'An all hands-on-deck approach is required to counter the educational emergency in the country': Kashf Foundation CEO

BR Research recently sat down with Ms. Roshaneh Zafar, CEO of Kashf Foundation to discuss the progress of Kashf and its impressive feat of winning the prestigious European Microfinance Award for its school funding initiative. We also discuss the future landscape of microfinance in Pakistan. Roshaneh is a graduate of the Wharton Business School, University of Pennsylvania, USA and also holds a Masters degree in Development Economics from Yale University, USA. She has worked with the World Bank as a women-in-development associate in the water and sanitation sectors. Ms. Zafar founded Pakistan's first specialised microfinance institution Kashf Foundation in 1996 after a chance meeting with Professor Yunus, and has also founded the Kashf Microfinance Bank in 2008. Below are the edited excerpts from the interview.

<B>BRR: Kashf Foundation recently won the 7th European Microfinance Award "Microfinance and Access to Education". Please tell us a bit about the journey that led you to this impressive achievement.</B>

<B>Roshaneh Zafar:</B> It has been a very exciting journey for us. You know we have been in this business for 20 years and we kept thinking that when we talk about the impact of micro financing, the first impact is on the children. Whether it is the food they intake or whether it is the ability of the household especially the women to send them to school.

So what we began to see was a very silent transformation which we had not studied at all earlier. But we had studied the fact that the majority of the families were not putting their children in public schools.

When we questioned the women, the perception in the local market across the board was that private schools which are organically grown businesses by individuals who are educators, are considered to be of higher quality given that they are privately run and there is more control. What we realised is that it is true to a certain extent that these schools are providing better quality of education because many of these have a slightly better assessment in terms of mathematics and basic literacy. So where a public school child is assessed in grade five he does not even have the literacy level of a second grader. But the private schools fared reasonably better than their government peers in this regard according to the study.

So we were very intrigued by the results and further studied about 300 schools around Lahore to get a sense of the gaps. Interestingly enough, the first gap was financing. The schools said they wanted to grow with there being huge demand but they lacked the finances to add maybe a computer lab or another classroom and other basic infrastructure. They did not talk about quality to us directly. But when we probed them we discovered that none of the teachers had ever been trained with most also being underpaid. They mostly learn on the job and are not aware about concepts such as curriculum development or content planning.

The other interesting thing that we saw in that study was that ninety five percent of these schools were profitable. They had certainly done their business modelling right and when we out there we saw that the demand for education and schools was also there. So then we came up with this idea that if we were to target these schools the financing side was not going to be the difficult part. But rather there was also a need to work on the quality which was bifurcated in two ways. One was the school owner's capacity to run a school. For example many times these people lacked basic concepts such as bookkeeping and human resource management. More importantly they lacked a vision of what they wanted their school to become in the next three to five years.

Therefore we designed a school owner training which is conducted for two days at the time of the loan so that they can prepare for a better outcome. Additionally we also do a teacher training module but which is not our forte obviously being a micro finance institution. We decided not to reinvent the wheel and approached one of the leading providers of education, Beaconhouse to provide help in this aspect. They were kind enough to give us their teacher trainers and help carry out training sessions.

Subsequently our outreach has grown and it was a great honour for us to be awarded the European Microfinance Award for our initiative of promoting education through the Kashf Foundation. Kashf feels there is so much potential in the school program because this is the future of Pakistan. Our aim is to make it sustainable as well as scalable. This is why we chose to piggyback on the entrepreneurship model of education. If we choose to make the existing schools better a lot of progress can be made in education. We need an all hands on the deck approach because there is an educational emergency in the country.

<B>BRR: Could you describe the operational aspects as well as the training processes you follow in this school funding initiative?</B>

<B>RZ:</B> The financing is managed directly by our branch network of more than 200 branches all over Pakistan. We have currently got to 1000 schools which have an average of 200 children in every school. So that is 200,000 children which we have reached only in a period of eighteen months. Our aim is to increase this number to 4000 schools in the next three years which means we will be able to reach out to 800,000 students which is a considerable number.

We have trained over 3000 teachers so far with the basic pedagogy of education. We started from the basics such as session planning and are now moving towards curriculum delivery. When it comes to curriculum we have been advised to bring them in line with the government curriculum and then bring improvements to it. For example one of the additions we have made is financial education for children. We have trained 55,000 children from grade one to eight on the concept of money and financial management. Ultimately in grade eight we also teach entrepreneurship to focus on creating job creators rather than job seekers. Another transformation we are witnessing in Pakistan is how education is transforming girls. But they do not have the opportunity to turn that into economic gains.

<B>BRR: What level of financing do you provide to the schools?</B>

<B>RZ:</B> The financing is customised according to an assessment that we undertake with the maximum loan being Rs300,000 and the minimum being Rs70,000. The average loan size right now is Rs150,000. We do an assessment based upon the school's current need, their capacity to repay, their future plan and the entrepreneurial capacity of the school owner. Interestingly enough 70 percent of the people we work with are women who mostly run these schools.

<B>BRR: Microfinancing has taken off in a big way in Pakistan but there are still hurdles that constrain its growth. Could you please shed some light on the impediments being faced by the sector?</B>

<B>RZ:</B> I think in the past 18 months things have really improved for this sector and the penetration rate has come up to 18-19 percent. The micro finance banks have done a lot on the remittance base, branchless banking as well as mobile accounts. Currently, a lot of work is being done in the digital financial services area so everything will be virtual in the future.

In microfinance getting to the client, making sure you have the right products, and getting repayment are key aspects. It is a higher volume and small ticket size business. So the costs are basically on the higher side but which can be brought down by provision of digital financial services. Those institutions that realise this will fare better in the future compared to those who do not ride the wave of using technology as a tool. There will be more partnerships in the future in this regard with a focus on utilising the smartphones as a banking tool for the clients.

The second challenge is the time and cost it takes to conduct an assessment. As we have ample data we are now creating a credit scoring model which will streamline this process and provide considerable savings for microfinance institutions. These are some of the supply side issues.

Then you have the funding issue which has been resolved to a large extent for banks. But institutions like us still rely primarily on debt financing which is dependent on our equity generation in turn. So there is a limit to how fast we can grow but of course there are interventions like the State Bank's credit guarantee schemes which come in useful.

The third area is environmental factors. When you go to Bangladesh for example there is a one size fits all approach. The same environment and culture is present in the north and south parts of the country. But in Pakistan regional dynamics are starkly different which necessitate customised products according to local values and culture. Then there are some areas we cannot cover due to security issues.

This leads to penetration being varied with extremely high penetration in some areas and lower in others. In conclusion, I believe things are looking bright for the sector and you will definitely see some new innovations happening. There will be greater penetration and increased partnerships which will create positive synergies.