MICRO FINANCE INSTITUTIONS IN BANGLADESH AND PAKISTAN

Comparative analysis Of Micro finance institutions in Bangladesh and Pakistan, case of Gremeen Bank in Bangladesh and Khushali Bank of Pakistan

Abstract

This paper looks at the establishment and evolution of the iconic Grameen Bank of Bangladesh and Khushhali Bank of Pakistan. This is based on the comparative analysis Of Micro finance institutions in Bangladesh and Pakistan, case of Gremeen Bank in Bangladesh and Khushali Bank of Pakistan. Both the bank have performed well by these criteria. They have quickly grown into by far the largest provider of microfinance in Pakistan, now providing a range of loan products to over 230,000 active clients from its network of branches across the country, and has stayed focused on the core objectives of operational and financial self-sufficiency. Finally, the paper looks at Khushhali & Grameen Bank's future role as a major player in the microfinance market in Pakistan and Bangladesh, and as an inspiration for those helping poor people improve their own lives.

Comparative analysis Of Micro finance institutions in Bangladesh and Pakistan, case of Gremeen Bank in Bangladesh and Khushali Bank of Pakistan

Chapter I: Introduction

Background

Although Pakistan's economy enjoyed relatively stable growth during the 1990s, poverty and income inequality continued to rise. The most recent official estimates are that roughly one-third of the population was below the poverty line at the start of the millennium (Government of Pakistan (2003), p. 12). In response to these widely cited figures, the Government of Pakistan established poverty reduction as its overarching objective and, recognizing the potential role of microfinance in alleviating poverty, embarked on a Microfinance Sector Development Program (MSDP) to broaden and deepen the microfinance sector to provide a broad range of financial services in a sustainable manner. The Khushhali Bank, a retail microfinance bank established in August 2000, was the first licensed microfinance bank established under the MSDP, and expectations for Khushhali as the flagship microfinance institution in Pakistan are high. The State Bank of Pakistan views Khushhali as a “model institution” for the private sector to follow in establishing sustainable, commercial microfinance banks that substantially increase the outreach of a range of financial services to the poor (State Bank of Pakistan (2004) p. 19).

Despite its short history, the bank has performed well by these criteria. It has quickly grown into by far the largest provider of microfinance in Pakistan, now providing a range of loan products to over 230,000 active clients from its network of branches across the country, and has stayed focused on the core objectives of operational and financial self-sufficiency.

But as its roots in the MSDP would suggest, in addition to the pressure to quickly expand outreach and make profits, Khushhali simultaneously faces the challenge of meeting a “second bottom line”: poverty reduction. The bank's dual mission is reflected in its Annual Report, which alongside audited financial statements and indicators of financial performance such as the bank's credit rating, portfolio at risk and efficiency ratio, includes a statement on the “Status and Nature of Business” emphasizing that ...