For over a decade Khushhalibank has been providing financial services to Pakistan’s rural poor. Khushhalibank President Ghalib Nistar talks to Maryam Syed and Mashaal Gauhar about the success of Khushhalibank and microfinance in Pakistan
UBL and Khushhalibank’s branchless banking initiative Omni has been very successful, what has accounted for its success?
Ghalib Nishtar: “I think it’s basically about outreach. We reached out to people at the bottom of the pyramid who required a convenient and accessible channel for their banking needs. This was made possible on the backbone of a very successful telecom revolution which has enabled everyone to afford a phone. Omni, the branchless banking initiative, backed by the central bank, has enabled banks to successfully reach out to people and that is what we can attribute the success of the initiative to. Pakistan presents great opportunities, like it did with microfinance banking back in 2000 and once again in terms of branchless banking recently.”
Khushhalibank offers a unique home remittances product in partnership with Western Union, what prompted the launch of this pioneering product?
GN: “Western Union operates across the world and it is partnered with most of the commercial banks in Pakistan. A lot of people who are using the Western Union channel are clients from low-income households and we succeeded in connecting Western Union with these customers. We were the first microfinance bank to partner with Western Union in Pakistan and the initiative has been very successful. The remittances coming in are in the bracket of $1000 to $2000 which are basically people whose families fall in the low-income household bracket and they are very much in the market segment that we serve in Pakistan.”
Khushhalibank is collaborating with MEDA to promote entrepreneurship in Pakistan, you have been an ardent advocate of micro-entrepreneurship for many years, can you share your views on promoting micro-entrepreneurship in Pakistan?
GN: “MEDA is executing a USAID initiative called The Entrepreneurs and they are supporting this in terms of value chain development for people in the rural market. We have the largest presence in the rural market so it was very natural that we should collaborate with them. We just signed up and the initiative is helping micro-entrepreneurs in managing their cash flows, establishing business plans and providing linkages in other areas. A similar initiative that we hope to launch soon is a partnership in which we will provide skill enhancement with a state-of-the-art skill enhancement centre in collaboration with one of the major international technical providers. They have set up a centre in Karachi on Tariq Road on donated land and also in interior Sindh. They are trying to help people develop their skills and would like to expand to other areas of Pakistan.”
Khushhalibank recently registered the highest growth among the microfinance banks, what has enabled this rapid growth?
GN: “We have the largest market share in Pakistan in terms of microfinance. We have 20% market share which is by far the largest and I think the reason for that is we have well positioned franchises, we are well established especially in the growth areas of Pakistan which are Sindh and Punjab. Khushhalibank’s initiatives have really benefitted the rural economy so despite the challenges that we see in other areas, the rural areas of Pakistan are doing really well and since we are predominantly a rural franchise, there are opportunities for us to grow. Urban areas are currently under stress but the rural areas, especially south Punjab and parts of irrigated Sindh, are presenting us with growth opportunities.”
Khushhalibank is unique in that its presence in rural areas remains unparalleled as other microfinance banks have focused on urban areas, can you elaborate on this?
GN: “When we started in 2000, we felt Pakistan is a rural economy and that is where we must focus our investment as there is great opportunity in terms of agriculture, in terms of Pakistan’s positioning in the region as a supplier of food and raw material. The population is extremely hardworking and resilient out there. Each year clients come back to pay their loans which accounts for excellent recovery, so it was a natural choice for us to serve these people.”
Pakistan is ranked as one of the most enabling environments for microfinance. What are your views on this?
GN: “In the year 2000, prior to when we launched the Microfinance Sector Development Program of the Government of Pakistan, the level of microfinance outreach and services available in Pakistan was quite low. Today Pakistan is ranked number one in the world in terms of the business environment for microfinance and that is because of the dedicated framework that has enabled it to be one of the top three countries in the world whose business environment is considered suitable for microfinance. That is why the ranking that we’ve had and the track record that we’ve established as an industry has led to the emergence of 10 microfinance banks working in the private sector. Investments from the private sector are moving into the microfinance sector which is a testament to the fact that the framework is good.”
Khushhalibank has emerged as the leading microfinance institution in Pakistan, what factors have contributed to its success?
GN: “Strong governance is critical. Khushhalibank emerged from the public sector, we have successfully made the transition to the private sector by attracting investments from the domestic and international market. Also, the clients we have are excellent and our team is superb.”
How do you see microfinance developing in the future in Pakistan?
GN: “Last month in Washington DC we were part of a major international conference hosted by the SEEP network where we showcased the country at an exclusive session titled Pakistan — the Dark Horse of Microfinance. Stakeholders from various networks, bankers, investors and the development community at large were present at the conference and we were able to make a strong pitch for Pakistan. Prospective investors acknowledged that Pakistan is the best place for investment because the markets are huge and the opportunities, particularly in the rural markets, are excellent. Furthermore, the governance, frameworks, structures and policies make Pakistan the ideal choice for microfinancing.”
Can you elaborate on what other projects Khushhalibank plans to undertake?
GN: “I believe the recent changes in the regulations by the central bank have allowed us space to venture into the micro-enterprise segment of the market. The segment is likely to present a thriving market for financial services in Pakistan besides opportunities for sustained economic growth and job creation.”