pmn.org.pk · Pakistan Microfinance Review 2016 inancial Services for all i Editorial Board Mr. Ghalib Nishtar Chairperson, Editorial Board President, Khushhali Bank Limited (KBL)

ANNUAL ASSESSMENT OF

THE MICROFINANCE INDUSTRY

FINANCIAL SERVICES FOR ALL

Produced by Pakistan Microfinance NetworkDesign and Layout by O3 Interfaceswww.o3interfaces.com

ANNUAL ASSESSMENTOF THE MICROFINANCE INDUSTRY

Pakistan Microfinance Review 2016Financial Services for all

i

Editorial Board

Mr. Ghalib NishtarChairperson, Editorial BoardPresident, Khushhali Bank Limited (KBL)

Syed Samar HusnainExecutive Director, Development Finance Group, State Bank of Pakistan (SBP)

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

Mr. Yasir AshfaqCEO,Pakistan Microfinance Investment Company (PMIC)

Mr. Azfar JamalExecutive Vice President, Head Payment Services & E-Banking, National Bank of Pakistan (NBP)

Mr. Masood Safdar GillDirector Programme, Urban Poverty Alleviation Programme, National Rural Support Programme (NRSP)

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PMN Team

Mr. Ali BasharatAuthor and Managing Editor

Mr. Miqdad HaiderCo-Author and Data Collection

Ms. Saba AbbasCo-Author and Data Collection

Ms. Saquiba AzizData Collection

Acronyms and Abbreviations

AC&MFD Agriculture and Microfinance Division

ADB Asian Development Bank

AMRDO Al-Mehran Rural Development Organization

AML Anti-Money Laundering

BPS Basis Points

CAR Capital Adequacy Ratio

CIB Credit Information Bureau

CDD Customer Due Diligence

CGAP Consultative Group to Assist the Poor

CGL Credit Guarantee Limits

CNIC Computerized National Identity Card

CPP Client Protection Principles

CPI Consumer Price Index

CPI Client Protection Initiative

CPC Consumer Protection Code

DFI Development Financial institute

DFID Department for International Development, UK

DPC Deposit Protection Corporation

DPF Depositor’s Protection Fund

ECA Eastern and Central Europe

ESM Environment and Social Management

EUR Euro

FATF Financial Action Task Force

FIP Financial Inclusion Program

FINCA FINCA Microfinance Bank Ltd.

FMFB The First Microfinance Bank Ltd.

FSS Financial Self Sufficiency

FY Financial Year

G2P Government to Person

GBP Great Britain Pound

GDP Gross Domestic Product

Annual Assessment of the Microfinance Industryiii


GLP Gross Loan Portfolio

GNI Gross National Income

GoP Government of Pakistan

IAFSF Improving Access to Financial Services Support Fund

IFAD International Fund for Agricultural Development

IFC International Finance Corporation

JWS Jinnah Welfare Society

KBL Khushhali Bank Ltd.

KF Kashf Foundation

KIBOR Karachi Inter-Bank Offering Rate

KP Khyber Pakhtunkhwa

KYC Know Your Customer

LCPS Low Cost Private Schools

MIV Microfinance Investment Vehicle

MIX Microfinance Information Exchange

MCGF Microfinance Credit Guarantee Facility

MCR Minimum Capital Requirement

MENA Middle East and North Africa

MFB Microfinance Bank

MFCG Microfinance Consultative Group

MF-CIB Microfinance Credit Information Bureau

MFP Microfinance Providers

MFI Microfinance Institution

MFT Microfinance Transparency

MIS Management Information System

MMFB Mobilink Microfinance Bank Ltd

MSME Micro, Small and Medium Enterprises

MIV Microfinance Investment Vehicle

MO Micro-Options

NADRA National Database and Registration Authority

NBMFI Non-Bank Microfinance Institutes

Annual Assessment of the Microfinance Industry iv


NGO Non-Governmental Organization

NFLP National Financial Literacy Program

NFIS National Financial Inclusion Strategy

NMFB Network Microfinance Bank Limited

NPLs Non-Performing Loans

NRDP National Rural Development Program

NRSP National Rural Support Programme

OPD Organization for Participatory Development

OSS Operational Self Sufficiency

OTC Over-The-Counter

P2P Person to Person

P2G Person to Government

PAR Portfolio at Risk

PBA Pakistan Banks Association

PBS Pakistan Bureau of Statistics

PKR Pakistan Rupee

PMN Pakistan Microfinance Network

PO Partner Organization

PPAF Pakistan Poverty Alleviation Fund

PPI Grameen Progress out of Poverty Index

PRISM Programme for Increasing Sustainable Microfinance

PRSP Punjab Rural Support Programme

PTA Pakistan Telecommunication Authority

ROA Return on Assets

ROE Return on Equity

RSP Rural Support Programme

SBP State Bank of Pakistan

SC The Smart Campaign

SDS SAATH Development Society

SECP Securities and Exchange Commission of Pakistan

SPTF Social Performance Task Force

SME Small and Medium Enterprise

SRSO Sindh Rural Support Organization

SRDO Shadab Rural Development Organization

SVDP Soon Valley Development Program

TMFB Telenor Microfinance Bank Ltd

UBL United Bank Limited

USD United States Dollar

USSPM Universal Standards for Social Performance Management

VDO Village Development Organization

WPI Wholesale Price Index

Annual Assessment of the Microfinance Industry


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Highlights

Year 2012 2013 2014 2015 2016

Active Borrowers(in millions)

2.0 2.4 2.8 3.6 4.2

Gross Loan Portfolio(PKR billions)

33.1 46.6 61.1 90.2 132.0

Active Women Borrowers(in millions)

1.3 1.4 1.6 2.0 2.3

Branches 1,460 1,606 1,747 2,754 2,367

Total Staff 14,648 17,456 19,881 25,560 29,413

Total Assets(PKR billions)

61.9 81.5 100.7 145.1 225.3

Deposits(PKR billions)

20.8 32.9 42.7 60.0 118.1

Total Debt(PKR billions)

24.9 26.9 31.1 44.5 54.7

Total Revenue(PKR billions)

12.5 17.3 24.3 32.8 41.8

OSS(percentage)

109.5 118.1 120.6 124.1 127.0

FSS(percentage)

107.5 116.5 119.6 121.0 123.9

PAR > 30(percentage)

3.7 2.5 1.1 1.5 1.2

Annual Assessment of the Microfinance Industry vi

Contents

01

02

03

The Year in Review

Financial Performance Review

Social Performance

Macroeconomy and Microfinance Industry 03

Policy and Regulatory Environment 05

Industry Initiatives 06

Conclusion 09

Scale and Outreach 14

Financial Structure 22

Profitability and Sustainability 25

Productivity 29

Risk 30

Conclusion 31

Analysis of the Sector’s SP Indicators 35

Annual Assessment of the Microfinance Industryvii


04

05

Challenges and Opportunities

Annexures

Digital Financial Services 51

Transition Challenges 53

The Interest Rate Conundrum 54

Responsible Finance & Financial Literacy 54

Meeting the Funding Challenge 56

AI - Performance indicators of industry 2016 61

AII - Performance indicators of individual MFPs 2016 67

AIII - Social Performance Indicators 2016 115

Annexure B - Regional Benchmark 175

Annexure C - Sources of Data 2016 177

Annexure D - Adjustment to Financial Data 187

Annexure E - Terms and Definitions 191

Annual Assessment of the Microfinance Industry viii




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Section 1THE YEAR IN REVIEW

The Year in Review

Macroeconomy and Microfinance Industry

The year 2016 saw the microfinance industry continue to grow and expand. Outreach continued to grow at a double-digit rate with notable expansion in the deposit base of the microfinance industry. Overall, the microfinance industry is now viewed as an important pillar in furthering the financial inclusion agenda in the country.

A favourable macroeconomic environment and economic stability played a catalytic role in the growth witnessed by the industry over the last one year. As a follow up to the launch of the National Financial Inclusion Strategy (NFIS) and the introduction of a regulatory framework for Non-Bank Microfinance Institutes (NBMFI) by the Securities & Exchange Commission of Pakistan (SECP) in 2015, 2016 saw steps being taken to promote access to finance and

transition of Microfinance Institutes (MFIs) and Rural Support Programmes (RSPs) to Non-Bank Microfinance Institutes.

On the funding side the microfinance industry saw a practitioner successfully tapping capital markets to raise debt and several successful debt placements were made by international lenders. Branchless banking continued to grow and mature as the percentage of transactions through m-Wallets picked up as compared to over-the-counter (OTC) transactions. Lending to micro-enterprises by MFBs and Interest Free Loans under the Prime Minister’s Youth Loan Scheme also witnessed an increase. On the responsible finance side, a number of advances took place especially in setting up client grievance redressal mechanisms.

Pakistan’s economy continued its upward momentum during the fiscal year 2016. The country’s GDP witnessed an 8-year high of 4.7 percent during 2016 as compared to 4.0 percent in 20151. Higher infrastructure spending, better energy supplies, lower interest rates and declining security concerns contributed to this

impetus. Nevertheless, the dismal performance of the agriculture sector partially offset the growth momentum, resulting in the economy falling short of the target of 5.5 percent. Despite modest growth in the economy, the microfinance industry surged by nearly 16 percent in terms of outreach while the Gross Loan Portfolio grew by

1 Annual Report 2015-16 (State of the Economy), SBPSect

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Annual Assessment of the Microfinance Industry3

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2 MicroWatch, A quarterly outreach publication, Qtr 4, 2016, PMN3 Annual Report 2015-16 (State of the Economy), SBP4 Ibid

47 percent to close at PKR 132 billion2.

Inflation measured by the consumer price index (CPI) continued its downward trajectory during the year. The annual inflation clocked in at 2.9 percent as compared to 4.5 percent during the fiscal year 2015 on the back of a stable exchange rate and lower oil prices3. This led to the continuation of an expansionary monetary policy by State Bank of Pakistan whereby the policy rate witnessed cuts of 50 and 25 basis point (bps) during fiscal year 2016 bringing it to 5.75 percent as shown in Exhibit 1.1. This should result in reduced cost of borrowing for microfinance

practitioners.

On the fiscal front, the current account deficit deteriorated further as compared to last year, though financial inflows kept it afloat. Similarly, the trade deficit also suffered and expanded by 6.9 percent during the period under review. Nevertheless, growth in tax revenues and stringent control over current expenditures reduced the overall budget deficit to 4.6 percent from 5.3 percent in previous year4. Moreover, SBP’s foreign exchange reserve witnessed an

all-time high of USD 18.1 billion in year 2016 on the back of support from the IMF programme, short-term commercial borrowing, and a surge in Foreign Direct Investment (FDI). Although the exchange rate has remained stable over the period under review, it continued to be under pressure owing to an expanding trade deficit. This exchange rate stability may not be sustainable in the long run and may require an adjustment at some point in time. Meanwhile the decline in interest rates remained positive for private businesses. Credit to the private sector witnessed an expansion of PKR 460.6 billion in 2016, which is more than double the level of

expansion seen during fiscal year 2015. All the major sectors resorted to bank borrowing to fulfill their financing needs. Moreover, decline in government borrowing from commercial banks coupled with improvement in the business environment allowed the private sector to reap benefits of the lowered policy rate. This bodes well for MFPs as well which are showing increased reliance on commercial borrowing to meet their funding needs.

Exhibit 1.1: Discount rate, KIBOR and CPI Trend

Discount Rate6 - months KIBORConsumer Price Inflation (Average)

2012

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2013 2014 2015 2016

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Policy and Regulatory EnvironmentOne of the main reasons for the growth in the microfinance industry has been the enabling policy and regulatory environment, which has been recognized globally at various forums. Pakistan’s regulatory and enabling environment for financial inclusion has been ranked 5th by The Economist5. Significantly the last year witnessed the transformation of MFIs and RSPs into regulated entities.

Transition to NBMFIs Following amendments in the Non-Bank Finance Companies Framework to allow for the establishment of Non-Bank Microfinance Institutes (NBMFIs), transformation of non-bank microfinance players into regulated entities under the umbrella of Securities and Exchange Commission of Pakistan was initiated. During the entire process, there was close interaction between the industry association, PMN, national apex, PMIC, and SECP itself to ensure a smooth transition.

Initially awareness sessions around the regulations were conducted by both SECP and PMN for the forty plus non-bank MFPs. As many of the entities had worked in an unregulated environment since inception, transforming them into regulated entities was quite challenging. While regulations were welcomed by all as the next step forward, several issues arose which had to be addressed during the transition.

Although some of the larger companies had been registered as companies, several others had to first register as companies before applying for licenses. To facilitate the players in getting the licenses the deadline for obtaining the licenses was extended from early 2016 to end of 2016. Another notable issue was meeting the Minimum Capital Requirements of PKR 50 million. Several smaller organizations were unable to meet this criterion and were assisted by PMIC in meeting the shortfall through endowments or subordinated debt. In addition, another prominent issue had to do with

corporate governance of these organizations. Cross directorship and the requirement for directors to meet the fit and proper criteria as prescribed by SECP remained key impediments. SECP gave an exemption for cross directorship up till April 2017 and meeting the requirement for fit and proper criteria was delinked from the licensing process. In addition, keeping in view the dynamics of the microfinance industry, people having expertise in fields like the social sector and economic development were allowed on the boards of NBMFIs.

Moreover, to facilitate small borrowers and reduce costs, the requirement for generating a credit inquiry for any loan above PKR 5,000 was revised upwards to PKR 10,000. The license fee was also reduced by half from PKR 750,000 to PKR 375,000 to facilitate the players.

As a result, over 21 entities have been licensed by SECP as NBMFIs and the remaining are in the process of acquiring the license. It is hoped that the transformation of non-bank players into NBMFIs would lead to transparency, create a level playing field in the industry and accelerate growth like the MFBs which are regulated by the central bank.

Reaching Out to Small & Marginalized Farmers According to the Agriculture Census 2010, there are nearly 5.3 million (out of a total of 8.3 million) farm households with landholdings below 5 acres. Despite having a large share in the total agricultural output, the small individual landholdings result in difficulty in obtaining credit from formal financial institutions.

The microfinance industry plays a crucial role in providing access to finance to small and marginalized farmers as the sector enjoys excellent outreach in rural areas, with over 54 percent of the total current clientele belonging to rural areas and over 42 percent affiliated with the

5 The Global Microscope 2016: The enabling environment for financial inclusion, EIU,20166 MicroWATCH, A quarterly outreach publication by PMN, Issue 42, Quarter 4, 2016Se

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Industry InitiativesThe year saw several new initiatives being undertaken especially on the funding side while existing ones were enhanced and expanded.

Branchless Banking Buoyed by an enabling regulatory and supportive business environment, the branchless banking sector in the country continued to expand in the year 2016. With the National Financial Inclusion Strategy (NFIS) aiming to provide access to finance to 50 percent of the adult population and 25 percent of adult women by 20207, digital financial services are likely to play a crucial role in meeting these goals. Branchless banking provides an excellent channel for the microfinance industry to increase outreach, reduce reliance on conventional branch networks and hence reduce operating costs. Utilizing digital credit models to extend microloans and mobile money accounts to mobilize savings are some tools available to the practitioners to boost financial inclusion at the base of pyramid.

All the main indicators of branchless banking have exhibited robust growth over the last one year. The value of branchless banking transactions grew from PKR 1,872,451 million to PKR 2,169,541 million showing a growth of 16 percent over the year8. Over the same time,

the number of transactions grew by 28 percent from 374 million to 478 million9. The total number of branchless banking accounts stood at 19.96 million at the end of the year showing an increase of 30 percent10. Out of the total branchless banking accounts 49 percent of them were active. Women accounted for 21 percent of the mobile accounts11. Total deposits in the m-Wallet accounts stood at PKR 11,717 million12. Branchless banking continues to be dominated by three players namely Easypaisa, Jazzcash and UBL Omni which accounted for 98 percent of the branchless banking accounts at the end of 2016 as compared to 97 percent13 in the previous year despite the entry of several new players in the arena. As the industry matures the adoption of m-Wallets is increasing as compared to OTC transactions. The m-Wallet to OTC transaction ratio has increased from 34 percent in 2015 to 49 percent in 201614.

Nearly 19 MFPs are using branchless banking channels primarily for recollection for loans, however, there remains scope for using them for additional services such as disbursements, savings and insurance. In this regard, alliances and partnerships between branchless banking providers and MFPs would go a long way in broad adoption of digital channels for extending financial services.

agriculture & livestock sector6. There remains, however, considerable room for expansion in serving this market niche.

SBP has included MFIs and RSPs in its annual agriculture disbursement targets and PMN has been made part of the Agriculture Credit Advisory Committee (ACAC) which is chaired by the Governor SBP and the Agriculture Credit Committee (ACC). An initial target of a GLP of 34 billion was assigned to 16 MFIs and RSPs in the

FY 2016.

As MFIs and RSPs are non-deposit taking institutions, financing remains a key challenge. To facilitate them, in 2016, SBP allowed commercial banks to provide wholesale lending to MFIs and RSPs to meet their annual farm sector credit target to subsistence farmers. It is hoped that the resulting synergies between commercial banks and NBMFIs will result in meeting the financing needs of small and marginalized farmers.

7 National Financial Inclusion Strategy (NFIS), SBP, 20158 Branchless Banking Newsletter, Multiple Issues, SBP9 Ibid10 Ibid11 Ibid12 Ibid13 Ibid14 Ibid



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Client Protection and Social Performance Management The year in review saw many advances in the client protection and social performance management domain, reflecting the commitment of the sector to becoming a double bottom line industry.

The State Bank of Pakistan introduced revised protocols for Client Grievance Handling Mechanisms (CGHM), which are a comprehensive set of guidelines, highlighting the overarching principles to establish robust CGHM in banks. The protocols put forth specific rules for establishment and operation of the systems at all banks including microfinance banks.

Considering the importance of Grievance Redressal Mechanisms in ensuring the provision of responsible and client-centric financial services, PMN in collaboration with The Smart Campaign, developed a progressive GRM framework to establish minimum standards of good practice for its member MFPs, keeping in view their scale and scope of operations. The project was undertaken realizing the need for standardization in the GRM domain as there remains a great deal of variation in the GRM processes employed by the MFPs. Since PMN’s partners range from very small institutions to large banks, PMN is keen on supporting the microfinance industry by helping them improve their practices around grievance redressal. Based on the framework, over the next two years, PMN will extend technical assistance to its members to bring their practices at par with the standards

outlined.

International LendingThe year saw continued investor interest in the industry with several international Development Financial Institutions, Microfinance Investment Vehicles (MIVs) and impact investors exploring the market. Eco Trade & Development Bank, ADB, Symbiotics, Incofin, Triple Jump, Proparco, Blue Orchard and Microvest were among the investors who actively explored the markets largely for debt placement.

Last year, saw the successful finalization of deals worth over USD 14.5 million by various funds to Kashf Foundation, USD 20 million by ADB and USD 5 million by ECO Trade & Development Bank to KBL and USD 10 million for NRSP Bank. Going forward it is expected that several mid-tier entities would also likely finalize deals with international lenders this year for debt.

Tapping Capital Markets With the industry growth in double digits over the last few years, the funding needs of the industry are also growing. Increasingly, practitioners are looking towards diversifying their funding sources and capital markets are a natural avenue for that.

The year saw a successful attempt by an MFP to tap the debt capital market to meet funding needs. NRSP Bank issued a Term Finance Certificate worth PKR 3 billion with a tenor of 2 years. JS Bank and Faysal Bank were lead arrangers for the facility. The principal amount is payable in 8 equal installments and the bonds

Box 1FINCA and Khushhali Microfinance Bank becomes first MFB in Pakistan to get Smart Certified

FINCA Microfinance Bank and Khushhali Bank Limited underwent a comprehensive third party smart assessment in 2016 and earlier 2017 respectively, with both banks becoming the first ones among microfinance Banks in Pakistan to be Smart Certified– a testament to the organizations’ focus on client centricity and responsible practices. Client protection has always been a conscious decision made by FINCA and KBL and institutionalizing it has been a process of exchange and learning from the clients. An international recognition of these standards will help stakeholders, including clients; understand the level of commitment to FINCA and KBL’s clients and its priority of aligning products, services, and procedures to clients’ needs.

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are priced at 3-months KIBOR + 2.35. The facility is secured against a cash coverage of PKR 300 million and hypothecation of current and future current assets of the bank. A key highlight of the transaction was that unlike previous issues the Term Finance Certificate was not secured through a credit guarantee.

Interest-Free Loan SchemeThe Interest Free Loan Scheme was launched by the current Government as part of the Prime Minister’s Youth Loan Scheme in 2014 with an aim of reducing poverty and generating employment. Pakistan Poverty Alleviation Fund (PPAF) has been tasked by the Government of Pakistan to mobilize, implement and monitor the scheme. A key element in the monitoring process has been to ensure the there is no overlap between conventional microfinance and interest free loans.

The scheme was launched with an allocation of PKR 3.5 billion out of which PKR 3.1 billion was for on-lending. By the end of 2016, PKR 5.5 billion had been disbursed through the revolving of funds15. The scheme is being implemented in 431 Union Councils across the country through 26 MFIs16. Moreover, more than 50,000 recipients of the loans were BISP beneficiaries who are now running their own businesses instead of relying on cash grants.

Micro-enterprise Lending Micro-enterprise lending has the potential to fill the financing gap between the microfinance and traditional Small and Medium Enterprises (SME). The entities falling in this gap have similar dynamics as the clientele of the microfinance

industry. They also have the potential to generate employment and grow their business.

At present 8 out of 11 MFBs are lending to this segment and the number of borrowers in this segment has risen to 32,000 from 12,000 in 201517 showing a growth of 261 percent. In the same time, the total loan outstanding for the segment stood at PKR 7.3 billion up from PKR 3 billion18 as shown in Table 1.1 below.

While the borrowers from this segment are a small fraction of the overall borrowers of the microfinance industry but they account for nearly 5 percent of the total GLP. Lending to this micro-enterprise segment will likely increase the funding requirement of MFPs exponentially and dedicated funding lines for the segment would likely increase lending and encourage NBMFIs to cater to this segment.

Commencement of Operations by PMICIncorporated in August 2016 as an Investment Finance Company, PMIC is setup jointly by Pakistan Poverty Alleviation Fund (PPAF), Department for International Development (DFID) through Karandaaz Pakistan and the German Development Bank (KFW) to catalyze and lead the next phase of growth in the microfinance sector of Pakistan as the wholesale lender and sector developer. Recognized as an important financial sector player in the National Financial Inclusion Strategy (NFIS) launched by Government of Pakistan in 2015, the purpose of the organization is to improve financial inclusion, employment and wellbeing of the poor by providing wholesale financing to the microfinance service providers in the country.

Year 2013 2014 2015 2016

Number of Loans 136 2,185 12,612 32,958

GLP 33,902,858 530,587,461 3,061,824,879 7,279,497,227

Average Loan Size (PKR) 249,286 242,832 242,771 220,871.9348

Table 1.1: Micro-enterprise Lending19

15 PPAF 16 Ibid17 MicroWATCH, A quarterly outreach publication, PMN, Multiple Issues 18 Ibid19 Ibid



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The institution also has a role in the development and strengthening of the microfinance sector by actively contributing to policy and regulations for microfinance, capacity building of microfinance players as well as to promote innovation and responsible financial practices in the sector. In sync with the Microfinance Growth Strategy 2020 articulated by the sector, PMIC envisions to become the largest provider of wholesale funds to the sector to increase the number of microcredit borrowers to 10 million by 2020.

PMIC is taking over the task PPAF has successfully carried out for more than 16 years for the development of the microfinance sector in the country which has been recognized and acknowledged both nationally and internationally. PMIC started its operations as a separate legal

entity in December 2016 by taking over PPAF’s portfolio in the microfinance sector. As the apex institution and sector developer, PMIC will issue a broad array of funding instruments and financial services to its borrowers (Non-bank Microfinance Institutions and Microfinance Banks) in the form of senior debt, guarantees, debt syndication, mezzanine capital among others. As a private sector commercial entity, PMIC is strategically placed to raise funds from commercial banks as well as capital markets to raise the quantum of funding available for the sector. PMIC aims to be the sector developer with emphasis on development of need based products for the sector which are innovative, market-based, abiding by international best practices, technologically savvy and, above all, are beneficiary-centric.

ConclusionOverall, the microfinance industry continued its upward trajectory in the 2016. With the NFIS in place and the entire microfinance sector under a regulatory umbrella, the players have in place a supportive environment to grow and become a significant part of the financial landscape. Moreover, with the industry infrastructure in place including the credit information bureau, digital financial services, responsible finance initiatives, players have an excellent opportunity to continue expanding outreach and tapping new market segments.

Capital markets, international lending and the Pakistan Microfinance Investment Company (PMIC) all provide avenues for MFPs to meet their increasing financing needs. Continued economic stability will continue to play a crucial role in the progress of the sector. In addition, players need to strengthen their corporate governance, build capacity, focus on product development and innovation and explore newer markets to become an increasingly important part of the financial landscape.

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Section 2FINANCIAL PERFORMANCE REVIEW

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Financial Performance Review

This section provides a detailed analysis of the financial performance of Pakistan’s microfinance industry in 2016. Performance has been assessed on three levels: industry wise, across peer groups and institution wise. The analysis is backed by 88 financial indicators, calculated from the audited financial statements of the reporting organizations. These indicators have been compared across time and regions to develop a

reliable and fair assessment of sector.

Detailed financial information is provided in Annex A-I and A-II of the PMR. Aggregate data has been reproduced for five years, whereas, the peer group and institution specific data has been made available only for the year 2016.

A total of 35 MFPs submitted their audited

Box 2.1Peer Groups

Microfinance InstitutionA non-bank microfinance institution (NBMFI) providing microfinance services. With the introduction of the non-bank microfinance regulatory framework by SECP in 2016, the institutions carrying out microfinance services are required to be registered with SECP as NBMFIs. Presently, 11 MFIs have obtained the NBMFI license while 12 MFIs are in the process of obtaining the license.

Microfinance BankA commercial bank licensed and prudentially regulated by the SBP to exclusively service the microfinance market. The first MFB was established in 2000 under a presidential decree. Since then, 11 MFBs have been licensed under the Microfinance Institutions Ordinance, 2001. MFBs are legally empowered to accept and intermediate deposits from the public. Currently there are 11 MFBs operating in the country.

Rural Support ProgrammeA non-bank microfinance institution (NBMFI) providing microfinance services. An RSP is differentiated from the MFI peer group based on the purely rural focus of its credit operations. As of now, these organizations are in the process of registering with SECP under the new regulatory framework for NBMFIs. At present, 3 organizations have obtained the license while 1 RSP is in the process of obtaining the license.

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financial statements for PMR 2016. For a complete list of reporting organizations refer to Annex B.

Industry players are categorized into three groups for benchmarking and comparison purposes: Microfinance Banks (MFBs), Microfinance Institutions (MFIs) and Rural

Support Programmes (RSPs). See Box 2.1 for detailed definitions.

The distribution of respondents (number of reporting organizations) by peer group is given in Exhibit 2.1. The MFI peer group comprises of the largest number of respondents followed by MFBs and then RSPs.

Exhibit 2.1: Distribution of Respondents by Peer Groups

MFI 22

RSP 4

MFB 9

Scale and OutreachThis section focuses on outreach indicators to provide a performance analysis of the industry in terms of credit growth and composition, deposit mobilization, depth of outreach and gender.

Scale and Outreach: BreadthIn the year 2016, credit outreach remained positive with active borrowers increasing to 4.2 million from 3.6 million in 2015 recording a growth of 16%. Meanwhile, the gross loan portfolio witnessed a staggering growth of 47% and crossed the PKR 100 billion mark. The GLP stood at PKR 132 billion from PKR 90 billion in

2015 (Exhibit 2.2). Among the MFPs, growth in active borrowers was driven by Akhuwat which added 162,000 borrowers, registering a growth of 40%. Telenor Microfinance Bank added 98,000 borrowers to its portfolio in 2016, while NRSP Bank added 67,000 borrowers.

The industry in terms of outreach remained dominated by 9 MFPs comprising of 80 percent of the total active borrowers as shown in Exhibit 2.3. NRSP maintained its top position with a portfolio of 650,000 borrowers. During the year under review, Akhuwat surpassed Khushhali Bank and became the second largest provider of micro-credit in terms of active borrowers by recording 568,000 borrowers. Khushhali Bank reported 557,000 active borrowers in its portfolio.



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Among the peer groups, MFBs continue to dominate the sector with a market share of 42% - registering an increase of 3%. This increase is attributed to growth in outreach of TMFB and NRSP-B. During the same period, the MFIs share witnessed a marginal reduction of 1% from last

year and stood at 37%. Similarly, the RSPs market share also reduced to 21% from 23% in 2015 as shown in Exhibit 2.4.

In terms of GLP, MFBs enjoy the largest market share of 68% among the peer group, followed

Exhibit 2.2: Growth in Number of Active Borrowers and GLP

0.5020

40

60

80

100

120

140

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2012 2013 2014 2015 2016

Active borrowersGLP

Act

ive

Bor

row

ers

in M

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ns

GLP

in P

KR

Bill

ions

Exhibit 2.3: Active Borrowers of Largest MFPs

NRSP

Akhuwat

KBL

TMFB

NRSP-B

ASA-P

FMFB

KF

FINCA

100 200 300 400 500 600 700

20152016

Active Borrowers in Thousands

90132

247215

177221

263322

258326

287385

521557

406568

590650

Exhibit 2.4: Share in Active Borrowers by Peer Group

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

MFBMFIRSP

27%

34%

39% 40%

35%

25%

42%

31%

27%

39%

38%

23%

42%

37%

21%

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by MFIs and RSPs having a market share of 20% and 12%, respectively. The MFBs share in total GLP witnessed a growth of 7% which is mainly on account of substantial increases in the portfolios of KBL, FINCA, U Bank, MMFB, and NRSP-B. The greater average loan size of MFBs (PKR 51,771) among peer groups is also a factor for the largest market share. Despite the robust performance by MFIs and RSPs with increased GLP by PKR 27 billion and PKR 16 billion respectively, their market share weakened in the current year.

During the current year, total GLP for the industry stood at PKR 132 billion up from PKR 90 billion in the previous year. Although this growth was supported by all the players of the sector, however, MFBs contributed the most, adding PKR 33.7 billion to their portfolios, followed by MFIs, and RSPs which added PKR 6 billion and PKR 2.3 billion, respectively (see Exhibit 2.6). This growth is supported by an increase in active borrowers coupled with improvement in the average loan size.

In terms of GLP, the top nine players dominate the sector accounting for 78% of the overall GLP. KBL continued to lead with a GLP of PKR 23.3 billion, recording a healthy growth of 33% over the last year. This growth is supported by a larger borrowers’ portfolio coupled with a high average loan size (PKR 48,508). TMFB continued to maintain its second position with a GLP of PKR 15.9 billion. During the period under review, NRSP-B surpassed NRSP and became the third largest provider with a GLP of PKR 13.3 billion. Moreover, FINCA’s performance remained impressive registering a growth of 85% with an addition of PKR 4.7 billion to its portfolio.

During the period under review, the industry witnessed a substantial growth (88%) in number of depositors thereby taking the total depositors to 15.9 million from 10.7 million in 2015 as shown in Exhibit 2.8. Similarly, the value of deposits also posted hefty growth of 41% and grew to PKR 118 billion from PKR 60 billion a year earlier. The largest increase in number of depositors came from Mobilink Microfinance Bank (MMFB)

Exhibit 2.5: Share of GLP by Peer Group

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

MFBMFIRSP

20%

23%

57% 60%

22%

18%

58%

24%

18%

61%

23%

16%

68%

20%

12%

2012 2013 2014 2015 2016

Exhibit 2.6: GLP by Peer Group

MFBMFIRSP

20

40

60

80

100

120

140

2012 2013 2014 2015 2016

PK

R in

Bill

ions

18.7

7.66.7

28.1

10.28.4

36.8

15.3

11.4

55.4

21.0

13.7

89.1

27.0

16.0



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which added 4.9 million depositors in the current year and became the industry leader with total depositors standing at 8.1 million. This growth was followed by KBL and FMFB with an addition of 240,000 and 162,000 depositors, respectively. This astounding increase in the depositors can be attributed to growth in mobile banking activities, especially opening of m-Wallet accounts. Government of Pakistan’s policy of biometric verification of all mobile sim card holders has eased the process of opening an m-Wallet account. During the period under review, performance of TMFB in terms of depositors remained dull, as the bank’s total depositors witnessed a decline of 293,000. This is mainly due to closure of dormant m-Wallet accounts.

TMFB remained the largest contributor to the value of deposits by adding PKR 12.1 billion, taking the deposit base to PKR 27.8 billion from PKR 15.7 billion in 2015 as shown in Exhibit 2.9. This growth was followed by NRSP-B which increased its deposit base by PKR 9.7 billion,

taking its total deposits outstanding to PKR 16.9 billion in the current year.

There was an impressive growth in deposit base by MFBs in the current year leading to a considerable increase in Deposit-to-GLP ratio, from 108% in 2015 to 133% in 2016 posting a jump of 24% (Exhibit 2.10). This ratio depicts MFBs are mainly relying on deposits to meet their funding needs, thereby reducing their cost of funds to 5.1% from 5.7% a year earlier. Moreover, a higher deposit-to-GLP ratio ascertains that MFBs have excess funds on hand and are adequately liquid, which remains positive for the sector.

Micro-insurance continued its upward trajectory during the year under review showing healthy growth. The number of policy holders increased to 5.8 million from 4.6 million a year earlier thus posting a growth of 28% (Exhibit 2.11). Moreover, the sum insured showed a remarkable growth of 85% thereby taking the total sum insured to PKR 150 billion in 2016 from PKR 81 billion in 2015.

Exhibit 2.7: GLP of 9 Largest MFPs

KBL

TMFB

NRSP Bank

NRSP

FINCA

FMFB

Akhuwat

AMFB

MMFB

10 20 30

20152016

PKR in Billions

0.15.9

0.06.3

4.88.1

5.68.3

5.510.2

10.112.0

9.113.3

12.215.9

17.523.3

Exhibit 2.8: Growth in Deposits and Number of Depositors

2012 2013 2014 2015 2016

DespositorDeposits Outstanding

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Dep

osito

rs in

Tho

usan

ds

20

40

60

80

100

120

140

Dep

osits

out

stan

ding

in B

illio

ns

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Growth in policy holders was mainly fueled by the MFIs peer group which added 1.3 million new policy holders – taking their market share to 44% from 28% in 2015, which was followed by MFBs, which added 507,000 policy holders. However, the sum insured remained dominated by the

MFB peer group with an addition of PKR 27 billion even though the market share reduced to 50% from 60% in the previous year. KF surpassed NRSP to become the largest provider of micro-insurance with 1.5 million policy holders. KF was followed by NRSP which recorded 905,000 policy

Exhibit 2.9: Deposit Growth by MFB

TMFB

KBL

FMFB

NRSP-B

FINCA

AMFB

MMFB

Ubank

Advans

20152016

5 10 15 20 25 30

PKR in Billions

0.00.0

1.18.1

3.210.3

10.46.1

11.17.3

16.99.7

12.212.5

21.215.7

27.8

4.5

Exhibit 2.10: Deposit-To-GLP Relation for MFBs

2012 2013 2014 2015 2016

DepositsDeposit-to-GLP

20%

40%

60%

80%

100%

120%

140%

Dep

osit-

to-G

LP R

atio

20

40

60

80

100

120

140

In P

KR

Bill

ions

GLP

Exhibit 2.11: Growth in Number of Policy Holders & Sum Insured

2012 2013 2014 2015 2016

Policy HoldersSum Insured

20

40

60

80

100

120

140

160

Sum

Insu

red

in P

KR

Bill

ions

1.70

2.20

2.70

3.20

3.70

4.20

4.70

5.50

5.70

6.20

Pol

icy

Hol

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in m

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holders. Akhuwat remained the third largest provider with 665,000 policy holders. In terms of sum insured, KF again dominated the sector and recorded PKR 38.4 billion, followed by KBL with PKR 25.2 billion and NRSP moving down to third place having PKR 20.9 billion worth of sum insured. The sector remained dominated by

health and credit life insurance having a market share of 46% and 52%, respectively.

Scale and Outreach: Depth 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 below 20 percent is assumed to mean that the MFP is poverty focused. However, the trend over the

years reveals that the industry’s ratio is following an upward trajectory, which is mainly caused

by the continuous increase in the MFB ratio of average loan balance to per capita GNI. Similarly, MFIs and RSPs are also showing an increasing trend, albeit at a slower pace. This is due to industry’s shift in focus towards larger loan sizes, demonstrating the realization among the players of appropriate loan sizes in the wake of Pakistan’s

inflationary environment. Moreover, increase in enterprise lending across the sector also demands larger loan sizes, which could be another factor for the upward movement in the ratio of average loan balance to per capita GNI. Exhibit 2.12 highlights that among the peer groups the MFBs’ ratio stood at 33% recording an increase of 8% during 2016. This rise can be attributed to an increase in lending to microenterprises by MFBs. Meanwhile, the ratio of MFIs and RSPs witnessed a modest increase of 1 percent each.

Exhibit 2.12: Depth of Outreach by Peer Groups

MFIRSPIndustryCut-offMFB

5%

10%

15%

20%

25%

30%

35%

2012 2013 2014 2015 2016

Ave

rage

Loa

n B

alan

ce P

er G

NI

Exhibit 2.13: Lending Methodology Trend

Individual BorrowingGroup Borrowing

2012 2013 2014 2015 2016

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Act

ive

Bor

row

ers

In T

hous

ands

18%

82%

25%

75%

31%

69%

42%

58%

51%

49%

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Lending Methodology

For many years the microfinance industry remained dominated by the group lending methodology. However, this domination has witnessed a steady decline over the last five years with focus shifting towards the individual lending methodology. Thus, during the period under review individual lending surpassed group lending and recorded an increase of 9% thereby capturing 51% market share of active borrowers as shown in Exhibit 2.13. This shift in lending methodology is primarily driven by KBL, MMFB, and TMFB.

Gender Distribution

The microfinance sector has always remained women centric resulting in a majority of women borrowers. However, over recent years this trend is reversing with the industry’s focus moving towards male borrowers. The percentage of women borrowers was 58% in 2014 which fell to

55% in 2015, and in 2016, with a marginal decline of 1%, it stood at 54%. The proportion of women borrowers for MFIs posted a marginal decline of 2%, whereas, MFBs and RSPs registered a growth of 1% and 3%, respectively. Among the peer groups, the MFBs client base is skewed towards male borrowers, while MFIs and RSPs are more focused on female borrowers (Exhibit 2.14).

Portfolio Distribution by Sector

Overall, the trading sector attracted the major portion of active borrowers though its share witnessed a marginal decline of 1% during 2016 as shown in Exhibit 2.15. Trading was followed by the agriculture and livestock sectors which posted market shares of 18% and 22% respectively. Agriculture’s share declined by 2% during the year, while the share of livestock increased by 3% in the same period. Meanwhile, the market share of services and the manufacturing sector remained in the single digits with slight deterioration in the current year.

Exhibit 2.14: Gender Distribution of Credit Outreach by Peer Group

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Male BorrowersFemale Borrowers

MFB MFI RSP Total

75%

25%

27%

73%

22%

78%

46%

54%

Exhibit 2.15: Active Borrowers by Sector

AgricultureLivestock/Poultry

TradeServicesManufacturing/ProductionHousingOther

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016

22%

16%

35%

9%

9%0%9%

22%

16%

30%

8%

9%0%15%

23%

16%

29%

8%

9%0%15%

20%

19%

25%

10%

8%0%

18%

18%

22%

24%

9%6%1%

21%



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Rural-Urban Lending

The orientation of the sector has always remained towards rural borrowers. During the period under review, the concentration of

rural borrowers remained stagnant at 54%, while urban clients constituted 46% of the sector (Exhibit 2.16). Moreover, the majority of borrowers of two main players – NRSP and KBL – remained concentrated in the rural segment of the population.

Conventional and Islamic Lending

The microfinance sector is divided into conventional and Islamic modes of lending. Presently, the industry is tilted towards

conventional lending with 85% of total active borrowers utilizing conventional loans, whereas, 15% of the borrowers are making use of the Islamic mode of financing. Among the peer groups, in terms of conventional lending, MFBs have a share of 50%, followed by MFIs and RSPs with 26% and 24% shares respectively. The Islamic lending is primarily led by MFIs having a market share of 99%, while MFBs constitute the remaining 1% (Exhibit 2.17).

Exhibit 2.16: Active Borrowers by Urban / Rural Areas

UrbanRural

2012 2013 2014 2015 2016

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

44%

56%

42%

58%

43%

57%

46%

54%

46%

54%

Exhibit 2.17: Active Borrowers by Conventional and Islamic Lending

MFI 99%

MFB 50%

MFB 1%

RSP 24%

MFI 26%

Conventional

Islamic

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Unsecured-Secured Lending

The industry is overall supported by unsecured financing which constitutes 88% of total active borrowers, whereas, the remaining 12% is secured lending. In terms of unsecured lending, MFBs and MFIs contain the major portion having

a market share of 43% and 40% respectively, while RSPs contribute 17% as shown in Exhibit 2.18. MFIs with a share of 43% are on top in terms of secured lending, which is followed by MFBs (41%) and RSPs (16%).

Exhibit 2.18: Active Borrowers by Unsecured / Secured Lending

MFB 41%

MFB 43%

RSP 43%

RSP 17%

MFI 16%

MFI 40%

Unsecured

Secured

Financial StructureAsset BaseThe total asset base of the industry registered a remarkable growth of 55% in 2016 and stood at PKR 225 billion as compared to PKR 145 billion in 2015. MFBs accounted for 75% of the total asset base, while MFIs and RSPs constituted 16% and 9% respectively. The asset base of MFB’s increased substantially from PKR 97 billion in 2015 to PKR 168 billion in 2016 thereby posting a growth of 73% (see Exhibit 2.19). Meanwhile, the MFI’s asset base recording a growth of 22% stood at PKR 36 billion, whereas, RSP’s assets increased by 16% and stood at PKR 22 billion.

The major contribution to the total asset base of the industry comes from the top 10 larger players which account for 86% of the sector’s asset base. Akhuwat and NRSP are the only non-bank players among the 10 largest MFPs, while all others belong to the MFB peer group. Among the players, TMFB has the largest asset base of PKR 36 billion followed by KBL (PKR 34 billion) and NRSP Bank (PKR 26 billion) as shown in Exhibit 2.20. Among MFIs, Akhuwat remained on top with assets of PKR 10 billion, while KF reporting an asset base of PKR 7 billion stood at second place. The RSP peer group is dominated by NRSP which has an asset base of PKR 15 billion.



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Asset CompositionThe sector’s asset utilization ratio (gross loan portfolio-to-total assets) has remained range bound over the years. However, during 2016 it witnessed a marginal decline from 62.2% to 58.6% as seen in Exhibit 2.21 largely as a result of the decline in utilization ratio of MFBs which stood at 53% as compared to 56.9% in 2015. The MFIs and RSPs asset utilization ratios noted improvement and stood at 75.7% and 73.9% respectively. The decline in the MFB’s utilization ratio is mainly due to a shift in their asset composition. Investments increased from 14% in 2015 to 19% in 2016 as a percentage of total assets, while composition of cash and cash equivalents increased to 19% (from 15% in 2015). Despite an improvement in the overall gross loan portfolio, the share of advances in total assets reduced, which is evident from the utilization ratio.

In comparison to global players, the asset

utilization in Pakistan is low as shown in Exhibit 2.22. This provides room for further growth which could be done through the use of extended grace periods and financing instruments with bullet repayments.

Funding ProfileOver the last five years, the capital structure of the industry has shown a consistent shift towards deposits as the main source of funding. Meanwhile, reliance on debt and equity has consistently declined. Deposits now constitute 56% of the total funding of the sector up from 45% in 2015. Debt financing witnessed a decline of 8% and stood at 26% in 2016. Despite an increase in profitability in the sector, the share of equity also reduced from 22% in 2015 to 17% in 2016 (Exhibit 2.23). To sustain further growth, practitioners may be forced to capitalize themselves either through equity injections or issuing subordinated debt.

Exhibit 2.19: Total Asset Base by Peer Group

MFBMFI

2012 2013 2014 2015 2016

20

40

60

80

100

120

140

160

180

RSP

PK

R in

Bill

ions

Exhibit 2.20: Asset Base of Larger MFPs

KBL

TMFB

NRSP Bank

FMFB

FINCA

NRSP

MMFB

AMFB

Ubank

Akhuwat

2015 2016

10 20 30 40

PKR in Billions

710

211

114

514

1315

816

1217

142627

3421

36

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Exhibit 2.21: Asset Utilization Ratio

2012 2013 2014 2015 2016

Asset Utilization Ratio

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Exhibit 2.22: Regional Comparison of Asset Utilization

Africa

East A

sia an

d

the P

acific

Easter

n Eur

ope

and C

entra

l Asia

Latin

Am

erica

and

The C

aribb

ean

Middle

East a

nd

North

Afric

aSou

th A

sia

Pakist

an

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Exhibit 2.23: Capital Structure of the Industry

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

DepositsDebtEquity

2012 2013 2014 2015 2016

37%

44%

20% 22%

35%

43%

23%

33%

44%

22%

33%

45%

17%

26%

56%



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The capital structure among the peer groups differs substantially. Non-bank MFPs completely rely on debt and equity to fulfill their funding needs since they cannot mobilize deposits, whereas, the MFBs ability to take deposits keeps their capital structure skewed towards the deposits as the primary source of financing. During the period under review, 76% of MFBs funding needs were met through deposits which increased from 67%

in 2015. Meanwhile, equity and debt financing witnessed a decline and recorded 15% and 9% share, respectively as shown in Exhibit 2.24. In the case of MFIs and RSPs, debt continued to be the primary source of funding accounting for 77% and 70% of the capital structure, respectively. However, RSPs equity funding showed a marginal increase of 1% during the current year and stood at 30%.

Exhibit 2.24: Capital Structure by Peer Group

2015

MFBs

2016 2015 2016 20162015

10%

20%

30%

40%

50%

60%

70%

80%

90%

EquityDebtDeposits

MFIs RSPs

Profitability and SustainabilityThe total revenue of the industry stood at PKR 41.8 billion, while net income was PKR 6.9 billion in 2016 which had increased from 5.1 billion in 2015. The unadjusted ROA and ROE for the industry stood at 3.9% and 21.4%, respectively. MFBs remained the major contributors (45.8%) to the total profitability, while MFIs and RSPs accounted for 35.6% and 18.6%.

The industry continued to be sustainable with Operational Self Sufficiency (OSS) and Financial Self Sufficiency (FSS) well above 100 percent, consistently showing an increasing trend as depicted in Exhibit 2.25. During the period under review, OSS and FSS recorded 127% and 124%, respectively. Out of the 35 reporting organizations 32 have OSS above 100 percent thereby reflecting the strong sustainability of the industry players.

The total revenue ratio of the industry declined from 26% in 2015 to 23% in 2016 shown in Exhibit 2.26. This is mainly attributed to a decrease in yield on gross loan portfolio which reduced from 34.6% in 2015 to 33.0% in 2016 coupled with an increase in the asset base.

A comparison with global players reveals that Pakistan’s yield on gross loan portfolio is highest in all regions (see Exhibit 2.27). The higher yield is a factor of high operating costs which is on account of smaller loan sizes. Nevertheless, with every passing year, a decline in yield points to the fact that the increase in loan sizes after targeting enterprise lending is bringing operational costs down.

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Exhibit 2.25: OSS and FSS Trend

Operational Self Sufficiency (OSS)Financial Self Sufficiency (FSS)

100.00%

105.00%

110.00%

115.00%

120.00%

125.00%

130.00%

2012 2013 2014 2015 2016

Exhibit 2.26: Total Revenue Ratio & Yield on Portfolio

Total revenue ratioYield on gross portfolio (Nominal)

Yield on gross portfolio (Real)

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2012 2013 2014 2015 2016

Exhibit 2.27: Regional Comparison of Nominal Yield

Africa

East A

sia an

d

the P

acific

Easter

n Eur

ope

and C

entra

l Asia

Latin

Am

erica

and

The C

aribb

ean

Middle

East a

nd

North

Afric

aSou

th A

sia

Pakist

an

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Yield on gross portfolio (Normal)



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The total revenue of the industry registered a growth of 27% and stood at PKR 41.8 billion in 2016 from PKR 32.9 billion in 2015. The major portion of the revenue comes from earnings from loan portfolio (87%), whereas investments in financial assets contributed 7% and the contribution of financial services was 6%. The share of financial assets and financial services reduced in comparison to the corresponding

period of last year (see Exhibit 2.28). During the period under consideration, income from branchless banking stood at PKR 4.97 billion as compared to PKR 3.9 billion in 2015 on the back of a substantial increase in MMFB’s income.

The expense to asset ratio of the industry has been declining for the last three years. During the period under review, the ratio fell to 18.9% from

21.5% in the same period last year (see Exhibit 2.29). This decrease is primarily on the back of industry attempts to curtail operating expenses coupled with the reduction in financial expense made possible by the lower interest rate scenario.

The operating expense to GLP ratio continued its downward trend for the third consecutive year. The ratio declined from 20.7% in 2015 to

18.6% in 2016 as shown in Exhibit 2.30. The decline is supported by a reduction in personnel and administrative expense. The industry’s shift towards larger loan sizes, in turn, catering to the financing requirements of microenterprises, has led to this downward trend. In future years, this trend is expected to continue since market players are aggressively focusing on microenterprise lending.

Exhibit 2.28: Revenue Streams

2012 2013 2014 2015 2016

Loan PortfolioFinancial AssetsFinancial Services

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

PK

R in

Bill

ions

Exhibit 2.29: Expense Ratio Trends

Adjusted financial expense/ total assetsAdjusted operating expense/ total assets

Adjusted loan loss provision expense/ total assetsAdjusted total expense / total assets

2012 2013 2014 2015 2016

5.0%

10.0%

15.0%

20.0%

25.0%

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The unadjusted operating expense of Pakistan is close to the average of global players (see Exhibit 2.31). However, in comparison to regional players operating expense is quite high. This shows that

Pakistan has yet to achieve economies of scale in terms of loan size; though year-on-year expense has reduced which shows that the industry has started moving in this direction.

Exhibit 2.30: Operating Expense to GLP Trend

Personnel expense/ Gross loan portfolioOperating expense / Gross loan portfolio

Admin expense/ Gross loan portfolio

2012 2013 2014 2015 2016

5.0%

10.0%

15.0%

20.0%

25.0%

Exhibit 2.31: Regional Comparison of Operating Expense/Assets

Africa

East A

sia an

d

the P

acific

Easter

n Eur

ope

and C

entra

l Asia

Latin

Am

erica

and

The C

aribb

ean

Middle

East a

nd

North

Afric

aSou

th A

sia

Pakist

an

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Operating Expense / Assets



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ProductivityThe personnel allocation ratio for the industry saw a substantial increase in 2016. The ratio improved from 39.2% in 2015 to 52.5% in the current year (Exhibit 2.32). This surge is primarily on the back of significant improvement in ratios of KBL, MMFB, UBank, and NRSP, which depicts that the industry is gearing up for further growth. The ratio varies among the peer group, with

RSPs leading the industry with a ratio of 77.2%, followed by MFIs having 52.5%, while MFBs having the lowest share recorded at 44.0%.

During the period under review, productivity indicators followed a mixed trend as shown in Exhibit 2.33. Loans per staff remained stagnant at 144, while loans per loan officers witnessed a

substantial dip and stood at 276. Depositors per staff which showed a hefty increase recorded at 542. The decline in loans per loan officer points to the fact that individual lending is on the rise. Meanwhile, the increase in depositors per staff is a factor of the significant increase in m-Wallet accounts.

Comparison with regional players shows that Pakistan’s depositors per staff is the highest globally (see Exhibit 2.34), which is mainly a factor of significant surge in branchless banking operations. At the same time, loans per staff and loans per loan officer is below the average of global players.

Exhibit 2.32: Personnel Allocation Ratio Trend

2012 2013 2014 2015 2016

Personnel allocation ratio

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Exhibit 2.33: Productivity of MFPs

Depositors per staffLoans per Loan Officer

Loans per staff

2012 2013 2014 2015 2016

100

200

300

400

500

600

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RiskCredit RiskDuring 2016, PAR > 30 days slightly declined to 1.2% from 1.5% in 2015 (Exhibit 2.35). Meanwhile, write-offs also remained low and reduced to 1.0% from 1.2% a year earlier. This reduction in PAR is supported by the MFB peer group whose PAR >

30 days reduced to 0.8% from 1.3% in 2015. Over the recent years, the industry’s PAR > 30 days has remained below 2%, which is well under the 5% cutoff point. This reflects positively on the quality of the industry’s portfolio. Despite the lower PAR value, the industry’s risk coverage ratio remained high and stood at 179.8%.

Exhibit 2.34: Regional Comparison of Productivity

100

200

300

400

500

600

Loans per StaffLoans per Loan Officers Depositors per Staff

Africa

East A

sia an

d

the P

acific

Easter

n Eur

ope

and C

entra

l Asia

Latin

Am

erica

and

The C

aribb

ean

Middle

East a

nd

North

Afric

aSou

th A

sia

Pakist

an

Exhibit 2.35: PAR > 30 days & Write-off Trend

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2012 2013 2014 2015 2016

2.3%

3.7%

2.5%

1.5%

1.1%

2.3%

1.5%

1.2%

1.2%

1.0%

Portfolio at Risk >30 daysWrite OffCut off



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ConclusionThe year 2016 was significant for the industry. The sector witnessed double-digit growth in all the key indicators including credit, deposits, and insurance. Growth in savings remained phenomenal during the year on the back of a surge in mobile banking operations. Meanwhile, credit outreach crossed PKR 100 billion which is an important milestone for the industry. Among the peer groups, MFBs continued to dominate the sector in terms of GLP with a market share of 68%. Overall, credit operations remained women-focused with rural areas as the primary target market and the agriculture and livestock sectors captured the majority share of available financing.

The year also remained profitable with improvement in sustainability. MFBs continued to lead the sector’s profitability in turn providing room for further growth. The operating expense

to GLP ratio witnessed a deterioration primarily due to the industry’s shift in focus to larger loan sizes thereby catering to the requirements of microenterprises.

The industry’s asset base remained strong and stood at over PKR 200 billion with MFBs comprising 75% of the total assets. MFBs continued to rely on deposits as their main source of funding, whereas, MFIs and RSPs had to rely on debt as their primary source of financing. The sector’s portfolio quality remained strong with PAR > 30 days declining to 1.2% from 1.5% in 2015, while risk coverage remained high.

The sector’s performance in the current year positioned it well for further growth. If this trend continues the industry could play a crucial role in financial inclusion.

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33


Section 3SOCIAL PERFORMANCE REVIEW

34


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Social Performance Review

Microfinance in Pakistan is essentially a double-bottom line industry – financial sustainability is not the end in itself, rather it is the means to achieving social goals. These goals differ across the sector; some MFPs may have a vision of poverty alleviation, others of women empowerment, while still others may be working for increasing access to formal financial services. To better ascertain an institution’s intended goals, microfinance stakeholders around the world now believe that unless an MFP’s systems, activities and outputs are deliberately geared towards its social vision, it is difficult to make the impact that the institution is aiming for. For an MFP, therefore, performance management means focusing simultaneously on its financial

and social bottom-lines. In all cases, it has become important for MFPs to track their progress towards achieving their respective social goals, using social performance indicators in the same way that financial data is used to manage the financial bottom-line.

The following section will outline key social performance indicators as monitored across the Pakistan microfinance landscape. We will attempt to analyze industry trends across various SP indicators, including social goals, poverty target, governance and HR, diversity in financial and non-financial service provision, client protection, pricing norms and environment.

20 These include KBL, FINCA, TMBL, UBANK, NRSP Bank, FMFB, MMFB, POMFB, APMBL, JWS, DSP, MICROOPTIONS, SAATH, SRDO, SWWS, VDO, ASA, SVDP, BRAC, OLP, OCT, AKHUWAT, CEIP, MOJAZ, AGAHE, BEDF, SSF, RCDP, KF, FFO, SRSO, NRSP, GBTI, PRSP and TMF.

Analysis of the Sector’s SP IndicatorsThe Microfinance Information eXchange (MIX), in collaboration with the Social Performance Task Force (SPTF), has developed an annual social performance reporting framework for MFPs. This framework has recently been formatted to better suit the reporting needs of the industry, and includes a new comprehensive set of indicators on institutions’ social goals, target segments and other services. As self-reported data, the MIX framework allows MFPs to select multiple

categories that are applicable to their respective institution. For example, within the ‘target population sub-section, an MFP may report to targeting all or none of the ‘women’, ‘clients living in the urban area’, ‘youth and adolescents’ and ‘clients living in the rural areas’ categories if those are applicable to their practices.

At the time of this publication, 35 PMN member MFPs20 reported on the new MIX Social

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Performance framework, including 9 MFBs (out of 10 MFB members), 21 MFIs (out of 36 MFI members) and 5 RSPs (out of 6 RSP members).

Target MarketDefining a target population that an MFP aims to reach helps to focus their efforts and optimize the limited resources available. Providing services that are relevant, client oriented and effective in serving an organization’s mission requires a thorough identification of the target market. MFP target markets by peer group are

highlighted in Exhibit 3.2.1. All 9 reporting MFBs, cited multiple targets, including women, clients living in rural areas and clients living in urban areas, while none of the MFBs is currently catering to the youth and adolescent segment of society. Of the 21 reporting MFIs, the majority (19) target women and clients in rural areas. Clients in urban areas make the second largest target group with 17 MFIs catering to them, while 3 MFIs and 1 RSP also reported targeting the youth.

Overall, clients are targeted based on gender and location. While the focus on rural areas

is relatively greater, urban clients are not far behind, particularly among MFPs providing individual loans.

Development GoalsAll reporting MFPs were found to have some social development goals built into their mission, which rarely change on an annual basis. An analysis of the statements yield commonality among the peer groups, for example, the microfinance banks are more focused on financial inclusion, with their mission being expanding

access to quality financial service to low income population, employment generation and growth of existing businesses and as a result improve their quality of life, economically and socially. Non-bank MFIs have holistic developmental goals, thus, poverty alleviation, empowerment of the ‘marginalized’ and expanding economic opportunities emerged as more common amongst the non-bank MFPs. The majority of MFPs now are also making concentrated efforts for achieving gender equality, contributing towards women empowerment.

Reporting to MIX SP Framework 2016 Total PMN Membership

MFB 09 10

MFI 21 36

RSP 05 06

Total 35 52

Table 1: Number of Reporting MFPs for Social Performance

Exhibit 3.2.1: MFPs’ Target Markets

MFBsMFIsRSPs

Women Clients living inrural areas

Clients living inurban areas

Adolescents andyouth

5

10

15

20

25

30

35

9

19

4

8

19

5

9

3

17

4

No.

of R

espo

nses



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The most common objectives were found out to be increased access to financial services, poverty reduction and growth of existing businesses, with 32, 34 and 31 reporting MFPs respectively citing these as their objectives. The other most commonly cited development goals across all peer groups are employment generation, and gender equality and women’s empowerment. Support to start-up businesses, which is generally considered a risky initiative for microfinance, has also seen growing interest among some MFPs (Exhibit 3.2.2).

Poverty Targeting In terms of poverty levels of targeted clients, almost all of the reporting institutions target more than one segment of the poor. Overall, the most common target market for the sector

in terms of income is low income clients, closely followed by poor clients. Only 5 reporting MFIs and 2 RSPs reported targeting very poor clients. MFIs and RSPs are largely targeting both poor and low income clients, while the MFBs tend to cater more to low income clients.

Poverty Measurement ToolsMany MFPs in Pakistan collect economic, social, and/or other types of wellbeing indicators from clients for the express purpose of determining clients’ poverty levels and tracking their progress. Assessing the poverty level of clients serves multiple purposes like guide client targeting and selection for MFPs, establish baselines of client poverty for subsequent impact evaluations,

Exhibit 3.2.2: Development Goals

Increa

sed a

cces

s

to fin

ancia

l serv

ices

Povert

y red

uctio

n

Emplo

ymen

t gen

eratio

n

Develo

pmen

t of

start-

up en

terpri

ses

Growth

of ex

isting

busin

esse

s

Yout

h opp

ortun

ities

Health

impro

vem

ent

Gende

r equ

ality

and

women

's em

powerm

ent

Wate

r and

sanit

ation

5

10

15

20

25

30

35

40

MFBsMFIsRSPs

9 9

20

5

6

18

2

5

8

3

9

19

3

242

232

5

17

3

122

18

5

Exhibit 3.2.3: Poverty Targets

MFBsMFIsRSPs

Very poor clients Poor clients Low income clients

5

10

15

20

25

30

35

5 5

17

4

8

19

4

2

No.

of M

FP re

spon

ses

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3



37

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appraisal of financial services to better suit needs of clients and overall measurement of the programme’s effectiveness.

While 20 reporting MFIs cited using one or more poverty scoring methods, only 5 MFBs reported doing so. Some MFPs employed only one method to measure poverty levels, others used multiple assessment tools, as shown in Exhibit 3.2.4. MFPs reported use of their own proxy poverty index, as well as the Grameen Progress out of Poverty Index (PPI) and per capita household income and expenditure. While the MIX SP Framework does not cover the poverty scorecard prescribed by the Pakistan Poverty Alleviation Fund (PPAF) designed by The World Bank, this is predominantly used by MFIs as partner organizations of PPAF.

Governance and Human ResourceAn MFP cannot be considered socially responsible unless they have robust processes in place ensuring both an involved and informed governance body and the well-being of its employees. Keeping that in mind, the Universal Standards of Social Performance Management (USSPM) highlights standards relating to Governance and Human Resource (HR) management and how to design policies so as to further the social goals of MFPs. The rationale behind inculcating social performance indicators in governance and HR structures is to allow MFPs to gauge commitment to their social development

goals at the institutional level.

Sensitivity to social performance in governance structures entails Board members receiving orientation on the social mission of the MFP, the presence of a SP champion or committee at the Board level, and Board level experience in SPM. During orientation, Board members are provided with an explanation of (or training on) the institution’s social mission and goals. Social performance champions are members of the Board of Directors that are assigned to oversee integration of social performance management practices within an institution while SP committees are formal entities within the Board that meet on a regular basis to discuss topics related to institutional SP. SP-related work experience should be understood broadly as referring to any experience or training related to managing social performance at MFPs.

Exhibit 3.2.5 shows 7 out of 9 reporting MFBs responded positively to Board members receiving SP orientation on a routine basis and one or more Board members having experience in SP management, while 3 of the 9 MFBs have a SP champion or committee at the Board level.

Majority of reporting MFIs show strong performance on Board orientation of social mission and experience in SPM (17 out of 21 and 19 out of 21 reporting MFIs respectively).

A thorough assessment of staff incentives at MFPs is crucial to avoid encouraging any negative behavior that may in turn harm social goals of the organization. Additionally, analysis of staff

Exhibit 3.2.4: Poverty Assessment Tools used by MFPs

Gram

een P

rogre

ss ou

t

of Pov

erty I

ndex

(PPI)

Per

capit

a hou

seho

ld

expe

nditu

re

Per

capit

a hou

seho

ld

incom

e

Par

ticipa

tory w

ealth

rankin

g

Hou

sing i

ndex

Food

secu

rity i

ndex

Own p

roxy

pove

rty

index

Non

e of t

he ab

ove

MFBsMFIsRSPs

2

4

6

8

10

12

12

4

1

2

6

1

2 21

4

6

1

3

5

2

4



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working conditions is important to ensure that they are not being burdened beyond capacity. Some of the indicators gauged here are number of clients entertained by the field staff, the quality of interaction with clients based on client feedback mechanisms, quality of social data collected and/or the portfolio quality maintained by field staff. Exhibit 3.2.6 shows that across the Pakistan microfinance industry, portfolio quality is the most cited factor for staff incentives, both for MFBs and non-Bank MFIs. This means that MFPs have incentives and/or bonus systems designed to reward staff based (in whole or in part) on whether staff members consistently collect loan payments on time. The second most prevalent factor is number of clients, which means MFPs have incentives and/or bonus systems designed to reward staff based (in whole or in part) on the number of clients in field offices’ portfolios. These can be based on total number of clients, number of clients meeting specific criteria (e.g. new

clients, returning clients, etc.), or both. Exhibit 3.2.7 shows that all MFPs use a combination of these measures for calculating staff incentives, with the most common being total number of clients, followed by number of new clients.

The USSPM necessitates an MFP to treat its employees responsibly. Building upon that Human Resource policies related to SP include the presence of social protection (medical insurance and/or pension contribution), a safety policy (protecting staff members from external harm while in the field), an anti-harassment policy, a non-discrimination policy (explicit policy against discrimination based on sex or ethnicity in matters of hiring, firing, and payment of staff members) and a grievance resolution policy (a formal channel or channels for communicating and redressing problems staff may have on the job). Exhibit 3.2.8 shows that all reporting MFPs have strong reporting on having a social

Exhibit 3.2.5: Social Performance Management at the Board

Boardexperience

in SPM

SPM champion/committee at

Board

Boardorientation of

social mission

MFBsMFIsRSPs

5 10 15 20

5

17

7

2

14

4

7

19

3

Exhibit 3.2.6: Staff Incentives related to SPM

Number of clients Quality of interaction with clients based on

client feedback mechanism

Quality of socialdata collected

Portfolio quality

5

10

15

20

25

30

35

Num

ber o

f MFP

s

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protection, an anti-harassment policy in place, a grievance resolution policy for staff, and a non-discrimination policy. However, there appears a gap in policies pertaining to safety of the staff members while out in the field with only 15 out of 32 reporting MFPs having any safety mechanism in place.

Products and Services: FinancialMicrofinance refers to a range of financial services for the low income and poor households including savings, insurance and money transfer services

along with credit. This sub-section summarizes the range of financial products offered by MFPs in Pakistan, based on the assumption that microfinance clients are a heterogeneous group with varying financial needs.

CreditAll reporting organizations offer microcredit services, for income generating purposes as well as for non-income generating purposes. According to Exhibit 3.2.9.1a, while all reporting MFPs offer income generating loans, a few also offer non-income generating or consumption based loans.

Exhibit 3.2.7: Method for incentivizing number of clients

Incentive on'total number of clients'

Incentive on number of new clients'

Incentive on'client retention'

5

10

15

20

25

96

10

3

4

9

27

4

MFBsMFIsRSPs

No.

of R

epor

ting

MFP

s

Exhibit 3.2.8: HR policies related to SP

Soc

ial pr

otecti

on (m

edica

l

insura

nce a

nd/o

r

pens

ion co

ntribu

tion)

Safe

ty po

licy

Ant

i-hara

ssm

ent

polic

y

Non

-disc

rimina

tion

polic

y

Grie

vanc

e res

olutio

n

polic

y

MFBsMFIsRSPs

5

10

15

20

25

30

35

No.

of R

espo

ndin

g M

FPs

9

18

4

5

12

2

8

20

4

8

18

4

8

14

4



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cial

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ance

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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 3.2.9.1b shows the range of activities for which income-generating loans are available in Pakistan.

The most common categories were found out to be Loans for Microenterprises, and Agricultural and Livestock Microcredit, with all 35 reporting MFPs offering the former and 30 out of 35 reporting MFPs offering the latter. Other activities for which a growing number of MFPs offer credit

products include SME Loans and Express Loans. This suggests that product differentiation in credit is under way and MFPs are beginning to offer products beyond the typical microenterprise loan, with some MFPs moving up the market to target MSMEs as well as offer timely Express Loans.21

Deposits

Considering the legislative structure around the product, only 37 percent of the reporting MFPs offer savings products (13 out of 35). All MFBs, under SBP regulations, can intermediate

21 While express loans are generally considered short-term loans intended to help clients take advantage of unexpected business opportunities, there is a need to analyze the increasingly popularity of express loans, as well as their use in financing the MSME sector through microfinance.

Exhibit 3.2.9.1a: Type of Credit Products offered by MFPs

Incomegenerating loans23%

Non-incomegenerating loans

5%

Exhibit 3.2.9.1b: Credit Offerings

Microenterpriseloans

SME loans Agriculture/livestockloans

Express loans

MFBsMFIsRSPs

5

10

15

20

25

30

35

40

No.

of M

FP re

spon

ses

9

21

5

9

8

17

5

4

Sect

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41

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client deposits, and thus, all reporting MFBs take deposits. Non-bank MFPs can only mobilize deposits. All MFBs offer both demand deposit accounts and time deposit accounts, based on the needs of their clients, though further diversified savings products and access to these savings products would help boost uptake among small savers.

Insurance

Offering micro insurance serves to protect vulnerable clients against risk of losses. A majority of the reporting MFPs offer insurance products to meet clients’ needs. The insurance indicator looks both at compulsory insurance, which is typically clubbed with credit products,

and voluntary insurance offered to clients as a stand-alone product. A majority of reporting MFPs offer insurance products to meet clients’ needs and to protect them against risk of losses. Out of the reporting MFPs offering compulsory insurance products, the majority offer credit life insurance only, with a few MFPs offering other types of insurance such as life/accident and agriculture (see Exhibit 3.2.9.3a).

Over the past few years, some MFIs have introduced voluntary insurance products through partnerships with insurance providers, offering life/accident, agriculture/livestock and health insurance products. The most common category remains health insurance with 9 reporting MFPs offering various health insurance

Exhibit 3.2.9.2: Savings Products Offered

Savingsaccounts37%

Does not offersavings accounts

63%

Exhibit 3.2.9.3a: Compulsory and Voluntary Insurance Provision by Peer Groups

Credit life insurance Life/accidentinsurance

Agricultureinsurance

MFBsMFIsRSPs

5

10

15

20

25

30

No.

of R

espo

nses

8

3

4

2

5

2

14

2



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packages (see Exhibit 3.2.9.3b). Selected partner organizations of PPAF have piloted agriculture/crop and livestock insurance products for their clients with explicit monitoring indices to insure clients’ losses of crops or livestock in the event of external risks.

Generally, there is need to expand insurance services to cover the wider set of risks that vulnerable clients face. Additionally, there is also a need to create greater awareness around the benefits of existing insurance products that are available for clients.

Other Financial Services

The provision of financial services other than traditional credit, savings and insurance remains marginally low, with primary suppliers being

MFBs. However, some MFIs are now offering clients the facility to repay loan installments through branchless banking agents. MFBs tend to dominate other financial services provided by MFPs, offering one or more other financial services amongst the following categories: debit/credit card, mobile banking services, savings facilitation, remittances services/money transfer services, payment services and scholarship/educational grants (as shown in Exhibit 3.2.10).

Products and Services: Non-FinancialMFPs offer non-financial services in addition to financial products and services to strengthen livelihoods of vulnerable clients; these are frequently supplied in partnership with

Exhibit 3.2.9.3b: Types of Voluntary Insurance by Peer Groups

Credit Life Insurance Life/accidentinsurance

Agriculture insurance Health insurance

MFBsMFIsRSPs

1

2

3

4

5

6

7

8

9

10

No.

of r

espo

ndin

g M

FPs

5

1

4

1

2

1

4

1

4

Exhibit 3.2.10: Provision of other financial services

Deb

it/cre

dit ca

rd

Mob

ile/b

ranch

less

bank

ing se

rvice

s

Sav

ings f

acilit

ation

servi

ces

Rem

ittanc

e/m

oney

trans

fer se

rvice

s

Pay

men

t serv

ices

MFBsMFIsRSPs

2

4

6

8

10

12

No.

of M

FP R

espo

nses

7

5 5

1

7

5

5

1

Sect

ion

3



43

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specialized public or private agencies and vary according to the capacity and vision of the institution, but the purpose is to develop client skills and/or provide basic services that they are unable to attain due to financial limitations. These can take the form of provision of basic services like health and education or business and/or technical skills training. For this analysis, such services are grouped into four main categories: enterprise, education, health and women’s empowerment.

Unlike the MFBs which have a lead in provision of other financial services, in this domain, MFIs and RSPs are actively providing all types of non-financial services in the market, especially those committed to a particular social mission (see Exhibit 3.2.11). While MFIs and RSPs are offering at least one (in some cases multiple) non-financial service, only one MFB is offering education services to its clients. Education services like financial literacy education, child and youth education and basic health/nutrition education are the most popular non-financial service being offered by MFPs. Followed by enterprise services, such as enterprise skills development and business development services and women’s empowerment including women’s rights education/gender issues training and leadership training. A handful of MFPs also offer health services like basic medical and special medical services for women and children.

Transparency of CostGlobally the case of adopting the declining balance method to calculate and display interest rates to clients is widely accepted as the ‘transparent’ way. While Pakistani MFPs accept the importance of employing the declining

balance method of calculation and disclose interest rates, most of the MFPs in Pakistan are still using the flat methodology, primarily due to the simplicity in calculation and marketing. As per State Bank of Pakistan’s regulations, however, MFBs are bound to disclose interest cost using the declining balance method to clients – which means interest is communicated on the amount of the loan principal which the borrower has not yet repaid. There is some resistance by MFPs generally in switching from flat to declining balance interest rate disclosures, fearing loss of clientele owing to a lack of level playing field in the absence of regulations mandating all peer groups to follow a similar methodology.

Many MFPs in Pakistan continue to use the flat methodology to communicate prices to clients – where interest rate is communicated on the basis of the stated initial principal amount of the loan irrespective of the payment plan. Around 54 percent of reporting MFPs are using the flat interest rate method while 46 percent use the declining balance method (as shown in Exhibit 3.2.12).

Client ProtectionClient Protection (CP) principles refer to the minimum ‘do no harm’ standards that clients should expect to receive when doing business with a microfinance institution. These principles help protect clients and help institutions practice good ethics and smart business – which is good for the industry overall.

There are seven all-encompassing principles of client protection developed by The SMART Campaign, an international consortium of microfinance stakeholders, which coordinates

Exhibit 3.2.11: Non-Financial Services

Enterprise services Womensempowerment

Education services Health services

MFBsMFIsRSPs

5

10

15

20

25

No.

of M

FP R

espo

nses

14 13

4

12

4

17

3

4



Sect

ion

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cial

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with the work of MFTransparency in the area of pricing transparency.22 The seven CP principles include:

• Appropriate product design and delivery• Prevention of over-indebtedness• Transparency• Responsible pricing• Fair and respectful treatment of clients• Privacy of client data• Mechanisms for complaint resolution

For self-reporting on social performance indicators, MFPs provided information regarding

the presence of various institutional-level client protection indicators, including policies supporting good repayment capacity analysis, internal audit compliance, full pricing terms disclosure, APR disclosure, CP code of conduct, sanctions for code of conduct violations, clear reporting systems and data privacy clauses.

Overall, the sector shows positive compliance to CP principles, particularly with all reporting MFPs having in place strong repayment capacity analysis, internal audit systems, full pricing terms disclosure, and defined code of conduct. However, as indicated in the sub-section above,

Exhibit 3.2.12a: How Service Cost is communicated

Declining balance46%

Flat interest54%

Exhibit 3.2.12b: Methods of Stating Service Cost by Peer Group

Declining balance Flat interest

MFBsMFIsRSPs

2

4

6

8

10

12

14

16

18

20

No.

of M

FPs

63

14

2

7

3

22 See the Smart Campaign website for more details on the seven CP principles and how these are promoted and monitored through Smart Assessment tools: http://www.smartcampaign.org/Se

ctio

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not all pricing is disclosed in Annual Percentage Rate (APR) format, particularly by the non-Bank MFIs. Due to the regulatory framework under which MFBs fall, all reporting Banks show full compliance to the basic CP indicators. Now with the MFIs coming under the regulatory framework of SECP, any gaps in their compliance are likely to be plugged in near future.

Environmental PoliciesIn recent years, the microfinance sector has seen the momentum being built for achieving the triple bottom-line i.e. inculcating environmental management in mainstream operations in addition to financial and social management. To gauge the current state of MFPs in Pakistan in the green domain, these indicators provide information about the environmental policies/products that they may have in place. These environmental policies refer to MFPs promoting awareness on environmental impacts, having tools to evaluate environmental risks of clients’ activities and including clauses in loan contracts to ensure mitigation of environmental risks through the clients’ businesses (see Exhibit 3.2.14a).

In addition to this, a few MFPs reported on various types of environmentally friendly products and/or practices that they are currently

piloting, including products related to renewable energy, for example solar panels, biogas digesters and so on. Some MFPs are also engaged in financing environmentally friendly businesses, for example organic farming, recycling and/or waste management (see Exhibit 3.2.14b).

The strong performance of the MFI peer group in this area reflects the efforts carried out by the PPAF, to ensure compliance of all its partner organizations to the Environment and Social Management (ESM) Framework. As PPAF-funded institutions, these MFIs are trained on the ESM Framework and required to provide quarterly progress update on ESM compliance. External environmental and/or social performance audits are commissioned by PPAF to monitor and physically verify PO compliance of the ESMF. Finally, MFIs are encouraged to incorporate ESM objectives into the Terms of Partnership that they sign with their respective community based institutions.

While reporting is relatively new in this respect, the industry is taking positive steps in moving towards supporting/financing more environmentally sustainable businesses. There is still a need for more comprehensive work in this area, specifically a natural disaster risk mitigation strategy not just to protect MFPs but also clients and their businesses.

Exhibit 3.2.13: Client Protection Indicators

Policie

s sup

port

good

repay

men

t cap

acity

analy

sis

Intern

al au

dit ve

rify co

mpli

ance

with po

licies

Prices

, insta

llmen

ts, te

rms a

nd

cond

itions

fully

disc

losed

to cl

ients

Annua

l perc

entag

e rate

s (APR)

of loa

n pro

ducts

disc

losed

Code o

f con

duct

clear

ly de

fined

Violati

ons o

f cod

e of

cond

uct s

ancti

oned

Clear r

epor

ting s

ystem

in pl

ace f

or

com

plaint

s fro

m cl

ients

at bra

nche

s

Contra

cts in

clude

a

data

priva

cy cl

ause

5

10

15

20

25

30

35

40

No.

of R

epor

ting

MFP

s



Sect

ion

3So

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5

Exhibit 3.2.14b: Environmentally friendly Products/Services Offered

Products related to renewable energy

(e.g. solar panels, biogas digesters etc)

Products related to energy efficiency

(e.g. insulation, improved cooking stove etc)

Products related to environmentally friendly

practices (e.g. organic farming,

recycling, waste management etc)

MFBsMFIsRSPs

2

4

6

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10

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Section 4CHALLENGES AND OPPORTUNITIES

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As the microfinance industry in Pakistan continues to grow and expand its footprint across the country, it faces several new challenges and opportunities. Some of these opportunities and challenges are discussed as follow.

Digital Financial ServicesDigital Financial Services provide an opportunity for the microfinance industry to reach out to the unbanked in a convenient and affordable manner. It allows MFPs to reduce their costs by ending reliance on brick and mortar structures, increasing outreach and delivering customer centric products.

With the total cellular customers touching 136 million in the country and cellular mobile tele-density reaching 70 percent by the end of 201623, technology can be leveraged to tap the unbanked. With three out of four MNOs owning MFBs, digital financial services can be the engine of growth for the microfinance industry and financial inclusion. This fact has not been lost on policy makers and DFS are a critical part of reaching the financial inclusion goals outlined in the NFIS.

Some of the key components of DFS which can assist in reaching out to the unbanked are highlighted below.

Digital CreditAccording to CGAP, digital credit as compared to conventional microfinance loans is instant, automated and remote. Digital credit requires limited human contact as the loan provider can assess the credit risk without extensive in-person interviews and leverages the technology infrastructure and any available data from multiple data sources such as social profiles, transactional data, credit information, and mobile data including voice, SMS and internet. It can allow microfinance providers to expand outreach and reduce costs at the same time.

Digital loans follow a ramp-up process starting with smaller denominations and gradually increasing the amount with more data based on usage and repayment behavior. Loans extended under the facility are mostly of small amounts and shorter durations as they are used to meet the short-term liquidity needs of borrowers. Due to high risks associated with this kind of model, exposure is kept minimal in terms of

23 www.pta.gov.pk

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value and duration of such loans. Digital credit can be either considered a standalone product, a bundled offer with products like micro insurance or a customer acquisition tool. Loans can be extended directly to borrowers or through third parties like distributers, merchants or value chain aggregators.

The credit decision can be made in a few seconds and at most within a day as part of digital credit. The decision is automated and relies on a series of decision trees and algorithms. Human interaction is kept at a bare minimum as disbursements and repayments are done through mobile money accounts. Digital credit requires all collection processes to be front loaded with proactive engagement of customer prior to due date, and it is important to understand that smaller size and large volume of these loans makes conventional collection methods irrelevant. Data available with Credit Information Bureaus can play a significant role in strengthening the credit decision.

Digital Credit can have significant financial inclusion implications as many digital credit models are not dependent on prior financial account ownership or credit histories which is why it has witnessed a growing trend especially in low income countries with significant unbanked populations especially in Sub Saharan Africa.

In a country, like Pakistan, where access to finance is a major challenge and only a fraction of population borrows from formal financial channels, digital credit can be useful tool to reach out to the unbanked. With an excellent existing digital infrastructure in place in the form of high tele density, credit information bureaus, national ID system and several branchless banking services working in the country, the market is ripe for a digital credit takeoff. Mobile network operators (MNOs) owned MFBs and growing number of upcoming FinTechs can play a crucial role in this field. Moreover, it would also provide MFPs an opportunity to reduce their operating costs by reducing their customer acquisition costs. There exists room for partnerships and alliances between MNOs, FinTechs and MFPs to promote and extend digital credits.

Digital Support Platform While the DFS providers were introducing products such as OTC, m-Wallets, payments through mobile phones, the microfinance institutions have relied heavily on conventional operating models with limited investment on building technology platforms. Thus, achieving

scalability and expanding to new markets remains due to high operational costs and sometimes inefficient processes.

Due to different operating models, MFPs mix and match partnerships with banks and mobile money providers. These partnerships are formed to meet specific business needs pertaining to loan disbursement, repayments, insurance and other value-added services. At present, MFPs rely mostly on partner banks for managing their loan disbursements either via cheques or cash on counter (COC); transaction costs vary according to the negotiated deals. Provision for these services requires MFPs to directly deal with banks and mobile money providers, which comes with its own set of operational requirements and overheads. Subsequently, MFPs have limited access to agent networks, as it is not feasible to integrate with every service provider due to time and cost constraints.

Keeping this in view, PMN has undertaken a project to create a ‘Digital Services Platform’ (DSP) that will enable MFPs to link with the larger financial services industry by digitalizing their work/process flows as well as digitizing the datasets via a shared hosting platform. As a result, clients will be enabled to perform transactions (repayments, disbursements, payments, etc.) either through mobile accounts or plastic cards.The Platform comprises of four main components: m-Wallets, payment services, agent aggregation, and digital services. DSP shall act as a switch for integration with mobile money players (m-Wallets), POS machine networks, ATM switch (in this case 1-Link), as well as with agent networks. DSP, as a platform, will also provide value-added services to MFPs in the form of digital services (data analytics, customized MIS solutions, General Ledger, et cetera). PMN has laid out a strategic plan for the realization of these objectives that will be done through partnering with relevant FinTech firms and/or payment gateways.

The use of the DSP can help MFPs to not only achieve their growth objectives through increased outreach and agility but also to reduce high administrative expenses. Previously, acquiring technology platforms or digital tools was quite expensive and out of reach for MFPs, however, now these services have become more open and inclusive through provision of shared services.

Synergies between microfinance and DFS



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remain critical for a digital financial eco-system. DFS players can augment their uptake if mobile wallet usage is pushed by MFIs to millions of active borrowers. Both parties can collaborate to introduce savings, insurance and other value-added products to customers through collaborative models. Essentially, the business viability hinges on DFS providers offering low cost of transactions and MFPs providing recurring high volumes of transactions.

Blockchain Blockchain, the technology underlying bitcoins, has unleashed a new wave of innovation and disruption especially in the financial industry. Using its decentralized approach, it allows for greater efficiencies and executes real time transactions in a secure and discreet manner.

Blockchain refers to a type of data structure that enables identifying and tracking transactions digitally and sharing this information across a distributed network of computers, creating in a sense a distributed trust network24. It is a protocol that allows for peer to peer exchange of value. Data can be continually added in the blockchain, however, once entered it cannot be altered. Depending upon accessibility, blockchains can be categorized as private or public. Private block chains have restricted access and require trust as compared to public ones which are open to all.

According to a publication by the Planet N Group on the topic, blockchain allows trust to

be created and maintained in an exchange of value without a central intermediary. Due to the structure of the technology, all users of the blockchain become participants (nodes) in the transaction by maintaining a ledger that records and confirms the transaction every time the blockchain progresses. The more nodes there are in the network confirming the transaction, the more secure the system becomes in maintaining its integrity.

One of the biggest implications for the financial industry due to adoption of blockchain technology will be the cutting out of the middleman. Since financial institutions are viewed as financial intermediaries, however, with blockchain the intermediary role can be eliminated by directly linking borrowers and savers. The payment business provides an interesting example of disruption due to blockchain. At present, payments being sent are routed through an electronic payment network. However, two machines connected to a blockchain can process the payment directly without the need of middleware.

Blockchains have important implications for financial inclusion. They are being used (can be used) to provide digital identity to clients and used for remittances services. Access to databases of “online and retail payments”, utility companies, MNOs and credit information bureaus can allow for better assessing the creditworthiness of clients.

Transition ChallengesWith the amendments in the NBFC rules and regulations in 2015 by SECP, the transition process of MFIs and RSPs into NBMFIs started. The transition was fraught with challenges. Out of the nearly 40 MFIs and RSPs operating in the country, nearly 21 have so far been able to obtain licenses to operate as NBMFIs. However, the key challenge facing most of the entities has been corporate governance and the minimum paid up capital requirement in case of smaller organizations.

Corporate governance has been a key challenge facing nearly all the organizations because of issues like cross directorship and applicability of fit

and proper criteria as prescribed by the regulator for directors. As per corporate governance best practices independence of the board is compromised due to cross directorship, however, due to small pool of board members available to NBMFIs they have to resort to this practice. In addition, as all the NBMFIs are structured as non-profits they cannot remunerate to their board members. In this scenario attracting qualified and competent persons to be directors at NBMFIs is a difficult proposition. The best approach can be to train and develop a pool of directors for NBMFIs – a role to be filled by PMN and PMIC. Until then exemption may be sought from the NBMFIs for cross directorship.

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The microfinance industry around the globe and in Pakistan continues to be beset by questions about the high interest rates being charged from their clients. With a poverty focused agenda and a clientele belonging to the lower income segments, the high interest rates being charged by practitioners are thought to add to the debt burden and not in sync with the social agenda of the industry. Moreover, availability of donor funding and grants for the industry have further compounded the issue.

In Pakistan with the prevailing low interest rate environment where the benchmark policy rate has touched a 42-year low at 5.75 percent, policy makers and regulators are raising concerns since there has been no corresponding decrease in the interest rates being charged by MFPs. It must be noted that the loan pricing of MFPs is not dependent upon the funding costs but operating

costs unlike commercial banks. Operating costs are themselves a function of the loan sizes. Since the loan size is smaller for MFPs, their operating costs are higher.

In addition, the low interest rates have allowed the sector to move away from subsidized funding to commercial funding which is far more dependable and sustainable. Moreover, MFBs have been able to meet noteworthy success in deposit mobilization over the last few years by offering above market rates to depositors. Because of the low interest rates environment, MFBs could offer such high rates without any impact on the pricing side. An increasing ROE for the players has been essential to sustain the double-digit growth witnessed over the last few years by allowing them to meet the capital adequacy requirements.

Smaller players have also been finding it difficult to meet the Minimum Capital Requirement (MCR) of PKR 50 million set by SECP. While some have been provided a subordinated debt facility by PMIC, other are still trying to meet the capital requirement. Most of these players are young and

growing and if given time would be able to meet the MCR. In this regard, SECP has forwarded the GOP a proposal to give entities with less than 5,000 borrowers and a GLP of PKR 50 million exemption from being regulated.

Responsible Finance & Financial LiteracyStrengthening Grievance Redressal Mechanisms among MFPs in Pakistan With tremendous growth in the past several years, it is widely recognized that microfinance in this increasingly complex and competitive global environment needs various interventions; one of the most important ones being strengthening grievance redressal mechanisms at the institutional level as well as provision of a third-party platform at the sector level.

Currently, most of the MFPs in the sector are making conscious efforts to bring clients to the center of their services. Most of the weak spots identified are due to the lags in the capacity and lack of formalization of grievance redressal processes rather than the lack of will.

According to a baseline study conducted by PMN in collaboration with The Smart Campaign, while the majority of the MFPs in the industry have some forms of grievance redressal channels in place, their appropriateness for the size and scope of respective MFPs remains questionable. The study findings depict that the complaint avenues offered by the medium and small MFPs are in line with the standards expected of their

The Interest Rate Conundrum



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capacity and size, however, much work needs to be done with the large MFPs to bring much-needed sophistication in their GR policies as well as processes. A comparison between peer groups revealed that while MFBs have robust multi-channel processes in place, owing to the SBP regulations, the same cannot be said for the NBMFIs, who irrespective of their size are still employing rudimentary mechanisms of complaint handling. Among large MFPs, 6 still do not have a separate designated resource/department for complaint resolution, and complaints are often routed through the operations department, highlighting an inherent conflict of interest and inappropriateness of the mechanism in place. This calls for regulators and policy makers to introduce mandatory formal GR protocols for this peer group as well.

Establishing an Independent Grievance Redressal Platform In addition to well-functioning complaints handling mechanisms at the MFP level, there is also a need to set up an independent grievance resolution authority at the national level. Currently, only clients of microfinance banks (MFBs) have access to an independent, third party complaint resolution mechanism through the State Bank of Pakistan. There is no such platform for clients of non-bank microfinance providers. The absence of such a platform increases the risk of clients approaching politicians and media (or other actors such as lawyers and thugs) in case they have a complaint against their respective service provider. Intervention by these types of players is detrimental for the sector and can lead to a delinquency crisis as was witnessed in Punjab in 2008-09.

Moreover, absence of a sector-level platform distorts the playing field for bank and non-bank MFPs. In addition, such platforms, if available, can raise ‘red flags’ by bringing to notice any systemic issues before they snowball into sector-wide disasters. Increasing competitiveness in the industry can lead to unhealthy practices and pose reputation risks, and damage the vulnerable population that makes up the microfinance client base. Pakistan Microfinance Network, as the national association of microfinance providers in

the country, is not only interested in establishing such a system at the sector level but is also willing to do the needed legwork.

At present, there are few countries in the world that have an industry-wide complaint resolution system for microfinance clients and experience thereof. Nonetheless, there exists at least one very strong example of an existing national system: the Client Grievance Cell housed at the National Credit Regulator (NCR) in South Africa.

The South African grievance redressal system caters to the clients of not only the microfinance sector, but clients of all financial services at the national level. The National Credit Regulator (NCR) was established as the regulator in South Africa under the National Credit Act 34 of 2005 and is responsible for the regulation of the South African credit industry. It is tasked with carrying out education, research, policy development, registration of industry participants, and investigation of complaints. In addition, the NCR is tasked with the registration of credit providers, credit bureaus and debt counselors, and enforcement of compliance with the Act.25 It is within the NCR that a client grievance redressal cell records and resolves client complaints.

In another example from beyond the border, Microfinance Institutions Network (MFIN) as a Self-Regulatory Organization (SRO) has set up a toll-free number (which was instituted in July 2015)26 number that gives direct access to microfinance clients to reach out to the SRO with their grievances. Although the SRO grievance redressal mechanism is an appellate level mechanism, there is no restriction on clients reaching out to MFIN. In the event of clients reaching out, the SRO facilitates communication of client complaints to the concerned MFI and tracks its resolution and where the case is not resolved to the satisfaction of the client within the stipulated Turn Around Time (TAT), MFIN’s Enforcement Committee steps in to resolve the same.

Drawing upon the experiences from across the globe, all the industry stakeholders, regulators, donors/investors and practitioners need to come together to develop a third-party solution for clients as the industry continues to scale new heights in terms of expansion and maturity.

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Financial Literacy and Client Awareness In Pakistan, as is the case internationally, there is growing pressure on the microfinance sector to generate economic growth and poverty alleviation through creating greater access to formal financial institutions for the poor. Given the social objectives tied to this sector in particular, it is important for financial institutions and other stakeholders to provide responsible finance and create an environment that is conducive for consumers to improve their socio-economic wellbeing. It is a natural progression, therefore, that the target clients of microfinance are made aware of basic money matters – that is they are given financial literacy trainings of savings, budgeting, debt management and other issues relevant to their success.

Currently only about 16% of the population in Pakistan is availing formal financial services, about one third are using some kind of informal financial service, while the remaining majority of 56% are entirely financially excluded (A2FS survey, 2015). If the situation of financial access in Pakistan is to be remedied, then creating greater financial literacy among the excluded segments of the population will play a crucial role in this regard (notwithstanding the disparity in financial access across gender and urban/rural divides). Moreover, while there is policy emphasis on enhancing outreach of financial services through cellular technology, it is noteworthy that only 3%

of people surveyed in A2FS were found out to be using mobile banking or mobile phone banking, and understanding of these relatively more sophisticated financial terms is low even among the banked population, particularly women.

There is an enormous potential in Pakistan currently to use financial literacy programmes as a means to promote responsible finance in the microfinance sector. PMN has undertaken a financial literacy and client awareness campaign, with an objective to effectively and consistently communicate (through multiple mediums) the intended messages to microfinance clients, promoting responsible behavior by clients and making them aware of what to expect from their service provider.

The Nationwide Financial Literacy Program undertaken by the SBP focuses on the poor income category of the population. It is expected to harness the combined efforts of multiple stakeholders including key outreach partners, possibly microfinance providers, to utilize the established network for dissemination of the financial literacy curriculum through trainings across all provinces. Keeping in mind some of the facts mentioned previously, it is hoped that this broad-based Financial Literacy Program will be successful in imparting theoretical financial education, as well as practical knowledge including information on available financial services and how/when to best utilize these, and the importance of consumer protection, to people who will benefit most from such an initiative.

Meeting the Funding ChallengeFunding remains one of the key challenges facing the industry. The funding needs of the industry have enhanced considerably due to growth witnessed over the last few years. As outlined in the Microfinance Growth Strategy 2020 published by PMN, the total funding requirement of the industry will reach PKR 400 billion which will be met by a combination of deposits and debt. MFPs are gradually diversifying their sources of funds to meet their financing needs.

MFBs have been successful in mobilizing deposits and to a considerable extent are relying on deposits to meet their funding needs. However, a few MFBs have also borrowed both locally and internationally to meet their liquidity

requirements.

The funding challenge is more precarious for MFIs and RSPs since they are dependent upon borrowed funds for on-lending. Moreover, unlike MFBs, they have not been regulated entities until recently which has caused many commercial lenders to shy away from them leaving them dependent upon the national apex to raise funds. It is hoped that the regulatory umbrella will help these organizations to borrow commercially.

Recent commencement of operations by PMIC and enhancement of its funding base is likely to play a crucial role in the continued growth of the sector. Some of the specific funding challenges



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and opportunities facing the sector are discussed as follow.

Deposit Mobilization: The Way Forward MFBs have met considerable success in mobilizing deposits over the last few years allowing them to fuel their credit growth from funds obtained through deposits. However, most of their deposits have been obtained by offering above market rates to corporate entities and high net worth individuals.

The current low interest rate environment has facilitated the above strategy by keeping the funding costs low. However, an increasing interest rate would push the funding costs up, leading MFBs to either reduce the markup being offered on deposits and risk being uncompetitive in comparison to the commercial banks or to suffer a cut in profitability.

With a solid deposit base combined with prevailing low interest environment, MFBs need to diversify their sources of deposits by developing newer savings products that meet the needs of micro-savers. M-Wallet accounts can play a crucial role in this regard. MFIs and RSPs as regulated entities now have the ability to raise funds by issuing Certificate of Deposits (CODs) contingent upon a capital requirement of PKR 1 billion and a favorable credit rating.

Why Guarantee Schemes? Guarantee facilities have played a crucial role in encouraging commercial lenders to lend to the microfinance sector and develop their comfort level about extending credit to practitioners. It has enabled bigger and more established players to obtain clean funding lines from financial institutions and raise funds through the capital markets.

However, the same cannot be said about the mid-sized and smaller players. Commercial lenders are reluctant to lend to mid-sized players and smaller players in the absence of a guarantee facility or any tangible collateral. The situation has been compounded by the expiry of the Microfinance Credit Guarantee Facility (MCGF). There is a need for similar facilities for mid-sized

players which would enable them to borrow from commercial lenders.

International Lending Solid growth and all-round positive indicators have generated considerable investor interest in the microfinance industry in Pakistan. International DFIs, MIVs, Social and Impact Investors have been aggressively exploring the market. Their target has been both larger and medium sized institutes for debt mainly. However, high pricing including the hedging costs coupled with the current low interest rate environment has kept bigger players borrowing from local sources of funds. Only a few DFIs offering competitive rates have been able to place funds with such entities.

In comparison, mid-sized institutes are willing to pay a premium to meet their increasing funding needs by borrowing from international donors. Since mid-sized entities are facing difficulty in raising funds from local markets in absence of collateral, clean lines extended by international donors are an attractive option for them. In addition, the PMIC requirement for borrowing institutes to raise at least 30 percent of their financing from other sources has also pushed organizations to borrow internationally.

Coopting Government Initiatives and Credit Interventions For an industry that counts funding among its key challenges, coopting government credit initiatives and interventions can provide an avenue for additional funding. The Interest Free Loan scheme launched under the Prime Minister’s Youth Loan Scheme provides an ideal example. Administered by PPAF, funded by GOP and channelized through MFPs the scheme has been a win-win for both government and MFPs.

The Government’s initiative to reach out to small and marginalized farmers and provide low cost housing segments through retail credit guarantees schemes can be similarly coopted by the microfinance industry. It would open newer funding avenues for the MFPs and allow them to enter newer market segments.

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Section 5ANNEXURES

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Infrastructure2010 2011 2012 2013 2014 2015 2016

Total Assets (PKR 000) 35,826,211 48,569,411 61,928,036 81,557,894 105,443,135 145,186,197 225,316,798

Branches (including Head Office)

1,405 1,550 1,630 1,606 2,026 2,754 2,430

Total Staff 12,005 14,202 15,153 17,456 21,516 25,560 29,413

Growth Rate

Total Assets 17.6% 35.6% 27.5% 31.7% 29.3% 37.7% 55.2%


15.1% 10.3% 5.2% -1.5% 26.2% 35.9% -11.8%

Total Staff 3.9% 18.3% 6.7% 15.2% 23.3% 18.8% 15.1%

Financing Structure2010 2011 2012 2013 2014 2015 2016

Total Assets (PKR 000) 35,826,211 48,569,411 61,928,036 81,557,894 105,443,135 145,186,198 225,316,798

Total Equity (PKR 000) 8,359,260 10,314,307 11,679,373 17,049,706 22,873,920 29,688,776 36,535,925

Total Debt (PKR 000) 27,466,951 38,255,104 25,876,598 26,913,359 34,682,369 38,554,959 54,710,855

Commercial Liabilities (PKR 000)

4,910,265 12,332,456 19,361,179 21,662,200 18,679,724 19,030,672 43,167,480

Deposits (PKR '000)* 10,132,332 13,908,759 20,840,990 32,925,558 42,715,846 60,028,340 118,096,732

Gross Loan Portfolio (PKR '000)

20,295,915 24,854,747 33,877,284 46,613,582 63,531,465 90,296,341 132,003,052

Ratios

Equity-to-Asset Ratio 23.3% 21.2% 18.9% 20.9% 21.7% 20.4% 16.2%

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Commercial Liabilities-to-Total Debt

17.9% 32.2% 74.8% 80.5% 53.9% 49.4% 78.9%

Debt-to-Equity Ratio 3.29 3.41 2.22 1.58 1.52 1.30 1.50

Deposits-to-Gross Loan Portfolio

49.9% 56.0% 61.5% 70.6% 67.2% 66.5% 89.5%

Deposits-to-Total Assets 28.3% 28.6% 33.7% 40.4% 40.5% 41.3% 52.4%

Gross Loan Portfolio-to-Total Assets

56.7% 51.2% 54.7% 57.2% 60.3% 62.2% 58.6%

*Only MFB deposits included

Outreach2010 2011 2012 2013 2014 2015 2016

Active Borrowers 1,567,355 1,661,902 2,040,518 2,392,874 2,997,868 3,632,532 4,225,968

Active Women Borrowers 811,520 917,058 1,275,387 1,442,197 1,692,451 2,001,772 2,273,389

Gross Loan Portfolio (PKR 000)

20,295,915 24,854,747 33,877,284 46,613,582 63,531,465 90,100,405 132,003,052

Annual per Capita Income (PKR)***

105,300 107,505 118,085 143,808 143,808 153,060 153,060

Number of Loans Outstanding

1,547,197 1,661,902 2,040,518 2,401,849 2,998,895 3,632,532 4,227,317

Depositors**** 764,271 1,332,705 1,730,823 2,150,675 5,675,437 10,661,366 15,937,079

Number of Deposit Accounts

764,271 1,332,705 1,730,823 2,998,641 5,675,437 10,661,366 15,937,079

Number of Women Depositors

64,159 259,104 334,994 837,144 2,503,582 3,009,992 142,784

Deposits Outstanding 10,132,332 13,908,759 20,840,990 32,925,559 42,715,786 60,028,340 118,096,732

Weighted Avg.

Proportion of Active Women Borrowers (%)

51.8% 55.2% 62.5% 60.3% 56.5% 55.1% 53.8%

Average Loan Balance per Active Borrower (PKR)

12,949 14,956 16,602 19,480 21,192 24,804 31,236

Average Loan Balance per Active Borrower/Per Capita Income

12.3% 13.9% 14.1% 13.5% 14.7% 16.2% 20.4%

Average Outstanding Loan Balance (PKR)

13,118 14,956 16,602 19,407 21,185 24,804 31,226

Average Outstanding Loan Balance /Per Capita Income

12.5% 13.9% 14.1% 13.5% 14.7% 16.2% 20.4%

Proportion of Active Women Depositors (%)

8.4% 19.4% 19.4% 38.9% 44.11% 28.23% 0.90%

Average Saving Balance per Active Depositor (PKR)

13,258 10,436 12,041 15,309 7,526 5,630 7,410

Active Deposit Account Balance (PKR)

13,258 10,436 12,041 10,980 7,526 5,630 7,410

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



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Financial Performance2010 2011 2012 2013 2014 2015 2016

Income from Loan Portfolio 6,122,154 7,998,956 10,040,720 13,542,893 18,581,489 26,007,641 36,582,140

Income from Investments 870,809 1,203,306 1,774,610 1,742,975 2,051,547 3,946,607 2,716,932

Income from Other Sources 528,457 899,713 816,461 2,093,035 3,707,417 2,919,233 2,471,332

Total Revenue 7,521,420 10,101,975 12,631,792 17,378,903 24,340,453 32,873,481 41,770,404

Less : Financial Expense 2,016,795 2,905,049 3,974,467 4,767,589 5,451,197 6,550,481 8,963,917

Gross Financial Margin 5,504,624 7,196,926 8,657,325 12,611,314 18,889,256 26,323,001 32,806,487

Less: Loan Loss Provision Expense

745,660 623,988 643,991 658,812 794,500 1,258,313 2,504,433

Net Financial Margin 4,758,964 6,572,938 8,013,334 11,952,503 18,094,756 25,064,687 30,302,054

Personnel Expense 2,819,891 3,345,284 3,784,676 5,032,342 6,557,709 8,712,495 11,575,971

Admin Expense 1,961,816 2,446,750 2,886,025 3,880,920 5,951,408 7,244,592 9,076,966

Less: Operating Expense 4,781,707 5,792,035 1,342,633 8,913,262 12,509,117 15,957,087 20,652,937

Other Non-Operating Expense

257,651 380,993 1,546,240 2,719,173 772,940

Net Income before Tax (22,742) 780,903 1,084,982 2,658,248 4,039,399 6,388,427 8,876,178

Provision for Tax (7,047) 116,314 152,380 503,118 614,684 1,230,787 1,977,555

Net Income/(Loss) (15,696) 664,589 932,602 2,155,130 3,424,715 5,157,640 6,898,623

Adjusted Financial Expense on Borrowings

- 372,524 205,943 181,422 113,553 402,632 491,926

Inflation Adjustment Expense

- (3,073) 870 1,152 916 270 722

Adjusted Loan Loss Provision Expense

- 357,688 49,456 18,743 13,625 275,656 321,188

Total Adjustment Expense - 727,138 256,270 201,317 128,095 678,559 813,820

Net Income/(Loss) After Adjustments

(15,696) (62,549) 676,332 1,953,814 3,296,620 4,479,081 6,084,802

Average Total Assets 30,399,088 42,282,393 57,182,714 70,192,281 95,494,664 125,951,408 178,064,618

Average Total Equity 7,854,713 8,719,204 11,594,943 14,513,187 20,629,780 89,551,880 32,240,189

Ratios weighted avg. weighted avg. weighted avg.

Adjusted Return-on-Assets (0.1%) (0.1%) 1.2% 3.3% 3.5% 3.6% 3.4%

Adjusted Return-on-Equity (0.2%) (0.7%) 5.8% 16.1% 16.0% 5.0% 18.9%

Operational Self Sufficiency (OSS)

99.7% 108.4% 109.4% 118.1% 119.9% 124.1% 127.0%

Financial Self Sufficiency (FSS)

81.7% 100.5% 107.0% 116.5% 117.7% 121.0% 123.9%

* Includes KF data** Without KF data

Operating Income2010 2011 2012 2013 2014 2015 2016

Revenue from Loan Portfolio 6,122,154 7,998,956 10,040,720 13,542,893 18,581,489 26,007,641 36,582,140

Total Revenue 7,521,420 10,101,975 12,631,792 17,378,903 24,821,486 32,873,481 41,770,404

Adjusted Net Operating Income/(Loss)

-22,742 5,252 828,712 2,456,931 3,286,779 4,474,629 6,084,786


Gross Loan Portfolio (Opening Balance)

16,948,466 20,576,342 25,743,757 34,668,730 48,423,008 63,402,462 89,528,314

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2010 2011 2012 2013 2014 2015 2016

Gross Loan Portfolio (Closing Balance)

20,295,915 24,854,747 33,877,284 46,105,712 63,531,465 90,283,337 132,003,052

Average Gross Loan Portfolio

18,622,190 22,715,544 29,810,520 40,387,221 55,977,237 76,842,899 110,765,683

Inflation Rate *** 15.0% 11.2% 10.4% 9.2% 8% 4% 4%

weighted avg. weighted avg. weighted avg.

Total Revenue Ratio (Total Revenue-to-Average Total Assets)

24.7% 23.9% 22.3% 24.8% 26.0% 26.1% 23.5%

Adjusted Profit Margin (Adjusted Profit/(Loss)-to-Total Revenue)

(0.3%) 0.1% 7.0% 14.1% 13.2% 13.6% 14.6%

Yield on Gross Portfolio (Nominal)

32.9% 35.2% 34.2% 33.5% 34.6% 34.6% 33.0%

Yield on Gross Portfolio (Real)

15.5% 21.6% 21.6% 22.3% 24.4% 29.9% 29.8%

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

Operating Expense2010 2011 2012 2013 2014 2015 2016

Adjusted Total Expense 7,544,162 10,096,723 11,803,080 14,540,979 20,842,120 27,121,782 33,707,341

Adjusted Financial Expense 2,016,795 3,304,504 4,181,281 4,950,162 5,742,091 6,911,552 9,455,843


745,660 1,000,184 693,447 677,555 808,125 1,533,970 2,825,622

Adjusted Operating Expense 4,781,707 5,792,035 6,928,352 8,913,262 14,291,904 18,676,260 21,425,876

Adjustment Expense - 775,651 256,270 201,317 453,639 678,579 813,837



Adjusted Total Expense-to-Average Total Assets

24.8% 23.9% 20.6% 20.7% 21.8% 21.5% 18.9%

Adjusted Financial Expense-to-Average Total Assets

6.6% 7.8% 7.3% 7.1% 6.0% 5.5% 5.3%

Adjusted Loan Loss Provision Expense-to-Average Total Assets

2.5% 2.4% 1.2% 1.0% 0.8% 1.2% 1.6%

Adjusted Operating Expense-to-Average Total Assets

15.7% 13.7% 12.1% 12.7% 15.0% 14.8% 12.0%

Adjusted Personnel Expense 9.3% 7.9% 6.6% 7.2% 6.9% 6.9% 6.5%

Adjusted Admin Expense 6.5% 5.8% 5.0% 5.5% 6.2% 5.8% 5.1%

Adjustment Expense-to-Average Total Assets

0.0% 1.8% 0.4% 0.3% 0.5% 0.5% 0.5%




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Operating Efficiency2010 2011 2012 2013 2014 2015 2016

Operating Expense (PKR 000)

4,781,707 5,792,035 6,928,352 8,913,262 12,745,665 15,957,087 20,652,937

Personnel Expense (PKR 000)

2,819,891 3,345,284 3,784,676 5,032,342 6,794,257 8,712,495 11,575,971

Average Gross Loan Portfolio (PKR 000)

18,622,190 22,715,544 29,810,520 40,387,221 55,977,237 76,842,899 110,765,683

Average Number of Active Borrowers

1,567,355 1,661,902 2,040,518 2,350,650 2,997,868 3,632,532 4,225,968

Average Number of Active Loans

1,567,355 1,661,902 2,040,518 2,359,625 2,998,895 3,632,532 4,227,317


Adjusted Operating Expense-to-Average Gross Loan Portfolio

25.7% 25.5% 23.2% 22.1% 22.8% 20.8% 18.6%

Adjusted Personnel Expense-to-Average Gross Loan Portfolio

15.1% 14.7% 12.7% 12.5% 12.1% 11.3% 10.5%

Average Salary/Gross Domestic Product per Capita

2.23 2.19 2.12 2.00 2.2 2.2 2.6

Adjusted Cost per Borrower (PKR)

3,051 3,485 3,395 3,792 4,252 4,393 4,887

Adjusted Cost per Loan (PKR)

3,051 3,485 3,395 3,777 4,250 4,393 4,886


Productivity2010 2011 2012 2013 2014 2015 2016

Number of Deposit Accounts

764,271 1,332,705 1,730,823 2,707,872 5,675,437 10,661,366 15,937,079

Total Staff 12,005 14,202 15,153 15,673 19,227 25,343 29,413

Total Loan Officers 5,148 7,165 7,541 6,892 8,801 9,923 15,342


Borrowers per Staff 131 117 135 144 156 143 144

Loans per Staff 131 117 135 144 156 143 144

Borrowers per Loan Officer 304 232 271 327 341 366 275

Loans per Loan Officer 304 232 271 328 328 366 276

Depositors per Staff 64 94 114 121 295 421 542

Deposit Accounts per Staff 64 94 114 173 295 421 542

Personnel Allocation Ratio 42.9% 50.5% 49.8% 44.0% 45.8% 39.2% 52.2%


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Risk2010 2011 2012 2013 2014 2015 2016

Portfolio at Risk > 30 days 829,314 793,966 1,232,842 1,157,297 659,418 1,321,207 1,565,459

Portfolio at Risk > 90 days 577,972 516,623 1,020,316 932,166 379,637 781,212 1,073,562

Adjusted Loan Loss Reserve 733,338 623,988 759,621 708,355 1,189,884 1,468,006 2,814,919

Loan Written Off during Year

335,463 592,429 675,835 615,293 1,222,076 917,855 1,147,319

Gross Loan Portfolio 20,295,915 24,854,747 33,877,284 46,105,712 63,531,465 90,081,589 132,003,052

Average Gross Loan Portfolio

18,622,190 22,715,544 29,810,520 40,387,221 55,977,237 76,690,720 110,765,683


Portfolio at Risk (>30)-to-Gross Loan Portfolio

4.1% 3.2% 3.6% 2.5% 1.0% 1.5% 1.2%

Portfolio at Risk(>90)-to-Gross Loan Portfolio

2.8% 2.1% 3.0% 2.0% 0.6% 0.9% 0.8%

Write Off-to-Average Gross Loan Portfolio

1.8% 2.6% 2.3% 1.5% 2.2% 1.2% 1.0%

Risk Coverage Ratio (Adjusted Loan Loss Reserve-to-Portfolio at Risk > 30 days)

88.4% 78.6% 61.6% 61.2% 180.4% 111.1% 179.8%




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AII - Performance indicators of individual MFPs 2016

InfrastructureMFB

KBL TMFB FMFB NRSP-B FINCA

Age 16 12 16 8 9

Total assets (PKR 000)

33,773,478 36,303,646 16,878,231 26,452,428 15,617,965

Total equity (PKR 000)

4,937,097 4,585,909 3,830,504 3,203,730 2,432,553

Total liabilities (PKR 000)

28,836,382 31,717,737 13,047,727 23,248,698 13,185,412


139 74 120 97 105

Personnel 2,708 3,473 1,541 2,340 1,324

MFB

AMFB MMFB U-Bank ADVANS Sub

Age 14 6 5 5


13,554,003 14,233,857 10,591,716 684,455 168,090


707,199 1,230,493 1,122,466 615,175 22,665,126

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MFB



12,846,804 13,003,364 9,469,250 69,281 145,425


89 51 77 5 757

Personnel 1,516 740 939 141 14,722

MFI

OCT KASHF SAFCO DAMEN CSC

Age 32 10 8 3 2


762,613 7,370,015 1,093,119 1,832,714 853,096


340,469 1,575,047 364,477 451,455 220,644


422,144 5,794,969 728,642 1,381,260 632,451


11 187 35 32 17

Personnel 140 2,096 286 250 208

MFI

GBTI FFO ASA-P MO BRAC-P

Age 21 14 9 8 9


696,390 487,403 6,103,602 114,864 1,641,931


401,773 42,683 1,481,968 53,907 189,550


294,617 444,720 4,621,634 60,957 1,452,382


17 18 230 5 69

Personnel 93 158 1,592 26 474

MFI

JWS ORIX RCDP Agahe AMRDO

Age 15 31 1 1 9


919,256 464,559 1,686,561 253,338 275,488


270,601 170,090 540,138 66,594 48,216


648,655 294,469 1,146,422 186,744 227,272


24 10 35 11 16

Personnel 249 73 421 86 104



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MFI

OPD SAATH SRDO SVDP VDO

Age 25 3 16 2 1


120,321 181,089 142,292 208,463 37,412


5,414 30,141 34,428 49,043 25,332


114,907 150,948 107,864 159,420 12,080


6 5 4 8 2

Personnel 62 35 26 71 12

MFI

Akhuwat OSDI Sub

Age 7


10,316,587 23,172 35,584,284


1,402,831 22,836 7,787,635


8,913,756 336 27,796,650


500 4 1,246

Personnel 3,491 46 9,999

RSP

NRSP PRSP TMF SRSO Sub

Age 8 19 17 14


15,485,752 2,971,177 2,004,171 1,181,633 21,642,732


4,467,973 1,025,673 647,658 (58,140) 6,083,164


11,017,778 1,945,504 1,356,514 1,239,773 15,559,569


160 60 150 57 427

Personnel 3,221 641 527 303 4,692

Sub MFB Sub MFI Sub RSP Total

Age


168,090 35,584,284.586 21,642,732.911 225,316,798


22,665,126 7,787,635 6,083,164 36,535,925


145,425 27,796,650 15,559,569 188,780,873


757 1,246 427 2,430

Personnel 14,722 9,999 4,692 29,413

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Financing Structure In PKR (000)MFB


Total assets 33,773,478 36,303,646 16,878,231 26,452,428 15,617,965

Total equity 4,937,097 4,585,909 3,830,504 3,203,730 2,432,553

Total debt 6,199,882 - 297,820 5,349,535 1,350,002

- Subsidized debt* 1,454,918 - - - -

- Commercial debt 4,744,964 - 297,820 5,349,535 1,350,002

Total Deposits 21,179,403 27,829,780 12,237,466 16,922,084 11,069,656

Total Liabilities 28,836,382 31,717,737 13,047,727 23,248,698 13,185,412

Gross loan portfolio 23,308,981 15,945,319 8,273,926 13,271,040 10,209,129

Equity-to-asset ratio 14.6% 12.6% 22.7% 12.1% 15.6%

Commercial liabilities-to-total debt

76.5% #DIV/0! 100.0% 100.0% 100.0%

Debt-to-equity ratio 1.3 0.0 0.1 1.7 0.6

Deposits-to-gross loan portfolio

90.9% 174.5% 147.9% 127.5% 108.4%

Deposits-to-total assets

62.7% 76.7% 72.5% 64.0% 70.9%

Cost of funds 6.6% 4.0% 4.6% 5.6% 5.2%

Gross loan portfolio-to-total assets

69.0% 43.9% 49.0% 50.2% 65.4%

MFB


Total assets 13,554,003 14,233,857 10,591,716 684,455 168,089,780

Total equity 707,199 1,230,493 1,122,466 615,175 22,665,126

Total debt 204,002 - 1,000,000 - 14,401,240.699

- Subsidized debt* - - - - 1,454,918

- Commercial debt 204,002 - 1,000,000 - 12,946,323

Total Deposits 10,420,589 10,306,362 8,109,924 21,469 118,096,732.386

Total Liabilities 12,846,804 13,003,364 9,469,250 69,281 145,424,654

Gross loan portfolio 6,320,692 5,933,962 5,576,802 212,539 89,052,391

Weighted Avg.



0.0% 0.0% 0.0% 0.0% 89.9%



164.9% 173.7% 145.4% 10.1% 132.6%


76.9% 72.4% 76.6% 3.1% 70.3%

Cost of funds 6.3% 2.5% 4.7% 3.9% 5.1%


46.6% 41.7% 52.7% 31.1% 53.0%



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MFI


Total assets 762,613 7,370,015 1,093,119 1,832,714 853,096

Total equity 340,469 1,575,047 364,477 451,455 220,644

Total debt 360,007 5,535,202 687,435 1,365,310 607,482

- Subsidized debt* - 233,850 144,000 - -

- Commercial debt 360,007 5,301,352 543,435 1,365,310 607,482

Total Deposits - - - - -

Total Liabilities 422,144 5,794,969 728,642 1,381,260 632,451

Gross loan portfolio 594,625 4,562,209 765,014 1,251,104 483,208



100.0% 95.8% 79.1% 100.0% 100.0%



- - - - -


- - - - -

Cost of funds 10.3% 10.2% 7.1% 7.5% 6.1%


78.0% 61.9% 70.0% 68.3% 56.6%

MFI


Total assets 696,390 487,403 6,103,602 114,864 1,641,931

Total equity 401,773 42,683 1,481,968 53,907 189,550

Total debt 233,237 399,313 4,214,517 60,725 977,499

- Subsidized debt* 56,389 20,000 - - 66,397

- Commercial debt 176,847 379,313 4,214,517 60,725 911,102


Total Liabilities 294,617 444,720 4,621,634 60,957 1,452,382

Gross loan portfolio 192,672 369,319 5,654,742 80,870 1,505,789



75.8% 95.0% 100.0% 100.0% 93.2%



- - - - -


- - - - -

Cost of funds 4.8% 7.5% 4.4% 16.9% 6.9%


27.7% 75.8% 92.6% 70.4% 91.7%

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MFI


Total assets 919,256 464,559 1,686,561 253,338 275,488

Total equity 270,601 170,090 540,138 66,594 48,216

Total debt 589,121 183,786 1,109,938 178,525 214,934

- Subsidized debt* 2,182 - 208,081 57,902 60,000

- Commercial debt 586,939 183,786 901,858 120,622 154,934


Total Liabilities 648,655 294,469 1,146,422 186,744 227,272

Gross loan portfolio 718,859 444,451 1,402,610 201,154 174,186



99.6% 100.0% 81.3% 67.6% 72.1%



- - - - -


- - - - -

Cost of funds 2.3% 9.0% 2.6% 4.7% 5.5%


78.2% 95.7% 83.2% 79.4% 63.2%

MFI


Total assets 120,321 181,089 142,292 208,463 37,412

Total equity 5,414 30,141 34,428 49,043 25,332

Total debt 110,960 139,083 105,271 153,361 9,084

- Subsidized debt* 17,600 42,591 - - -

- Commercial debt 93,360 96,492 105,271 153,361 9,084


Total Liabilities 114,907 150,948 107,864 159,420 12,080

Gross loan portfolio 90,843 128,934 95,678 148,190 15,524



84.1% 69.4% 100.0% 100.0% 100.0%



- - - - -


- - - - -

Cost of funds 7.1% 7.1% 6.7% 8.5% 11.4%


75.5% 71.2% 67.2% 71.1% 41.5%



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MFI

Akhuwat OSDI Sub

Total assets 10,316,587 23,172 35,584,285

Total equity 1,402,831 22,836 7,787,634.674

Total debt 8,848,845 - 26,083,632.559

- Subsidized debt* 8,848,845 - 9,757,837

- Commercial debt - - 16,325,795

Total Deposits - - -

Total Liabilities 8,913,756 336 27,796,650

Gross loan portfolio 8,063,573 11,407 26,954,961

Weighted Avg.

Equity-to-asset ratio 13.6% 98.6% 21.9%


0.0% #DIV/0! 62.6%

Debt-to-equity ratio 6.3 0.0 3.35


- - -


- - -

Cost of funds 0.0% #DIV/0! 4.6%


78.2% 49.2% 75.7%

RSP


Total assets 15,485,752 2,971,177 2,004,171 1,181,633 21,642,733

Total equity 4,467,973 1,025,673 647,658 (58,140) 6,083,164.225

Total debt 10,553,599 1,172,558 1,305,825 1,194,000 14,225,982.109

- Subsidized debt* 271,400 59,220 - - 330,620

- Commercial debt 10,282,199 1,113,338 1,305,825 1,194,000 13,895,362


Total Liabilities 11,017,778 1,945,504 1,356,514 1,239,773 15,559,569


Weighted Avg.

Equity-to-asset ratio 28.9% 34.5% 32.3% -4.9% 28.1%


97.4% 94.9% 100.0% 100.0% 97.7%

Debt-to-equity ratio 2.4 1.1 2.0 -20.5 2.34


- - - - -


- - - - -

Cost of funds 6.9% 6.7% 6.4% 7.0% 7.1%


77.2% 36.4% 80.0% 114.3% 73.9%

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Total assets 168,089,780 35,584,285 21,642,733 225,316,798

Total equity 22,665,126 7,787,634.674 6,083,164.225 36,535,925

Total debt 14,401,240.699 26,083,632.559 14,225,982.109 54,710,855

- Subsidized debt* 1,454,918 9,757,837 330,620 11,543,375

- Commercial debt 12,946,323 16,325,795 13,895,362 43,167,480

Total Deposits 118,096,732.386 - - 118,096,732

Total Liabilities 145,424,654 27,796,650 15,559,569 188,780,873

Gross loan portfolio 89,052,391 26,954,961 15,995,700 132,003,052

Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg.

Equity-to-asset ratio 13.5% 21.9% 28.1% 16.2%


89.9% 62.6% 97.7% 78.9%

Debt-to-equity ratio 0.6 3.35 2.34 1.50


132.6% - - 89.5%


70.3% - - 52.4%

Cost of funds 5.1% 4.6% 7.1% 5.2%


53.0% 75.7% 73.9% 58.6%

OutreachMFB


Active borrowers 557,082 385,415 221,078 325,521 132,252

Active women borrowers

144,765 144,218 78,088 50,959 6,715

Gross loan portfolio (PKR 000)

23,308,981 15,945,319 8,273,926 13,271,040 10,209,129

Annual per capita income (PKR)*

153,060 153,060 153,060 153,060 153,060

Number of loans outstanding

557,082 385,415 221,078 325,521 133,601

Depositors 1,369,007 4,666,050 458,210 674,494 406,984

Number of deposit accounts

1,369,007 4,666,050 458,210 674,494 406,984

Number of women depositors

- - - 109,437 20,925

Deposits outstanding (PKR 000)

21,179,403 27,829,780 12,237,466 16,922,084 11,069,656

Proportion of active women borrowers (%)

26.0% 37.4% 35.3% 15.7% 5.1%

Average loan balance per active borrower (PKR)

41,841 41,372 37,425 40,769 77,195

Average loan balance per active borrower/per capita income

27.3% 27.0% 24.5% 26.6% 50.4%



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Average outstanding loan balance (PKR)

41,841 41,372 37,425 40,769 76,415

Average outstanding loan balance / per capita income

27.3% 27.0% 24.5% 26.6% 49.9%

Proportion of active women depositors (%)

0.0% 0.0% 0.0% 16.2% 5.1%

Average saving balance per active depositor (PKR)

15,471 5,964 26,707 25,089 27,199

Active deposit account balance (PKR)

15,471 5,964 26,707 25,089 27,199

MFB


Active borrowers 45,643 90,929 22,254 2,925 1,783,099


5,963 11,292 3,272 624 445,896


6,320,692 5,933,962 5,576,802 212,539 89,052,391


153,060 153,060 153,060 153,060 153,060


45,643 90,929 22,254 2,925 1,784,448

Depositors 113,688 8,086,949 153,039 8,658 15,937,079


113,688 8,086,949 153,039 8,658 15,937,079


- - 12,422 142,784


10,420,589 10,306,362 8,109,924 21,469 118,096,732

Weighted Avg.


13.1% 12.4% 14.7% 21.3% 25.0%


138,481 65,259 250,598 72,663 49,942


90.5% 42.6% 163.7% 47.5% 32.6%


138,481 65,259 250,598 72,663 49,905


90.5% 42.6% 163.7% 47.5% 32.6%


0.0% 0.0% 8.1% 0.0% 0.9%


91,660 1,274 52,993 2,480 7,410


91,660 1,274 52,993 2,480 7,410

* http://www.sbp.org.pk/departments/stats/NDSP.htm

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18,924 214,787 33,470 44,954 21,427


594,625 4,562,209 765,014 1,251,104 483,208


153,060 153,060 153,060 153,060 153,060


44,741 214,981 58,468 44,954 22,940

Depositors - - - - -


- - - - -


- - - - -


- - - - -


42.3% 99.9% 57.2% 100.0% 93.4%


13,290 21,221 13,084 27,831 21,064


8.7% 13.9% 8.5% 18.2% 13.8%


13,290 21,221 13,084 27,831 21,064


8.7% 13.9% 8.5% 18.2% 13.8%


- - - - -


- - - - -


- - - - -

MFI




12,749 20,669 314,928 3,140 52,339


192,672 369,319 5,654,742 80,870 1,505,789


153,060 153,060 153,060 153,060 153,060


13,121 20,724 322,015 4,474 56,327



- - - - -


- - - - -



Sect

ion

5A

nn

exu

res

MFI



- - - - -


97.2% 99.7% 97.8% 70.2% 92.9%


14,684 17,821 17,560 18,076 26,733


9.6% 11.6% 11.5% 11.8% 17.5%


14,684 17,821 17,560 18,076 26,733


9.6% 11.6% 11.5% 11.8% 17.5%


- - - - -


- - - - -


- - - - -

MFI




35,293 21,202 64,834 13,574 7,302


718,859 444,451 1,402,610 201,154 174,186


153,060 153,060 153,060 153,060 153,060


35,627 22,718 71,430 14,269 12,891



- - - - -


- - - - -


- - - - -


99.1% 93.3% 90.8% 95.1% 56.6%


20,177 19,564 19,636 14,097 13,512


13.2% 12.8% 12.8% 9.2% 8.8%


20,177 19,564 19,636 14,097 13,512

Sect

ion

5



77

An

nex

ure

s

MFI



13.2% 12.8% 12.8% 9.2% 8.8%


- - - - -


- - - - -


- - - - -

MFI




3,269 3,009 1,780 2,455 1,020


90,843 128,934 95,678 148,190 15,524


153,060 153,060 153,060 153,060 153,060


6,094 5,917 3,637 6,314 1,748



- - - - -


- - - - -


- - - - -


53.6% 50.9% 48.9% 38.9% 58.4%


14,907 21,790 26,307 23,470 8,881


9.7% 14.2% 17.2% 15.3% 5.8%


14,907 21,790 26,307 23,470 8,881


9.7% 14.2% 17.2% 15.3% 5.8%


- - - - -


- - - - -


- - - - -



Sect

ion

5A

nn

exu

res

MFI

Akhuwat OSDI Sub

Active borrowers 567,761 330 1,551,481


238,460 2 1,129,587


8,063,573 11,407 26,954,961


153,060 153,060 153,060


567,761 330 1,551,481

Depositors - - -


- - -


- - -


- - -

Weighted Avg.


42.0% 0.6% 72.8%


14,202 34,567 17,374


9.3% 22.6% 11%


14,202 34,567 17,374


9.3% 22.6% 11%


- - -


- - -


- - -

RSP




526,364 28,690 79,202 63,650 697,906


11,960,308 1,080,378 1,603,839 1,351,175 15,995,700


153,060 153,060 153,060 153,060 153,060


649,682 58,890 110,055 72,761 891,388



- - - - -


- - - - -

Sect

ion

5



79

An

nex

ure

s

RSP



- - - - -

Weighted Avg.


81.0% 48.7% 72.0% 87.5% 78.3%


18,409 18,346 14,573 18,570 17,945


12% 12% 10% 12% 12%


18,409 18,346 14,573 18,570 17,945


12.0% 12.0% 10% 12.1% 11.7%


- - - - -


- - - - -


- - - - -


Active borrowers 1,783,099 1,551,481 891,388 4,225,968


445,896 1,129,587 697,906 2,273,389


89,052,391 26,954,961 15,995,700 132,003,052


153,060 153,060 153,060 153,060


1,784,448 1,551,481 891,388 4,227,317

Depositors 15,937,079 - - 15,937,079


15,937,079 - - 15,937,079


142,784 - - 142,784


118,096,732 - - 118,096,732

Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg.


25.0% 72.8% 78.3% 53.8%


49,942 17,374 17,945 31,236


32.6% 11% 12% 20.4%


49,905 17,374 17,945 31,226


32.6% 11% 11.7% 20.4%



Sect

ion

5A

nn

exu

res



0.9% - - 0.90%


7,410 - - 7,410


7,410 - - 7,410

Financial Performance in PKR 000MFB


Income from loan portfolio

6,493,876 5,500,627 2,217,401 3,543,641 3,324,590

Income from investments

371,841 516,367 421,632 147,258 102,855

Income from other sources

179,152 122,830 11,791 223,651 110,194

Total revenue 7,044,869 6,139,824 2,650,824 3,914,550 3,537,639

Less : financial expense

1,807,109 1,113,495 580,886 1,239,768 647,593

Gross financial margin

5,237,760 5,026,329 2,069,938 2,674,782 2,890,047

Less: loan loss provision expense

684,807 103,555 15,612 155,329 219,211

Net financial margin 4,552,953 4,922,774 2,054,326 2,519,453 2,670,836

Personnel expense 1,340,023 1,670,412 835,550 891,854 848,857

Admin expense 1,415,892 1,814,795 724,387 666,912 820,903

Less: operating expense

2,755,914 3,485,207 1,559,937 1,558,766 1,669,761

Other Non operating expense

17,957 68,282 2,574 188 13,480

Net income before tax

1,779,082 1,369,285 491,815 960,499 987,595

Provision for tax 506,348 473,931 175,556 275,711 356,700

Net income/(loss) 1,272,734 895,354 316,259 684,787 630,896


- - - - -


0 110 42 84 46


- - - - -

Total Adjustment Expense

0 110 42 84 46


1,272,734 895,244 316,217 684,704 630,849

Average total assets 30,234,912 28,680,884 14,532,784 20,372,307 12,034,942

Average total equity 4,444,293 4,137,596 2,687,455 2,874,116 2,183,044

Sect

ion

5



81

An

nex

ure

s

MFB


Adjusted return-on-assets

4.2% 3.1% 2.2% 3.4% 5.2%

Adjusted return-on-equity

28.6% 21.6% 11.8% 23.8% 28.9%

Financial expense ratio

8.9% 7.9% 8.3% 11.1% 8.3%

Operational self sufficiency (OSS)

133.8% 128.7% 122.8% 132.5% 138.7%

Financial self sufficiency (FSS)

133.8% 128.7% 122.8% 132.5% 138.7%

MFB



1,329,051 1,699,396 1,181,055 96,212 25,385,849


173,923 245,530 182,882 - 2,162,290


51,427 3,660 6,531 6,541 715,776

Total revenue 1,554,400 1,948,586 1,370,468 102,754 28,263,914


671,551 255,330 428,308 830 6,744,870


882,849 1,693,256 942,160 101,924 21,519,044


845,921 67,611 44,490 12,772 2,149,307

Net financial margin 36,928 1,625,645 897,670 89,152 19,369,738

Personnel expense 644,650 598,679 439,096 90,602 7,359,723

Admin expense 462,604 688,503 362,846 153,114 7,109,956


1,107,253 1,287,181 801,942 243,716 14,469,679


27,253 3,629 2,066 2,898 138,327


(1,097,578) 334,835 93,661 (157,462) 4,761,732

Provision for tax (362,054) 104,077 21,309 48,425 1,600,002

Net income/(loss) (735,524) 230,758 72,353 (205,887) 3,161,730


- - - - -


(10) 28 33 16 349


- - - - -


(10) 28 33 16 349


(735,514) 230,729 72,320 (205,903) 3,161,381

Average total assets 3,714,717 9,562,207 6,431,319 623,601 126,187,673

Average total equity 798,816 1,115,414 1,085,261 550,871 19,876,866

weighted avg.


-19.8% 2.4% 1.1% -33.0% 2.5%



Sect

ion

5A

nn

exu

res

MFB



-92.1% 20.7% 6.7% -37.4% 15.9%


15.0% 7.0% 13.2% 0.4% 9.4%


58.6% 120.7% 107.3% 39.5% 120.3%


58.6% 120.7% 107.3% 39.5% 120.3%

MFI

OCT KASHF Safco DAMEN CSC


107,904 1,957,475 215,546 455,625 171,799


11,508 128,607 18,290 24,909 18,144


5,086 262,504 17,378 3,301 16,301

Total revenue 124,499 2,348,586 251,214 483,835 206,244


36,987 562,273 48,904 102,817 36,840


87,512 1,786,313 202,310 381,019 169,404


34,011 (25,327) 14,764 15,338 6,463

Net financial margin 53,501 1,811,640 187,546 365,680 162,941

Personnel expense 24,916 689,726 73,066 106,809 66,821

Admin expense 13,384 189,296 47,303 87,136 58,278


38,300 879,022 120,369 193,944 125,099


7,609 190,941 - 27,556 5,049


7,592 741,677 67,178 144,180 32,793

Provision for tax - - - - 4,391

Net income/(loss) 7,592 741,677 67,178 144,180 28,403


- - - - -


12 13 4 12 3


167,057 4,326 - - -


167,069 4,338 4 12 3


(159,477) 737,339 67,173 144,168 28,400

Average total assets 764,883 7,190,410 986,827 1,608,334 770,778

Average total equity 336,688 1,163,398 286,788 379,365 159,025


-20.8% 10.3% 6.8% 9.0% 3.7%


47.4% 63.4% 23.4% 38.0% 17.9%

Sect

ion

5



83

An

nex

ure

s

MFI

OCT KASHF Safco DAMEN CSC


0.1% 12.3% 7.5% 8.6% 9.2%


106.5% 146.2% 136.5% 142.4% 118.9%


43.8% 145.8% 136.5% 142.4% 118.9%

MFI



37,370 113,590 1,987,001 27,616 544,179


39,608 3,137 15,416 2,089 140


73,977 3,856 5,966 6,654 561,682

Total revenue 150,956 120,583 2,008,383 36,360 1,106,001


11,218 30,096 184,724 10,243 67,936


139,738 90,486 1,823,659 26,116 1,038,066


- 7,127 48,580 (1,123) 26,705

Net financial margin 139,738 83,359 1,775,079 27,239 1,011,361


Admin expense 11,538 29,505 154,971 8,820 525,286


37,917 65,564 598,708 18,066 950,928


62,478 1,420 74,060 3,623 457


39,343 16,375 1,102,311 5,551 59,976

Provision for tax - - 360,984 - 11,837

Net income/(loss) 39,343 16,375 741,327 5,551 48,139


- - 185 4,818 -


14 1 53 (1) 5


- - - - -


14 1 239 4,817 5


39,328 16,375 741,089 734 48,134

Average total assets 557,945 524,943 5,138,196 125,184 1,519,718

Average total equity 382,673 34,950 1,419,123 44,542 167,617


7.0% 3.1% 14.4% 0.6% 3.2%


10.3% 46.9% 52.2% 1.6% -28.7%


7.2% 8.2% 3.9% 11.5% 4.8%



Sect

ion

5A

nn

exu

res

MFI



135.2% 115.7% 221.7% 118.0% 105.7%


135.2% 115.7% 221.6% 102.1% 105.7%

MFI



76,667 150,348 129,224 46,255 48,150


2,943 - 3,483 3,081 3,505


604 382 71,287 8,161 13,008

Total revenue 80,214 150,731 203,994 57,498 64,663


13,747 16,515 28,852 8,458 11,785


66,467 134,216 175,141 49,039 52,878


1,303 2,496 9,401 2,017 (1,968)

Net financial margin 65,164 131,720 165,740 47,023 54,846


Admin expense 14,958 31,908 25,634 16,807 12,485


41,019 66,877 60,870 41,361 38,570


3,544 - - - -


20,601 64,844 104,870 5,662 16,275

Provision for tax - - - - -

Net income/(loss) 20,601 64,844 104,870 5,662 16,275


10,287 - 28,142 2,187 1,366


10 4 17 1 1


- - - - (1,968)


10,297 4 28,159 2,187 (601)


10,304 64,840 76,711 3,475 16,876

Average total assets 919,283 435,281 1,471,027 227,728 267,391

Average total equity 276,358 137,668 509,082 47,847 39,476


1.1% 14.9% 5.2% 1.5% 6.3%


3.7% 47.1% 15.1% 7.3% 42.8%


1.9% 4.0% 2.4% 5.0% 6.7%


134.6% 175.5% 205.8% 110.9% 133.6%

Sect

ion

5



85

An

nex

ure

s

MFI



114.7% 175.5% 160.3% 106.4% 135.3%

MFI



31,493 41,057 21,394 45,819 3,764


2,476 1,715 860 2,719 1,334


357 869 980 25,266 1,270

Total revenue 34,327 43,640 23,234 73,804 6,369


7,876 9,890 7,052 13,059 1,036


26,451 33,750 16,181 60,745 5,333


2,868 1,998 1,902 2,156 (383)

Net financial margin 23,582 31,752 14,279 58,589 5,716


Admin expense 8,570 6,865 5,655 8,125 1,728


22,348 11,690 10,738 29,448 3,777


1,088 510 - 74 -


147 19,553 3,541 29,068 1,939

Provision for tax - - - - 341

Net income/(loss) 147 19,553 3,541 29,068 1,598


- - - - -


0 0 0 1 1


- - - - -


0 0 0 1 1


147 19,553 3,541 29,066 1,597

Average total assets 145,416 165,756 137,955 196,961 46,485

Average total equity 5,340 20,364 22,657 46,947 24,533


0.1% 11.8% 2.6% 14.8% 3.4%


2.7% 96.0% 15.6% 61.9% 6.5%


9.1% 8.9% 7.8% 9.4% 5.4%


100.4% 181.2% 118.0% 165.0% 143.8%


100.4% 181.2% 118.0% 165.0% 143.7%



Sect

ion

5A

nn

exu

res

MFI

Akhuwat OSDI Sub


824,058 - 7,036,334


45,629 - 329,594


531,085 20,211 1,630,187

Total revenue 1,400,771 20,211 8,996,115


- 59 1,210,366


1,400,771 20,152 7,785,748


38,844 - 187,172

Net financial margin 1,361,927 20,152 7,598,576

Personnel expense 568,823 18,462 2,683,648

Admin expense 185,645 18,057 1,461,952


754,468 36,518 4,145,600


241,790 - 620,198


365,670 (16,367) 2,832,778

Provision for tax - - 377,553

Net income/(loss) 365,670 (16,367) 2,455,225


444,943 - 491,926


28 1 181


- 5,336 174,752


444,971 5,338 666,859


(79,302) (21,704) 1,788,366

Average total assets 8,512,448 31,631 31,744,580

Average total equity 1,219,996 31,223 6,755,660

weighted avg.


-0.9% -68.6% 5.6%


-6.5% -69.5% 26.5%


0.0% 0.0% 5.1%


135.3% 55.3% 146.0%


94.6% 48.2% 131.7%

Sect

ion

5



87

An

nex

ure

s

RSP



3,166,610 285,982 404,018 303,348 4,159,958


145,780 50,507 15,981 12,780 225,048


45,035 20,400 17,558 42,376 125,369

Total revenue 3,357,425 356,889 437,557 358,504 4,510,375


732,121 78,731 114,516 83,312 1,008,680


2,625,304 278,158 323,041 275,192 3,501,695


115,381 (1,316) 10,729 43,161 167,955

Net financial margin 2,509,923 279,474 312,312 232,031 3,333,740

Personnel expense 1,185,258 81,757 156,942 108,643 1,532,600

Admin expense 368,786 35,159 53,087 48,025 505,058


1,554,044 116,916 210,029 156,668 2,037,658


- 6,901 7,514 14,415


955,879 162,558 95,382 67,849 1,281,667

Provision for tax - - - - -

Net income/(loss) 955,879 162,558 95,382 67,849 1,281,667


- - - - -


132 46 19 (5) 191


- - 34,973 111,464 146,437


132 46 34,993 111,458 146,628


955,747 162,512 60,390 (43,609) 1,135,039


Average total equity 3,933,562 1,164,765 601,400 (92,065) 5,607,662

weighted avg.


6.7% 5.7% 3.2% -3.7% 5.6%


24.3% 14.0% 10.0% 47.4% 20.2%


6.6% 6.4% 7.7% 6.6% 6.7%


139.8% 183.6% 127.9% 123.3% 139.7%


139.8% 183.6% 116.0% 89.2% 133.6%



Sect

ion

5A

nn

exu

res



25,385,849 7,036,334 4,159,958 36,582,140


2,162,290 329,594 225,048 2,716,932


715,776 1,630,187 125,369 2,471,332

Total revenue 28,263,914 8,996,115 4,510,375 41,770,404


6,744,870 1,210,366 1,008,680 8,963,917


21,519,044 7,785,748 3,501,695 32,806,487


2,149,307 187,172 167,955 2,504,433

Net financial margin 19,369,738 7,598,576 3,333,740 30,302,054

Personnel expense 7,359,723 2,683,648 1,532,600 11,575,971

Admin expense 7,109,956 1,461,952 505,058 9,076,966


14,469,679 4,145,600 2,037,658 20,652,937


138,327 620,198 14,415 772,940


4,761,732 2,832,778 1,281,667 8,876,178

Provision for tax 1,600,002 377,553 - 1,977,555

Net income/(loss) 3,161,730 2,455,225 1,281,667 6,898,623


- 491,926 - 491,926


349 181 191 722


- 174,752 146,437 321,188


349 666,859 146,628 813,837


3,161,381 1,788,366 1,135,039 6,084,786

Average total assets 126,187,673 31,744,580 20,132,365 178,064,618

Average total equity 19,876,866 6,755,660 5,607,662 32,240,189

weighted avg. weighted avg. weighted avg. weighted avg.


2.5% 5.6% 5.6% 3.4%


15.9% 26.5% 20.2% 18.9%


9.4% 5.1% 6.7% 8.1%


120.3% 146.0% 139.7% 127.0%


120.3% 131.7% 133.6% 123.9%

Sect

ion

5



89

An

nex

ure

s

Operating Income in PKR 000MFB


Revenue from loan portfolio

6,493,876 5,500,627 2,217,401 3,543,641 3,324,590

Total revenue 7,044,869 6,139,824 2,650,824 3,914,550 3,537,639

Adjusted net operating income / (loss)

1,272,734 895,244 316,217 684,704 630,849


Gross loan portfolio (opening balance)

17,466,883 12,186,090 5,639,743 9,085,508 5,478,758

Gross loan portfolio (closing balance)

23,308,981 15,945,319 8,273,926 13,271,040 10,209,129

Average gross loan portfolio

20,387,932 14,065,704 6,956,835 11,178,274 7,843,943

Inflation rate * 3.7% 3.7% 3.7% 3.7% 3.7%

Total revenue ratio (total revenue-to-average total assets)

23.3% 21.4% 18.2% 19.2% 29.4%

Adjusted profit margin (adjusted profit/(loss)-to-total revenue)

18.1% 14.6% 11.9% 17.5% 17.8%

Yield on gross portfolio (nominal)

31.9% 39.1% 31.9% 31.7% 42.4%

Yield on gross portfolio (real)

27.1% 34.1% 27.2% 27.0% 37.3%

MFB



1,329,051 1,699,396 1,181,055 96,212 25,385,849

Total revenue 1,554,400 1,948,586 1,370,468 102,754 28,263,914


(735,514) 230,729 72,320 (205,903) 3,161,381



2,654,416 1,350,107 919,381 205,347 54,986,234


6,320,692 5,933,962 5,576,802 212,539 89,052,391


4,487,554 3,642,034 3,248,092 208,943 72,019,312

Inflation rate * 3.7% 3.7% 3.7% 3.7% 3.7%

weighted avg.


41.8% 20.4% 21.3% 16.5% 22.4%


-47.3% 11.8% 5.3% -200.4% 11.2%


29.6% 46.7% 36.4% 46.0% 35.2%



Sect

ion

5A

nn

exu

res

MFB



25.0% 41.4% 31.5% 40.8% 30.4%

MFI



107,904 1,957,475 215,546 455,625 171,799

Total revenue 124,499 2,348,586 251,214 483,835 206,244


(159,477) 737,339 67,173 144,168 28,400



561,424 4,553,709 539,095 1,145,587 321,162


594,625 4,562,209 765,014 1,251,104 483,208


578,025 4,557,959 652,055 1,198,346 402,185

Inflation rate * 3.7% 3.7% 3.7% 3.7% 3.7%


16.3% 32.7% 25.5% 30.1% 26.8%


-128.1% 31.4% 26.7% 29.8% 13.8%


18.7% 42.9% 33.1% 38.0% 42.7%


14.4% 37.8% 28.3% 33.1% 37.6%

MFI



37,370 113,590 1,987,001 27,616 544,179

Total revenue 150,956 120,583 2,008,383 36,360 1,106,001


39,328 16,375 741,089 734 48,134



117,912 369,025 3,818,570 97,050 1,312,220


192,672 369,319 5,654,742 80,870 1,505,789


155,292 369,172 4,736,656 88,960 1,409,005

Inflation rate * 3.7% 3.7% 3.7% 3.7% 3.7%


27.1% 23.0% 39.1% 29.0% 72.8%

Sect

ion

5



91

An

nex

ure

s

MFI



26.1% 13.6% 36.9% 2.0% 4.4%


24.1% 30.8% 41.9% 31.0% 38.6%


19.6% 26.1% 36.9% 26.4% 33.7%

MFI



76,667 150,348 129,224 46,255 48,150

Total revenue 80,214 150,731 203,994 57,498 64,663


10,304 64,840 76,711 3,475 16,876



717,862 390,754 1,008,196 134,892 175,850


718,859 444,451 1,402,610 201,154 174,186


718,361 417,603 1,205,403 168,023 175,018

Inflation rate * 3.7% 3.7% 3.7% 3.7% 3.7%


8.7% 34.6% 13.9% 25.2% 24.2%


12.8% 43.0% 37.6% 6.0% 26.1%


10.7% 36.0% 10.7% 27.5% 27.5%


6.7% 31.2% 6.8% 23.0% 23.0%

MFI



31,493 41,057 21,394 45,819 3,764

Total revenue 34,327 43,640 23,234 73,804 6,369


147 19,553 3,541 29,066 1,597



83,130 94,134 85,467 130,950 23,179


90,843 128,934 95,678 148,190 15,524


86,986 111,534 90,573 139,570 19,351

Inflation rate * 3.7% 3.7% 3.7% 3.7% 3.7%



Sect

ion

5A

nn

exu

res

MFI



23.6% 26.3% 16.8% 37.5% 13.7%


0.4% 44.8% 15.2% 39.4% 25.1%


36.2% 36.8% 23.6% 32.8% 19.5%


31.3% 31.9% 19.2% 28.1% 15.2%

MFI

Akhuwat OSDI Sub


824,058 - 7,036,334

Total revenue 1,400,771 20,211 8,996,115


(79,302) (21,704) 1,788,366



4,830,627 19,676 20,530,473


8,063,573 11,407 26,954,961


6,447,100 15,542 23,742,717

Inflation rate * 3.7% 3.7% 3.7%

weighted avg.


16.5% 63.9% 28.3%


-5.7% -107.4% 19.9%


12.8% 0.0% 29.6%


8.8% -3.6% 25.0%

RSP



3,166,610 285,982 404,018 303,348 4,159,958

Total revenue 3,357,425 356,889 437,557 358,504 4,510,375


955,747 162,512 60,390 (43,609) 1,135,039



10,098,401 1,361,739 1,363,045 1,188,422 14,011,607

Sect

ion

5



93

An

nex

ure

s

RSP



11,960,308 1,080,378 1,603,839 1,351,175 15,995,700


11,029,354 1,221,059 1,483,442 1,269,799 15,003,653

Inflation rate * 3.7% 3.7% 3.7% 3.7% 3.7%

weighted avg.


23.6% 12.5% 22.9% 30.8% 22.4%


28.5% 45.5% 13.8% -12.2% 25.2%


28.7% 23.4% 27.2% 23.9% 27.7%


24.1% 19.0% 22.7% 19.5% 23.2%



25,385,849 7,036,334 4,159,958 36,582,140

Total revenue 28,263,914 8,996,115 4,510,375 41,770,404


3,161,381 1,788,366 1,135,039 6,084,786

Average total assets 126,187,673 31,744,580 20,132,365 178,064,618


54,986,234 20,530,473 14,011,607 89,528,314


89,052,391 26,954,961 15,995,700 132,003,052


72,019,312 23,742,717 15,003,653 110,765,683

Inflation rate * 3.7% 3.7% 3.7% 3.7%



22.4% 28.3% 22.4% 23.5%


11.2% 19.9% 25.2% 14.6%


35.2% 29.6% 27.7% 33.0%


30.4% 25.0% 23.2% 28.3%



Sect

ion

5A

nn

exu

res

Operating Expense in PKR 000MFB


Adjusted total expense

5,265,787 4,770,539 2,159,009 2,954,051 2,550,044

Adjusted financial expense

1,807,109 1,113,495 580,886 1,239,768 647,593

Adjusted loan loss provision expense

684,807 103,555 15,612 155,329 219,211

Operating expense 2,773,871 3,553,489 1,562,511 1,558,954 1,683,241

Adjustment expense 0 110 42 84 46


Adjusted total expense-to-average total assets

17.4% 16.6% 14.9% 14.5% 21.2%

Adjusted financial expense-to-average total assets

6.0% 3.9% 4.0% 6.1% 5.4%

Adjusted loan loss provision expense-to-average total assets

2.3% 0.4% 0.1% 0.8% 1.8%

Adjusted operating expense-to-average total assets

9.2% 12.4% 10.8% 7.7% 14.0%

Adjusted personnel expense

4.4% 5.8% 5.7% 4.4% 7.1%

Adjusted admin expense

4.7% 6.3% 5.0% 3.3% 6.8%

Adjustment expense-to-average total assets

0.0% 0.0% 0.0% 0.0% 0.0%

MFB



2,651,978 1,613,751 1,276,807 260,216 23,502,182


671,551 255,330 428,308 830 6,744,870


845,921 67,611 44,490 12,772 2,149,307

Operating expense 1,134,506 1,290,810 804,009 246,614 14,608,005

Adjustment expense (10) 28 33 16 349


Weighted avg.


71.4% 16.9% 19.9% 41.7% 18.6%


18.1% 2.7% 6.7% 0.1% 5.3%


22.8% 0.7% 0.7% 2.0% 1.7%


30.5% 13.5% 12.5% 39.5% 11.6%

Sect

ion

5



95

An

nex

ure

s

MFB



17.4% 6.3% 6.8% 14.5% 5.8%


12.5% 7.2% 5.6% 24.6% 5.6%


0.0% 0.0% 0.0% 0.0% 0.0%

MFI



283,964 1,611,235 184,036 339,655 173,451


36,987 562,273 48,904 102,817 36,840


201,068 (21,001) 14,764 15,338 6,463

Operating expense 45,909 1,069,963 120,369 221,500 130,148

Adjustment expense 167,069 4,338 4 12 3



37.1% 22.4% 18.6% 21.1% 22.5%


4.8% 7.8% 5.0% 6.4% 4.8%


26.3% -0.3% 1.5% 1.0% 0.8%


6.0% 14.9% 12.2% 13.8% 16.9%


3.3% 9.6% 7.4% 6.6% 8.7%


1.7% 2.6% 4.8% 5.4% 7.6%


21.8% 0.1% 0.0% 0.0% 0.0%

MFI



111,613 104,207 906,257 35,626 1,046,025


11,218 30,096 184,909 15,061 67,936


- 7,127 48,580 (1,123) 26,705

Operating expense 100,395 66,984 672,768 21,688 951,385

Adjustment expense 14 1 239 4,817 5




Sect

ion

5A

nn

exu

res

MFI



20.0% 19.9% 17.6% 28.5% 68.8%


2.0% 5.7% 3.6% 12.0% 4.5%


0.0% 1.4% 0.9% -0.9% 1.8%


18.0% 12.8% 13.1% 17.3% 62.6%


4.7% 6.9% 8.6% 7.4% 28.0%


2.1% 5.6% 3.0% 7.0% 34.6%


0.0% 0.0% 0.0% 3.8% 0.0%

MFI



69,900 85,887 127,265 54,022 47,786


24,033 16,515 56,994 10,645 13,150


1,303 2,496 9,401 2,017 (3,935)


Adjustment expense 10,297 4 28,159 2,187 (601)



7.6% 19.7% 8.7% 23.7% 17.9%


2.6% 3.8% 3.9% 4.7% 4.9%


0.1% 0.6% 0.6% 0.9% -1.5%


4.8% 15.4% 4.1% 18.2% 14.4%


2.8% 8.0% 2.4% 10.8% 9.8%


1.6% 7.3% 1.7% 7.4% 4.7%


1.1% 0.0% 1.9% 1.0% -0.2%

Sect

ion

5



97

An

nex

ure

s

MFI



34,180 24,087 19,692 44,736 4,430


7,876 9,890 7,052 13,059 1,036


2,868 1,998 1,902 2,156 (383)


Adjustment expense 0 0 0 1 1



23.5% 14.5% 14.3% 22.7% 9.5%


5.4% 6.0% 5.1% 6.6% 2.2%


2.0% 1.2% 1.4% 1.1% -0.8%


16.1% 7.4% 7.8% 15.0% 8.1%


9.5% 2.9% 3.7% 10.8% 4.4%


5.9% 4.1% 4.1% 4.1% 3.7%


0.0% 0.0% 0.0% 0.0% 0.0%

MFI

Akhuwat OSDI Sub


1,480,045 41,914 6,830,015


444,943 59 1,702,293


38,844 5,336 361,924

Operating expense 996,258 36,518 4,765,798

Adjustment expense 444,971 5,338 666,859


Weighted avg.


17.4% 132.5% 21.5%


5.2% 0.2% 5.4%


0.5% 16.9% 1.1%


11.7% 115.5% 15.0%


6.7% 58.4% 8.5%



Sect

ion

5A

nn

exu

res

MFI

Akhuwat OSDI Sub


2.2% 57.1% 4.6%


5.2% 16.9% 2.1%

RSP



2,401,546 194,332 377,148 402,119 3,375,144


732,121 78,731 114,516 83,312 1,008,680


115,381 (1,316) 45,702 154,624 314,391

Operating expense 1,554,044 116,916 216,930 164,182 2,052,073

Adjustment expense 132 46 34,993 111,458 146,628


Weighted avg.


16.9% 6.8% 19.8% 34.5% 16.8%


5.2% 2.8% 6.0% 7.1% 5.0%


0.8% 0.0% 2.4% 13.3% 1.6%


10.9% 4.1% 11.4% 14.1% 10.2%


8.3% 2.9% 8.2% 9.3% 7.6%


2.6% 1.2% 2.8% 4.1% 2.5%


0.0% 0.0% 1.8% 9.6% 0.7%

Sect

ion

5



99

An

nex

ure

s

Operating EfficiencyMFB


Operating expense (PKR 000)

2,755,914 3,485,207 1,559,937 1,558,766 1,669,761

Personnel expense (PKR 000)

1,340,023 1,670,412 835,550 891,854 848,857

Average gross loan portfolio (PKR 000)

20,387,932 14,065,704 6,956,835 11,178,274 7,843,943

Average number of active borrowers

557,082 385,415 221,078 325,521 132,252

Average number of active loans

557,082 385,415 221,078 325,521 133,601

Adjusted operating expense-to-average gross loan portfolio

13.52% 24.8% 22.4% 13.9% 21.3%

Adjusted personnel expense-to-average gross loan portfolio

6.57% 11.9% 12.0% 8.0% 10.8%

Average salary/gross domestic product per capita

3.2 3.1 3.5 2.5 4.2

Adjusted cost per borrower (PKR)

4,947 9,043 7,056 4,789 12,626

Adjusted cost per loan (PKR)

4,947 9,043 7,056 4,789 12,498

MFB



1,107,253 1,287,181 801,942 243,716 14,469,679


644,650 598,679 439,096 90,602 7,359,723


4,487,554 3,642,034 3,248,092 208,943 72,019,312


45,643 90,929 22,254 2,925 1,783,099


45,643 90,929 22,254 2,925 1,784,448

weighted avg.


24.7% 35.3% 24.7% 116.6% 20.1%


14.4% 16.4% 13.5% 43.4% 10.2%


2.8 5.3 3.1 4.2 3.3


24,259 14,156 36,036 83,322 8,115


24,259 14,156 36,036 83,322 8,109



Sect

ion

5A

nn

exu

res

MFI



38,300 879,022 120,369 193,944 125,099


24,916 689,726 73,066 106,809 66,821


578,025 4,557,959 652,055 1,198,346 402,185


44,741 214,981 58,468 44,954 22,940


44,741 214,981 58,468 44,954 22,940


6.6% 19.3% 18.5% 16.2% 31.1%


4.3% 15.1% 11.2% 8.9% 16.6%


1.2 2.1 1.7 2.8 2.1


856 4,089 2,059 4,314 5,453


856 4,089 2,059 4,314 5,453

MFI



37,917 65,564 598,708 18,066 950,928


26,380 36,059 443,737 9,246 425,642


155,292 369,172 4,736,656 88,960 1,409,005


13,121 20,724 322,015 4,474 56,327


13,121 20,724 322,015 4,474 56,327


24.4% 17.8% 12.6% 20.3% 67.5%


17.0% 9.8% 9.4% 10.4% 30.2%


1.9 1.5 1.8 2.3 5.9


2,890 3,164 1,859 4,038 16,882


2,890 3,164 1,859 4,038 16,882

Sect

ion

5



101

An

nex

ure

s

MFI



41,019 66,877 60,870 41,361 38,570


26,061 34,969 35,237 24,553 26,085


718,361 417,603 1,205,403 168,023 175,018


35,627 22,718 71,430 14,269 12,891


35,627 22,718 71,430 14,269 12,891


5.7% 16.0% 5.0% 24.6% 22.0%


3.6% 8.4% 2.9% 14.6% 14.9%


0.7 3.1 0.5 1.9 1.6


1,151 2,944 852 2,899 2,992


1,151 2,944 852 2,899 2,992

MFI



22,348 11,690 10,738 29,448 3,777


13,778 4,825 5,083 21,323 2,049


86,986 111,534 90,573 139,570 19,351


6,094 5,917 3,637 6,314 1,748


6,094 5,917 3,637 6,314 1,748


25.7% 10.5% 11.9% 21.1% 19.5%


15.8% 4.3% 5.6% 15.3% 10.6%


1.5 0.9 1.3 2.0 1.1


3,667 1,976 2,952 4,664 2,161


3,667 1,976 2,952 4,664 2,161



Sect

ion

5A

nn

exu

res

MFI

Akhuwat OSDI Sub


754,468 36,518 4,145,600


568,823 18,462 2,683,648


6,447,100 15,542 23,742,717


567,761 330 1,551,481


567,761 330 1,551,481

weighted avg.


11.7% 235.0% 17.5%


8.8% 118.8% 11.3%


1.1 2.6 1.8


1,329 110,662 2,672


1,329 110,662 2,672

RSP



1,554,044 116,916 210,029 156,668 2,037,658


1,185,258 81,757 156,942 108,643 1,532,600


11,029,354 1,221,059 1,483,442 1,269,799 15,003,653


649,682 58,890 110,055 72,761 891,388


649,682 58,890 110,055 72,761 891,388

weighted avg.


14.1% 9.6% 14.2% 12.3% 13.6%


10.7% 6.7% 10.6% 8.6% 10.2%


2.4 0.8 1.9 2.3 2.1


2,392 1,985 1,908 2,153 2,286


2,392 1,985 1,908 2,153 2,286

Sect

ion

5



103

An

nex

ure

s



14,469,679 4,145,600 2,037,658 20,652,937


7,359,723 2,683,648 1,532,600 11,575,971


72,019,312 23,742,717 15,003,653 110,765,683


1,783,099 1,551,481 891,388 4,225,968


1,784,448 1,551,481 891,388 4,227,317



20.1% 17.5% 13.6% 18.6%


10.2% 11.3% 10.2% 10.5%


3.3 1.8 2.1 2.6


8,115 2,672 2,286 4,887


8,109 2,672 2,286 4,886

ProductivityMFB


Number of active borrowers

557,082 385,415 221,078 325,521 132,252

Number of active loans

557,082 385,415 221,078 325,521 133,601

Number of active depositors

1,369,007 4,666,050 458,210 674,494 406,984


1,369,007 4,666,050 458,210 674,494 406,984

Total staff 2,708 3,473 1,541 2,340 1,324

Total loan officers 1,396 1,366 710 1,289 689

Borrowers per staff 206 111 143 139 100

Loans per staff 206 111 143 139 101

Borrowers per loan officer

399 282 311 253 192

Loans per loan officer 399 282 311 253 194

Depositors per staff 506 1,344 297 288 307

Deposit accounts per staff

506 1,344 297 288 307


51.6% 39.3% 46.1% 55.1% 52.0%



Sect

ion

5A

nn

exu

res

MFB



45,643 90,929 22,254 2,925 1,783,099


45,643 90,929 22,254 2,925 1,784,448


113,688 8,086,949 153,039 8,658 15,937,079


113,688 8,086,949 153,039 8,658 15,937,079

Total staff 1,516 740 939 141 14,722

Total loan officers 339 266 357 62 6,474

weighted avg.


Loans per staff 30 123 24 21 121


135 342 62 47 275


Depositors per staff 75 10,928 163 61 1,083


75 10,928 163 61 1,083


22.4% 35.9% 38.0% 44.0% 44.0%

MFI



44,741 214,981 58,468 44,954 22,940


44,741 214,981 58,468 44,954 22,940


- - - - -


- - - - -

Total staff 140 2,096 286 250 208

Total loan officers 65 1,105 139 88 82


Loans per staff 320 103 204 180 110


688 195 421 511 280


Depositors per staff 0 0 0 0 0


0 0 0 0 0


46.4% 52.7% 48.6% 35.2% 39.4%

Sect

ion

5



105

An

nex

ure

s

MFI

GBTI FFO ASA-P MO BRAC


13,121 20,724 322,015 4,474 56,327


13,121 20,724 322,015 4,474 56,327


- - - - -


- - - - -

Total staff 93 158 1,592 26 474

Total loan officers 12 83 912 14 274


Loans per staff 141 131 202 172 119


1,093 250 353 320 206

Loans per loan officer 1,093 250 353 320 206



0 0 0 0 0


12.9% 52.5% 57.3% 53.8% 57.8%

MFI



35,627 22,718 71,430 14,269 12,891


35,627 22,718 71,430 14,269 12,891


- - - - -


- - - - -

Total staff 249 73 421 86 104



Loans per staff 143 311 170 166 124


283 483 308 310 293




0 0 0 0 0


50.6% 64.4% 55.1% 53.5% 42.3%



Sect

ion

5A

nn

exu

res

MFI



6,094 5,917 3,637 6,314 1,748


6,094 5,917 3,637 6,314 1,748


- - - - -


- - - - -

Total staff 62 35 26 71 12



Loans per staff 98 169 140 89 146


254 370 404 275 583




0 0 0 0 0


38.7% 45.7% 34.6% 32.4% 25.0%

MFI

Akhuwat OSDI Sub


567,761 330 1,551,481


567,761 330 1,551,481


- - -


- - -

Total staff 3,491 46 9,999

Total loan officers 1,899 2 5,245

weighted avg.

Borrowers per staff 163 7 155

Loans per staff 163 7 155


299 165 296

Loans per loan officer 299 165 296

Depositors per staff 0 0 -


0 0 -


54.4% 4.3% 52.5%

Sect

ion

5



107

An

nex

ure

s

RSP



649,682 58,890 110,055 72,761 891,388


649,682 58,890 110,055 72,761 891,388


- - - - -


- - - - -

Total staff 3,221 641 527 303 4,692

Total loan officers 3,014 224 237 148 3,623

weighted avg.


Loans per staff 202 92 209 240 190


216 263 464 492 246


Depositors per staff - - - - -


- - - - -


93.6% 34.9% 45.0% 48.8% 77.2%



1,783,099 1,551,481 891,388 4,225,968


1,784,448 1,551,481 891,388 4,227,317


15,937,079 - - 15,937,079


15,937,079 - - 15,937,079

Total staff 14,722 9,999 4,692 29,413

Total loan officers 6,474 5,245 3,623 15,342


Borrowers per staff 121 155 190 144

Loans per staff 121 155 190 144


275 296 246 275

Loans per loan officer 276 296 246 276

Depositors per staff 1,083 - - 542


1,083 - - 542


44.0% 52.5% 77.2% 52.2%



Sect

ion

5A

nn

exu

res

Risk in PKR 000MFB


Portfolio at risk > 30 days

347,374 93,891 58,873 48,060 114,977


193,416 31,864 19,201 17,784 54,716

Loan loss reserve (balance sheet)

369,450 110,070 90,698 144,309 126,865

Loan Portfolio written off during year

535,708 52,348 55,057 97,336 152,428



20,387,932 14,065,704 6,956,835 11,178,274 7,843,943

Portfolio at risk (>30)-to-gross loan portfolio

1.5% 0.6% 0.7% 0.4% 1.1%

Portfolio at risk(>90)-to-gross loan portfolio

0.8% 0.2% 0.2% 0.1% 0.5%

Write off-to-average gross loan portfolio

2.6% 0.37% 0.8% 0.9% 1.9%

Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30 days)

106.4% 117.2% 154.1% 300.3% 110.3%

MFB



24,400 - 25,633 6,007 719,215


449 - 13,153 4,006 334,590


913,163 75,138 48,381 4,511 1,882,585


- - 2,589 23,651 919,119

Gross loan portfolio 6,320,692 5,933,962 5,576,802 212,539 89,052,391


4,487,554 3,642,034 3,248,092 208,943 72,019,312

weighted avg.


0.4% 0.0% 0.5% 2.8% 0.8%


0.0% 0.0% 0.2% 1.9% 0.4%


0.0% 0.0% 0.1% 11.3% 1.3%


3742.5% #DIV/0! 188.7% 75.1% 261.8%

Sect

ion

5



109

An

nex

ure

s

MFI



234,972 14,798 10,466 5,057 50


207,637 10,045 9,282 2,869 50


33,828 45,481 25,584 62,555 22,233


15,919 3,099 27,428 9,319 7

Gross loan portfolio 594,625 4,562,209 765,014 1,251,104 483,208


578,025 4,557,959 652,055 1,198,346 402,185


39.5% 0.3% 1.4% 0.4% 0.0%


34.9% 0.2% 1.2% 0.2% 0.0%


2.8% 0.1% 4.2% 0.8% 0.0%


14.4% 307.4% 244.5% 1237.0% 44226.7%

MFI



- 5,918 11,410 753 30,551


- 3,680 11,410 436 28,876


7,852 18,107 47,571 4,525 57,820


- 318 8,486 - 32,304

Gross loan portfolio 192,672 369,319 5,654,742 80,870 1,505,789


155,292 369,172 4,736,656 88,960 1,409,005


0.0% 1.6% 0.2% 0.9% 2.0%


0.0% 1.0% 0.2% 0.5% 1.9%


0.0% 0.1% 0.2% 0.0% 2.3%


0.0% 306.0% 416.9% 600.8% 189.3%



Sect

ion

5A

nn

exu

res

MFI



306 3,170 4,291 26 4,996


306 2,991 2,767 - 3,042


36,093 4,992 68,923 8,407 7,047


4,678 1,892 1,242 425 -

Gross loan portfolio 718,859 444,451 1,402,610 201,154 174,186


718,361 417,603 1,205,403 168,023 175,018


0.0% 0.7% 0.3% 0.0% 2.9%


0.0% 0.7% 0.2% 0.0% 1.7%


0.7% 0.5% 0.1% 0.3% 0.0%


11804.6% 157.5% 1606.3% 0.0% 141.1%

MFI



4,493 3,556 9,302 1,928 749


3,871 2,149 5,360 1,515 587


6,744 5,619 4,712 7,319 776


1,294 1,086 1,463 343 1,302

Gross loan portfolio 90,843 128,934 95,678 148,190 15,524


86,986 111,534 90,573 139,570 19,351


4.9% 2.8% 9.7% 1.3% 4.8%


4.3% 1.7% 5.6% 1.0% 3.8%


1.5% 1.0% 1.6% 0.2% 6.7%


150.1% 158.0% 50.7% 379.5% 103.7%

Sect

ion

5



111

An

nex

ure

s

MFI

Akhuwat OSDI Sub


26,325 11,407 384,524


- 11,407 308,278


80,642 6,071 562,898


5,466 - 116,072

Gross loan portfolio 8,063,573 11,407 26,954,961


6,447,100 15,542 23,742,717

weighted avg.


0.3% 100.0% 1.4%


0.0% 100.0% 1.1%


0.1% 0.0% 0.5%


306.3% 53.2% 146.4%

RSP



150,169 16,052 48,760 246,739 461,720


130,729 14,881 44,573 240,510 430,693


160,255 79,200 8,578 121,403 369,436


37,224 - 31,742 43,161 112,127



11,029,354 1,221,059 1,483,442 1,269,799 15,003,653

weighted avg.


1.3% 1.5% 3.0% 18.3% 2.9%


1.1% 1.4% 2.8% 17.8% 2.7%


0.3% 0.0% 2.1% 3.4% 0.7%


106.7% 493.4% 17.6% 49.2% 80.0%



Sect

ion

5A

nn

exu

res



719,215 384,524 461,720 1,565,459


334,590 308,278 430,693 1,073,562


1,882,585 562,898 369,436 2,814,919


919,119 116,072 112,127 1,147,319

Gross loan portfolio 89,052,391 26,954,961 15,995,700 132,003,052


72,019,312 23,742,717 15,003,653 110,765,683



0.8% 1.4% 2.9% 1.2%


0.4% 1.1% 2.7% 0.8%


1.3% 0.5% 0.7% 1.0%


261.8% 146.4% 80.0% 179.8%

Sect

ion

5



113

An

nex

ure

s



Sect

ion

5A

nn

exu

res

MFBs

Social GoalsKBL TMFB FMFBP FINCA MMFB

1.1 Target market Clients living in rural areas

P P P P P

Clients living in urban areas

P P P P P

Women P P P P PAdolescents and youth (below 18)

None of the above

Ubank POMFB NRSP Bank

APMBL

Clients living in rural areas

P P P


P P P P

Women P P P PAdolescents and youth (below 18)

None of the above

AIII - Social Performance Indicators 2016

Sect

ion

5


An

nex

ure

s

KBL TMFB FMFBP FINCA MMFB

1.2 Development goals Increased access to financial services

P P P P P

Poverty reduction P P P P PEmployment generation

P P P P

Development of start-up enterprises

P P

Growth of existing businesses

P P P P P

Improvement of adult education

Youth opportunities PChildren's schooling PHealth improvement PGender equality and women's empowerment

P

Water and sanitation PHousing P PNone of the above


APMBL

Increased access to financial services

P P P P

Poverty reduction P P P PEmployment generation

P P


P P P


P P P P


Youth opportunities PChildren's schooling PHealth improvement PGender equality and women's empowerment

P P P P

Water and sanitation

Housing

None of the above


1.3 Poverty level Very poor clients

Poor clients P P PLow income clients P P P PNo specific poverty target

P



Sect

ion

5A

nn

exu

res


APMBL

Very poor clients

Poor clients P PLow income clients P P P PNo specific poverty target


1.4 Does MFP measure poverty

Yes P P P P

No P Unknown


APMBL

Yes P P No P P Unknown


1.5 Poverty measurement tool

Grameen Progress out of Poverty Index (PPI)

P

USAID Poverty Assessment Tool (PAT)

Per capita household expenditure

P

Per capita household income

P

Participatory Wealth Ranking (PWR)

Housing index

Food security index

Means test

Own proxy poverty index

P P P

None of the above P


APMBL




P


P


Sect

ion

5



117

An

nex

ure

s

Housing index

Food security index

Means test


P

None of the above P P

Governance and HRKBL TMFB FMFBP FINCA MMFB

2.1 Board orientation of social mission

Yes P P P P

No PUnknown


APMBL

Yes P P P PNo

Unknown


2.2 SPM champion/ committee at Board

Yes P P

No P P PUnknown


APMBL

Yes PNo P P PUnknown


2.3 Board experience in SPM Yes P P P PNo PUnknown


APMBL

Yes P P PNo

Unknown P



Sect

ion

5A

nn

exu

res


2.4 Staff incentives related to SP

Number of clients P P P P

Quality of interaction with clients based on client feedback mechanism

P

Quality of social data collected

Portfolio quality P P P P PNone of the above


APMBL

Number of clients P P P PQuality of interaction with clients based on client feedback mechanism


Portfolio quality P P P PNone of the above


2.5 How number of clients is incentivized

Total number of clients P P P P P

Number of new clients P P P Client retention P None of the above


APMBL

Total number of clients P P P P Number of new clients P P P Client retention P P P None of the above


2.6 HR policies related to SP Social protection (medical insurance and/or pension contribution)

P P P P P

Safety policy P PAnti-harassment policy P P P P PNon-discrimination policy

P P P P P

Grievance resolution policy

P P P P P

None of the above

Sect

ion

5



119

An

nex

ure

s


APMBL

Social protection (medical insurance and/or pension contribution)

P P P P

Safety policy P P PAnti-harassment policy P P PNon-discrimination policy

P P P


P P P

None of the above

Products and ServicesKBL TMFB FMFBP FINCA MMFB

3.1 Types of credit products Income generating loans

P P P P P

Non-income generating loans

P P P

Does not offer credit products


APMBL

Income generating loans

P P P P


P P



3.2 Types of income generating loans

Microenterprise loans P P P P P

SME loans PAgriculture/livestock loans

P P P P P

Express loans P P P PNone of the above


APMBL

Microenterprise loans P P P PSME loans P P PAgriculture/livestock loans

P P P

Express loans

None of the above



Sect

ion

5A

nn

exu

res


3.3 Types of non-income generating loans

Education loans P

Emergency loans P P PHousing loans P POther household needs/consumption

P P P

None of the above P


APMBL

Education loans PEmergency loans PHousing loans

Other household needs/consumption

P P



3.4 Types of savings products

Compulsory sacings accounts

P

Voluntary savings accounts

P P P P P

Does not offer savings accounts


APMBL



P P P P



3.5 Types of voluntary savings products

Demand deposit accounts

P P P P P

Time deposit accounts P P P P PNone of the above


APMBL


P P P P

Time deposit accounts P P P PNone of the above


3.6 Compulory insurance required

Yes P P P P

Sect

ion

5



121

An

nex

ure

s

No P Unknown


APMBL

Yes P P P P No

Unknown


3.7 Types of compulory insurance required

Credit life insurance P P P P

Life/accident insurance P PAgriculture insurance P P PNone of the above P


APMBL

Credit life insurance P P P PLife/accident insurance PAgriculture insurance P PNone of the above


3.8 Voluntary insurance offered

Yes P P P

No P P Unknown


APMBL

Yes P No P P P Unknown


3.9 Types of voluntary insurance offered

Credit life insurance

Life/accident insurance PAgriculture insurance PHealth insurance P P PHouse insurance

Workplace insurance




Sect

ion

5A

nn

exu

res


APMBL


Life/accident insurance

Agriculture insurance

Health insurance PHouse insurance

Workplace insurance

None of the above P P P


3.10 Other financial services offered

Yes P P P P P

No

Unknown


APMBL

Yes P P P No P Unknown



Debit/credit card P P P P

Mobile/branchless banking services

P P P

Savings facilitation services

P P

Remittance/money transfer services

P P P P P

Payment services P P PMicroleasing

Scholarship/educational grants

None of the above


APMBL

Debit/credit card P P PMobile/branchless banking services

P P


P P P


P P

Payment services P PMicroleasing


Sect

ion

5



123

An

nex

ure

s

None of the above P


3.12 Enterprise services offered

Yes

No P P P P P Unknown


APMBL

Yes

No P P P P Unknown


3.13 Types of enterprise services offered

Enterprise skills development

Business development services

None of the above P P P P P


APMBL



None of the above P P P P


3.14 Women’s empowerment services

Yes



APMBL

Yes

No P P P P Unknown


3.15 Types of women’s empowerment services offered

Leadership training for women

Women's rights education/gender issues training



Sect

ion

5A

nn

exu

res

Counseling/legal services for female victims of violence



APMBL






3.16 Education services offered

Yes P P P

No P P Unknown


APMBL

Yes P No P P P Unknown


3.17 Types of education services offered

Financial literacy education

P P

Basic health/nutrition education

P

Child and youth education

Occupational health and safety in the workplace education



APMBL


P





Sect

ion

5



125

An

nex

ure

s


3.18 Health services offered Yes



APMBL

Yes

No P P P P Unknown


3.19 Types of health services offered

Basic medical services

Special medical services for women and children



APMBL




Client ProtectionKBL TMFB FMFBP FINCA MMFB

4.1 Do policies support good repayment capacity analysis

Yes P P P P P

No

Partially

Unknown


APMBL

Yes P P P P No

Partially

Unknown



Sect

ion

5A

nn

exu

res


4.2 Does internal audit verify compliance with policies

Yes P P P P P No

Partially

Unknown


APMBL

Yes P P P P No

Partially

Unknown


4.3 The institution fully discloses to the clients all prices, installments, terms, and conditions of all financial products, including all charges and fees, associated prices, penalties, linked products, third party fees, and whether these can change over time.

Yes P P P P No

Partially P Unknown


APMBL

Yes P P P P No

Partially

Unknown


4.4 The institution clearly presents to clients the total amount that the client pays for the product, regardless of local regulations (including in the absence of industry-wide pricing transparency initiative).

Yes P P P P No

Partially P Unknown


APMBL

Yes P P P No

Partially P Unknown

Sect

ion

5



127

An

nex

ure

s


4.5 The institution clearly spells out in a Code of Conduct (i.e., in Code of Conduct, Code of Ethics, Book of Employee Rules) the specific standards of professional conduct that are expected of all employees involved in collections (including third party staff).

Yes P P P P No

Partially P Unknown


APMBL

Yes P P P P No

Partially

Unknown


4.6 The institution sanctions cases of violations of the Code of Conduct or collections policies (identified by management, internal audit or an efficient complaint mechanism) according to set rules.

Yes P P P P No

Partially P Unknown


APMBL

Yes P P P No P Partially

Unknown


4.7 The institution’s policies include how to handle complaints. They include how to inform clients about the complaint mechanism. The institution’s clients receive a timely resolution of their complaints.

Yes P P P P P No

Partially P Unknown


APMBL

Yes P P P P No

Partially

Unknown



Sect

ion

5A

nn

exu

res


4.8 The institution’s contracts include a data privacy clause, describing how and when data can be shared (in addition to credit bureau information).

Yes P P P P P No

Partially P Unknown


APMBL

Yes P P P P No

Partially

Unknown


4.9 How interest rate of most representative credit product is stated

Declining balance interest method

P P P

Flat interest method P P


APMBL


P P P

Flat interest method P

EnvironmentKBL TMFB FMFBP FINCA MMFB

5.1 Environmental policies in place

Awareness raising on environmental impacts

P

Clauses in loan contracts requiring clients to improve environmental practices/mitigate environmental risks

P P

Tools to evaluate environmental risks of clients' activities

P P

Specific loans linked to environmentally friendly products and/or practices

P P

None of the above P


APMBL


P

Sect

ion

5



129

An

nex

ure

s



P P


P P


None of the above P


5.2 Types of environmentally friendly products and/or practices offered

Products related to renewable energy (e.g. solar panels, biogas digesters etc)

P

Products related to energy efficiency (e.g. insulation, improved cooking stove etc)

P

Products related to environmentally friendly practices (e.g. organic farming, recycling, waste management etc)



APMBL


P






Sect

ion

5A

nn

exu

res

MFIs

Social GoalsAGAHE Akhuwat BEDF CSC FFO


P P P P P


P P P P P

Women P P P P PAdolescents and youth (below 18)

None of the above

JWS Kashf Founda-tion

MOJAZ OCT RCDP


P P P P


P P P P P

Women P P P P P

Adolescents and youth below 18)

P

None of the above

SSF SVDP OLP BRAC Micro-op-tions


P P P P P


P P P


P

None of the above

SRDO SWWS ASA-P SAATH VDO


P P P P


P P P


P

None of the above

DSP


P


P

Women PAdolescents and youth (below 18)

Sect

ion

5



131

An

nex

ure

s

None of the above

AGAHE Akhuwat BEDF CSC FFO

1.2 Development goals Increased access to financial services

P P P P


P P P P


P P


P P P P P


Youth opportunities P PChildren's schooling

Health improvement P PGender equality and women's empowerment

P P P P


Housing PNone of the above


MOJAZ OCT RCDP


P P P P P


P P P P


P P


P P P P


P

Youth opportunities PChildren's schooling

Health improvement PGender equality and women's empowerment

P P P P P


Housing

None of the above



P P P P P



Sect

ion

5A

nn

exu

res

Poverty reduction P P P PEmployment generation

P P P P P


P P P


P P P P P


P

Youth opportunities

Children's schooling PHealth improvement

Gender equality and women's empowerment

P P P

Water and sanitation PHousing

None of the above



P P P


P P P P


P


P P P P


Youth opportunities PChildren's schooling

Health improvement


P P P P

Water and sanitation PHousing

None of the above

DSP


P

Poverty reduction PEmployment generation

P



P


Sect

ion

5



133

An

nex

ure

s

Youth opportunities

Children's schooling

Health improvement


P


Housing

None of the above


1.3 Poverty level Very poor clients P PPoor clients P P P P PLow income clients P P P PNo specific poverty target


MOJAZ OCT RCDP

Very poor clients PPoor clients P P PLow income clients P P P P PNo specific poverty target


Very poor clients P PPoor clients P P P PLow income clients P P P P PNo specific poverty target


Very poor clients

Poor clients P P P PLow income clients P P P PNo specific poverty target

DSP

Very poor clients

Poor clients PLow income clients PNo specific poverty target



Sect

ion

5A

nn

exu

res



Yes P P P P

No PUnknown


MOJAZ OCT RCDP

Yes P P P P PNo

Unknown


Yes P P P P P

No

Unknown


Yes P P P P P

No

Unknown

DSP

Yes P

No

Unknown


1.5 Poverty level Grameen Progress out of Poverty Index (PPI)





Housing index

Food security index

Means test




MOJAZ OCT RCDP


P P P


Sect

ion

5



135

An

nex

ure

s




P

Housing index

Food security index

Means test


P P P

None of the above





P P P


P P


Housing index PFood security index

Means test


P P

None of the above



P


P


P


P P P P


P

Housing index PFood security index PMeans test


None of the above

DSP






Sect

ion

5A

nn

exu

res



Housing index

Food security index

Means test


P

None of the above

Governance and HRAGAHE Akhuwat BEDF CSC FFO


Yes P P P P P

No

Unknown


MOJAZ OCT RCDP

Yes P P P P P No

Unknown


Yes P P P P No P Unknown


Yes P P P P P No

Unknown

DSP

Yes

No P Unknown



Yes P P

No P P P Unknown

Sect

ion

5



137

An

nex

ure

s


MOJAZ OCT RCDP

Yes P P P No P P Unknown




Yes P P P P P No

Unknown

DSP

Yes P No

Unknown


2.3 Board experience in SPM Yes P P P P No

Unknown P


MOJAZ OCT RCDP





Yes P P P P P No

Unknown

DSP

Yes

No P Unknown



Sect

ion

5A

nn

exu

res





P


P

Portfolio quality P P PNone of the above P


MOJAZ OCT RCDP


P P P


P P




P


P



Number of clients P PQuality of interaction with clients based on client feedback mechanism

P P


P P

Portfolio quality P P P PNone of the above P

DSP

Number of clients



Portfolio quality

None of the above P

Sect

ion

5



139

An

nex

ure

s



Total number of clients P P

Number of new clients P Client retention P None of the above P P


MOJAZ OCT RCDP

Total number of clients P Number of new clients P P P Client retention P P P P None of the above P


Total number of clients P P Number of new clients P P P Client retention P None of the above


Total number of clients P P Number of new clients P P P Client retention P P P None of the above P

DSP

Total number of clients

Number of new clients

Client retention

None of the above P



P P P P P

Safety policy P PAnti-harassment policy P P P P PNon-discrimination policy

P P P P


P P P P P

None of the above



Sect

ion

5A

nn

exu

res


MOJAZ OCT RCDP


P P P P P

Safety policy P P P PAnti-harassment policy P P P P PNon-discrimination policy

P P P P


P P P P P

None of the above



P P P P

Safety policy P P PAnti-harassment policy P P P P PNon-discrimination policy

P P P P


P P P P

None of the above



P P P

Safety policy P PAnti-harassment policy P P P PNon-discrimination policy

P P P P P


P P P P

None of the above

DSP


P

Safety policy PAnti-harassment policy PNon-discrimination policy

P


P

None of the above

Sect

ion

5



141

An

nex

ure

s

Products and ServicesAGAHE Akhuwat BEDF CSC FFO


P P P P P


P



MOJAZ OCT RCDP


P P P P P


P P




P P P P P





P P P P P


P


DSP


P




3.2 Types of income generating loans


SME loans

Agriculture/livestock loans

P P P P

Express loans

None of the above


MOJAZ OCT RCDP

Microenterprise loans P P P P PSME loans P P P



Sect

ion

5A

nn

exu

res


P P P

Express loans

None of the above


Microenterprise loans P P P P PSME loans P P P PAgriculture/livestock loans

P P P P P

Express loans

None of the above


Microenterprise loans P P P P PSME loans P PAgriculture/livestock loans

P P P P

Express loans

None of the above

DSP

Microenterprise loans PSME loans


P

Express loans

None of the above



Education loans P

Emergency loans PHousing loans POther household needs/consumption



MOJAZ OCT RCDP

Education loans PEmergency loans P P PHousing loans


P P



Education loans

Sect

ion

5



143

An

nex

ure

s

Emergency loans

Housing loans




Education loans P PEmergency loans

Housing loans



DSP

Education loans

Emergency loans

Housing loans


None of the above P



Compulsory savings accounts



P P P P P


MOJAZ OCT RCDP



P


P P P P



P



P P P P




P P


P P P

DSP



Sect

ion

5A

nn

exu

res




P




Time deposit accounts



MOJAZ OCT RCDP










P

Time deposit accounts PNone of the above P P P

DSP



None of the above P



Yes P P P

No P P Unknown


MOJAZ OCT RCDP


Sect

ion

5



145

An

nex

ure

s


Yes P P P P No

Unknown Unknown



DSP

Yes P No

Unknown



Credit life insurance P P

Life/accident insurance PAgriculture insurance



MOJAZ OCT RCDP

Credit life insurance P P P PLife/accident insurance


None of the above P


Credit life insurance P P P PLife/accident insurance P PAgriculture insurance

None of the above


Credit life insurance P P PLife/accident insurance PAgriculture insurance P PNone of the above P P P

DSP

Credit life insurance PLife/accident insurance PAgriculture insurance

None of the above



Sect

ion

5A

nn

exu

res



Yes P

No P P P P Unknown


MOJAZ OCT RCDP

Yes P P No P P P Unknown


Yes P No P P P P Unknown



DSP

Yes

No P Unknown





P


Health insurance

House insurance

Workplace insurance



MOJAZ OCT RCDP

Credit life insurance P P Life/accident insurance


Health insurance P P House insurance

Workplace insurance

"

Sect

ion

5



147

An

nex

ure

s



Credit life insurance P Life/accident insurance

P

Agriculture insurance P Health insurance P House insurance

Workplace insurance



Credit life insurance P P Life/accident insurance

P P

Agriculture insurance P Health insurance P House insurance

Workplace insurance


DSP




Health insurance

House insurance

Workplace insurance

None of the above P

"



Yes P P

No P P P Unknown


MOJAZ OCT RCDP



Yes P P No P P P



Sect

ion

5A

nn

exu

res

Unknown



DSP

Yes P No

Unknown


3.11 Types of other financial services offered

Debit/credit card


P



Payment services

Microleasing


P



MOJAZ OCT RCDP

Debit/credit card


P



Payment services

Microleasing


P P



Debit/credit card


P P



Payment services

Microleasing

Sect

ion

5



149

An

nex

ure

s




Debit/credit card




Payment services

Microleasing P PScholarship/educational grants


DSP

Debit/credit card


P



Payment services

Microleasing


None of the above



Yes P P P P

No P Unknown


MOJAZ OCT RCDP

Yes P P P P P No

Unknown




Yes P P P No P



Sect

ion

5A

nn

exu

res

Unknown P

DSP

Yes P No

Unknown




P P P P


P P P

None of the above P


MOJAZ OCT RCDP


P P P P P


P P P

None of the above



P P


P




P P P P


P P P


DSP


P


None of the above



Yes P P P P

No P Unknown


MOJAZ OCT RCDP

Yes P P P P

Sect

ion

5



151

An

nex

ure

s

No P Unknown


Yes P P No P P Unknown P



DSP

Yes P No

Unknown




P P P


P P P P


P

None of the above P


MOJAZ OCT RCDP


P P P P


P P


P

None of the above P



P


P P





Sect

ion

5A

nn

exu

res



P P P


P P P


P P P


DSP


P



None of the above



Yes P P

No P P P Unknown


MOJAZ OCT RCDP

Yes P P P No P Unknown





DSP

Yes

No

Unknown

Sect

ion

5



153

An

nex

ure

s




P P


P





MOJAZ OCT RCDP


P P P


P P


P


P




P P


P






P P P P


P P P


P P P


None of the above P

DSP


P






Sect

ion

5A

nn

exu

res

None of the above


3.18 Health services offered Yes P No P P P P Unknown


MOJAZ OCT RCDP





Yes P P No P P Unknown P

DSP

Yes

No

Unknown P



Basic medical services P




MOJAZ OCT RCDP

Basic medical services P PSpecial medical services for women and children

P



Basic medical services P P

Sect

ion

5



155

An

nex

ure

s




Basic medical services P PSpecial medical services for women and children

P P

None of the above P P v

DSP



None of the above P

Client ProtectionAGAHE Akhuwat BEDF CSC FFO


Yes P P P P P

No

Partially

Unknown


MOJAZ OCT RCDP

Yes P P P P P No

Partially

Unknown


Yes P P P P No

Partially P Unknown


Yes P P P P P No

Partially

Unknown

DSP



Sect

ion

5A

nn

exu

res

Yes P No

Partially

Unknown



Yes P P P P P

No

Partially

Unknown


MOJAZ OCT RCDP

Yes P P P P P No

Partially

Unknown


Yes P P P P P No

Partially

Unknown


Yes P P P P P No

Partially

Unknown DSP

Yes P No

Partially

Unknown



Yes P P P P P No

Partially

Unknown


MOJAZ OCT RCDP

Sect

ion

5



157

An

nex

ure

s

Yes P P P P P No

Partially

Unknown


Yes P P P P P No

Partially

Unknown


Yes P P P P P No

Partially

Unknown

DSP

Yes P No

Partially

Unknown


4.4 The institution clearly presents to clients the total amount that the client pays for the product, regardless of local regulations (including in the absence of industry-wide pricing transparency initiative).

Yes P P P No

Partially

Unknown P P


MOJAZ OCT RCDP

Yes P P P P P No

Partially

Unknown


Yes P P P P No

Partially P Unknown


Yes P P P No

Partially



Sect

ion

5A

nn

exu

res

Unknown

DSP

Yes P No

Partially

Unknown



Yes P P P P No

Partially P Unknown


MOJAZ OCT RCDP

Yes P P P P P No

Partially

Unknown


Yes P P P P P No

Partially

Unknown


Yes P P P P P No

Partially

Unknown

DSP

Yes P No

Partially

Unknown

Sect

ion

5



159

An

nex

ure

s


4.6 The institution sanctions cases of violations of the Code of Conduct or collections policies (identified by management, internal audit or an efficient complaint mechanism) according to set rules.

Yes P P P P No

Partially P Unknown


MOJAZ OCT RCDP

Yes P P P P P No

Partially

Unknown


Yes P P P P P No

Partially

Unknown


Yes P P P P No

Partially

Unknown

DSP

Yes P No

Partially

Unknown


4.7 The institution’s policies include how to handle complaints. They include how to inform clients about the complaint mechanism. The institution’s clients receive a timely resolution of their complaints.

Yes P P P P P No

Partially

Unknown


MOJAZ OCT RCDP

Yes P P P P P No

Partially

Unknown


Yes P P P P P



Sect

ion

5A

nn

exu

res

No

Partially

Unknown


Yes P P P P P No

Partially

Unknown

DSP

Yes P No

Partially

Unknown


4.8 The institution’s contracts include a data privacy clause, describing how and when data can be shared (in addition to credit bureau information).

Yes P P P P No P Partially

Unknown


MOJAZ OCT RCDP

Yes P P P P No P Partially

Unknown


Yes P P P P No

Partially

Unknown P


Yes P P P P P No

Partially

Unknown

DSP

Yes P No

Partially

Unknown

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Flat interest method P P P P


MOJAZ OCT RCDP


P P P

Flat interest method P P P



P P

Flat interest method P P P



P

Flat interest method P P P P

DSP


P

Flat interest method

EnvironmentAGAHE Akhuwat BEDF CSC FFO



P P P P P


P P P P


P


P P

None of the above


MOJAZ OCT RCDP


P P P P



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P P P P


P P


P P

None of the above



P P P


P P P


P P


P P




P P P P P


P P P P


P P P P


P P

None of the above

DSP





None of the above P

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P P



MOJAZ OCT RCDP


P P P


P


P




P P


P


P P




P



P P P



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DSP




None of the above P

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RSPs

Social GoalsNRSP TMF PRSP GBTI SRSO


P P P P P


P P P P


P

None of the above

NRSP TMF PRSP GBTI SRSO

12 Development goals Increased access to financial services

P P P P P


P P


P P P


P P P


Youth opportunities P PChildren's schooling PHealth improvement P PGender equality and women's empowerment

P P P

Water and sanitation P PHousing PNone of the above


1.3 Poverty level Very poor clients P P Poor clients P P P P Low income clients P P P P No specific poverty target



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Yes P P P

No P P Unknown


1.5 Poverty measurement tool




P


P


P P

Housing index

Food security index

Means test


P


Governance and HRNRSP TMF PRSP GBTI SRSO


Yes P P P P

No P Unknown



Yes P P

No P P Unknown P


2.3 Board experience in SPM Yes P P P P P No

Unknown

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Quality of nteraction with clients based on client feedback mechanism

P


P P




Total number of clients P P P P

Number of new clients P P PClient retention P PNone of the above P



P P P P

Safety policy P PAnti-harassment policy P P P PNon-discrimination policy

P P P P


P P P P

None of the above

Products and ServicesNRSP TMF PRSP GBTI SRSO


P P P P P


P P




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3.2 Types of income generat-ing loans


SME loans


P P P P P

Express loans PNone of the above



Education loans P

Emergency loans PHousing loans POther household needs/consumption

P P







P P P P P








Yes P P P P P

No

Unknown



Credit life insurance P P

Life/accident insur-ance

P P

Agriculture insurance P None of the above

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Yes P

No P P P P Unknown





Agriculture insurance PHealth insurance

House insurance

Workplace insurance




Yes P P

No P P P Unknown


3.11 Types of other financial services offered

Debit/credit card


P


P


Payment services

Microleasing

Scholarship/education-al grants




Yes P P P P

No P Unknown



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Enterprise skills devel-opment

P P P P


P P

None of the above P



Yes P P P P

No P Unknown




P P P

Women's rights edu-cation/gender issues training

P P P

Counseling/legal ser-vices for female victims of violence

None of the above P



Yes P P P P

No P Unknown




P P P


P P P


P P

Occupational health and safety in the work-place education

None of the above P


3.18 Health services offered Yes P P P No P P Unknown

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Basic medical services P P P

Special medical ser-vices for women and children

P


Client ProtectionNRSP TMF PRSP GBTI SRSO


Yes P P P P P

No

partially

Unknown



Yes P P P P

No P partially

Unknown



Yes P P P P P No

partially

Unknown



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4.4 The institution clearly presents to clients the total amount that the cli-ent pays for the product, regardless of local regu-lations (including in the absence of industry-wide pricing transparency initiative).

Yes P P P P P No

partially

Unknown



Yes P P P P P No

partially

Unknown


4.6 The institution sanctions cases of violations of the Code of Conduct or collections policies (identified by manage-ment, internal audit or an efficient complaint mechanism) according to set rules.

Yes P P P P P No

partially

Unknown


4.7 The institution’s policies include how to handle complaints. They include how to inform clients about the complaint mechanism. The institu-tion’s clients receive a timely resolution of their complaints.

Yes P P P P P No

partially

Unknown


4.8 The institution’s contracts include a data privacy clause, de-scribing how and when data can be shared (in addition to credit bureau information).

Yes P P P P P No

partially

Unknown




P P P

Flat interest method P P

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EnvironmentNRSP TMF PRSP GBTI SRSO



P P P P P

Clauses in loan con-tracts requiring clients to imrove environmen-tal practices/mitigate environmental risks

P P


P P


P

None of the above




P P


Products related to en-vironmentally friendly practices (e.g. organic farming, recycling, waste management etc)

P P

None of the above P



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Outreach Africa Asia EAP27 ECA28 LAC29 MENA30

Number of MFIs 193 196 136 136 347 27

Gross Loan Portfolio (in USD million)

8,490 18,794 15,064 9,900 38,909 1,353

Number of active borrowers (in '000)

5,780 66,929 16,258 3,083 22,500 2,148

Deposits (in USD million)

9,213 6,886 7,687 7,664 27,331 251

Number of depositors (in '000)

27,029 55,912 17,483 7,572 30,230 735

Average loan balance per borrower (in USD)

616 246 924 2,160 1,579 630

Average loan balance per borrower / GNI per capita

66% 19% 65% 65% 32% 18%

Funding Structure

Assets (in USD million)

13,874 21,991 18,132 15,367 47,555 1,996

Debt to equity ratio

4.8 3.7 4.1 5.7 5.1 1.7

Capital /asset ratio

17% 21% 20% 14% 16% 37%

Gross loan portfolio to total assets

59% 85% 83% 63% 79% 68%

Annexure BRegional Benchmarks 2016

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Outreach Africa Asia EAP27 ECA28 LAC29 MENA30

Effeciency

Operating expense / loan portfolio

13% 9% 8% 10% 14% 15%

Operating expense / assets

8% 8% 6% 6% 11% 10%

Cost per borrower (in USD)

128 20 69 286 227 86

Profitability

Return on assets 2.1% 4.2% 1.9% 0.6% 2.3% 2.9%

Return on equity 12.0% 20.2% 9.6% 3.9% 14.2% 8.0%

Operational self sufficiency

116% 130% 120% 104% 117% 119%

Risk Profile


3.6% 1.8% 1.3% 6.1% 4.6% 3.6%


2.7% 1.6% 0.9% 5.1% 3.7% 2.8%

Write-off ratio 0.4% 0.5% 0.5% 1.1% 2.8% 1.5%

27 East Asia and the Pacific28 Eastern Europe and Central Asia29 Latin America and the Caribbean30 Middle East and North Africa



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Microfinance Banks (MFBs)ADVANS Pakistan Microfinance Bank Ltd (ADVANS)• ADVANS provided PMN its audited accounts. The numbers reported in the PMR match these

reports. Deloitte Yousuf Adil audited the annual accounts of ADVANS for the year ending at 31st December 2016.

• The financial statements have been presented as per the requirements of the State Bank of Pakistan.• The related party transactions have been properly disclosed in notes to the financial statements.• The grant income has been properly disclosed in financial statements and there is proper disclosure

on grants in notes to the financial statements.• The following numbers have been taken from AMFB’s MIS: i). rural-urban clients; ii). male-female

clients; iii). Number of staff; iv). Number of credit officers; and v). Number of branches (also available in audited accounts).

APNA Microfinance Bank Ltd (AMFB) • AMFB provided PMN its audited accounts. The numbers reported in the PMR match these reports.

RSM Avais Hyder Liaquat Noman audited the annual accounts of AMFB for the year ending at 31st December 2016.


on grants in notes to the financial statements.• The auditors have drawn attention to the existence of material uncertainty in the financial

statements which may cast significant doubt about the bank’s ability to continue as going concern.• The following numbers have been taken from AMFB’s MIS: i). rural-urban clients; ii). male-female


Annexure CSources of Data (2016)

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FINCA Microfinance Bank Ltd (FINCA)• FINCA provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Deloitte Yousuf Adil audited the annual accounts of FINCA for the year ending at 31st December 2016.


on grants in notes to the financial statements.• The following numbers have been taken from FINCA’s MIS: i). rural-urban clients; ii). male-female


Khushhali Bank Ltd (KBL)• KBL provided PMN its audited accounts. The numbers reported in the PMR match these reports.

BDO Ebrahim & Co. audited the annual accounts of KBL for the year ending at 31st December 2016.

• The financial statements have been presented as per the requirements of the State Bank of Pakistan.• The related party transactions have been properly disclosed in notes to the financial statements.• The grant income has been properly disclosed in financial statements and there is a proper

disclosure on grants in notes to the financial statements.• The following numbers have been taken from KBL’s MIS: i). rural-urban clients; ii). male-female

clients; iii). Portfolio aging; iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts).

The First Microfinance Bank Ltd (FMFB) • FMFB provided PMN its audited accounts. The numbers reported in the PMR match these reports.

EY Ford Rhodes audited the annual accounts of FMFBL for the year ending at 31st December 2016.• The financial statements have been presented as per the requirements of the State Bank of Pakistan.• The related party transactions have been properly disclosed in notes to the financial statements.• The grant income has been properly disclosed in financial statements and there is proper disclosure

on grants in notes to the financial statements.• The following numbers have been taken from the MIS: i). rural-urban clients; ii). male-female clients;

iii). Portfolio aging; iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts).

National Rural Support Programme Microfinance Bank (NRSP-B) • NRSP-B provided PMN its audited accounts. The numbers reported in the PMR match these

reports. Deloitte Yousuf Adil audited the annual accounts of NRSP-B for the year ending at 31st December 2016.






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Mobilink Microfinance Bank Ltd (MMFB)• MMFB provided PMN its audited accounts. The numbers reported in the PMR match these reports.

A.F Fergurson & Co. audited the annual accounts of MMFB for the year ending at 31st December 2016.




Telenor Microfinance Bank Ltd (TMFB) • TMFB provided PMN its audited accounts. The numbers reported in the PMR match these reports.

KPMG Taseer Hadi and Co. audited the annual accounts of TMFB for the year ending at 31st December 2016.




U Microfinance Bank Ltd (U-bank) • U-bank provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Deloitte Yousuf Adil audited the annual accounts of FINCA for the year ending at 31st December 2016.




Microfinance Institution (MFI)ASA Pakistan limited (ASA-P)• ASA-P provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Ernst and Young Ford Rhodes has audited the annual accounts of ASA-P for the year ending at 31st December 2016.

• ASA-P prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices.

• All necessary adjustments to ASA-P data have been made in order to remove subsidies. • The following numbers have been taken from the organization’s MIS: i). rural-urban clients; and ii).

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male-female clients; • There is proper disclosure on the balance sheet of loan portfolio, and loan loss provision; expense

charged during the year is disclosed on the income statement.• The related party transactions have been properly disclosed in notes to the financial statements.

Agahe• Agahe provided PMN its reviewed accounts. The numbers reported in the PMR match these

reports. Grant Thornton Anjum Rahman has reviewed the annual accounts of Agahe for the year ending at 31st December 2016.

• Agahe prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices.

• All necessary adjustments to Agahe data have been made in order to remove subsidies. • The related party transactions have been properly disclosed in notes to the financial statements.• The grant income has been properly disclosed in financial statements.

Akhuwat• Akhuwat provided PMN its audited accounts. The numbers reported in the PMR match these

reports. Deloitte Yousuf Adil has audited the annual accounts of Akhuwat for the year ending at 30th June 2016.

• Akhuwat prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices.

• All necessary adjustments to data have been made in order to remove subsidies. • The following numbers have been taken from the organization’s MIS: i). rural-urban clients; and ii).

male-female clients; • The grant income has been properly disclosed in financial statements and there is proper disclosure

on grants in notes to the financial statements.

Al-Mehran Rural Development Organization (AMRDO)• AMRDO provided PMN its audited accounts. The numbers reported in the PMR match these

reports. BDO Ebrahim & Co. has audited the annual accounts of AMRDO for the year ending at 30th June 2016.

• AMRDO prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices.

• All necessary adjustments to data have been made in order to remove subsidies. • The related party transactions have been properly disclosed in notes to the financial statements.• The grant income has been properly disclosed in financial statements.

BRAC-Pakistan• BRAC-Pakistan provided PMN its audited accounts. The numbers reported in the PMR match these

reports. Junaidy Shoaib Asad (Morison KSi) has audited the annual accounts of BRAC-Pakistan for the year ending at 31st December 2016.

• BRAC prepares its financial statements under the historical cost convention and in conformity with accepted accounting policies.

• All necessary adjustments to data have been made in order to remove subsidies.

Community Support Concern (CSC)• CSC provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Riaz Ahmad & Co. audited the annual accounts of CSC for the year ending at 30th June 2016.• All necessary adjustments to CSC data have been made in order to remove subsidies.



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• CSC prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices.

• The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (verifiable from audited accounts); iv). Number of staff; v). Number of credit officers; and vi). Number of offices.

• The grant income has been properly disclosed in financial statements.

Development Action for Mobilization and Emancipation (DAMEN)• DAMEN provided PMN its audited accounts. The numbers reported in the PMR match these

reports. A.F Ferguson and Co. audited the annual accounts for DAMEN for the year ending at 30th June 2016.

• There is no adjustment on cost of borrowing since DAMEN’s actual cost is higher than the adjusted cost. Similarly, no adjustment was made to loan loss provisioning expense; DAMEN is aggressive in its policies.

• DAMEN prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices.

• The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements.

• The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (verifiable from audited accounts); iv). Breakup for the number of loans doubtful; v). Number of staff; vi). Number of credit officers

Farmers Friend Organization (FFO)• FFO provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Tariq Abdul Ghani Maqbool & Co audited the annual accounts for FFO for the year ending at 30th June 2016.

• All necessary adjustments to FFO data have been made in order to remove subsidies. There is no adjustment on loan loss provisioning expense as FFO is aggressive in its policies.

• FFO prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices.

• The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio iv). Number of staff; v). Number of credit officers; and vi). Number of offices.


Ghazi Barotha Taraqiati Idara (GBTI)• GBTI provided PMN its audited accounts. The numbers reported in the PMR match these reports.

KPMG (Taseer Hadi and Co) audited the annual accounts for GBTI for the year ending at 30th June 2016.

• GBTI prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices.

• The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-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 officers; and vi). Number of offices.

• There is proper disclosure on the balance sheet of loan portfolio, and loan loss provision; expense charged during the year is disclosed on the income statement.


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Jinnah Welfare Society (JWS)• JWS provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Tariq Abdul Ghani Maqbool & Co. audited the annual accounts for JWS for the year ending at 30th June 2016.

• JWS prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices.

• The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (verified from audited accounts); iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts).

Kashf Foundation (KF)• KF provided PMN its audited accounts. The numbers reported in the PMR match these reports.

KPMG (Taseer Hadi and Co) audited the annual accounts for KF for the year ending at 30th June 2016.

• The financial statements have been presented as per the requirements of the State Bank of Pakistan.• All necessary adjustments to KF data have been made in order to remove subsidies. • KF prepares accounts on historical cost basis using the accrual system of accounting.• The grant income has been properly disclosed in financial statements and there is a proper

disclosure on grants in notes to the financial statements.• The following numbers have been taken from KF’s MIS: i). rural-urban clients; ii). male-female


Micro Options (MO)• MO provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Mohisn and Co. has audited the annual accounts of MO for the year ending at 31st December 2016.• MO prepares its financial statements under the historical cost convention, in conformity with

accepted accounting practices.• All necessary adjustments to data have been made in order to remove subsidies.• The grant income has been properly disclosed in financial statements. Additionally, there is proper

disclosure on grants in notes to the financial statements.• The following numbers have been taken from MO’s MIS: i). rural-urban clients; ii). male-female


Organization for Participatory Development (OPD)• OPD provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Junaidy Shoaib Asad has audited the annual accounts of OPD for the year ending at 30th June 2016.• OPD prepares its financial statements under the historical cost convention, in conformity with

accepted accounting practices.• All necessary adjustments to data have been made in order to remove subsidies. • The grant income has been properly disclosed in financial statements. Additionally, there is proper

disclosure on grants in notes to the financial statements.

Orangi Charitable Trust (OCT)• OCT provided PMN its audited accounts. The numbers reported in the PMR match these reports.

H.A.M.D & Co. has audited the annual accounts of OCT for the year ending at 30th June 2016.• OCT prepares its financial statements under the historical cost convention, in conformity with



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accepted accounting practices.• All necessary adjustments to data have been made in order to remove subsidies. • The related party transactions have been properly disclosed in notes to the financial statements.• The grant income has been properly disclosed in financial statements. Additionally, there is proper


Orix Leasing Pakistan Ltd. (OLP)• OLP has provided its audited accounts for the reporting period to PMN. • However, given that OLP’s audited accounts do not disclose figures related to its Microfinance

Division (MFD), the data reported in the PMR is not verifiable with audited accounts.• OLP has separate staff and offices for microfinance. OLP’s MFD has provided data specific to its

microfinance operations. • OLP prepares its financial statements under the historical cost convention in using accrual system

of accounting. • Adjustments to the data have been made as per the PMN’s adjustment policies. These adjustments

are in line with international practices being followed by The MIX.

Organization for Social Development Initiative (OSDI)• OSDI provided PMN its audited accounts. The numbers reported in the PMR match these reports. • OSDI prepares its financial statements under the historical cost convention, in conformity with

accepted accounting practices.• All necessary adjustments to data have been made in order to remove subsidies. • The following numbers have been taken from MO’s MIS: i). rural-urban clients; ii). male-female


Rural Community Development Program (RCDP)• RCDP provided PMN its audited accounts. The numbers reported in the PMR match these reports. • RCDP prepares its financial statements under the historical cost convention and in conformity with

accepted accounting practices.• All necessary adjustments to data have been made in order to remove subsidies. • The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii).

male-female clients; iii). Number of staff; iv). Number of credit officers; and v). Number of branches (also available in audited accounts).

SAFCO Support Fund (SAFCO)• SAFCO provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Deloitte Yousuf Adil audited the annual accounts for SAFCO for the year ending at 30th June 2016.• All necessary adjustments to SAFCO data have been made in order to remove subsidies. • SAFCO prepares its financial statements under the historical cost convention and in conformity

with accepted accounting practices.• The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii).

male-female clients; iii). Number of staff; and iv). Number of credit officers. • The grant income has been properly disclosed in financial statements. Additionally, there is proper


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Saath Development Society (SDS)• SDS provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Moochhala Gangat & Co. has audited the annual accounts of SDS for the year ending at 30th June 2016.

• SDS prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices.

• All necessary adjustments to data have been made in order to remove subsidies. • The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii).

male-female clients; iii). Number of staff; and iv). Number of credit officers. • The grant income has been properly disclosed in financial statements. Additionally, there is proper


Shadab Rural Development Organization (SRDO)• SRDO provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Junaidy Shoaib Asad has audited the annual accounts of SRDO for the year ending at 30th June 2016.

• SRDO prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices.

• All necessary adjustments to data have been made in order to remove subsidies. • The grant income has been properly disclosed in financial statements. Additionally, there is proper


Sindh Rural Support Organization (SRSO)• SRSO provided PMN its audited accounts. The numbers reported in the PMR match these reports.

EY Ford Rhodes has audited the annual accounts of SRSO for the year ending at 30th June 2016.• SRSO prepares its financial statements under the historical cost convention, in conformity with

accepted accounting practices.• All necessary adjustments to data have been made in order to remove subsidies. • The related party transactions have been properly disclosed in notes to the financial • The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii).

male-female clients; iii). Number of staff; and iv). Number of credit officers.

Soon Valley Development Program (SVDP)• SVDP provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Horwath Hussain Chaudhury and Co. has audited the annual accounts of SVDP for the year ending at 30th June 2016.

• SVDP prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices.



Villagers Development Organization (VDO)• VDO provided PMN its audited accounts. The numbers reported in the PMR match these reports.

Moochhala Gangat and Co. has audited the annual accounts of VDO for the year ending at 30th June 2016.

• VDO prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices.



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Rural Support Programme (RSP)

National Rural Development Program (NRSP)• NRSP provided PMN its audited accounts. The numbers reported in the PMR match these reports.

EY Ford Rhodes has audited the annual accounts of NRSP for the year ending at 30th June 2016.• NRSP prepares its financial statements under the historical cost convention, in conformity with

accepted accounting practices.• All necessary adjustments to data have been made in order to remove subsidies. • The grant income has been properly disclosed in financial statements. Additionally, there is proper


Punjab Rural Support Programme (PRSP)• PRSP has provided its audited accounts for the reporting period to PMN. A.F Ferguson and Co.

audited the annual accounts for PRSP for the year ending at 30th June 2016.• All necessary adjustments to PRSP data have been made in order to remove subsidies. • PRSP prepares its financial statements under the historical cost convention, in conformity with

accepted accounting practices.• The grant income has been properly disclosed in financial statements and there is a proper

disclosure on grants in notes to the financial statements.• The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii).


Thardeep Microfinance Foundation (TMF)• TMF has provided its audited accounts to PMN. Grant Thornton (Anjum Rahman) audited the

annual accounts for TMF for the year ending at 30th June 2016.• All necessary adjustments to TMF data have been made in order to remove subsidies. • TMF prepares its financial statements under the historical cost convention in conformity with

accepted accounting practices.• The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii).


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RationaleAdjustments to financial statements are made when doing benchmark analysis. Adjustments are made for two primary reasons:

• To give an institution a more accurate picture of its financial position, by accounting for factors unique to an MFP including the predominance of below-market-rate funding sources. Such factors distort an MFP’s on-going performance.

• To make the data of various MFPs comparable. Thus, adjustments are made in order to bring organizations operating under varying conditions and with varying levels of subsidy onto a level playing field.

The following adjustments are made to data used for the PMR:

A. Inflation AdjustmentInflation adjustment adjusts for the effect of inflation on an MFP’s equity and non-monetary assets i.e., fixed assets. Inflation decreases the real value of an MFP’s equity. Fixed assets are capable of tracking the increase in price levels; their monetary value is increased. The net loss (or gain) is considered to be a cost of funds, and results in a decrease (or increase) in net operating income.

Annexure D Adjustments to Financial Data

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Calculation of inflation adjustment

Inflation adjustment revenueNet Fixed Assets (Prior Year) X Average Annual Inflation Rate (Current Financial Year)

Inflation adjustment expenseEquity (Prior Year) X Average Annual Inflation Rate (Current Year)

Net inflation adjustment expenseInflation Adjusted Revenue – Inflation Adjusted Expense

B. Subsidies adjustmentAdjustments for three types of subsidies are made:

• A cost-of-funds subsidy from loans at below-market rates• Current year cash donations to fund portfolio and cover expenses• In-kind subsidies, such as rent-free office space or the services of personnel not paid by the MFP

and thus not reflected on its income statement.

Additionally, for multipurpose MFPs, an attempt to isolate the performance of the financial services program is made by removing the effect of any cross-subsidization. Cash donations flowing through the income statement are accounted for by reclassifying them below net operating income on the income statement. Thus, adjustments for cash donations are not made since these are handled through a direct reclassification on the income statement. This year no MFP has disclosed receipt of in-kind subsidy.

B.1 Cost-of-funds subsidyThe cost-of-funds adjustment reflects the impact of soft loans on the financial performance of an MFP. The analyst needs to calculate the difference between what an MFP actually paid in interest on its subsidized liabilities and a shadow market rate for each country. This difference represents the value of the subsidy, considered an additional financial expense. Only funds received as loans need to be adjusted. Client deposits are not adjusted. Only loans that have a finite (1-5 years) term length are adjusted. Subordinated debt and other quasi-equity accounts are reclassified as ‘other equity’ on the balance sheet.

Care is taken in the choice of an 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

1. Calculate average balance for all borrowings. Borrowings do not include deposits or “other liabilities”. If an MFI has given an average balance, see if this is more appropriate to use; if not, calculate average from last year’s ending balance.

2. Multiply the average balance by the shadow market rate3. Compare with the amount actually paid in interest and fees. If less “market” rate, impute the

difference (market price minus Financial Expense paid on Borrowings) to the Subsidized Cost of Funds Adjustment Expense



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B.2 Cash donationsFunds donated to cover operational costs constitute a direct subsidy to an MFP. The value of the subsidy is therefore, equal to the amount donated to cover expenses incurred in the period reported. Some donations are provided to cover operating shortfall over a period greater than one year. Only the amount spent in the year is recorded on the income statement as revenue. Any amount still to be used in subsequent years appears as a liability on the balance sheet (deferred revenue). This occurs because theoretically, if an MFP stopped operations in the middle of a multi-year operating grant, it would have to return the unused portion of the grant to the donor. The unused amount is therefore, considered as a liability.

Funds donated to pay for operations should be reported on the income statement separately from the revenue generated by lending and investment activities. This practice is meant for accurately reporting the earned revenue of an MFP. Donated funds are deducted from revenue or net income prior to any financial performance analysis because they do not represent revenue earned from operations.

Note: Costs incurred to obtain donor funds (fundraising costs) should also be separated from operating expenses, because the benefit of receiving the funds is not included.

B.3 In-kind subsidyImputed cost (book value) of donated/loaned-out vehicles, machinery and buildings need to be included in operating expenses. Expatriate staff salaries paid by donor or parent company, or other technical assistance, need to be accounted for. Here, imputed salaries are used instead of salaries actually received by them i.e., the salary range that a local hire would get for the same level of work-load/position is used.Note: The analyst must use his/her judgment in deciding whether or not the in-kind donation represents a key input to the on-going operations of the MFP. An appropriate basis for valuation is important. This could include selecting a percentage of the total cost and attributing it to program expense. The percentage may be selected on the basis of sales proportion, management input, etc.

Calculation of in-kind subsidy

Sum of in-kind subsidies by operating expense account, added to unadjusted numbers for each account.

C. Loan loss provisioningPMN standardizes loan loss provisioning for MFPs to a minimum threshold or risk. MFPs vary tremendously in accounting for loan delinquency. Some count the entire loan balance as overdue the day a payment is missed. Others do not consider a loan delinquent until its full term has expired. Some MFPs write off bad debt within one year of the initial delinquency, while others never write off bad loans, thus carrying forward a default that they have little chance of ever recovering.

The analyst applies a standard loan loss provisioning to all MFPs and adjusts, where necessary, to bring them to the minimum threshold. In some cases, these adjustments may not be precise. Portfolio aging information may only be available on different aging scales.

Calculation of loan loss provisioning

Step 1:Multiply the PAR age categories by the following reserve factors:PAR up to 89 days no provisioningPAR 91 – 180 x 0.50PAR 181 – 360 x 1.00Renegotiated loans x 0.50

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Step 2:Sum above reserve calculations. If sum is more than current reserves make calculated reserve new Loan Loss Reserve. If not, keep current reserves.

Step 3:Add the Unadjusted Loan Loss Provision Expense to the difference between the Adjusted Net Loan Portfolio and the Unadjusted Net Loan Portfolio. This is the Adjusted Loan Loss Provision Expense.



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AgeNumber of years an organization has been functioning as a microfinance provider (MFP).

Active Saving Account BalanceIt is the average balance of savings per account (not per depositor).

Adjustment ExpenseTotal adjustment cost related to inflation, subsidized cost of borrowing, loan loss provisioning and in-kind subsidies.

Adjusted Financial Expense RatioIt is calculated by using standardized ageing-of-portfolio technique. The principle of conservatism is used which is why loan loss provision in audited accounts is greater than the amount computed by the analyst.

Adjusted Loan Loss ReserveFormula:Adjusted Financial ExpenseAdjusted Average Total Assets

Adjusted Operating ExpenseAlso included in operating expense:• Imputed cost (book value) of donated/loaned vehicles, machinery and buildings• Expatriate staff salaries paid by donor or parent company• Other technical assistance paid for with donations

NOTE: Imputed salaries should be used instead of salaries actually received by such persons, thus salary range that a local hire would get for the same level of work-load/position should be used. Judgment is used to decide whether or not the in-kind donation represents a key input to the on-going operations of the MFP

Annexure ETerms and Definitions

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Formula:Personnel Expense + Administrative Expense

Adjusted Operating Expense RatioFormula:Adjusted Operating ExpenseAdjusted Average Total Assets

Adjusted Portfolio at Risk > (30, 60, 90 Days)Indicates the credit risk of a borrower above the specified number of days (30, 60, 90) past his/her due date for installment payment.Formula:Outstanding balance less loans overdue > (30 or 60 or 90) DaysAdjusted Gross Loan Portfolio

Adjusted Cost per BorrowerIt accounts for loan size differentials, generally operating expense ratio is lower (more efficient) for institutions with higher loan sizes, ceteris paribus. This indicator discounts the effect of loan size on efficient management of loan portfolio.Formula:Adjusted Operating ExpenseAverage Number of Active Borrowers

Adjusted Cost per LoanFormula:Adjusted Operating ExpenseAverage Number of Active Loans

Adjusted Financial ExpenseIt includes actual cost of borrowing and shadow cost of subsidized funding.

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

Adjusted Loan Loss Provision Expense RatioFormula:Adjusted Net Loan Loss Provision ExpenseAdjusted Average Total Assets

Adjusted Loan Loss Provision ExpenseLoan loss provision expense calculated with standardized ageing-of-portfolio technique. It is however ensured that if the actual loan loss provision expense is higher than the adjusted then the conservatism principle is followed.

Adjusted Operating ExpenseIt includes actual operational expenses and in-kind subsidy adjustments.

Adjusted Operating Expense RatioIt indicates efficiency of an MFP’s loan portfolio.Formula:Adjusted Operating ExpenseAverage Gross Loan Portfolio



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Adjusted Personnel ExpenseIncludes actual personnel expenses (salaries and benefits), and in-kind subsidy adjustments.

Adjusted Personnel Expense RatioFormula:Adjusted Personnel ExpenseAverage Gross Loan Portfolio

Adjusted Profit MarginFormula:Adjusted Net Operating IncomeAdjusted Financial Revenue

Adjusted Return on AssetsFormula:Adjusted Net Operating Income, net of taxesAverage Total Assets

Adjusted Return on EquityFormula:Adjusted Net Operating Income, net of taxesAverage Total Equity

Adjusted Total ExpenseIncludes all actual and adjusted expenses related to operations, cost of borrowings, loan losses and inflation adjustment.

Adjusted Total Expense RatioFormula:Adjusted (Financial Expense + Net Loan Loss Provision Expense + Operating Expense) Cost Average Total Assets

Average Gross Loan PortfolioAverage of opening and closing balance of Gross Loan Portfolio (GLP).

Average Loan Balance per Active BorrowerIndicates average loan balance outstanding.

Average Loan Balance per Active Borrower to Per Capita IncomeUsed to measure depth of outreach. The lower the ratio the more poverty-focused the MFP.

Average Number of Active BorrowersIt is average of opening and closing balance of active borrowers.Formula:[Active Borrowers (Opening Balance) + Active Borrowers (Closing Balance)] 2

Average Number of Active LoansAverage of opening and closing balance of active loans

Average Outstanding BalanceIt indicates the average balance of loans outstanding.Formula:Adjusted Gross Loan PortfolioAdjusted Number of Loans Outstanding

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Average Outstanding Balance to Per Capita IncomeIt is a measure of depth of outreach. The lower the ratio the more poverty-focused the MFP.Formula:Average Outstanding BalancePer Capita Income

Average Saving Balance per SaverIt indicates average amount of saving balance per saver.

Average Total AssetsIt is average of opening and closing balance of total assets.

Average Total EquityIt is average of opening and closing balance of total equity.

Borrowers per Loan OfficerIt is a measure of loan officer productivity. It indicates the number of borrowers managed by a loan officer.Formula:Number of Active BorrowersNumber of Loan Officers

Borrowers per StaffIt is a measure of staff productivity. It indicates the number of borrowers managed by the staff on average.Formula:Number of Active BorrowersNumber of Total Personnel

Commercial LiabilitiesIt is principal balance of all borrowings, including overdraft accounts, for which the organization pays a nominal rate of interest that may be greater than or equal to the local commercial interest rate.

Commercial Liabilities-to-Gross Loan Portfolio RatioIt indicates efficiency of an MFP’s loan portfolio.Formula:All liabilities with “market” priceGross Loan Portfolio

Deposits Demand deposits from the general public and members (clients) held with the institution. These deposits are not conditional to accessing a current or future loan from the MFP and include certificates of deposit or other fixed term deposits.

Deposit-to-Gross Loan Portfolio RatioIt is inverse of the advance-to-deposit ratio.Formula:DepositsGross Loan Portfolio

Deposit-to-Total Asset RatioIndicates the percentage of assets financed through deposits.Formula:DepositsTotal Assets



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Equity-to-Asset RatioThis is a simple version of the capital adequacy ratio as it does not take in to account risk weighted assets. This ratio indicates the proportion of a company’s equity that is accounted for by assets.Formula:Total EquityTotal Assets

Financial ExpenseThis is total of financial expense on liabilities and deposits.

Financial RevenueThis is the total revenue from loan portfolio and other financial assets, as well as other financial revenue from financial services.

Financial Revenue from Other Financial AssetsThis is net gains on other financial assets.

Financial Revenue from Loan PortfolioThis is total interest, fees and commission on loan portfolio.

Financial Revenue RatioIndicates the efficiency with which an MFP is utilizing its assets to earn income from them.Formula:Financial RevenueAverage Total Assets

Financial Self-SufficiencyFormula:Financial RevenueAdjusted (Financial Expense + Net Loan Loss Provision Expense + Operating Expense + Inflation Adjustment)

Gross Loan PortfolioIt is the outstanding principal for all outstanding client loans, including current, delinquent and restructured loans. It does not include:

• Loans that have been written-off• Interest receivable• Employee loans

For accounting purposes GLP is categorized as an asset.

Gross Loan Portfolio-to-Total Asset RatioIndicates the efficiency of assets deployed in high yield instruments and core business of an MFP.Formula:Gross Loan PortfolioTotal Assets

Inflation Adjustment Expense31

Inflation decreases the real value of an MFP’s equity. Fixed assets are considered to track the increase in price levels, and their value is considered increased. The net loss (or gain) is treated as a cost of funds, is disclosed on the income statement, and decreases net operating income.

31 PMN adjusts for the effect of inflation on an MFP’s equity and its non-monetary assets - essentially fixed assets - on its balance sheet.Sect

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Inflation RateLatest annualized consumer price index (CPI) as reported by the State Bank of Pakistan.

Liabilities-to-Equity Ratio (debt-equity ratio)Formula:Total LiabilitiesTotal Equity

Loan Loss Provision ExpenseIt is the sum of loan loss provision expense and recovery on loan loss provision.

Loans per Loan OfficerFormula:Number of Active LoansNumber of Loan Officers

Loans per StaffFormula:Number of Active LoansNumber of Personnel

Net Adjusted Loan Loss Provision Expense32

It is the sum of loan loss provision expense and recovery on loan loss provision. MFPs vary tremendously in accounting for loan delinquency. Some count the entire loan balance as overdue the day a payment is missed. Others do not consider a loan delinquent until its full term has expired. Some MFPs write off bad debt within one year of the initial delinquency, while others never write off bad loans, thus carrying forward a defaulting loan that they have little chance of ever recovering.

Number of Active BorrowersNumber of borrowers with loan amount outstanding.

Number of Active LoansThe number of loans that have been neither fully repaid nor written off, and thus that are part of the MFP’s gross loan portfolio.

Number of Active Women BorrowersNumber of women borrowers with loan amount outstanding.

Number of Active Women Borrowers to total Active BorrowersIt indicates percentage of women borrower to total active borrowers.

Number of Loans OutstandingIt is the number of loans outstanding at the end of the reporting period. Depending upon the policy of an MFP one borrower can have two loans outstanding; hence, the number of loans could be more than the number of borrowers.

Number of SaversIt is the number of depositors maintaining voluntary demand deposit and time deposit accounts with an MFP.

32 PMN applies a standard write-off and loan loss provisioning to all MFPs, and adjusts, where necessary, to bring them to the minimum threshold.



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Number of Saving Accounts

One depositor can have more than two deposit accounts. Hence, the number of deposit accounts could be more than the number of depositors.

Number of Women SaversIt is the number of women savers with voluntary demand deposit and time deposit accounts.

OfficesThe 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.

Operating ExpenseTotal of Personnel Expense and Administrative Expense.

Operational Self-SufficiencyFormula:Financial Revenue(Financial Expense + Net Loan Loss Provision Expense + Operating Expense)

Per Capita IncomeAverage income per person.

Percentage of Women Savers to Total SaversThe percentage of women in the total saving portfolio.

PersonnelThe number of individuals actively employed by an MFP. This number includes contract employees and advisors who dedicate the majority of their time to the organization, even if they are not on the MFP’s roster of employees. This number is expressed as a full-time equivalent, such that an advisor who spends 2/3 of his/her time with the MFP is accounted for as 2/3 of a full-time employee.

Personnel Allocation RatioThe higher the indicator the more lean the head office structure of the organization. This indictor is used to measure organizational efficiency.Formula:Loan OfficersTotal Staff

Risk Coverage RatioIndicates the provision created by an MFP against its credit risk.Formula:Adjusted Loan Loss ReservePAR > 30 Days

Saving OutstandingTotal value of demand deposit and time deposit accounts.

Savers per StaffFormula:Number of SaversNumber of Personnel

Loan Loss Provision ExpenseThe sum of loan loss provision expense and recovery on loan loss provision.

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Loans per Loan OfficerFormula:Adjusted Loan Loss ReservePAR > 30 Days

Total AssetsTotal net asset accounts i.e., all asset accounts net of any allowance. The one exception to this is the separate disclosure of the gross loan portfolio and loan loss reserve.

Total EquityEquity represents the worth of an organization net of what it owes (liabilities). Equity accounts are presented net of distributions, such as dividends.Formula:Total Assets – Total Liabilities

Total LiabilitiesLiabilities represent the borrowings of an organization i.e., the amount owed. Examples of liabilities include loans, and deposits. This number includes both interest and non-interest bearing liabilities of an MFP.

Total Number of Loan OfficersThe number of staff members who dedicate the majority of their time to direct client contact. Front office staff include more than those typically qualified as credit or loan officers. They may also include tellers, personnel who open and maintain accounts—such as savings accounts—for clients, delinquent loan recovery officers, and others whose primary responsibilities bring them in direct contact with microfinance clients.

Loan Written Off during YearThe value of loans written off during the year.

Write-Off RateFormula:Loans written off during the yearAverage 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 PortfolioAverage 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)



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F I N A N C I A L S E R V I C E S F O R A L L

Pakistan Microfinance Network

3rd Floor, Mandir Square, Block 12-C/2, G-8 Markaz, Islamabad, Pakistan.TEL. +92 51 226 6215-17, +92 51 229 2231 FAX. +92 51 226 6218

www.pmn.org.pk

Documents

pmn.org.pk · Pakistan Microfinance Review 2016 inancial Services for all i Editorial Board Mr. Ghalib Nishtar Chairperson, Editorial Board President, Khushhali Bank Limited (KBL)