29
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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