Introduction to SME, Micro finance

& KhushhaliBank Limited

By: Syed Imran Ali ShahArea Manager – Khushhalibank ltd

What is SME Definition?

Small & Medium Enterprises are defined as follows, as approved in SME Policy 2007

SME Definition

Enterprise Category Employment Size (a) Paid Up Capital (b) Annual Sales (c)

Small & Medium Enterprise (SME)

Up to 250 Up to Rs. 25 Million Up to Rs. 250 Million

Loan limit 0.5M - 75M (Collateralized)

The Federal Government, in line with the economic development of Pakistan may, from time to time modify the eligibility criteria as it sees fit. All providers of services receiving funding from the Government may define more narrow scopes for specific targeting purposes.

What is Microfinance?

Microfinance Banking for low income individuals or groups who would

otherwise have no other means of gaining financial services

The goal of microfinance is to provide a means of, Saving money Borrowing money Insurance Remittances

Microsavings A branch of microfinance, consisting of a small deposit

account offered to lower income families or individuals as an incentive to store funds for future use.

The minimum balance requirements are often waived, or very low, allowing users to save small amounts of money.

Microfinance

Microcredit A small loan given to poor people to help them become self

employed. 

Also known as "microlending" or "microloan". 

Microinsurance A division of microfinance, microinsurance looks to aid poor

families by offering insurance plans tailored to their needs.

Impact of Microfinance

Microfinance Industry Overview

Microfinance Institution (MFI): A non-bank, non-government

organization (NGO) Registered under a variety of

regulations including the Societies Act, the Trust Act, and the Companies Ordinance.

BRAC-Pakistan and ASA-Pakistan.

Microfinance Bank (MFB): A commercial bank licensed and

prudentially regulated by the Central Bank of Pakistan.

Licensed under the Microfinance Institutions Ordinance, 2001.

Legally empowered to accept and intermediate deposits from the public.

Rural Support Programme (RSP): Also an NGO registered as a non-profit

section 42 company under the Companies Ordinance.

Purely rural focus of its credit operations.

Registered with and supervised by the Securities and Exchange Commission of Pakistan (SECP).

Customer segments

Research indicates that Microfinance Programmes work best when targeted at populations just below and above the poverty line

Transitory Non-Poor and Vulnerable Those people who live above the

poverty line Transitory Poor

Those people who live below the poverty line for most of the time, but not always

Extremely and Chronic Poor Those people who always live below

the poverty line, all the time

MICROFINANCE BANKS IN PAKISTAN

Microfinance Bank licensed and prudentially regulated by the State Bank of Pakistan to exclusively service microfinance market

1.Advans Pakistan Microfinance Bank2.Apna Microfinance Bank Ltd. (formerly NMFB)3.Kashf Microfinance Bank (KMFB)4.KhushhaliBank Limited5.National Rural Support Programme Bank Ltd. (NRSP Bank)6.Pak-Oman Microfinance Bank Ltd. (POMFB)7.Rozgar Microfinance Bank Ltd. (RMFB)8.Tameer Microfinance Bank Ltd. (TMFB)9.The First MicroFinanceBank Ltd. (FMFB)10.Waseela Microfinance Bank

Why too many Entrepreneurs don’t know how to raise Capita?

Regardless of sector or size, companies wanting to expand sales, production and profits must have funds to hire people, buy equipment and acquire larger facilities. And much of that capital will come from credit financing.

Rising Capital for Small, Medium & Micro Entrepreneurs

Tools & Resources

Register as limited companyDesign your company logoFind cash flow solutionsGet business card designed & printedFind an accountFind office premisesRaise finance from Institute

Microfinance: 

Micro-enterprises and small businesses account for the major share of the private sector and employment in many developing countries. Yet, despite their size and importance, these businesses rarely have access to the savings, credit, and payment services provided by formal financial institutions. However MFBs in Pakistan are the specialized institutes who are facilitating to micro enterprises up to a maximum of Rs. 500,000/- with easy procedure. The MFB shall extend the enterprise loans only in the name of micro entrepreneur to ensure traceability and reduce the incidence of multiple borrowing.

Rising Capital for Small, Medium & Micro Entrepreneurs

Khushhalibank Limited

• Pakistan’s first Microfinance Bank

• Established in August 2000 as part of government of Islamic Republic of Pakistan’s poverty reduction strategy and its Micro Finance Sector Development Program (MSDP

• Pakistan’s largest Micro Finance Bank in terms of outreach

• Footprint of 110 branches

KBL Role

Retailing microfinance services nationwide.Pivotal to building a conducive environment to

attract other MFIs.Provide NGOs a platform to evolve/strengthen

their respective specialist functions.

KBL Network

Punjab 68

Sindh 24

Balochistan 3

NWFP 12

AJK 03

KBL Update as of 30th June-2013

Number of Active

Borrowers

Gross Loan Portfolio(PKR)

Number of Active Savers

Value of Savings(PKR)

Number of Policy

HoldersSum Insured

(PKR)

Balochistan 3 19,840 204,820,661 7,890 325,118,423 3,698 68,218,647

N.W.F.P 12 45,703 651,681,858 48,134 687,999,027 29,276 578,108,154

Punjab 68 306,456 5,731,180,354 400,128 3,187,323,375 268,721 5,516,251,820

Sindh 24 98,200 1,568,135,131 104,842 758,112,742 62,805 1,254,827,540

AJK 3 11,472 153,723,254 10,322 488,745,852 9,250 140,101,012

GRAND TOTAL(All Pakistan)

110 481,671 8,309,541,258 571,316 5,447,299,419 373,750 7,557,507,173

Micro-Insurance(Jun. 30)

Number of Branches/ Units

(Jun. 30)

District - Level InformationMicro-Savings

(Jun. 30)Microcredit(Jun. 30)

District

1. Liability Suite• Current Accounts• Savings Account• Term Deposits

2. Asset Suite• Individual Loan ( Secured)• Group Loan ( Unsecured)• Value Chain Financing

3. Other Services • Western Union Money Transfer• Repayments at Omni Dukaans

Products & Services

Lending Suite

•Khushhali Cash Sahulat(Asset backed lending for

Individuals)

•Khushhali Qarza(Unsecured Group Lending)

Description– Offered to borrower groups including 5 to 20 people for enterprise, livestock or

agriculture purposes– Social collateral ( Grameen Model)

Target Segment– Geared towards fulfilling small financing requirements for our rural and urban

customers.

Loan Ticket– Rs 10,000(Min)- Rs 50,000(Max)

APR– 31% (Charged on outstanding balance) Types of Loan

Agri Livestock Enterprise

Repayment Options EMI (Equal Monthly Installments) Bullet

Tenure 3-12 months

Credit Life Insurance (Mandatory) Free

Khushhali Qarza

Description– Collateralized loan to individual customers– Collateral includes Gold, National Savings Certificates (NSC's) and Khushhalibank TDs Target Market– Urban and Rrural– Slightly larger businesses Loan Ticket– Rs 25,000(Min) - Rs 150,000(Max) APR

28% against Gold 25% Land Backed/passbook 15% against liquid securities

Types of Loan Agri Livestock Enterprise

Repayment Options EMI(Equal Monthly Installments) Bullet

Tenure 3-12 months

Free Life Insurance of outstanding balance

Khushhali Cash Sahulat

Liability Suit

Current Account

Current Deposit Account

CDA is an excellent transactional account for Individuals with frequent transaction needs & small business owners

Minimum balance requirement is Rs. 500 and account can be opened with Rs. 100

Basic Banking Account

BBA is also targeted towards the mass market with frequent transaction needs

Minimum balance requirement is ZERO and account can be opened with Rs. 1000

Savings Account

Mehfooz Account

Targeted towards small savers, households, KBL borrowers

No minimum monthly balance or monthly average balance requirement

Interest Rate, 6% per annum

Karobari Munafa Account

Targeted towards small business owners Minimum balance requirement is Rs. 5,000

and account can be opened with Rs. 500 Interest Rate, 6% per annum

Behtreen Bachat Account

Targeted towards elderly savers, investors and pensioners

Minimum balance requirement is Rs. 25,000 and account can be opened with Rs. 5,000

Interest Rate, 6-8% per annum depending upon amount of deposit

Saving Accounts Strengths

Brand Name Strengths

Mehfooz Account

•No Minimum balance requirement•FREE first 10 leaf Check book•Interest accrual on daily balance and not minimum balance

Karobari Munafa

•Unlimited Free PO’s/DD’s•Low MAB requirement

Behtreen Bachat Account

•High GIR•FREE Life insurance

Term Deposit

Khushhali Aamdani Certificate (KAC)

– Pays out profit at the end of the specified tenure i.e at maturity.

– Designed for customers with strong savings who are looking for higher rate of return

– Min Deposit Requirement is Rs. 5,000/-– Tenures of 1,3,6,12,18,24 and 36 months– Issuable in multiples of Rs. 1,000

and Khushhali Izafa Certificate (KIC)

– Pays out interest on a monthly basis – Designed for customers with strong savings

who are looking for higher rate of return– Min Deposit requirement is Rs. 25,000/-– Tenures of 6,12,18,24 and 36 months– Issuable in multiples of Rs. 1,000

KBL TDC’s Strengths

KBL Strengths

TDC’s

•Competitive interest rates•Profit pay-out option•Low fixed penalties on early encashment.

• Western Union Money Transfer facility is provided in all 107 branches.• Approx. 1,000 txns per month

Benefits• NFI• Cross-sell opportunity

• Brand Equity enhancement

• Loan repayment through OMNI Dukaans mapped on all KBL branches• Over 500 Agents on board accepting repayments

Benefits• Transactional convenience• Increased outreach

Other Services

Employment career for post graduates in

Khushhalibank ltd.

Eligibility criteria for recruitment

Education: Min Graduate (BA, B.Com, BBA, BPA or equalant) Age: 28years max

Gender: Equal opportunity for both

Exp: Experience in Relevant field’ll be preferable/Fresh graduate are encouraged to apply

Employment career for post graduates in

Khushhalibank ltd. Field & Career

Considering nature of business we offer field & office based jobs in initially three caders

Entry Level: BDO (Business Development Officer) for field based permanent officer jobJob Description: Sale & Recovery of loan products (Credit Portfolio) Entry Level: Operations Officer for back-office function permanent

officer jobJob Description: Responsible to execute back-office functions smoothly i.e Cash dealing, Client Servicing, Transfers, Clearing, A/C Opening etc.

Entry Level: Sales Consultant, field based job for deposit mobilization

Job Description: Responsible to mobilize deposit from market.

Fareeda – SukkarBy: S. Imran Ali Shah

   

Thinking about change helps us believing in ourselves, and enables us to make plans bigger than our existing circumstances. But when it comes to the womenfolk in Pakistan, all their plans become more difficult to realize as compared to the male members of the society, unfortunately. In the most of the underdeveloped areas, women have to struggle more for everything starting from developing an identity of their own to getting themselves established financially.

The story of Ms. Fareeda, resident of Sukkar, is no exception. Her father was the only bread earner of her family. He was in trouble making ends meet. That lack of resources prevented her and her siblings from joining school or any vocational institution thus perpetuating the vicious cycle of deprivation and lack of means to improve their life.

However, one thing distinguished Ms. Fareeda from the average women. She had a strong resolve to support her family and to give them a chance for building a brighter future free of any financial worries. This led her to a decision of starting her own embroidery business.

With no formal education, Ms. Fareeda’s decision was a difficult task to accomplish. On her way to success, she faced implications like social and domestic backlash and contending with lack of resources. Putting aside all her inhibitions, she contacted Khushhalibank, the pioneer bank in microfinance, for financial assistance. Khushhalibank responded Ms. Fareeda’s request with not only the initial finances to enable her for starting embroidery business but also gave her the best possible financial and business advisory to run her business smoothly.

Now with the support of Khushhalibank, Ms. Fareeda is running her embroidery business successfully with plans for expansion on a commercial scale, thus gaining access to urban and rural markets. Ms. Freeda has become a successful entrepreneur who is a role model for other members of the society at the same time. She is also teaching the art of embroidery to women of the area for helping them changing the course of life for their families.

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