The digital financial services like digital lending will expand the scope of services to be offered by Khushhali Microfinance Bank Limited (KMBL) to its customers. "The digital lending will help establishing market linkages for small farmers and businesses working in remote areas and make them part of value chains and offer information services to small farmers," said Ghalib Nishtar, president KMBL while talking to Business Recorder.
He was optimistic that the clients will be able to take loans and manage their repayments through a single mobile application, making the presence of a branch in their area less relevant. He said "the digital financial services will expand the scope of services which the bank will offer to our customers, adding establishing market linkages for small farmers and businesses working in remote areas will make them part of value chains."
The Bank is confident to use the technology and digital solutions to be able to reach to new markets and client segments and provide more convenient solutions to its customers. "We are investing in upgrading our technology infrastructure by acquiring a modern core banking system with supporting business intelligence tools for mining and understanding client data and analytics and developing a comprehensive Digital Financial Strategy for the bank with the objective of improving customer experience," he shared.
KMBL has recently signed an agreement of collaboration with International Finance Corporation (IFC) to design agri-digital finance solutions. The partnership aims to leverage the international experience of IFC in digital finance and use it to develop the local markets.
The bank is hopeful to set the foundation of technology driven solutions in finance industry through collaboration and encourage international Fin Tech companies to invest in Pakistan - a step forward towards providing incentives to local tech start-ups and increase market opportunities.
He said KMBL won an award for the best microfinance bank in Pakistan recently which he attributed the committed management of his team and a dynamic bottom of the pyramid markets and clients. Khushhali is the first microfinance bank in Pakistan which pioneered the concept of a regulated and sustainable microfinance banking model.
Discussing business risks and challenges, he explained that the success of the bank has broken the myth in Pakistan that low income segments and small loan program that benefit the majority of the population do not work and have a high default rate. KMBL has been lending in rural areas as well as within the marginalized groups of urban areas and the loan recovery rate has been exceptionally good with a track record spanning 18 years.
The key has been the policies and procedures that ensure that loans are given to right people, and they use it for the economically productive initiatives. He continued that climate change is becoming a challenge for farmers and can lead to fluctuations in their productivity and income. Since KMBL invests majority of its portfolio in agriculture sector, this remains a point of concern and there is a need to develop risk mitigation mechanism.
Talking about the loan taking procedures, he said that the bank strives to provide a hassle free loan process to its customers at their workplace so that clients do not have to leave their business places to come to the bank as they are mostly self- employed.
KMBL has 200 branches all over Pakistan with over 2 million active clients and 50 more branches are soon to be opened around the country. The bank is committed to remain a market leader and adapt and innovate to be able to better serve its clientele. Banking penetration has improved in the country since the advent of microfinance banks but there is still room for improvement.
Nishtar explained that most of KMBL's work has been in the rural areas providing loans for agriculture and livestock businesses. "There is a significant demand within the country as well as within food deficit neighboring countries like Afghanistan, Iran and China. We can support small farmers to become suppliers in international markets," he stated.
He said that in the past 18 years, KMBL has given more than six million loans and positive rates of return on their savings. "We are proud to be an enabler in the lives of millions." Nishtar believes there is immense potential in the microfinance sector.
There are currently 11 private sector banks in the industry and they all have upward growth trends because of the excellent market prospects. He said that in terms of policy direction, State bank of Pakistan is working actively on National Financial Inclusion Strategy (NFIS) to build a dynamic and inclusive financial sector to support Pakistan's growth in the 21st century.
Nishtar feels that the future prosperity in the country is directly linked to the growth of micro, small and medium enterprises (MSMEs). To enable microfinance banks to lend to MSMEs, he added, SBP increased the loan limit from Rs150,000 to Rs500,000. The policy change showed immediate impacts on the sector and successful lending by banks in this sector increased the confidence of the regulator, he added.