Mi­cro-credit growth

The Pak Banker - - FRONT PAGE -

Arecent re­search re­port shows that the year 2017 proveds to be a good one for the coun­try's mi­cro­fi­nance in­dus­try. With an as­sets base of Rs 203.3 bil­lion, the Mi­cro­fi­nance Bank­ing In­dus­try grew by 52.5 per­cent dur­ing the last fis­cal year (FY17). Ac­cord­ing to State Bank of Pak­istan, the mi­cro­cre­dit port­fo­lio posted an in­crease of 53.5 per­cent to reach Rs 111.9 bil­lion as at end of FY17 com­pared to Rs 72.86 bil­lion end of FY16. Sim­i­larly, the num­ber of bor­row­ers of Mi­cro­fi­nance banks (MFBs) grew by 29.9 per­cent to 2.209 mil­lion dur­ing FY17. As­set base grew by 52.5 per­cent to Rs 203.3 bil­lion by end of last fis­cal year com­pared to Rs 133.324 bil­lion in the pre­vi­ous year. The lat­est fig­ures show that there was a dou­ble-digit growth in key sec­tor in­di­ca­tors. The bor­row­ing side picked up sig­nif­i­cantly in the first six months of the cal­en­dar year, and the num­ber of ac­tive bor­row­ers reached 5.2 mil­lion, a growth of 14 per­cent since De­cem­ber 2016. The gross loan port­fo­lio in­creased to Rs171 bil­lion, up 25 per­cent from Rs137 bil­lion re­ported six months ago.

Ac­cord­ing to a sur­vey, Khush­hali Mi­cro­fi­nance Bank has posted its ap­pre­cia­ble growth in terms of prof­its and div­i­dends. The Bank main­tains the largest net­work of 173 out­lets and en­joys the largest mar­ket share in terms of loan port­fo­lio, de­posits and as­set base in the mi­cro-fi­nance sec­tor. Com­pared to last year, port­fo­lio qual­ity in­di­ca­tors also im­proved, with growth in loan book of 40 per cent pri­mar­ily led by the agri­cul­ture sec­tor lend­ing. The Bank de­posits ex­panded ap­pre­cia­bly by over 100 per cent as com­pared to last year and a strong built up was seen in ur­ban op­er­a­tions. This il­lus­trates how Pak­istan's mi­cro­fi­nance sec­tor is grow­ing from year to year.

The lat­est data based on reports from 39 mi­cro­fi­nance providers (MFPs) - 11 mi­cro­fi­nance banks, 12 mi­cro­fi­nance in­sti­tu­tions, 4 ru­ral sup­port pro­grammes, and 12 so­cial sec­tor or­gan­i­sa­tions -- shows that mi­cro­fi­nance is ex­pand­ing its pen­e­tra­tion across Pak­istan. Mi­cro­fi­nance cov­er­age now ex­tends to 106 dis­tricts in Pak­istan. The mi­cro­fi­nance pen­e­tra­tion rate is re­ported at roughly 25 per­cent, based on an es­ti­mated po­ten­tial mar­ket size of 20.5 mil­lion. The num­ber of ac­tive bor­row­ers has dou­bled be­tween 2011 and 2016 - and the tally is get­ting big­ger. There are plans to dou­ble the cov­er­age by 2020. The po­ten­tial mar­ket is still very large, and ap­par­ently grow­ing. A loan-book of over Rs400 bil­lion is needed to serve 10 mil­lion mi­cro bor­row­ers. That means equity cap­i­tal must reach at least Rs40 bil­lion.

The mi­cro-credit ser­vices ex­panded to over 5.202 mil­lion low in­come bor­row­ers by June 30, 2017, reg­is­ter­ing an in­crease of 25 per­cent from 4.161 mil­lion in the pre­vi­ous year. Con­cur­rently, a growth of 57 per­cent or Rs 62.127 bil­lion was also reg­is­tered in the gross loan mi­cro-credit port­fo­lio that in­creased to Rs 171 bil­lion from Rs 108.8 bil­lion dur­ing the pre­ced­ing year. The av­er­age loan bal­ances also in­creased by Rs 6,703 to reach Rs 32,868. To serve the credit de­mand of 10 mil­lion bor­row­ers, the mi­cro­fi­nance en­ti­ties need to dis­burse ad­di­tional Rs220 bil­lion over ex­ist­ing loan-book size. The re­cent launch of the Pak­istan Mi­cro­fi­nance In­vest­ment Com­pany, which is a PPAF spin-off that is also funded by donors, can be in­stru­men­tal in bridg­ing that gap. Com­mer­cial banks will need to play a role, too. Ac­cord­ing to SBP, a Line of Credit (LoC) is be­ing es­tab­lished with the fund­ing sup­port of the gov­ern­ment of Pak­istan un­der the World Bank's Fi­nan­cial In­clu­sion In­fras­truc­ture Pro­ject. The new scheme will al­low MFBs to im­prove mi­croen­ter­prises' ac­cess to credit.

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