Micro Finance Bank Ltd

By Author: Ibrahim Machiwala Lodhi
Total Articles: 463
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The First MicroFinance Bank Ltd (FMFBL) is the Pakistan's first private sector micro credit institution licensed by State Bank of Pakistan under the Microfinance Ordinance, 2001. The Ordinance defines that the FMFBL borrowers are those whose annual income is below the taxable limit. The Microfinance Institutions are allowed under this Ordinance to provide a whole range of services under one roof such as granting loans, generating deposits, providing remittance facilities and other related financial services.

The President Pervez Musharraf in the presence of the Present Imam formally inaugurated it on March 11, 2002. In his speech, the Imam said, "All my warm congratulations go to the many admirable men and women who have conceived and brought this new financial institution into being. It is my hope and prayer that it will serve well the poor of Pakistan, replacing despair with hope and confidence in a better future."

The FMFBL aims to reach out to those who are currently not able to receive adequate financial services, throughout the country, in rural areas as well as urban areas. The target audience is the poor ...
... and the underprivileged of Pakistan, especially women. The main sponsors of the Bank are the Aga Khan Fund for Economic Development (AKFED) and the Aga Khan Rural Support Program (AKRSP) with an equity investment of PKR 500 million. The International Finance Group, a member of the World Bank Group has become a partner with an investment of PKR 160 million, raising the total capital to PKR 660 million. Institutions of the Aga Khan Fund for Economic Development (AKFED) have been providing financial services in Asia and Africa for more than 60 years through a range of entities from small savings and micro credit organizations to major commercial banks and insurance companies listed on national stock exchanges. AKFED is present in 15 developing countries through its network of affiliates and is currently involved in more than 90 projects and several micro-finance programs.

Over 30% of the population in Pakistan is below the poverty line. Majority of these people do not have access to formal financial services thus denying them access to capital for enhancing their economic productivity. According to the Pakistan Microfinance Network there are 5.6 million households in Pakistan in need of micro finance services and currently only 1% have any access to Microfinance Services. The successful micro credit and savings initiative of the AKRSP that was initiated since 1982, and has facilitated savings of more than PKR 500 million and provided micro loans to more than 100,000 households. The FMFBL, carrying the concept forward, has so far disbursed loans over PKR 200 million, and intends to raise it to PKR 600 million by the end of 2004. It has already mobilized Rs. 330 million from 9000 clients and expect to touch PKR 550 million by the end of 2004. Total loans and saving clients are expected to be over 33,500 clients by 2004 end. This remarkable achievement reveals its aim to provide Pakistan's poor, will endeavour to fulfill this mission by reaching out to vulnerable groups, especially women in rural as well as urban areas, with an access to full array of financial services, and to empower them to overcome poverty by mobilizing savings, providing income-generating opportunities through micro-credit loans and other financial services. There are around 30% representation of women in both the deposit and loan clients. Over 13,000 clients have already availed loans and saving services; deposit accounts are opened with a minimum of PKR 5/- and clients are encouraged to save on a voluntary basis.

The Band has established its presence in Rawalpindi, Karachi and Hyderabad amongst the urban areas along with seven fully equipped rural branches/units in the Northern Areas of Pakistan and Chitral. The Bank has also started operations in Lahore and will expand as far as Baluchistan with a branch in Gwadar. By the end of the year 2004, the number of branches/units will reach to 26 and will be increased to more than 35 in the next 5 years.

In addition to expanding its series of loan and deposit products, the Bank is in the process of developing new products, such as Micro-Assets financing and sale of Government securities. It relates to the financing for acquisition of economic assets for enhancing the disposable income of the poor entrepreneurs. Government securities are the highest yielding investment bonds available in Pakistan and will be available in small denominations to facilitate small savers who will be able to optimize their savings. Services such as fee collection, which facilitate students at educational institutions, have already been launched in Karachi in collaboration with the Aga Khan Education Service, Pakistan (AKESP) schools. In Northern Areas of Pakistan, the Bank is working with Aga Khan Planning and Building Service (AKPBS).