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KMBL — idol in helping sustainable, inclusive economy

KMBL — idol in helping sustainable, inclusive economy

Interview with Mr. Aameer Karachiwalla — President/CEO, Khushhali Microfinance Bank Limited


With over 30 years of experience, Mr. Aameer Karachiwalla is a fellow of the Institute of Chartered Accountants of Pakistan and a long-serving Director and Chairman of the Board of Directors of Khushhali Microfinance Bank Limited.

Mr. Karachiwalla was re-appointed as the Chief Financial Officer of UBL in July 2016. He joined UBL in 1998 and has previously held the positions of Chief Operating Officer, Chief of Staff and Group Executive Retail Banking at UBL.

During this time, he has been instrumental in launching the bank’s branchless banking business, implementing the IT vision of the bank and in developing the bank’s overall restructuring plan which led to its successful privatization. He is also the Chairman of the Board of UBL Insurers Limited and Director at 1Link.

Before joining UBL, Mr. Karachiwalla held senior positions at a number of financial institutions and multinationals including American Express Bank, Citicorp Investment Bank and Artal Group of Companies.

PAGE: Can you share your insightful perspectives on the differences between microfinance and conventional banking? Additionally, we would love to hear more about the relationship between UBL and Khushhali Bank.

Aameer Karachiwalla: It is important to note that UBL has been a pioneer in microfinance and was one of the founding investors in Khushhali Microfinance Bank since its inception in 2000. Conventional banking tends to serve a diverse range of customers, including large corporations, small and medium-sized enterprises, and retail customers, while microfinance banking, and specifically Khushhali Bank, is primarily focused on providing financial services to individuals and small businesses in Pakistan, especially those with low-income levels who do not have access to traditional banking services in agriculture, livestock, and micro and small enterprises (MSEs) sectors, with a special focus on women entrepreneurs and low-income households.

Microfinance requires a personalized and community-oriented approach, which involves building relationships with customers and offering customized financial solutions to meet their unique needs and circumstances. Additionally, microfinance institutions operate on smaller scales, with lower transaction volumes and smaller loan sizes, requiring a different cost structure and risk management strategy.

Although UBL and Khushhali Bank are separate entities, there has been a long-standing relationship between the two banks. In 2012, UBL increased its shares in Khushhali Bank to 30%, making it the largest single investor, while foreign shareholders own the remaining 70%. UBL not only provides financing and cash management facilities to Khushhali Bank but also offers technical support, which has helped to improve its operations and overall performance. This mutually beneficial partnership allows both banks to leverage resources and expertise to better serve their customers and support the economic growth and development of Pakistan as a whole.

PAGE: What methods does Khushhali Microfinance Bank use to provide financial services to clients in remote and underdeveloped areas of Pakistan, and what are the unique challenges that arise in doing so?

Aameer Karachiwalla: As one of its primary areas of focus, Khushhali Microfinance Bank employs various channels to provide financial services to clients in remote and underdeveloped areas of Pakistan. These channels include a retail network, mobile banking, agent banking, and community-based approaches. The retail network serves as a physical point of contact for clients, offering loans, savings, and money transfers. Meanwhile, mobile banking enables clients in remote areas to access their accounts, make transactions, and receive updates on their account status. Additionally, a network of loan officers and other retail staff provides financial services on behalf of the bank.

However, providing financial services to clients in remote and underdeveloped areas presents unique challenges, such as inadequate infrastructure, low levels of financial literacy, security concerns and the lack of collateral. These challenges can make it difficult for microfinance banks to operate effectively and for clients to access financial products and services. For example, inadequate infrastructure such as lack of roads, electricity, and internet connectivity can hinder the bank’s ability to provide services, while low levels of financial literacy can make it challenging for clients to understand financial products and services. Security concerns can also affect the operation of microfinance banks, and the lack of collateral can make it difficult for clients to access loans.

Despite these challenges, Khushhali Microfinance Bank remains committed to developing innovative approaches to reach clients in remote and underdeveloped areas, with the aim of promoting financial inclusion and economic development. By creating sustainable and impactful financial solutions, the bank hopes to improve the lives of its clients and their communities.

PAGE: What is the level of penetration of Khushhali Bank’s network in Sindh? What are the key success factors of Khushhali Bank’s growth in the Sindh area?

Aameer Karachiwalla: Approximately 25% of our branch network is dedicated to customers in Sindh. This indicates a significant level of penetration of Khushhali Bank’s network in the province.

The key factors contributing to Khushhali Bank’s growth in Sindh are:

Strong focus on talent sourcing and training: Khushhali Bank has mentioned that they have worked hard to source talent from Sindh and provide them with relevant training. This has helped them to build a strong team of local experts who understand the market and the needs of customers in Sindh.

Modern technology and infrastructure: Khushhali Bank has equipped its teams in Sindh with modern gadgets and infrastructure. This has enabled them to provide efficient and effective services to customers in the province.

Customer-centric approach: Khushhali Bank has a strong customer-centric approach, which means they focus on understanding the needs and requirements of customers and tailor their services accordingly. This has helped them to build a loyal customer base in Sindh.

Strong brand reputation: Khushhali Bank has been operating in Pakistan since 2000 and has built a strong reputation for itself. This has helped them to establish a strong presence in Sindh and other parts of the country.

Product innovation: Khushhali Bank has been continuously innovating its product offerings to meet the changing needs of customers in Sindh. This has helped them to stay relevant and grow their customer base in the province.

PAGE: Can you describe the key strategies implemented by Khushhali Microfinance Bank to ensure long-term sustainability and growth, especially considering the challenges faced by the microfinance banking industry in Pakistan last year?

Aameer Karachiwalla: In response to the challenges faced by the microfinance banking industry in Pakistan last year, Khushhali Microfinance Bank has taken several measures to ensure its long-term sustainability and growth. One key strategy has been to diversify its products and services to meet the changing needs of its clients. This includes offering a range of financial products and services such as loans, savings accounts, insurance, and money transfer services. By diversifying its offerings, the bank can reach a larger customer base and reduce its reliance on a single product or service.

Another important strategy for Khushhali Bank is prudent risk mitigation. The bank implements risk mitigation strategies to minimize the negative impact of risks on its financial performance and ensure the safety and security of its customers’ deposits.

Responsible lending is also a priority for the bank, which has increased its efforts to conduct thorough credit assessments to ensure that borrowers have the capacity to repay their loans. This not only protects the institution from high default rates but also ensures that borrowers do not fall into a cycle of debt.

The bank has also accelerated its technology integration efforts, using digital platforms for account opening and providing mobile banking services to reach more customers, especially those in remote areas.

Partnerships are crucial for the bank, especially during tough times. The bank is building partnerships with local NGOs, government agencies, and investors to access new markets, funding sources, and technical assistance. These partnerships have enabled the bank to serve underserved communities and expand its operations.

Finally, the bank is investing heavily in the capacity building of its staff and clients by providing training on financial management, entrepreneurship, and business skills. This helps clients grow their businesses and improve their livelihoods and also improves the quality of services offered by the institution.

Despite the challenges of the past year, Khushhali Microfinance Bank is confident in its ability to recover and achieve long-term sustainability. Its well-rounded approach includes risk mitigation, responsible lending, product diversification, technology integration, partnerships, and capacity building, all of which are geared toward serving clients and helping them achieve their financial goals.

PAGE: As the National Financial Literacy Program gains momentum with the backing of the State Bank of Pakistan, it is crucial to understand how Khushhali Microfinance Bank is contributing to this initiative. Could you please explain where and how your bank is promoting financial literacy, and what impact has it had on the communities you serve?

Aameer Karachiwalla: At Khushhali Microfinance Bank, we believe that promoting financial literacy and education is crucial to improve the economic well-being of the communities we serve. To this end, we have taken several initiatives to promote financial literacy among our clients.

Firstly, we have trained our branch staff to educate clients on financial management, including budgeting, saving, and credit management. Furthermore, we conduct regular financial literacy workshops and seminars in partnership with local NGOs and community organizations. Through these initiatives, we have been able to reach thousands of clients and improve their understanding of financial products and services.

Moreover, we have developed educational materials such as brochures, posters, and videos to explain financial concepts in simple and understandable language. Additionally, we have created a dedicated section on our website that provides financial education resources for our clients.

These efforts have had a significant impact. Our clients are now better informed and empowered to make informed financial decisions. We have witnessed a reduction in the number of defaulters, as clients are better able to manage their finances and repay their loans. Additionally, clients are more likely to save and invest in their businesses, leading to increased economic activity and growth in the communities we serve.

In summary, promoting financial literacy and education is a core part of our mission to improve the lives of our clients and communities. Through our initiatives, we have been able to contribute to the National Financial Literacy Program and enhance the financial well-being of the people we serve.

PAGE: Could you enlighten us about the latest range of products and services that Khushhali Microfinance Bank has introduced to cater to the dynamic requirements of your clients, and what has been the response from your clientele?

Aameer Karachiwalla: As an institution that places a premium on client satisfaction, Khushhali Microfinance Bank has recently introduced a host of new products and services tailored to meet the ever-evolving needs of our clients. We have made several groundbreaking moves, including the integration of RAAST into our platform, which provides free fund transfers to ensure our clients can seamlessly transact without additional costs. Additionally, we have introduced biometric verification to safeguard our clients’ information while enhancing the security of their transactions.

Our focus on innovation has also led to the development of machine learning tools to assess our client’s unique financial circumstances and tailor solutions that cater to their needs. Our Prime Minister’s Kissan Package, which provides interest-free loans to farmers hit by last year’s floods, is an initiative we take immense pride in, and it has been widely appreciated by our customers.

Moreover, we have introduced a range of secured loan facilities to support micro and small enterprises’ growth, while our salaries and pensions loan facility has been a game-changer for low-income households looking to borrow against the deposits in their salary or pension accounts.

In partnership with reputable insurance companies such as Adamjee, Jubilee, and Pak Qatar, we have also launched bancassurance & insurance products that enable our clients to invest their savings while receiving life protection. Lastly, we are shifting our portfolio from bullet to EMI, ensuring regular cash flow to enable us to lend onward to new customers.

Our new products and services have been incredibly well-received by our clients, and we remain committed to providing innovative solutions that meet their unique needs. At Khushhali Microfinance Bank, we believe in consistently pushing the envelope to provide the best possible financial solutions to our clients.

PAGE: As the financial industry moves towards digitalization, how is Khushhali Microfinance Bank competing with digital financial institutes and has the shift to digital financial models affected the microfinance sector?

Aameer Karachiwalla: As we enter a new era dominated by digital technologies, financial institutions are swiftly adapting to the changing landscape. Khushhali Microfinance Bank recognizes the importance of embracing digital innovations in order to stay ahead of the competition. Our mobile banking, online banking, and digital account opening services are just a few examples of how we are catering to the ever-evolving needs of our clients. These digital solutions offer convenient and accessible options for clients to manage their accounts and conduct transactions at any time and from any location.

Despite the rise of digital financial institutes, Khushhali Microfinance Bank believes in offering personalized and localized services to our clients. We understand that maintaining a physical presence in the communities we serve and providing face-to-face interactions is key to building strong relationships with our clients. This is particularly relevant in remote or underserved areas where digital services may not be accessible or preferred.

As the digital financial business model continues to transform the industry, it has both enabled and challenged the microfinance sector in Pakistan. While it has allowed microfinance banks to expand their reach and provide financial services to more clients, it has also introduced new risks, such as cybersecurity threats, and requires continuous investment in technology and infrastructure. At Khushhali Bank, we remain committed to staying ahead of the curve by investing in cutting-edge technology and infrastructure, ensuring that our digital financial services are secure, reliable, and accessible to all of our clients.

PAGE: With the Covid-19 pandemic followed by massive floods, what combined impact did these two factors have on the customer base and profitability of microfinance banks operating primarily in the agricultural and livestock business, as well as the overall microfinance industry? What were the measures taken by KMBL for its Sindh customers?

Aameer Karachiwalla: The Covid-19 pandemic and the massive floods have had a significant impact on the customer base and profitability of microfinance banks operating primarily in the agricultural and livestock business, as well as the overall microfinance industry in Pakistan.

Due to the pandemic, many businesses were affected, and the economic slowdown had a direct impact on the agriculture and livestock sector. Additionally, the floods further aggravated the situation, leading to losses in crops and livestock, and displacement of people. This resulted in a decline in the income of the customers of microfinance banks, which affected their ability to repay loans.

As a result, microfinance banks in Pakistan faced challenges in maintaining their profitability and managing their loan portfolios. The industry as a whole experienced a slowdown in growth and an increase in non-performing loans.

In response to these challenges, Khushhali Microfinance Bank Limited (KMBL) took several measures to support its customers in Sindh. These measures included:

Moratorium on loan repayments: KMBL provided a moratorium on loan repayments to its customers, which allowed them to defer their loan repayments for a certain period.

Restructuring of loans: KMBL also offered loan restructuring options to its customers, which allowed them to extend the repayment period or reduce the installment amount.

Interest rate reductions: KMBL reduced its interest rates on certain loan products to provide relief to its customers.

Digital channels: KMBL encouraged its customers to use digital channels for banking transactions, which allowed them to continue banking from the safety of their homes during the pandemic.

Awareness campaigns: KMBL conducted awareness campaigns to educate its customers on safety measures to prevent the spread of CovidOVID-19.

Corporate Social Responsibility (CSR): Our sales teams went from door to door ensuring the safety of our customers and their families, we provided financial and material aid (tents, food, utensils, medicines etc.) to more than 3000+ families in the Sindh region alone.

PAGE: In what ways does Khushhali Microfinance Bank prioritize sustainable and inclusive economic growth in Pakistan, and what strategies does the bank have in place to achieve these goals?

Aameer Karachiwalla: Khushhali Microfinance Bank recognizes its crucial role in promoting sustainable and inclusive economic growth in Pakistan. We believe that financial services are essential in empowering individuals and small businesses to contribute to the country’s economic growth. To fulfill this role, we have designed our products and services to cater to the needs of our clients, enabling them to start or expand their businesses and create employment opportunities.

Our primary focus is to promote financial inclusion by reaching out to marginalized and underserved communities such as women, rural populations, and small businesses. We understand that these communities often face barriers in accessing formal financial institutions and are therefore committed to providing them with financial services to promote their economic growth.

To drive economic growth in Pakistan, we prioritize supporting sectors such as agriculture, livestock and micro and small enterprises, which have the potential to create significant employment opportunities and contribute to sustainable economic growth.

At Khushhali Bank, we also prioritize environmental sustainability by implementing measures to reduce our environmental impact, such as promoting energy-efficient practices and reducing paper usage. By doing so, we hope to contribute to sustainable economic growth while protecting the environment.

In the future, we plan to expand our outreach to underserved communities and support sectors with high growth potential. We will continue to introduce new products and services that cater to the needs of our clients and contribute to sustainable economic growth. Additionally, we will promote financial literacy and inclusion to ensure that more individuals and businesses can participate in and benefit from the country’s economic growth.

PAGE: Could you provide some examples of how Khushhali Microfinance Bank has impacted the lives of its clients and their communities in a positive way? What lessons can be learned from these experiences?

Aameer Karachiwalla: Certainly! Khushhali Microfinance Bank has been instrumental in making a difference in the lives of its clients and their communities in several ways. One of our significant achievements has been empowering women entrepreneurs. We have extended financial services to several women across Pakistan, enabling them to establish and expand their businesses. For instance, we provided a loan to Ms. Farzana, who started a home-based embroidery business. With the funds, she procured a new embroidery machine and scaled her business, which has now become a source of income for her family. This example underscores the profound impact supporting women entrepreneurs can have on their lives and families. Our focus on financial inclusion for women has contributed to promoting gender equality and enabling economic empowerment.

We have also supported the livelihoods of countless farmers and livestock owners across Pakistan. For example, we provided a loan to Mr. Irfan, a livestock owner, to acquire additional cattle. With the loan, he could expand his business, increase his income, and improve his family’s living standards. Supporting the agricultural and livestock sectors can have a profound impact on the lives of individuals and their communities. Our focus on providing financial services to these sectors has contributed to rural economic growth.

Lastly, we have introduced several initiatives to promote financial literacy among our clients. For instance, we have conducted financial literacy sessions in rural areas, educating individuals on basic financial concepts such as budgeting and savings. As a result, many individuals have improved their financial management skills and made informed financial decisions. Promoting financial literacy can have a significant impact on individuals’ lives and their communities. Our focus on financial education has facilitated financial inclusion and empowered individuals to make informed financial decisions.

These experiences reinforce the significance of providing tailored financial services to underserved communities and promoting financial literacy to enable individuals and promote sustainable economic growth. We are proud to have one of the largest client bases amongst microfinance banks, with over 700,000 active borrowers and more than 3.1 million active savers. Our clients and their prosperity are the primary motivators for Khushhali Microfinance Bank, and we look forward to continuing to make a positive difference in their lives and communities.

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