The concept of microfinancing is still in its infancy in Pakistan. Therefore, my first question was about his reasons for agreeing to help set up the First Microfinance Bank; what was the idea behind the inception of the bank? In reply, Hussain Tejani said, "The government of Pakistan wanted to take some initiative in the microfinance world and eliminating poverty which is the key objective of present government.
Our sponsors, the Aga Khan Development Network agreed to establish a nation wide bank. It took one year for the government to promulgate the Ordinance - on October 17, 2001 the ordinance came into effect and within 15 days the bank was incorporated.
In March 2002, the institution was formally inaugurated by the President of Pakistan in the presence of His Highness Prince Karim Aga Khan. Since then, we have managed to open 21 branches throughout Pakistan. We have already dispersed Rs 600 million among the poor and within two-and-a-half years' time we have mobilised deposits of around 480 million rupees."
Replying to a question about the methodology of the bank in helping the poor save their money, Mr Tejani disclosed, "The unique features of our bank is that we firmly believe that the poor need to conserve their assets and we help them in that and we also believe that for eliminating poverty, disbursing loans is not the answer; they need other financial services, particularly deposits, and by the end of this year we are expected to reach 30,000 customers.
Now these savers are poor people having an average deposit for Rs 500. We open their accounts with Rs 5, and with no service charges because we believe that this institution is meant for the poor and we should give them all facilities.
Further, we don't grant loan according to the request by the poor; we carry on our own assessment of their requirement, and if we find that they are asking for insufficient amount, we guide them accordingly.
To us, the poor are equal citizens and deserve dignity and when they come to a branch of ours, our guard salutes them.
To a question about the financial services provided to the poor consumers, Tejani replied, "We don't believe in a lot of paperwork. Our people go and visit the prospective borrowers and assess their needs, and within 48 hours we provide them with loans.
We believe that the poor need other financial services. For instance, the poor come to the town and work for their livelihood. Generally they leave their family behind and the male member sends the money back to the villages.
This amount is usually meagre and it is very difficult for them to send it home. We have developed an electronic fund transfer facility where by we transfer this money with 24 hours, which is very unique, and our charges are very nominal which they can afford easily.
Another service that we provide is also very unique; we provide the borrowers insurance policies for which a nominal amount is deducted. Generally, when the borrower dies the family has to return the money, but we feel that it is difficult for the family minus the earning member. Insurance is done through a good insurance company.
In case the borrowers dies then the insurance company pays the amount, but we know that after out loan is recovered the family is still in distress so we make another insurance in which not only do we waive the loan but the family is paid Rs 10000. We only charge. 8 rupees a month which is the premium.
We give loans to hawkers, mechanics, shopkeepers, teachers, policemen etc. To us, anyone under the income bracket of Rs 8000 is a poor and hence eligible for loan."
To a question about the behaviour pattern of the borrowers, Mr Tejani replied, "We have had no problems in the repayment of loans. May of our borrowers pay us on daily basis, we have structured their repayment schedule according to their generating capacity, and they can pay on daily, weekly or monthly basis according to what suits them. Our recovery rate is 99 percent."
Responding to a query about their donors, Tejani disclosed, "Our main sponsor is the Aga Khan Development Network, IFC has invested with us in Afghanistan and Tajikistan, and we are also collaborating with the Citibank in a project aimed at creating health awareness among the poor.
In this endeavour, we are strongly supported by the Aga Khan University, which provides treatment to our consumers.
I was interested to learn about the policy of the bank about female borrowers, so my next question was about loans to women; how often does the bank grant loan to women, and what is the bank's policy on the employment of the female staff.
Tejani said, "We encourage women to borrow for their enterprises and offer them guidance and counselling. Women are very good at paying back loans. We hire female staff in our branches also. In the northern areas, too, we hire female staff.
While enumerating the achievements of his bank, Tejani said, "UNDP has a programme of giving awards to the best entrepreneurs. Among the 8 short-listed candidates, two belonged to us, and the number one award was also given to one of our clients.
"We have pioneered in another area; there is a rating agency called JCR-VIS; they are the rating agency for the government, and doing the ratings for all financial banks. After one year's operation, we went to them as we wanted to know where we stood. Plus, we wanted to create a local capacity for this agency in Pakistan instead of going to foreign rating agencies for microfinance. The rating we got was the highest in Pakistan."
"I think the role of rating agencies is very important," continued Tejani. "Transparency, for us, in a challenge. The rating agency goes through our entire operation, and then comes up with the rating. It is very good creditability." Tejani is a philanthropist who very modestly insists on understanding his contribution in the welfare work carried out by the various branches of the Aga Khan Network, and he is actively involved in the running of a number of schools.
He is also involved with a lot of projects for the Aga Khan Rural Support Programme, and spends his free time by doing voluntary work for the poor.
(The writer is President of the First Microfinance Bank)
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