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Need and importance of assignment

Pakistan is a poor country most of people living their lives below the poverty line. In this

condition micro finance bank is last hope for the revival. Micro finance bank provide short

term loan to investors so that they can spend in a useful purposes and can earn a usefulreturn from them. specially as we know that success of each country depends upon the

strong footings of the hosue and cottage industry(eg china).so in a country like Pakistan

where there is a high inflation and high intrest rates there must be a institution which

provide loan to the people at low cost.so that theycan save themselves from sahukars.

As far as we people are concerned this assignment is very important for us.As,this will

provide us with a better understanding of NBFC with refrence to micro finance.this will

provide us with some subjective information which we will implement practically in near

future

Selection of specialized financialinstitution with strong reason

Povertythe malignant malady ailing todays worldhas posed a major challenge to

emerging nations in their pursuit of economic growth and social development. And rightly

so, because macro-economic growth does not always filter down to the last legs of society.

And millions are left to suffer poverty, trapped without hope or respite.

Even with Pakistan averaging an impressive GDP growth rate of over 7.5 per cent over the

last several years, unemployment has rated above 5 per cent while literacy is estimated at

only 54 per cent. Every fourth Pakistani is surviving below the poverty line.

Tackling these deep-rooted issues is beyond the very structure and scope of mainstream

commercial banking and thats not even their objective. About 80 per cent of Pakistans

population does not at all have access to financial services by the commercial banks. Hence

microfinance is a targeted strategy to bring about change in the lives of millions for whom it

is by far the only true hope of improving their lives. Khushhali Bank Limitedone

microfinance institution that is convincingly dispelling this misconception through its

pioneering performance. With initial funding from the Asian Development Bank, and the

paid-up capital subscribed by 16 commercial banks, Khushhali Bank Limited was established

in August 2000 as the countrys first licensed microfinance institution.

Backed by a strong banking expertise and an in-depth knowledge of the emerging socio-

economic markets, and driven by a deep and compassionate understanding of the poverty

factor, Khushhali Bank Limited is today the largest microfinance institution in Pakistan in

terms of coverage. Its operations and impact span across all the four provinces of the

country, Jammu and Kashmir and the Federally Administered Tribal Areas. And being a

pioneer, born and bred on a solid home ground, Khushhali Bank Limited is fully prepared to

offer viable answers to how poverty can be alleviated and optimistically eliminated in the

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near future.

Overview of organization

Founded in the year 2000, Khushhali Bank Limited was a part of the Government of Islamic

Republic of Pakistan's Poverty Reduction Strategy and its Microfinance Sector Development

Program (MSDP). MSDP was developed with the facilitation of Asian Development Bank

(ADB). With its headquarters based in Islamabad, Khushhali Bank Limited operates under the

supervision of the State Bank of Pakistan (SBP) and many central (commercial) banks are its

shareholders. The mandate remains to retail microfinance services and to act as a catalyst

in stabilizing the country's newly formed microfinance sector.

Vision:

To be a premier financial Institution within the microfinance Industry.

Mission:

To strengthen the economic base of low-Income populace across Pakistan by improving theiraccessibility to financial services.By supporting a diverse product suite with exemplaryservice and by deploying cost efficient next generation delivery systems, we intendachieving our core objective of outreach and sustainability.

Values:

Empower

Excel

Ethics

No of branches and head office:

Northen region21

Eastern region

27

Central region

31

Southern region

35

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No of branches:114

Head office:

Islamabad, blue area.

Shareholders

The shareholders of the Bank are as follow:

1. National Bank of Pakistan

2. Habib Bank Limited

3. MCB Bank Limited

4. United Bank Limited

5. Allied Bank Limited

6. Standard Chartered Bank (Pakistan) Limited

7. Askari Bank Limited

8. Bank Al Habib Limited

9. Soneri Bank Limited

10.Habib Metropolitan Bank Limited

11.Faysal Bank Limited

12.KASB Bank Limited

13.Silk Bank Limited

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14.Mybank Limited

15.Citibank N. A. Pakistan Operations

Historical Back ground

The history of microfinancing can be traced back as long to the middle of the 1800s when

the theorist Lysander Spooner was writing over the benefits from small credits to

entrepreneurs and farmers as a way getting the people out of poverty. But it was at the end

of World War II with the Marshall plan the concept had an big impact.

The today use of the expression microfinancing has it roots in the 1970s when organizations,

such as Grameen Bank of Bangladesh with the microfinance pioneer Mohammad Yunus,

where starting and shaping the modern industry of microfinancing. Another pioneer in this

sector is Akhtar Hameed Khan. At that time a new wave of microfinance initiatives

introduced many new innovations into the sector. Many pioneering enterprises began

experimenting with loaning to the underserved people. The main reason why microfinance is

dated to the 1970s is that the programs could show that people can be relied on to repay

their loans and that its possible to provide financial services to poor people through

marketbased enterprises without subsidy. Shorebank was the first microfinance andcommunity development bank founded 1974 in Chicago .

An economical historian at Yale named Timothy Guinnane has been doing some research on

Friedrich Wilhelm Raiffeisens village bank movement in Germany which started in 1864 an

by the year 1901 the bank had reached 2million rural farmers. Timothy Guinnane means

that already then it was proved that microcredit could pass the two tests concerning peoples

paybackmoral and the possibility to provide the financial service to poor people.

Another organization, The caisse populaire movement grounded by Alphone and Dorimne

Desjardins in Quebec , was also concerned about the poverty, and passed those two tests.

Between 1900 to 1906 when they founded the first caisse, they passed a law governing

them in the Quebec assembly , they risked their private assets and must have been verysure about the idea about microcredit.

Today the World Bank estimates that more than 16 million people are served by some 7000

microfinance institutions all over the world. CGAP experts means that about 500 million

families benefits from these small loans making new business possible. In a gathering at a

Microcredit Summit in Washington DC the goal was reaching 100 million of the worlds

poorest people by credits from the world leaders and major financial institutions.

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History of micro finance in pakistan:

The Pakistan Microfinance Network (PMN) evolved in late 1997 from an informal effort of

several Pakistani attendees of the Microcredit Summit in February 1997 .

The Microfinance Group Pakistan (MFG-P) was created in 1999 and first received funding

from the Aga Khan Foundation (AKF) and The Asia Foundation (TAF). The MFG-P matured

and established greater credibility with donors, Government, and other microfinance

practitioners. It was registered under Section 42 of the Companies Ordinance, 1984 as a

legal entity as the Pakistan Microfinance Network in April 2001.

Development and commercial role

Earthquake livelihood restoration program:

The objective of ELRP was to provide substantial and immediate response to the poor in the

nine districts declared as disaster affected areas with an objective to restore income flows,

reduce dependence on relief, revive local economies and provide shelter whilst undertaking

livelihoods. To achieve these objectives Khushhali Bank with its extensive network of

branches was the designated implementing agency. KBL used its own organizational

structures and personnel and coordinated with service providers for immediate outreach to

affected households. For immediate response, State Bank of Pakistan (SBP) issued licenses

and KBL in addition to its existing branches in Abbottabad & Muzaffarabad established sixnew branches in the affected districts of Neelum Bagh and Poonch in AJK province and

Batagram, Kohistan and Shangla in NWFP.

Small infrastraucture projects

The objective of Small Infrastructure Projects (SIPs) was to increase access of poor

communities to infrastructure for improving their livelihoods through efficient and

productive use of local resources. For this purpose a Community Investment Fund (CIF) was

established to finance the Small Infrastructure Projects through participatory process. Theinvolvement of local stakeholders in identifying, planning, executing & monitoring

community infrastructure projects greatly empowered them

The Small Infrastructure Projects were undertaken on equity participation of 40% from the

Community Organization against the total project cost while 60% cost was funded through

the Community Investment Fund (CIF). A Service Provider was engaged to work on technical

side of the projects and as a result 1569 SIPs were completed during the period of Fund.

These projects include Roads & Bridges (122), Farm irrigation (689), Domestic Water Supply

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(164), Drainage & Sewerage (27), School Building (49), Rural Electrification, Computer

Centers, PCOs and Community Halls (518).

Management Supports Women

KBs female orientation is reflected not only in the clients they serve, but in their hiring

policy as well. More than 30% of KBs staff are women, with 2 women occupying seats in the

board of directors to ensure gender orientation in policy making.

Distance Learning programs

Distance Learning programs (DLP) objective was to spread business development servicesand corporate image building materials by mobile training units that were well equippedwith media technologies, raising the confidence of existing and potential borrowers andcommunities at large thus enabling the Bank to develop its market and client loyalty.

Scholarship program

In line with overall strategy of Khushhali Bank Limited (KBL) to strengthen its role and brand

image in marginalized territories and attract to promote education and enhance accessibility

to educational institutions as part of its social corporate responsibility mandate, KBL

commenced Khushhali Bank Scholarship Scheme (KBSS) in 2005.

A total of 332 scholarships amounting to PKR 76,890,465 have been awarded as ofSeptember 30, 09, to domicile holders of Sindh, Balochistan and FATA, of which 244scholarships valuing PKR 52,548,012 were awarded to domicile holders of tribal areas. Atotal of 62 students have completed their degrees as of September 09.

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Jafakash Aurat Program

kB started a unique project for women folk who only believes in hard work but alsoconfidence themselves. The purpose of this project is to generate income for the poorwomen by developing and strengthening their skills. The project was started in Gawadarthat was a itself a challenge because unavailability of school and college and second

accessibility and availability of raw material. When KBL covered initial problems then itstarted Training Need Assessment (TNA). After finding potential lucrative and mostdemanded skills KBL started short courses e.g. beautician, cooking on commercial basis,designing and computer literacy etc. this project was successfully running and now totaltrained 4500 women. 695 women enjoys the micro credit loans.

Product line

Micro cradit products

Agri loans

Product

FeaturesDetails

Product Name Agriculture Loan

Product

Type/CategoryGroup Based

Product

Description

For the purchase of seed, fertilizer, pesticides.

For irrigation, rental of agricultural

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equipment, transportation etc.

Loan Eligibility

Criteria

Age: 18 58 years, Maximum for repeat

clients: 65 years

Income: Total annual income is less than

Rs.300,000Permanent resident of the locality for 2 years

NADRA NIC Holder

2 years experience

Loan Amount PKR 3,000 / 15,000

Tenure/Repayme

nt Options

3-12 Months

Quarterly/Semiannual/Annually

Guarantors Cross Guarantees

Collateral None

Live stock loan

Product Features Details

Product Name Live Stock Loan

Product

Type/CategoryGroup Based

Product For the purchase of livestock

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Description

Loan EligibilityCriteria

Age: 18 58 years, Maximum for repeat

clients: 65 years

Income: Total annual income is less

than Rs.300,000Permanent resident of the locality for 2

years

NADRA NIC Holder

2 years experience


Tenure/Repayment

Options

3-12 Months

Monthly/Quarterly/Semiannual/Annually


Collateral None

Asset purchase loan:


Product Name Asset Purchase Loan

Product Type/Category Group Based

Product DescriptionFor the purchase of new assets having

minimum useful life of one year.

Loan Eligibility Criteria Age: 18 58 years, Maximum for repeat

clients: 65 years

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Rs.300,000

Permanent resident of the locality for 2 years

NADRA NIC Holder

2 years experience


Tenure/Repayment

Options

3-12 Months

Monthly/Quarterly/Semiannual/Annually


Collateral None

Working capital need:


Product Name Working Capital Loan

Product Type/Category Group Based

Product Description For managing a running business

Loan Eligibility Criteria Age: 18 58 years, Maximum for repeat

clients: 65 years


Rs.300,000

Permanent resident of the locality for 2

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years

NADRA NIC Holder

2 years experience


Tenure/Repayment

Options

3-12 Months

Bullet/Quarterly/Semiannual/Annually


Collateral None

New business loan:

Product Features

Details

Product Name New Business Loans

Product Type/Category Group Based for both rural and urban

Product Description For establishment of new business.

Loan Eligibility Criteria

Age: 18 58 years, Maximum for repeat clients:65 years


Rs.300,000Permanent resident of the locality for 2 years

Resident for 2 years

NADRA NIC Holder


Tenure/Repayment Options3-6 Months

Equal Monthly Installments


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Collateral None

Rates & Fees Structure Please refer to our current schedule of charges

Micro insurance products


Product Name KBL Micro loan insurance Scheme

Product Description Credit Life Insurance

Insurance Coverage of Death / Permanent Disability of Borrower

Eligibility All eligible borrowers

Period Covered Equal to loan term

Sum Insured Outstanding Loan Amount

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Current account:


Product Name Khushhali Bank Current Account

Product DescriptionCurrent Account (non-interestbearing)

Cheque Books Available (conditions apply)

Eligibility Criteria Age: 18 years and above

NADRA NIC Holder/Valid PakistaniPassport2 Passport Size Photographs,terms apply

Account OpeningCharges

Rs.50.

Minimum BalanceRequired

Rs. 500

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Fees & ChargesPlease refer to our current scheduleof charges

Remittance:


Product Name Khushhali Bank Remittances

Product Description Demand Drafts (DD), Pay Orders

(PO) and Inter Branch Funds Transfer.

Fees & Charges Please refer to our current schedule of

charges

Term deposit certificate:

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Product Name Individuals ( Retired persons /

Pensioners/ House wives / Self

Employed Joint / Group Sole

Proprietors / partnerships Public

& private Companies Institutions (Govt.non - Govt.)

Target Group Minimum PKR 10,000

Issueable in multiple of PKR.

10,000

Maximum per instrument value

PKR. 100,000

Product Range Minimum PKR 10,000

Issueable in multiple of PKR.10,000

Maximum per instrument value

PKR. 100,000

Product Tenure Offered One month

Three Months

6 Months

One Year

Product success and failure:

Agricultre products are more successful because our country is a agricultural country.people need loan for there

short term needs to puchase seeds and fertilizer etc.mostly they earn revenue through this agri products.we can say

that their major part of loan portfolio is consisted of the agri loan.ZTBL is the specially based organization fot the

development of aricultuere sector but we cant deny the role played by khushali and other micro finance banks

Entrepenuer loan is provided to the small investor who want to start their new bussiness in a new way.this is thesecond most popular and successful product of the khushali bank.people maty need working capital loan to meet

their regular expenses of their bussiness.moreover there is no guarntee required other than the cross guarantee.

The third successful product of khushali bank is the loan for new assets purcahse.it is popular because this is the era

of technology.one has to install new machines if he want to be competitive.khushali bank provides such opputunity

to it potential clients so that they can increase their productivity and increase overall GDP.this loan is provided on a

linient conditions and borrower doesnt have to toil to much as in the case of other loan specially from thecommercial banks.in pakistan small and cootage industry is flourishing these day thats why its wietage is increasing

day by day in the loan portfolio of Khushali bank

Livestock loan,this is the type of loan which is not so popular and successful loan of the KB.the big reason behind

this is that in pakistan livestock is not popular with respect to the agriculture sector in the country.the livestock

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industry in pakistan is confined to some backward areas such as cholistan and some of the tribal areas.Although

Khushali bank have no such cluster of branches in such areas.the faliure of loan may be due to the low development

of the livestock sector in Pakistan.

New products such as term deposit certificate have been introduced by the Khushali bank as a step forward to full

banking service.its offers a good rate of return on the TDR certificates.the edge that khushali bank gets over the

commercial banks in this regard is the minimum amount through which a term deposit certficate can bepurcahsed.this product has a very good future.

Future outlook of the organization1. Human Resource

Perusing the business objective hr strategy for 2011 as under

employee selection strategy focusing on person job fit and a person organization fit

Employee management strategy changing from controlling self managment and

empowerment.

Employee motivation strategy built around creating family like envoirment supported

by reward and recognition culture.

Reinforce timely communication of the performance obj periodic rewiews completion

of annual appraisals and compensation rewiews.

Align induction policy of branch retail staff from local need perspective ,quality and

minimum time to hire.

Manage staff performance through automated HRMS

Build people management capacities at supervisory and managerial cadre with

empahisis on customer services and leadership development.

Reinforce work life balance so that people enjoy working for khushali bank.

2. IT department

IT team has a challenging role in term of role out of integrated banking application

acroos network.

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Plans include conversion of 2/3rd of our network on an integrated banking application

system in 2011,while remaining branches would follow in the next year.

3. Full banking services

Khushal bank is going to start full service banks in Pakistan.now the KB has some

branches offering products like commercial banks.this is the main objective of the

Khushali bank for the future.

Financial performance of khushali bank:

indicator 2010

(000)

2009

(000)

2008

(000)

2007

(000)

Outreach Active

Borrowers

325,523 329,421 312,851 283,965

Number of Savers 205,962 74,995 3,477 -

GLP PKR 3,722,152,7

97

3,630,204,658 3,093,335,635 2,652,915,785

Amount of

Savings PKR

1,000,328,6

25

190,032,590 18,168,500 -

Total Revenue

PKR

1,471,489,8

09

1,318,331,158 1,013,196,990 813,828,031

Total Revenue

PKR

1,471,489,8

09

1,318,331,158 1,013,196,990 813,828,031

Net Profit/(Loss)

PKR

188,138,462 252,004,780 60,911,974 156,306,062

Average ROA

% ---

0.8% 0.4% 4.9% 3.9%

Average ROE

% ---

2.6% 1.3% 17.9% 14.8%

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Operational Self

Sufficiency (OSS)

105.0% 98.6% 75.5% 80.5%

Operating

Expense/GLP %

28.0% 29.3% 31.6% 31.9%

PersonnelExpense/GLP

%

13.7% 14.0% 13.3% 14.1%

Borrowers per

Staff

150 165 156 152

Savers per Staff 95 37 2 -

Comparative analysis with other banks:

SBP has published the stretigic framework for the MFIs for 2011 reflecting

microfinance bank progressKB stands on the top of all.

MFBs Branche

s

Borrowers Advances Deposits Asset Borrowing Equity NPL%

KBL 114 352743 4129635 198782 6620837 4019160 223074

6

1.96

FMFB 83 204301 3181759 5291011 6051049 - 523428 4.97

Tameer 40 104726 2835506 2296135 4136529 513379 108968

6

0.92

Kashf 27 18142 449178 474050 1271234 300000 402065 3.65

Pak

oman

17 8113 109214 28125 719455 - 677300 9.09

Network 5 6224 84251 40686 278122 - 230747 38.51

Rozgar 4 14 726 23221 122826 - 96963 64.46

Total 290 694263 10790269 8352010 1920005

2

4832539 525097

5

3.00

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Credit Rating of Khushali Bank Limited

JCR-VIS Credit Rating Company Limited (JCR-VIS) upgrades the entity ratings of KhushhaliBank Limited which is as follows:

Medium to long-term A (Single A)from A- (Single A Minus)

Short-term A-1 (A One)from A-2 (A-Two)

We recorded a profit before tax of PKR 188 million forthe year 2010 which is lower than lastyears of PKR 252million primarily as a result of fall in non-core grant Income from PKR 250 million to PKR 98million.

The bank continues to pursue a sustainable growth strategy with reliance on core businessreducing grants/subsidies and the overall sustainability indicators reflect improvementfrom99% last year to 105% in 2010.The devastating floods of August 2010 affected a large partof the branches and business in some of the mostpotential areas of the country, andcorrespondingly suppressed growth in portfolio and revenues.However,a comprehensive risk mitigation mechanism is in place to monitor and address thesituation and was successful incurtailing the impact to a large extent in 2010 and efforts willcontinue in the next year as well.The conversion of branches to full service bankingcontinuesas per plan while simultaneously moving onto a new corebanking platformproviding capability to develop newproducts & services and pursue new businessavenues.This is supplemented by strengthening of our businessfaculties resulting in upsurgein retail deposits that willprovide funding at competitive costs for future growth andprofitability.

Non fianacial performance

Clients loyalty

For khushali bank clients loyalty is the long term financial success.KB has the strong

customer base with some of their regular customers.it also offer some benefits for their

regular customers.clients who are loyal to the organization create good word of mouth for

the organization which will increase customers for the KB.KB main focus through the start of

its operation is to create the loyalty of the customer

Job knowledge testJob knowledge test of all branch retail staff was conduscted in two phases in phase 1 middle

managers were tested,whereas officers cadres were tested in phase 2,this will increae the

efficiency of employees and provide them opputunity to weigh themselves on a yard

stick.further this will be recognized.This will increase the non financial performance of the

organization

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Employee recognition

In khushali bank there is a culture of appraising employees on regular basis.in addition to

the recognition at the site,it also publish a newsletter outreach on a quarter basis.KBL

management conrajulates their employees on their well deserved promotion

Refresher trainings

Khushali bank offers regular training programs for their employees,which will increase

efficiency and thus effect the overall profitability of the organization.the best example is the

certified bank teller program.specially with the FSB program emergence it is the need of the

hour to have your employees trained.All the ROM and OM were trained as master trainers

Summary

Founded in the year 2000, Khushhali Bank Limited was a part of the Government of Islamic

Republic of Pakistan's Poverty Reduction Strategy and its Microfinance Sector DevelopmentProgram (MSDP). MSDP was developed with the facilitation of Asian Development Bank

(ADB). With its headquarters based in Islamabad.

It deals in no of microfinance and full banking services product like agri,new

bussiness,working capital needs,livestock loan and full banking product constitutes of

current account,term deposits certificates and remmitance facilites.it got a good depositor

and borrower base as compared to other micro finance institution in the field and lead the

industry in key financial indicators.the bank also involves in non financial performance such

as emplyee training and recoginition.khushali bank provide their employee a good working

envoirment,it also contribute towrds the commercial and developmental role.Khushali bank

looking forward to have some improvement in their HR department IT department and

conversion of its branches to full banking facility.in short Khushali bank is playing a vital rolein the economic development of the country by increasing the productivity and reducing

the poverty which is the main problem of our country.

Recommendations

Open the branches in rural areas

Support the community based loans

Formulate incentive program for their employees

There are many alliances of KB it must reduce its dependency on others

Providing employees to latest technology so that they can urge potential customers in a

proper way.(for E.G videos on large screen such as success stories)

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Refrence:

http://www.microfinanceinfo.com/history-of-

microfinance/

http://www.microfinanceconnect.info/au_history.php
http://www.microfinanceinfo.com/history-of-microfinance/http://www.microfinanceinfo.com/history-of-microfinance/http://www.microfinanceconnect.info/au_history.phphttp://www.microfinanceinfo.com/history-of-microfinance/http://www.microfinanceinfo.com/history-of-microfinance/http://www.microfinanceconnect.info/au_history.php

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