Prime Minister Shaukat Aziz on Saturday formally launched the Khushhali Bank's (KB) 'micro-loan' product, designed with government's financial support to provide interest-free start-up loans to facilitate income stabilisation in earthquake affected areas.
KB's core business is to provide micro loans to low income segments purely for income generation purposes. It has now developed a loan product to leverage upon funds periodically allocated by the government and pass interest subsidy to the borrower for limited period of time.
KB President Ghalib Nishtar said that KB is currently offering loans up to one year, without interest, through its branches operating in areas affected by the October 8, 2005, earthquake.
He said that people could borrow these funds at these terms for a limited period to return them on timely basis. He said that KB had decided to provide these services even to individuals who had defaulted on their loans prior to the earthquake in the affected areas and would be willing to waive the negative credit history with the bank in return for ensuring that loan proceeds are utilised towards income stabilisation and their on-time repayment.
KB President briefed on bank's objective of developing non-bankable and highly marginalised territories for formal microfinance products and said that KB is a for-profit commercial microfinance bank which has largely been prioritising commercially viable territories with its own resources by virtue of its charter. He said that all the while the government had acted very responsibly in supporting growth of microfinance and remained particularly responsive to financial needs of non-bankable and highly marginalised territories.
He said that microfinance was relatively a new phenomenon but had picked up pace in recent years. Nishtar said that while an escalated credit risk is essentially an impediment for commercial entities such as KB to pursue an active interest in non-viable territories, KB had collaborated with a multi-lateral development agency primarily to test a model for underdeveloped markets subsidising high costs in return for measurable progress of territorial development initiatives.
He said that in the wake of recent successful experiences in marginalised territories, KB had recently collaborated with Government of Pakistan to develop a framework for extending access to micro loans in calamity-stricken zones on fast track basis thus facilitating the government in achieving its objective of livelihood restoration without undermining the commercial focus of microfinance bank's charter.
He was particularly appreciative of government's resolve to devise the framework for subsidised microfinance and assured of KB's commitment to stabilise a system under which non-bankable territories could be developed with non-institutional.