Finance Project on Khushhalibank

8/6/2019 Finance Project on Khushhalibank

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PROJECT ON

SPECIALIZED FINANCIALINSTITUTIONS

Submitted To:

Prof. Sana Farooq

Project On:

KHUSHHALI BANK

Submitted By:

SALMA BASHIR 1

SANA KHALID 2

Section: A (Morning)Semester 1


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ACKNOWLEDGEMENT

We are grateful to Allah almighty, for enabling us to fulfill this tiring, but interesting job

for the completion of our report.

We would not be going to do justice in presenting this report without mentioning the

people around us who have been inextricably related with the completion of this report.

We would like to express our heart felt thanks to our course teacher Prof. Sadia for her

support and guidance, which she rendered through out the study to peruse this report. It

could not have been possible to accomplish this report without her thoughtful guidance

and expertise.

We would also like to thank the management of KHUSHALI BANK for permitting us to

conduct the interviews from their different department and for supporting us in the whole

procedure.

Finally, for any all too fallible errors, omissions and shortcomings in the writing of the

report only we are responsible for which we hope that all concerning regards of this

report will forgive us.


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BRIEF CONTENTS

Synopsis ------------------------------------------------------------------------------ 1

Banks Profile------------------------------------------------------------------------- 2

History---------------------------------------------------------------------------------- 3

Introduction- Khushhali Bank of Pakistan----------------------------------------- 4

Mission & Values--------------------------------------------------------------------- 5

Facts and Figures---------------------------------------------------------------------- 5

Shareholders--------------------------------------------------------------------------- 6

Network--------------------------------------------------------------------------------- 7

List of Participant--------------------------------------------------------------------- 8

Cooperate Governance and Management------------------------------------------ 11Key Events------------------------------------------------------------------------------ 11

Upcoming Projects--------------------------------------------------------------------- 13

Products---------------------------------------------------------------------------------- 14

Micro Credit Products--------------------------------------------------------------14

Micro Insurance Product-----------------------------------------------------------19

Full Service Banking---------------------------------------------------------------20

Donors and Funding--------------------------------------------------------------------21

Projects--------------------------------------------------------------------------------- 26

Poverty Alleviation Programs in Pakistan-------------------------------------- 26

Scholarship------------------------------------------------------------------------ 29

Women Empowerment and Social Welfare------------------------------------ 31

SME Development---------------------------------------------------------------- 33

Agricultural extension------------------------------------------------------------ 36

Earthquake livelihood Rehabilitation Programm----------------------------- 38

Dairy and Meat Farm Financing------------------------------------------------ 42

Challenges and Prospectives--------------------------------------------------------- 44

Strengths ------------------------------------------------------------------------------ 49

Weaknesses---------------------------------------------------------------------------- 52

Conclusions---------------------------------------------------------------------------- 54

Recommendations-------------------------------------------------------------------- 55


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SYNOPSIS

Khushhali Bank (KB) was established in August 2000 as part of the Government of the

Islamic Republic of Pakistan's Poverty Reduction Strategy. The Pakistan MicrofinanceSector Development Program (MSDP) was developed with the technical assistance andfunding of the Asian Development Bank, which provided a US$150 million loan to thegovernment of Pakistan, US$70 million being used for micro-loans provided by KB.Headquartered in Islamabad, KB operates under the central bank's supervision (StateBank of Pakistan) with several commercial banks operating as its primary shareholders.KB has already provided services to 100,000 customers and aims to reach 700,000 by2007.

Khushhali Bank is the Pakistani government first major government initiative to bridgethe demand for microfinance services. The bank operates on a community-based service

delivery mechanism and forms client clusters to reduce transactional costs. The Banksline of products includes short-term micro loans ranging up to US$500 for workingcapital and asset purchase. It also mobilizes deposits and provides counselling services toits clients.

Khushhali Bank has extensive links with existing microfinance NGOs. These allianceshave been constructed with the aim of developing a more effective and cohesivemicrofinance sector in Pakistan.

Khushhali Bank has operating branches in four provinces, throughout the 38 districts ofthe country including Azad Jammu and Kashmir. The Bank now provides microfinance

services to over 100,000 poor households through 38 branches (hubs) and 72 ServiceCentres (spokes). Approximately 30% of KBs clients are women (Aug 2003).

Khushhali Bank operates throughout urban and rural Pakistan. It currently providesservices to over 100,000 clients of which approximately 30% are women. More than 30%of KBs staff members are women, with two women on the board of directors.

KB also directs its financial endowments to partnering NGOs for social mobilization,capacity building of communities and providing small infrastructure projects within the bank's service areas. This unique arrangement allows KB to disseminate specializedsocial services through NGOs while its delivers financial services to the same market

segments.

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BANKS PROFILE

Khushhali Bank is the country's first major initiative to bridge the demand formicrofinance services. Integral to microfinance services is the intensive and sustained

social support for mobilization, management and development of all clients of the bankand their access to basic infrastructure services.As a for-profit, commercial microfinanceinstitution, its purpose is to:

Establish a sustainable, scalable pro-poor financial services platform with retaildelivery.

Catalyze an enabling environment, within which the microfinance sector candevelop in Pakistan.

Assist the central bank in setting up an appropriate and responsive regulatoryframework within which microfinance institutions can operate on sustainable

grounds, thereby expanding outreach to the poor.

Promote transparency, financial rigor and good governance as leading indicatorsof excellence within the microfinance sector in Pakistan.

Operating through the Microfinance Sector Development Program, Government ofPakistan has issued a Microfinance Development Policy and the State Bank of Pakistanhas developed an exclusive regulatory framework for microfinance institutions with a setof initiatives to ensure dynamic governing conditions. The objective of MSDP is toprovide affordable financial and social services to the poor for a significant impact onpoverty reduction through:

Increased income of poor households,

Enhanced outreach, particularly to women,

Build social capital, and

Reduce risks faced by the poor

The Microfinance Sector Development Program provides an integrated package of policyreforms and means for institutional development and outreach expansion to facilitate

growth of microfinance sector.

LOCATION

Corporate Office94W, 4th FloorJinnah Avenue, Blue Area

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Islamabad-44000, Pakistan+92 (0)51 111 092-092

HISTORY

In August 2000, Khushhali Bank was established as part of the Government of IslamicRepublic of Pakistan's Poverty Reduction Strategy and its Microfinance SectorDevelopment Program (MSDP) that was developed with the assistance of AsianDevelopment Bank. It is headquartered in Islamabad and operates under the centralbank's supervision (State Bank of Pakistan) with commercial banks as its shareholders.Its mandate is to retail microfinance services and act as a catalyst in stabilizing thecountry's newly formed microfinance sector.

Key Project Activities

Improved delivery systems in non-bankable territories;

Raised awareness of formal banking options through innovative marketingstrategies;

Applied communication strategies that improve financial discipline ofpotential clients;

Focused business development services on technical information, productdevelopment and marketing of specific enterprise, crop or livestock products;

Building of the KB image as a trusted, financially strong and friendly bankthat wants to facilitate them in improving their income levels and reduce their

debt;

Improved institutional capacity of KB to trigger take off in non-bankablesegments by analysis of how much subsidy per unit borrower is required andfor what length of time before KB can make a non-bankable territory into abankable territory

Providing higher education opportunities to qualified poor from the projectarea to build future KB local capacity to support KB banking operations;

INTRODUCTION

Who We Are

We are a for-profit, commercial, microfinance institution established for the poor throughfinancial collaboration through shareholder from private and public commercial banks.We operate under a regulatory framework of the countrys central bank (State Bank ofPakistan).Our mandate is to develop outreach and establishing a pro-poor sustainable financial

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services delivery network in the country and assist in creating an enabling environmentthat will attract other microfinance operators to commence their operations.

Head OfficeIslamabad, Pakistan.

BranchesThe Bank is servicing 85 districts of the country through 73 branches and 12 districtservice centers. It operates across all provinces of the country including Azad Jammu andKashmir.

CustomersSince launching our operations in August 2000, we have maintained our commitment toincrease our women-client base across our urban and rural operations. As a result, over23% of our 565,000 clients are women.

Product rangeThe bank operates on a community-based service delivery mechanism and forms clientclusters to reduce transactional costs. The Banks line of products includes short-tenuremicro loans ranging up to US$ 500 for working capital and asset purchase. It alsoproactively mobilizes deposits and provides counseling services to its clients andcontinues to expand its range of services to address client needs.

Our Alliances

Government of Pakistan

The Government has undertaken a significant numbers of programmes to improve thewelfare of its citizens, particularly the poor. The Government initiated a Micro FinanceSector Development Programme (MSDP) to provide a conducive environment andinstitutional capacity to retail microfinance services to the poor. This included the launchof Khushhali Bank (KB) in August 2000, which with in the period of just over six yearsof this commercial launch has established a network of 73 branches and 147 servicecenters in 85 districts across Pakistan. As of March 31, 2007, KB has also processed over986,687 loans totaling more than Rs. 10.3 billion across 560,000 households.

The Bank proactively encourages formation of alliances with the NGOs and recognizes

their role in poverty reduction efforts as envisaged by Government of PakistansMicrofinance Sector Development Policy. The Bank benefits from the an endowmentfund, namely MSDF(Microfinance Social Development Fund) established by theGovernment under a Asian Development Bank loan by directing their proceeds to its pertaining NGOs for social projects within the Banks service areas. This uniquearrangement allows the Bank to disseminate specialized social services through NGOswhile it delivers financial services to the same market segments.

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MISSION & VALUES

Mission

To strengthen the economic base of low-income populace across Pakistan by improvingtheir accessibility to financial services. By backing a diverse product suite withexemplary customer service, and by combining cost-efficiency with next-generationdelivery systems, we intend to achieve our core objective of attaining operational andfinancial self-sufficiency.

Values

Service excellence Performance Ethics Team work Professionalism

FACTS AND FIGURES

Profit seeking, commercial, microfinance institution.

Established for the poor through financial.

The banks head office is located in Islamabad, Pakistan.

Collaborated through shareholder from private and public commercial banks.

Operate under a regulatory framework of the countrys central bank (State Bankof Pakistan).

The Bank is servicing 85 districts of the country through 73 branches and 12district service centers.

It operates across all provinces of the country including Azad Jammu andKashmir.

The bank operates on a community-based service delivery mechanism and formsclient clusters to reduce transactional costs.

The Banks line of products includes short-tenure micro loans ranging up to US$500 for working capital and asset purchase.

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It also mobilizes deposits and provides counseling services to its clients andcontinues to expand its range of services to address client needs.

The ShareholdersFourteen commercial banks, including three multinational banks are the bank'sshareholders:

Private Sector Banks

1. Allied Bank Limited

2. Askari Commercial Bank Limited

3. Habib Bank Limited

4. Habib Metropolitan Bank Limited

5. KASB Bank Limited

6. MCB Bank Limited

7. My bank Limited

8. Soneri Bank Limited

9. SaudiPak Commercial Bank Limited

10. United Bank Limited

Public Sector Banks

1. National Bank of Pakistan

Multinational Banks

1. ABN Amro BankCitibank

2. N.AStandard Chartered

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The NetworkKhushhali Bank operates in all provinces of the country. While its concentration was inrural territories, it is fast penetrating into urban territories as well as its delivery systemsstrengthen. The Bank leverages upon a community-based approach for financialintermediation and invests on building social collateral amongst its client groups.

Operations Department

NWFP

Branches 15

Distrcit/Tehsil ServiceCenters

2

Urban Service Centers -

Presense in Distrcits 7

Punjab

Branches 24

District & Tehsil

Service Centers

10 DSC + 15 TSC =

25Urban Service Centers 16


Sindh

Branches 17

District & TehsilService Centers

10 TSC

Urban Service Centers 9


Baluchistan

Branches 11

District & Tehsil -

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Service Centers



AJK

Branches 1

FATA

Branches 2


-

Urban Service Centers -


Pakistan

Branches 73


12 DSC + 25 TSC =37



List of Participants

Sr. # Participants Name & Designation Name of Institution

1.Dr. Ishrat HusainGovernorState Bank of Pakistan

2. Mr. Mansur-ur-Rehman KhanDeputy GovernorState Bank of Pakistan

3. Mr. Kazi Abdul MuktadirManaging DirectorNational Institute of Banking & Finance

4. Mr. Akram Durrani

Director / HeadState Bank of Pakistan

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5. Mr. Saleem Umer

Chief ExecutiveThe Institute of Bankers Pakistan

6.Mr. Ismet Saeed MirzaJoint Director Compensation & BenefitsState Bank of Pakistan

7.Mr. Amjad ManzoorJoint Director Recruitment & HRISState Bank of Pakistan

8. Mr. M. Mazher-ul-Haq

Joint Director Training & DevelopmentState Bank of Pakistan

9.Mr. Anjum AminVice President (Human Resources)ABN Amro Bank N.V.

10. Dr. Ziauddin Ahmed ZiaEVP & Chief of Human ResourcesAllied Bank of Pakistan Ltd.

11. Mr. Shakil MaparaManager/Head (Human Resources)American Express Bank Ltd.

12. Mr. Zahid Mehmood

Senior Vice President (Human Resources)Askari Commercial Bank Limited

13. Mr. Rafiq Ahmed SuhrwardyGeneral Manager (Human Resources)Bank Al Habib Limited

14.Mr. Zaffar-ul-Islam SiddiquiDeputy General Manager (Human Resources)Bank Al Habib Limited

15. Mr. Bakhtiar KhawajaExecutive In-charge HRBank Alfalah Ltd.

16. Mrs. Amena Arif Buksh

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Director (Human Resources)Citibank N.A.

17. Mr. Ahmed Kamran

EVP/Regional Manager (HR)

Faysal Bank Limited

18. Mrs. Saira Khan

SVP Human ResourcesHabib Bank Limited

19. Mr. Sadiqul Huda

Head of Human Resources & TrainingIndustrial Development Bank of Pakistan

20. Mr. Muhammad Aftab Changi

Head of Human Resources & TrainingKASB Bank Limited

21. Syed Zahid RazaHead of Human Resources & TrainingKhushhali Bank

22. Mr. Ozair A. HanafiExecutive DirectorKhushhali Bank

23. Mr. Pervez MobinHead, Training & Human ResourcesMeezan Bank Limited

24.Mr. Anwar NomanVice President (Human Resources)Metropolitan Bank Limited1st Meeting of Banks HR Heads Forum held on 22nd November, 2004 at SBP, KarachiList of ParticipantsSr. # Participants Name & Designation Name of Institution

25. Mr. Malik Abdul WaheedGroup Head, HR & TrainingMuslim Commercial Bank Limited

26. Mr. S. Safdar Raza RizviSVP Human Resources

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National Bank of Pakistan

27. Mr. Rahat Saeed Khan

Executive Vice President (HR)PICIC Commercial Bank Limited

28.Mr. Moghis BokhariEVP & Head (Human Resources)Prime Commercial Bank Limited29. Ms. Beenish RehmanSVP / Head HR / Admn Saudi Pak Commercial Bank Limited

30.Mr. Saeed ShakirVice President (Human Resources)Soneri Bank Limited

31.Mr. Monis MirzaHead of Human ResourcesStandard Chartered Bank Ltd.

32.Ms. Shahma ZahidManager (Human Resources)The First Micro Finance Bank Limited

33. Mr. Asir Manzur

Director, Human ResourcesUnion Bank Limited

34. Mr. Aejaz H. Khan

Senior Vice President & ManagerUnion Bank Limited

35. Ms. Rukhsana Asghar Ali

Head of Human ResourcesUnited Bank Limited

Corporate Governance & Management

An autonomous, private-sector board comprising of professional bankers and socialdevelopers governs bank's policies and provides guidance to the management inestablishing a robust, customer-centric platform. With an intention to establish a dynamicwork environment and to inculcate a competitive culture, the bank's core management isselected from the banking industry bringing skills in operations and financialmanagement whereas a robust delivery channel gains its strength from professionals withmarketing backgrounds from various sectors.

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Key events

December 1999Governments Economic Reform Agenda centers on poverty alleviation and commits toestablish a Bank for the poor.

February 2000Task force is formed comprising of Ministry of Finance, SBP and the civil society.

June 2000The Finance Minister announces the Microfinance Policy.

August 2000The President of Pakistan promulgates an ordinance to establish the countrys firstmicrofinance bank which is later named as Khushhali Bank.

August 2000Khushhali Bank commences its operation from a remote village in Dera Ghazi Khan.

December 2000Asian Development Bank approves a loan of US$ 150 million for the MicrofinanceSector Development Program.

December 2000Khushhali Bank establishes outreach to 1000 households in 4 of the poorest districts.

October 2001Omnibus legislation promulgated by the president opening the sector to private sector.

December 2001Khushhali Bank achieves its expansion into 20 districts covering 15,000 households.

December 2002Khushhali Bank achieved its expansion into 31 districts covering 68,000 households.




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Next phase of Khushali Bank's micro-scheme be carried out

soon

ISLAMABAD, September 29 (Online): President Khushli Bank Ghalib Nishtar has saidthat the next phase of Khushali Bank's micro-scheme will be carried out in the month ofJanuary 2006 with the worth 150 million dollars aiming at facilitating the 3 millionhouseholds.

"Khushali Bank's operations have posed positive influence on income generation,empowerment, health and education, he said while talking to Online here onWednesday.

He said that the first phase of micro scheme of khushali bank had been successful andwould be completed in the month of December and its next phase would start in January.

He informed that as many as 150 million dollars would be spent in the next phase and 0.5million households would be facilitated in the next two years.

He added that 6 million households had been targeted to be facilitated through micro

scheme and Khushali Bank would facilitate 3 million households and the rest would bebenefited by other banks from the private sectors.

He said that as many 6 new banks were about to launch their branches in the country andit was the evidence that the micro scheme had been successful in achieving its targets.

He said that the sphere of micro scheme would be extended to the far-flung and remoteareas of the country so that the target set could be achieved.

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PRODUCTS

The bank's line of products includes short-tenure microloans, for working capital andasset purchase, as well as training and consulting; i.e.;

Micro credit products

Micro insurance product

Full service banking

Micro Credit Products

Agriculture Loan

This type of loan (AGL) provides facility to small farmers who depend mostly onlandlords or the moneylenders at the time of sowing or cutting of the crops. The clients

can purchase seeds, pesticides, herbicides, fertilizers, watering the land, rent the servicesof transportation, purchasing or hiring the servicing of agricultural equipment etc.

Product Features Details

Product Name Agriculture Loan

Product Type/Category (GroupBased, Individual etc.)

Group Based

Product DescriptionFor the purchase of new assets having minimumuseful life of one year

Loan Eligibility Criteria

Age: 18 58 years, Maximum for repeat clients: 65yearsIncome: Maximum 150,000 PKRResident for 2 yearsNADRA NIC Holder2 years experience

Loan Amount

(i) Minimum initial amount PKR 3,000

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(ii) Maximum initial amount(iii) Maximum total amount

PKR 10,000PKR 30,000

Tenure/Repayment Options3-12 MonthsBullet/Quarterly/Semiannual

Guarantors Cross Guarantees

CollateralInsurance

NoneMandatory

Rates & Fee Structure 23% (on declining balance)

Documentation RequiredILA, PG form, Cash flow, Credit scoring, LoanContract terms and conditions,Schedule of Charges, Loan Repayment Schedule

Disbursement Tools(Draft/Cheque/Cash etc. )

Cheque/Draft/ *Direct Account Credit

Repeat Loans Yes

Top Ups Not allowed

Live Stock Loan

Under this category of loan the client can purchase livestock for milking reasons or forbreeding/slaughtering and other animals from which the client can generate income.

This type of loan can use for the purpose of primary source of income or supplementary

source of income.


Product Name Live Stock Loan

Product Type/Category(Group Based, Individualetc.)

Group Based

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Product Description Both Rural and Urban


Age: 18 58 years, Maximum for repeat clients: 65yearsIncome: Maximum 150,000 PKRResident for 2 years

NADRA NIC Holder2 years experience

Loan Amount

(i) Minimum initialamount(ii) Maximum initialamount(iii) Maximum total amount

PKR 3,000PKR 10,000PKR 30,000

Tenure/Repayment Options3-12 MonthsEMI for dairyBullet/Quarterly/Semiannual for breeding

Guarantors Cross GuaranteesCollateralInsurance

NoneMandatory

Rates & Fees Structure 23% (on declining balance)

Documentation RequiredILA, PG form, Cash flow, Credit scoring, LoanContract terms and conditions, Schedule ofCharges, Loan Repayment Schedule



Repeat Loans Yes

Top Ups Not allowed

Asset Purchase Loan

Under this category the customer may purchase movable engines, parts, machines, tools(including agriculture related tools), equipments etc, which is usable minimum for oneyear. The purchased asset should be according to the clients working experience.


Product Name Asset Purchase Loan

Product Type/Category(Group Based, Individual etc.)

Group Based

Product DescriptionFor the purchase of new assets having minimumuseful life of one year

Loan Eligibility Criteria Age: 18 58 years

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Income: Maximum 150,000 PKRResident for 2 yearsNADRA NIC Holder2 years experience

Loan Amount

(i) Minimum initial amount(ii) Maximum initial amount(iii) Maximum total amount

PKR 3,000PKR 10,000PKR 30,000

Tenure/Repayment Options3-12 MonthsEMI / Bullet / Quarterly / Semiannual


CollateralInsurance

NoneMandatory



Disbursement Tools(Draft/Cheque/Cash etc.)


Repeat Loans Yes

Top Ups Not allowed

Working Capital Loan

This type of loan (WCL) is for the client who is already doing his business, so WCL isfor improving the existing business thats why the experience in current business ismandatory to avail this type of loan.

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It is not for the clients/customers who want to establish their business. From this loan theclient can purchase raw material, increase its production capacity, can purchasestock/inventory.

Product Features DetailsProduct Name Working Capital Loan

Product Type/Category(Group Based, Individualetc.)

Group Based

Product DescriptionExtended for managing running business for thepurchase of raw material/inventory


Age: 18 58 years,Maximum for repeat clients: 65 yearsIncome: Maximum 150,000 PKRResident for 2 yearsNADRA NIC Holder2 years experience

Loan Amount

(i) Minimum initial amount(ii) Maximum initial amount(iii) Maximum total amount

PKR 3,000PKR 10,000PKR 30,000

Tenure/Repayment Options3-12 MonthsEMI / Bullet / Quarterly / Semiannual


Collateral

Insurance

None

MandatoryRates & Fees Structure 23% (on declining balance)




Repeat Loans Yes

Top Ups Not allowed

New Business Loan

This type of loan (NBL) is for the persons who are entering in the new business. TheNBL also applicable for the clients who are doing the business and want to increase thebusiness. NBL is for those customers who want to avail it for income generating purposenot for those who want to use it for consumption purpose. Relevant working experienceis considered additional advantage but not mandatory. So the first time the credit scoring

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and cash flow are exempted but the standard evaluation is mandatory to repeat the loan.


Product Name New Business Loans

Product Type/Category (GroupBased, Individual etc.)

Group Based for both rural and urban

Product Description Extended for establishment of new business


Age: 18 58 years,Maximum for repeat clients: 65 yearsIncome: Maximum 150,000 PKRResident for 2 yearsNADRA NIC Holder

Loan Amount

(i) Minimum initial amount

(ii) Maximum initial amount(iii) Maximum total amount

PKR 3,000

PKR 5,000PKR 30,000

Tenure/Repayment Options3-6 MonthsEqual Monthly Installment (EMI).


CollateralInsurance

NoneMandatory


Documentation RequiredILA, PG Form, Loan Contract terms andConditions, Schedule of Charges, LoanRepayment Schedule



Repeat Loans Yes

Top Ups Not allowed

Micro Insurance Product

Micro Loan Insurance Scheme


Product Name KBL Micro loan insurance Scheme

Product DescriptionCredit/default insurance on the event of death/partial orpermanentdisability of an active borrower

Insurance Coverage Death / Disability of Borrower

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of

Eligibility All eligible borrowers

Scope of Coverage Credit default only

Exclusions (if any) None

Period Covered Equal to loan term

Sum Insured Outstanding Loan

Indemnity Death / Disability

Procedure for ClaimImmediate reporting from branches to HO, Information tobe consolidated and forwarded to NJI along withrespective documents

Claim SettlementPeriod

90 days

Full Service Banking

Current Account Product


Product Name Khushhali Mahana Committee Account

Product Description Current Account (non-interest bearing)

Checking or Non-Checkingaccount

Non-checking account

Eligibility Criteria

Age: 18 years and above

NADRA NIC Holder/Valid Pakistani Passport2 Passport Photographs

Account Opening Amount

(i) Minimum amount required Rs. 200

Account Statement Cycle Half Yearly

Documentation Required

Account Opening form, Contract terms andconditions, Schedule of Charges, SignatureSpecimen Card, KBL Customer ID Card,Indemnity forms

Fees & Charges

- Account opening charges Rs. 50

- Incidental charges; charges re.balance falling below theminimum balance limit

Rs. 25 / month

- Charges if Account Statementis required before the stipulatedperiod

Rs. 50

Donors and Funding

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A donor in general is a person that donates something voluntarily. Usually used torepresent a form of pure altruismbut sometimes used when the payment for a service isrecognised by all parties as representing less than the value of the donation and that themotivation is altruistic

Funding

It is to provide capital (funds), which means money for a project, a person, a business orany other private or public institutions.

Those funds can be allocatedfor either short term or long term purposes. The health fundis a new way of funding private healthcare cent

Sources of Funding

Among the main sources of funding, there are:

Savings

Credit

Donations,

Lottery

Subsidies, Grants

Taxes

Saving

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http://en.wikipedia.org/wiki/Donationhttp://en.wikipedia.org/wiki/Altruismhttp://en.wikipedia.org/wiki/Altruismhttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Allocationhttp://en.wikipedia.org/wiki/Allocationhttp://en.wikipedia.org/wiki/Savingshttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Donationhttp://en.wikipedia.org/wiki/Lotteryhttp://en.wikipedia.org/wiki/Subsidyhttp://en.wikipedia.org/wiki/Grant_(money)http://en.wikipedia.org/wiki/Taxhttp://en.wikipedia.org/wiki/Altruismhttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Allocationhttp://en.wikipedia.org/wiki/Savingshttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Donationhttp://en.wikipedia.org/wiki/Lotteryhttp://en.wikipedia.org/wiki/Subsidyhttp://en.wikipedia.org/wiki/Grant_(money)http://en.wikipedia.org/wiki/Taxhttp://en.wikipedia.org/wiki/Donation


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In common usage, saving generally means putting money aside, for example, by puttingmoney in the bank or investing in a pension plan. In a broader sense,savingis typicallyused to refer to economizing, cutting costs, or to rescuing someone or something. Interms ofpersonal finance, saving refers to preserving money for future use - typically byputting it on deposit- this is distinct from investment where there is an element of risk.

Credit

is the provision of resources (such as granting a loan) by one party to another partywhere that second party does not reimburse the first party immediately, therebygenerating a debt, and instead arranges either to repay or return those resources (ormaterial(s) of equal value) at a later date. The first party is called a creditor, also knownas a lender, while the second party is called adebtor, also known as aborrower.

Any movement offinancial capital is normally quite dependent on credit, which in turn isdependent on the reputation orcreditworthinessof the entity which takes responsibility

for the funds.

A donation is a gift given, typically to a cause or/and forcharitable purposes. A donationmay take various forms, including cash, services, new or used goods as i.e.clothing, toys,food, vehicles, emergency orhumanitarian aiditems, and can also relate to medical careneeds as i.e.blood ororgansfortransplant. Charitable gifts of goods or services are alsocalled gifts in kind.

Legal Aspects

Donations are gifts given without return consideration. This lack of return consideration

means that, in common law, an agreement to make a donation is an "imperfect contractvoid for want of consideration."Only when the donation is actually made does it acquirelegal status as a transfer or property. In civil law jurisdictions, on the contrary, donationsare valid contracts, though they may require some extra formalities, such as being done inwriting.

In politics, the law of some countries may prohibit or restrict the extent to which politicians may accept gifts or donations of large sums of money, especially frombusiness or special interest groups.

In countries where there are limits imposed on the freedom of disposition of the testator,

there are usually similar limits on donations. The person or institution giving a gift iscalled the donor, and the person or institution getting the gift is called the donee.

Donating in the Name of Others

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http://en.wikipedia.org/wiki/Pensionhttp://en.wikipedia.org/wiki/Personal_financehttp://en.wikipedia.org/wiki/Personal_financehttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Lenderhttp://en.wikipedia.org/wiki/Lenderhttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Borrowerhttp://en.wikipedia.org/wiki/Borrowerhttp://en.wikipedia.org/wiki/Financial_capitalhttp://en.wikipedia.org/wiki/Creditworthinesshttp://en.wikipedia.org/wiki/Creditworthinesshttp://en.wikipedia.org/wiki/Charitable_organizationhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Goodshttp://en.wikipedia.org/wiki/Clothinghttp://en.wikipedia.org/wiki/Clothinghttp://en.wikipedia.org/wiki/Toyshttp://en.wikipedia.org/wiki/Foodhttp://en.wikipedia.org/wiki/Vehicleshttp://en.wikipedia.org/wiki/Humanitarian_aidhttp://en.wikipedia.org/wiki/Humanitarian_aidhttp://en.wikipedia.org/wiki/Bloodhttp://en.wikipedia.org/wiki/Organshttp://en.wikipedia.org/wiki/Organshttp://en.wikipedia.org/wiki/Organ_transplanthttp://en.wikipedia.org/wiki/Gifts_in_kindhttp://en.wikipedia.org/wiki/Considerationhttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Civil_law_(legal_system)http://en.wikipedia.org/wiki/Interest_grouphttp://en.wikipedia.org/wiki/Testatorhttp://en.wikipedia.org/wiki/Pensionhttp://en.wikipedia.org/wiki/Personal_financehttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Lenderhttp://en.wikipedia.org/wiki/Debtorhttp://en.wikipedia.org/wiki/Borrowerhttp://en.wikipedia.org/wiki/Financial_capitalhttp://en.wikipedia.org/wiki/Creditworthinesshttp://en.wikipedia.org/wiki/Charitable_organizationhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Goodshttp://en.wikipedia.org/wiki/Clothinghttp://en.wikipedia.org/wiki/Toyshttp://en.wikipedia.org/wiki/Foodhttp://en.wikipedia.org/wiki/Vehicleshttp://en.wikipedia.org/wiki/Humanitarian_aidhttp://en.wikipedia.org/wiki/Bloodhttp://en.wikipedia.org/wiki/Organshttp://en.wikipedia.org/wiki/Organ_transplanthttp://en.wikipedia.org/wiki/Gifts_in_kindhttp://en.wikipedia.org/wiki/Considerationhttp://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Civil_law_(legal_system)http://en.wikipedia.org/wiki/Interest_grouphttp://en.wikipedia.org/wiki/Testator


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It is possible to donate in the name of a third party, making a gift in honor or in memoryof someone or something. Gifts in honor or memory of a third party are made for variousreasons, such as holiday gifts, wedding gifts, in memory of somebody who has died, inmemory of pets or in the name of groups or associations no longer existing. Memorialgifts are sometimes requested by the survivors (e.g. "in lieu of flowers, contributions may

be made to ABC Charity"), usually directing donations to a charitable organization forwhich the deceased was a donor or volunteer, or for a cause befitting the deceased'spriorities in life or manner of death. Memorial donations are also sometimes given bypeople if they cannot go to the ceremonies.

Lottery

It is a form of gambling which involves the drawing of lots for a prize. Somegovernments outlaw it, while others endorse it to the extent of organizing a nationallottery. It is common to find some degree ofregulationof lottery by governments.

At the beginning of the 20th century, most forms of gambling, including lotteries andsweepstakes, were illegal in many countries, including the U.S.A. and most of Europe.This remained so until after World War II. In the 1960s casinos and lotteries began toappear throughout the world as a means to raise revenue in addition to taxes.

Subsidies

In economics, a subsidy (also known as a subvention) is a form of financial assistancepaid to a business or economic sector. A subsidy can be used to support businesses thatmight otherwise fail, or to encourage activities that would otherwise not take place.

Subsidies can be regarded as a form ofprotectionism ortrade barrierby making domesticgoods and services artificially competitive against imports. Subsidies may distortmarkets, and can impose large economic costs.

Financial assistance in the form of a subsidy may come from one's government, but theterm subsidy may also refer to assistance granted by others, such as individuals or non-governmental institutions, although these would be more commonly described as charity.

Grants

Grants are funds dispersed by one party (Grant Makers), often a Government

Department, Corporation, Foundation or Trust, to a recipient, often (but not always) anon profit entity, educational institution or business. Such application processes,generally require some form of Grant Writing often referred to as either proposals orsubmissions. For more information regarding successful grant submissions see GrantWriting

Many Grant Makers require Grant Seekers to have some form of tax-exempt status, be aregistered nonprofit organization or a local government. Most grants are made to fund a

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These measures are construed as a catalyst for broadening and deepening the country'smicrofinance market thus contributing towards poverty alleviation in the country onsustainable basis. They include:

Microfinance Social Development Fund

US$ 40 million fund supports social mobilization activities within poor communities.

Earthquake Livelihood Restoration Fund

20,000 community groups will be formed for provision of equity support and workingcapital loans to 100,000 households to restore 100,000 livelihoods.2,000 Community Infrastructure projects will be implemented with good communitygroups.

A fund of US$ 38 million to finance Earthquake Livelihood Rehabilitation Programme

(ELRP) has been established in SBP which is managed by ELRF Committee.

Risk Mitigation Fund

US$ 5 million fund provides risk mitigation cover to micro borrowers of the bank.

Deposit Protection Fund

US$ 5 million fund provides protection to micro depositors of the bank.

PROJECTS OF KHUSHHALI BANK

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Poverty Alleviation Programs in Pakistan: Great

Expectations

With the increasing severity of poverty and its adverse social, economic and politicaleffects, the present regime has initiated some major policy interventions under theumbrella of poverty alleviation programs in the country. These include microfinance/Khushhali bank; food support program (FWP); revamping Zakat system; andpublic works program (PWP). These programs are in addition to the on going programfor poverty reduction, Pakistan poverty alleviation fund (PPAF).

Poverty is not just non-accessibility of sufficient food and other basic necessities ofdailylife. Most recent literature for poverty describes it as a deprivation and exclusion ofsocial, economic and political opportunities in society.

Poverty results from the poor performance of the economy, institutions, governance andan unequal distribution of resources. The reduction of poverty, therefore, requires a

holistic approach, one, which should address the broader macro economic issues and themain causes of poverty effectively in society.

The objective of MSDP is to provide affordable financial and social services to the poorfor a significant impact on poverty reduction through:

Increased income of poor households

Enhanced outreach, particularly to women

Build social capital

Reduce risks faced by the poor

Products & Services

The Bank's line of products includes short-tenure micro loans ranging up to US$ 500 forworking capital and asset purchase. It also proactively mobilizes deposits and providescounseling services to its clients and continues to expand its range of services to addressclient needs.

With the increasing severity of poverty and its adverse social, economic and politicaleffects, the present regime has initiated some major policy interventions under the

umbrella of poverty alleviation programs in the country. These include microfinance/Khushhali bank; food support program (FWP); revamping Zakat system; andpublic works program (PWP). These programs are in addition to the on going programfor poverty reduction, Pakistan poverty alleviation fund (PPAF).

Poverty is not just non-accessibility of sufficient food and other basic necessities of dailylife. Most recent literature for poverty describes it as a deprivation and exclusion ofsocial, economic and political opportunities in society.

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Poverty results from the poor performance of the economy, institutions, governance andan unequal distribution of resources. The reduction of poverty, therefore, requires aholistic approach, one, which should address the broader macro economic issues and themain causes of poverty effectively in society.

Against this backdrop, it would be timely to critically evaluate the governments povertyalleviation progrmmes. Let us begin with a brief description of its components:

Major Objectives

The main objective of the bank is to reduce poverty through the provision of micro credit.The bank has signed agreements of $150 million loan with the Asian Development Bank.The government has also provided some tax exemptions and other incentives for thebank.

The Khushhali bank will deliver its services mainly through the network of National

Rural Support Program (NRSP). The loans will be provided without physical collateral tothe poor. The size of the loan will be between Rs. 3000-30,000.

The identification of the poor, mobilization of the community and recovery of loan willbe made through the NRSP. In the areas where NRSP does not exist, the bank willprovide loans through other NGOs and commercial banks within the areas. The bankwill only be responsible for monitoring the accountancy and auditing of loan records.

ECONOMIC INITIATIVES

Econ Intiatives

Projects

Agriculture and Livestock

Support

Distribution of compoundanimal feed & urea molassesto flood affected households inSindh.

Micro-Credit Program

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Loan disbursment to supportagriculture, livestock andsmall enterprises.

ECONOMIC INITIATIVES

This program focuses on enhancing the skills and scope of generating income ofcommunities through capacity building and micro credit. The EconomicInitiatives Programme aims at providing the poor with the relevant tools toreduce poverty and provides opportunities through micro-financing andsustainable livelihood schemes.It also helps increase opportunities for income-generation for the rural poor toreap the rewards of their own labour.

Under the Economic Initiatives Program, the following are ensured:

VOCATIONAL SKILLS DEVELOPMENT :

It was observed by IRC that clients coming in for loans make requests for loansfor almost the same purposes. So IRC took the initiative of enhancing thevocational skills of local people to encourage, especially women entrepreneurs,through training.In this regard, a number of trainings were carried out by trained coordinators ofIRC. Topics included livestock management, agricultural inputs, craftsdevelopment, trainings on jute work, foamic work, candle making, glass

painting, amongst many others.

PROVIDING MARKETING OPPORTUNITIES FORPARTNERS :

IRC has initiated the concept of the first cultural center in the city of KhairpurcalledKHAZANA, a platform where people are able to display their skills and

products. KHAZANA is not only restricted to products of Khairpur but caters toentrepreneurs and small business owners from all over Sindh.IRC also arranges 'melas' which provide people better opportunities to sell their

products and enhance their marketing skills.

SOCIAL DEVELOPMENT FUND (SDF)

Social Development Fund (SDF) where IRC non-formal schools are functioningto increase the Community Based Organizations (CBOs) ability to respond to thedevelopment needs of the village and meet 50 per cent of the direct expenses ofnon-formal schools in future

Khairpur

Districts TehsilsUnion

Concils

Villages

&

Mohallas

Total

Members

Total

Amount

Disbursed

Donors

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1 5 15 177 5,800Rs.

24,000,000

PPAF, DIL,IRC,

KhushhaliBank

DADU / JAMSHORO

Districts TehsilsUnion

Concils

Villages

&

Mohallas

Total

Members

Total

Amount

Disbursed

Donors

2 4 10 32 2,200Rs.

2,001,000,981

PPAF,IRC,

KhushhaliBank, Orix

Leasing

Scholarship

Ever since its inception, Khushhali Bank Limited has been providing services to the areasearlier considered as un-bankable segments. Khushhali Banks strategy has been toprovide impetus to growth by providing economic uplift and creating opportunities forunderprivileged people residing in the most marginalized areas of the country. In linewith this strategy, KBL in collaboration with USAID has endeavored to award

scholarships to deserving students of relatively backward and underdeveloped areas ofBaluchistan, Sindh (rural) and FATA to extend the benefits of quality education to theless privileged segments of such marginalized territories.

The scholarship will cover:Tuition and examination fee, course related material/books, boarding & lodging expensesand associated incidental charges

ELIGIBILITY FOR FULL SCHOLARSHIP:

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The student must hold a domicile of any area of Baluchistan, any rural territory ofSindh and FATA.

The student must have an offer of admission to a two-year full time academicprogram of study leading to a Masters Degree or a two to four years programleading to the award of a Bachelors Degree in business disciplines.

The student must qualify for financial assistance in accordance with establisheduniversity/institutes policy. The declared gross annual income of the studentsparents/guardians must not be in excess of 300,000 PKR.

The continuation of scholarship to students will be subject to their ability tomaintain minimum academic performance as prescribed from time to time, and incompliance with the academic/discipline rules of the university/institute.

PROCEDURE

Students will apply directly to the university/institute on the prescribed applicationform for the award of scholarship. The Khushhali Bank Scholarship Program will bemanaged by a committee comprising of one representative each from KBL and theuniversity/institute.

The university/institute will shortlist the students and forward details to the

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committee for a final decision in this regard. The committee will review the academicperformance of all students who have been awarded the Banks scholarship on aperiodic basis.

WAY FORWARD

During the course of study, the students may be offered internship and on completionof the degree, they may also be offered employment in accordance with the banksrequirements, rules and regulations.

PARTICIPATING UNIVERSITIES/INSTITUTES

University No. of Scholarship

LUMS Lahore

Website:www.lums.edu.pk7

IBA Karachi

Website:www.iba.edu.pk3

IBA Sukkur

Website:www.iba-suk.edu.pk11

BUITMS Quetta

Website:www.buitms.edu.pk17

SZABIST Karachi

Website:www.szabist.edu.pk4

IMS Hayatabad PeshawarWebsite:www.imsciences.edu.pk

47

City University of Science & Information

Technology PeshawarWebsite:www.cityuniversity.edu.pk

34

University of PeshawarWebsite:www.upesh.edu.pk

47

Total 170

Women Empowerment and Social Welfare:

Women Empowerment:

The Government of Pakistan is committed to ensure an active role for women in theSocio-economic field through their active participation relating policies and programs.The current situation is briefly described as:

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68 percent rural women fall in the category of the vulnerable lacking in assets,access to services and economic opportunities.

Women dwelling in slums or katchi abadis or just above the poverty line lack

basic needs. Both rural/urban women suffer socio-cultural gender biases. In the Medium Term

Development Framework (MTDF), the following objectives are envisaged forwomen development:

Greater participation of women in political, economic and legislative- decision-making.

Enhanced availability of Micro credit facilities for women.

Accurate gender and rural/urban disaggregated database for planning&programming purposes.

The overall strategy of Women Development is the socio-economic and politicalempowerment of all Pakistani women and eradication of extreme poverty. The objectiveis to bring rural women into the mainstream. The major aim is to ensure womens equalaccess in the development process. A national and four provincial Gender Reform ActionPlans (GRAPs) have been prepared through a consultative process under the aegis ofMinistry of Women Development.

Economic Empowerment Concerted efforts are being made by the Government toalleviate poverty amongst the women of Pakistan. Consequently, the Ministry of WomenDevelopment in Collaboration with development partners and financial institutions like

Aga Khan Rural Support Program (AKRSP), First Women Bank Ltd (FWBL) andKhushhali Bank (KB) Conceived pilot projects for economic empowerment of ruralwomen under the Umbrella of National Fund for Advancement of Rural Women,Jafakash Aurat. Three Pilot projects were launched in remote areas of Balochistan,NWFP and Punjab under the Jafakash Aurat Program for this purpose.

JAFAKASH AURAT PROJECT

The project aims at providing skills to Gawadar women to generating/improve incomegeneration capacity presented by the existing and aspect market conditions. Over periodof three year approximate 3500 women will be trained in various skills (suited to

literate/illiterate women) and 1000 women provided with micro credit to set up theirbusinesses or enhance the existing ones.

This project has two components, vocational skills training of women and providingmicro credit to enable the women to set up their own micro businesses or acquiringgainful employment for well being of their economic conditions.

PROJECT IMAGES

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Social Empowerment

Some 8,314 women in different districts benefited from women centers in the form ofshelters, free legal aid, free medical aid and psycho -social counseling.

Annual Plan 2007-08

An amount of Rs 163.1 million in PSDP 2007 -08 has been allocated for 12 on-going andnew projects. Some of the major projects are Gender Reform Action Plan (GRAP) which

includes inter-alia a national and four provincial plans, establishment of Crisis Centres invarious Districts of the country, National Fund for Advancement of Rural Women,Jafakash Aurat and Pilot Project for District Resource Centers for Women in LocalGovernment.

Physical Targets

The Ministry of Women Development plans to establish District Resource Centers forwomen in Local Government throughout Pakistan under its Gender Reform Action Planto provide conducive atmosphere for the women councilors. More women crisis centersare envisaged throughout the country to provide legal aid and protection to women.

Under the Jafakash Aurat Program, technical, vocational, marketable skills and microcredit facilities will continue to be provided to local women entrepreneurs.

Project of SME Development

The bigger challenge was to extend fund without collateral and to also ensure recovery.The common saying is, small borrowers hardly default, and it has proved correct in thecase of Khushhalibank.

ROLE OF KHUSHHALI BANK IN RISING OF GOP:

In Pakistan, almost one third of the population, lives below the poverty line. TheGovernment of Pakistan has taken a conscious decision to bring poverty alleviation to thecenter stage of economic policy making. The strategy includes access to sustainablemicrofinance services to the poor for enhancement of their income as one of the primaryobjective.

The GOP launched the Microfinance Sector Development Programme in late 2000 toreduce poverty in the country. The purpose was to induce private investments for

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fostering growth of new microfinance institutions to efficiently provide a range offinancial and social service to the poor, especially women. The GOP initiated policyactions for development of the sector. These included:

developing an enabling policy framework for microfinance growth

establishment of Khushhalibank, and

development of a legislative and regulatory framework toencourage establishment of private sector microfinance institutions.

Khushhalibank institutionalized the basic attributes of microfinance policy, specializedoperating procedures and established industry benchmarks. The private sectorparticipants in microfinance sector can take advantage of the institutional and operatinginfrastructure developed by Khushhalibank.

International financial institutions helped in raising the seed money

Khushhalibank is owned by 3 public Sector, 11 private sector and 2 foreign banks whichhave contributed US $ 30 million or Rs. 1.7 billion towards the capital of the bank. Inaddition to this, the GoP has solicited a loan of US $ 150 million through the AsianDevelopment Bank which comprises, US $ 70 million for on-lending to Khushhalibank,US $ 10 million for its capacity building and the remaining US $ 70 million comprisessectoral funds through endowment created at the State Bank of Pakistan.

Three banks now that are catering to this segment

The SME Bank focuses on a higher tier of clientele whereas the Khushhalibank and the

recently established First Micro Finance Bank cater to the requirements of the smallborrowers of the country. However, given the number of 6 million poor households andas per our initial feasibility study, the estimated requirement of funds is about US $ 2billion annually. There is hardly any competition within the formal sector and the majorchallenge will be to set up an efficient delivery channel for affordable financial servicesto the poor.

Creation of enabling environment

Stakeholder consultations and feasibility study undertaken by the Asian DevelopmentBank (ADB) converged on a financial system development approach to create a broad

based system anchored with the ongoing financial sector reforms that emphasizeautonomy, good governance, privatization, and sustainability. These arrangements havetwin objectives, first to ensure an orderly development of the micro finance sector andsecond, to protect the financial assets of the poor. NGOs and their sponsors can nowgraduate into micro finance banks and provide a full range of services to the poor.

The experience with regard to loan payments by the borrowers:

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The bank has established its network across 30 of the poorest districts of the country andextended credit over Rs. 500 million which comprises 50,000 small loans averaging Rs10,000. Planned, focused and structural policies resulted in recovery rates around 98 percent while ensuring that over 30 per cent of our clients are women.

Development of entrepreneurial skills:

Bank aim at strengthening the social capital of the poor increasing opportunities fortheir participation in the working of the society where social cohesion is weak and poorsuffer from systematic exclusion. Increasing economic opportunities and creatingparticipatory institutions/mechanisms are required to enhance social capital. These fundssupport capacity building of community based organization in terms of social awarenessand selection and management of income generating activities, developing skills andproviding basic training to leaders of community organizations These interventions willstrengthen the community organizations, which serve as a delivery point for financial andsocial services, and promotes social and economic vitality.

INCLUSIVE FINANCIAL SYSTEM

Bank programs in FATA with support October - December 06

One promise:

Poverty breaks people. It smears dignity. It poisons hope. It violates dreams. It shatters

self-esteem. It burns integrity. Khushhali Bank has provided micro-loans to over fivehundred and fifty thousand Pakistanis with the primary aim of supporting and rebuildingordinary lives by creating the right combination of circumstances through skill andinfrastructure development, community empowerment, independence and enterprise.More proof that were giving common people an uncommon advantage to realize heir fullpotential.

Which is why, Khushhali Bank is more than a bank, its a promise.Inside this Issue;

A very Happy New Year to all our readers. U.S. Ambassador Supports Khushhali Bank Program in FATA

Khushhali Banks Clients & Staff recognized Global Microcredit Summit 2006 A Glance into Khushhali Banks Promise of Changing Lives.

U.S. Ambassador Supports Khushhali Bank Program in FATA:

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While addressing the gathering of Khushhali Bank clients and staff, the US Ambassadorcongratulated Khushhali Bank on their achievements over the past three years. WithUSAID assistance, the bank has opened twenty two branches, including two in Khyberand Kurram agency of FATA; has hired nearly 200 loan officers in the field and hasdisbursed more than 200,000 loans to clients in FATA, Balochistan and Sindh. USAID

will further support the bank plans to extend its services in the remaining five agencies ofFATA over the next four years. The Ambassador said that creating employment andhelping small-scale businesses in Pakistan is an important U.S. goal. Throughmicrofinance, USAID is helping provide impetus to sustained economic growth and fightpoverty.

The Ambassador specifically encouraged women clients to diligently work for theireconomic development with Khushhali Banks participation. We are proud to announcethat out of 150 applications from across pakistan, 20 cases were short-listed by acommittee. Khushhali Bank submitted 7 cases and following two clients won the Microentrepreneurship awards in their respective categories:

National Level:

Ghazala Yasmeen:

Entrepreneur from Faisalabad whos Customer Services Officer (Khushhali Bank) isUzma Noureen. Ghazala Yasmeen won the best National Female entrepreneur award ofRs. 150,000 and CSO Uzma Noureen won the Loan Officer Recognition Award-category National amounting to Rs. 20,000.

Regional Level

Bibi Noor Jahan:Bibi Noor Jahan- Entrepreneurs from Quetta whos Customer Services OfficerKhushhali Bank) is Uzma Naqvi. Bibi Noor Jahan won the Regional Urban Runner-Upentrepreneurship award of Rs.50, 000. And CSO Uzma Naqvi won the Loan OfficerRecognition Award under Regional category and got prize amounting to Rs. 15,000.

We now have sufficient evidence to show that microfinance works. The challenge for usnow is to build a financial system which caters to the majority of the population. Such asystem should provide equal opportunity in terms of access to an array of affordablefinancial services. The task at hand is to secure global commitment to developing such asystem, where people irrespective of their economic threshold have access to services

they require to make the best possible use of their human potential. In this context weneed to undertake a number of measures to underscore the effectiveness of theseinitiatives:

Firstly, there is a need to create an increased awareness of microfinance and itspotential and the conditions in which it can flourish.

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Secondly, it is imperative to fill several information gaps: which for instance arethe segments of the population with access to financial services; which services in particular; what is the cost effectiveness of impact and if , there are anyimpediments to access.

Thirdly, there is a need to secure commitments at the global level and withinmultilateral frameworks that fiscal, macroeconomic, regulatory and supervisorypolicies are supportive of microfinance services.

And in the fourth place, microfinance should be mainstreamed into the financialsector as a commercially viable proposition and not viewed as an isolated act ofcharity. This is envisaged to bring into focus the role of the private sector andprivate/commercial capital for the requirements of a huge market for financialservices.

In the context of Pakistan the macroeconomic scene has stabilized substantially over the

last seven years with the growth in economy and the overall volume of trade leading to better per capita incomes and reduction in absolute levels of poverty, however aformidable challenge still remains in terms of transferring the benefits of the economicturnaround at a faster rate and more equitably across the countrys population.

In order to address this situation the Government of Pakistan has developed a strategy toreduce poverty through investment in social sectors, rural development, creating more jobopportunities and improving access to financial services. Within the overarching strategysmall and medium enterprises and microfinance have attained significant importance aspoverty alleviation tools.

The Government of Pakistan has systematically, proactively and comprehensivelyendeavored to address the underlying issues that restrict the flow of microfinance servicesto the poor and Pakistan is perhaps one of the first countries from amongst the developingworld to have put in place a policy framework conducive to the development and growthof the microfinance sector. The Policy framework adopted has the following attributes:

It recognizes Microfinance as a part of the broader financial system. It encourages theemergence of Microfinance Institutions to increase outreach to the poor especiallywomen. The framework recognizes the need to direct investments to build social capitaland mitigate risks faced by the poor. The policy promotes cross sectoral linkages betweenMicrofinance Institutions specializing in financial intermediation to provide financial and

non-financial services to individuals as well as groups. It also restricts states direct roleand intervention to policy support.

Furthermore our framework promotes public-private partnerships and private sectorinitiatives. It also improves profile of Microfinance Institutions among policy makers andmainstreams core attributes of Microfinance best practices and good governance. Usingthe attributes of the Microfinance policy, the Government of Pakistan facilitated designof a legal framework for diversification of Microfinance markets in the country.

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The Legal framework comprises of Microfinance Institutions Ordinance 2000 and 2001promulgated by the President of Pakistan and the subsequent legislation notified by thecentral bank the State Bank of Pakistan. The legal framework opens the sector forprivate participation with Microfinance institutions enjoying full autonomy and privileges

of a financial entity. Seed capital financial requirements have substantially been reducedand institutions are permitted to be established at any level, i.e. districts, province ornational and mobilize resources from local markets. Licensing, procedures andsupervisory regulations and disclosure standards have been simplified.

The Policy clearly sees microfinance as a viable commercial activity run by the privatesector with government having a policy support role under a proactive and supervisoryrole of the State Bank of pakistan

These measures have created conducive environment and additionally the enablinginfrastructure has brought focus and attracted private sector investment leading to

positive outcomes as evidenced by substantial growth in the microfinance sector inPakistan over the last seven years. This growth has been witnessed in all fronts and isevidenced by increase in the number of microfinance players, entry of GreenfieldMicrofinance banks, entry of commercial banks into microfinance, diversification ofproducts, ten fold increase in the number .

Towards An Inclusive Financial Sector-microfinance In Pakistan of borrowers to sevenhundred thousand households and development of distribution networks as conduits forfuture growth in the rural and marginalized areas of the country.

These developments have encouraged the emergence of a meso-sector that services themicrofinance market in terms of microfinance networks, specialized rating firms, the bigfour audit firms getting involved into microfinance, enhancing the capability of a centralcredit bureau to service the microfinance sector and a greater level of compliance tointernational standards of reporting and transparency. Today microfinance in Pakistan is asector in its own right rather than just a tool for poverty alleviation with increasing degreeof competition and a high trajectory growth curve.

These efforts and investments have been undertaken with an implicit promise in Pakistan- to build a financial system that reaches out to the poor & provides them with qualityservices to better manage their precarious lives.

Agricultural extension and the role of the private

sector in Pakistan

Public and private sectors, particularly from the perspective of small farmers. It arguesthat both sectors have strengths and weaknesses of their own. The public sector extensionservices do not reach the bulk of the small farmers due to poorly motivated staff,

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inadequate operational funds, lack of relevant technology, top-down planning, centralizedmanagement, and weak accountability systems.

On the other hand, the private sector extension services are targeted at big farmers andare primarily triggered by a profit maximization motive. The paper then presents a unique

model of partnership between a private sector concern, a non-profit (rural supportprogramme), and farmers, and argues that similar models could be adopted to makeagricultural extension services work to the benefit of small farmers.

Introduction

Agriculture is the mainstay of Pakistans economy. More than 24% of the countrys GDPcomes from agriculture sector which also employs about 44% of the labor force, sustainsalmost 75% of the population, and accounts for 30% of the exports and 50% of the totalforeign exchange earnings (Government of Pakistan, 2000). Since Pakistan has high

population growth (more than 2.5%), a sustained growth in agricultural output andproductivity is critical for its economy and social wellbeing.

The Agriculture management model in Pakistan is quite similar to other developingcountries. The Ministry of Food, Agriculture & Livestock (MINFAL) through its provincial departments carries out most of the agricultural extension (Umali andSchwartz, 1994; Swanson, Farner and Bahal, 1990).

The role of the agricultural extension service is to introduce new technologies, advisefarmers on various aspects of crop production, supply inputs such as chemicals, fertilizerand seed, and provide services like crop and orchard sprays against pests and diseases.

Pakistan has tried several extension models including the Village Agricultural andIndustrial Development Programme (Village-AID Programme), Basic Emergence ofprivate sector in agricultural extension.

The Khushali Bank has use the micro-finance model in order to provide credit to thepoor. This programme has set up based on the experience gained through the RSPs, andis two important pillars of the Pakistan Poverty Reduction Strategy.

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To illustrate how such a partnership model can work for improved agriculture extensionservices, a case study from Rahim Yaar Khan, a southern district of Punjab Province, ispresented here.

A case study of partnership between the public and private sectors in Rahim Yar Khan,wheat, cotton and sugarcane are the main cash crops. Mango orchards are abundant butare mostly owned by relatively large growers. Livestock is a secondary source of incomein this area. Rahim Yar Khan lies at the tail of the irrigation system and often faces watershortfalls. Small farmers are especially prone to the irrigation water shortages. Cotton is ahigh-risk crop, often devastated by sporadic pest attacks and crop diseases. This affectsthe small farmers, who are left with little or no profit, accumulated debt, and worsenedquality of life.

In contrast, sugarcane is a low-risk crop. However, it is irrigation-intensive and occupiesfarmland longer than any other crop. This increases the costs of production. The farmers

also have to wait for longer periods before they get paid for their crops, because of theircomparative disadvantage in marketing vis--vis the bigger farmers.

Many COs are showing increased interest in these projects. The communities manage theprojects and they also contribute 20-30% towards the total cost. Most of the smallfarmers have so far opted for installation of electric turbines or renovation of their waterchannels. So far 32 such projects have been initiated, while others are waiting funding inthe next phase. These opportunities have increased the level of interest for unorganizedfarmers and now more people are joining in after witnessing the success of farmers whoreduced their costs and saved water and time after completion of irrigation projects.

Earthquake Livelihood Rehabilitation Program

The earthquake of October 8, 2005 hit the hardest on the livelihoods of those who werealready poor and accentuated their vulnerability due to lack of skills, difficult terrain,inaccessibility, and inadequate linkages to the market. Most livelihoods were catering tolocal markets and the lower income segments of population both for inputs and outputs.

The extent of damage to livelihoods was compounded by loss of lives, injuries,destruction of houses, shelter, productive assets, and damage to social, physical andtransport infrastructure.

Khushhali Bank Limited (KBL), the largest microfinance bank in the country, hadalready been pooling the development efforts and skills of service provider agenciesincluding NGOs for mobilizing poor households into community groups to providefinancial and social services to the group members. In addition, KBL through its partnerorganizations was also providing community infrastructure grants. These businessprincipals of community based service delivery had fostered active participation andownership of KBL program at grassroots level.

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Hence KBL leveraged upon its established experience and developed EarthquakeLivelihood Rehabilitation Program (ELRP), salient features of which are as follows:

The Objective and Scope

The objective of ELRP is poverty reduction through substantial and immediate responsedirected to poor household in affected areas (as defined by the AJK and NWFPGovernment) to restore income flows, reduce dependency on relief, revive localeconomies, and provide shelter including for restoring livelihoods. These will have

immediate poverty reduction impact and thereby increase income of effected households,build social capital, and reduce vulnerability.

Components and Budget:

20,000 community groups will be formed for provision of equity support and workingcapital loans to 100,000 households to restore 100,000 livelihoods.

2,000 Community Infrastructure projects will be implemented with good communitygroups.

A fund of US$ 38 million to finance ELRP has been established in SBP which ismanaged by the ELRF Committee.

Project Implementation

Post Disaster Relief Phase

In the relief phase of disaster, KBL has established a Project Implementation Unit (PIU)in corporate office to oversee implementation of the project.

Rehabilitation PhaseELRP was formally inaugurated by Prime Minister of Pakistan on August 26, 2006, inthe rehabilitation phase of disaster.KBL has established branches in Abbotabad, Bagh,Batagram, Kohistan, Mansehra, Muzaffarabad, Neelam, Poonch and Shangla.

Local resource was hired and trained as Customer Services Officers, to serve theircommunity. KBL has finalized service providers including NGOs to organize community

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into groups so that groups have access to KBLs venture capital financing facility andCommunity Infrastructure Projects grant.

Reconstruction Phase

Community infrastructure projects were slated to be launched in 2007.

Development Phase:

Graduate clients of rehabilitation phase will have access to KBLs mainstream financialand social services.

Khushali Bank Grant/Soft Loan Program (06-10-2007)

Eligibility Criteria:

Earthquake affectees who want to establish/strengthen grocery shop etc. will beprovided Rs.15,000/family

Rs. 12,000/-would be provided as grant whereas Rs. 3,000/- (soft loan with zero mark-up) will be recovered in six installments (Rs.500 / P.M)

Updated on 01-04-08

S# District Male FemaleGrant

(Rs. in Million)

Soft Loan

(Rs. in Million)

Total

(Rs. in Million)

1. Muzaffarabad 3,760 4,260 96.240 24.060 120.300

2. Bagh 968 39 12.084 3.021 15.105

3. RawalaKot 1,937 668 31.260 7.815 39.075

4. Neelum 47 -- 0.564 0.141 0.705

Total 6,712 4,967 140.148 35.037 175.185

Dairy and Meat Farm Financing

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Pakistan is the fourth largest producer of milk in the world, however, only 2-3 percent ofmilk is processed. Similarly, the country has great potential to develop meat farm and canhave substantial share in the attractive Halal meat market. Lack of access to adequatefinancial services has been among other key impediments in the growth and development

of this sector.

The easy and sustained access of dairy and meat farms with affordable financial serviceswould enable the dairy and meat growers to acquire modern and efficient livestockfacilities, infrastructure and processing systems for milk and meat production therebygiving boost to livestock sector to produce large quantity of livestock products fordomestic consumption as well as for export.

Delivery Methodology in Livestock and Dairy Sector

Expert trainers in Agriculture and Horticulture, Livestock and Dairy Sector. Fisheries andMicro Enterprise Management are hired and khushhali bank has provided them state-of-the-art Audio/Video equipment with documentaries and 4x4 vehicles so that they canreach remote and distant areas.

Modules are listed below:

Livestock and Dairy Sector

Breeds of livestock with reference to their productivity traits

Importance of balanced feeding to enhance the productivity of livestock

Methods of urea feeding in livestock

Feeding dairy animals for higher milk production

Fattening of small ruminants

Range management and grazer training

Awareness about contagious diseases and their vaccination program

Awareness about external & internal parasites and their control

Detection and control of mastitis

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Care and management of new born calves

Reproductive health management

Hygienic milk production and dairy products

CHALLENGES AND PROSPECTIVES

Background

KB was designed to implement the MF policy in response to the rising incidence of poverty, significant demand and supply gap, negligible institutional outreach, anddisarray of DFIs. KB is the lead institution to generate the momentum for the sector togrow, and expected investments and institutional diversity to materialize.

The objective of KB is to provide sustainable MF services to the poor in order to reducepoverty and promote social development and economic Justice through communitybuilding and social mobilization.

While observing successful MF practices KB plans to provide affordable services,including savings, credit, leasing, money transfer, and risk mitigation. KB combines thedevelopment efforts of a range of service institutions in a synergistic and catalyticmanner. KB has adopted an innovative management structure to reduce transaction costs.40% of KB staff and 32% of its clients are women. Outreach is projected to be 560,000borrowers by 2006 with portfolio outstandings projected at US$ 133 million.

Khushhalibanks design incorporates global experiences and best practices of themicrofinance industry. By October 2002, KB was operating 31 branches and servicing 33districts. It was managing receivables of US$ 9 million. KB had successfully disbursedUS$ 12 million and serviced over 70,000 loans since its inception.

The number of poor people in Pakistan nearly doubled during the 1990s and thisincidence of poverty will continue to increase if economic performance is notaccelerated, directed poverty reduction interventions are not enhanced, and delivery ofpro-poor services not improved. Therefore, the Government has made poverty reductionits prime objective and identified microfinance (MF) as a critical element of its poverty

reduction strategy.

As institutional MF is a recent development in Pakistan and, therefore, has a very limitedoutreach. However, the poverty reduction potential of MF is now widely recognized atthe policy-making level and among the development community.

Challenges to the Expansion of Khushhali Bank

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With an outreach of less than 5% of poor households, affordable MF services are notavailable to the majority of the poor; thus they are unable to participate in the localeconomy. The outreach of the institutions is expected to grow to 400,000 households(currently about 60,000) by the end of 2004. Commercial banking sector is neitherstructured nor geared to adopt MF as a substantive part of their portfolio. Therefore, in

the absence of complementary or alternative arrangements, the MF market will remaingrossly underserved, and its poverty reduction potential largely unrealized in the mediumto long term.

For this potential to be realized, the following constraints and issues must be addressed,

Social

Inadequate Access of the Poor to Services

Inadequate access to productive resources and social services has resulted in low

indicators of well-being and lack of employment opportunities. This situation iscompounded in rural areas where access is even more difficult due to inadequate orcomplete lack of basic infrastructure.Low skill level and absence of support for human resource development for the poor

prevents them from diversifying their household income. Government interventions have

Documents

Finance Project on Khushhalibank