Khushhali Bank Project of NBFC 6/3/2011 University of the Punjab
Project of NBFC
6/3/2011University of the Punjab
Khushhali Bank
Project of NBFC
Submitted to:
Sir Ehtsham
Submitted by:
Attiq ur rehman MC09128
Yasir Ayub MC09103
Abdul Baki
Asim nisar
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Khushhali Bank
Dedication
Our group dedicates this project to our parents who encourage us & help us in every field
of life & of course our teacher without whom we could not able to make this project. May
they live long.
(Aamin)
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Khushhali Bank
Acknowledgment
First of all we thank our Almighty ALLAH who has blessed us the courage, energy to
complete our final project.
This course work project which is the assignment of our M.com program is dedicated
unanimously to our Sir. What we have learnt from this program is not the gift of our course
books but is the relentless hard work and skill of our instructor. Whatever benefit we will
get by this course in our personal life is one thing but the quality of the knowledge that has
been delivered to us will remain with us.
We are also thankful to all those who helped us to collect the data without which my report
would not have been completed
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Khushhali Bank
Executive Summary
Founded in the year 2000, Khushhali Bank Limited was a part of the Government of Islamic
Republic of Pakistan's Poverty Reduction Strategy and its Microfinance Sector
Development Program (MSDP). MSDP was developed with the facilitation of Asian
Development Bank (ADB). With its headquarters based in Islamabad.
It deals in no of microfinance and full banking services product like agri, new business,
working capital needs,livestock loan and full banking product constitutes of current
account, term deposits certificates and remittance facilites. it got a good depositor and
borrower base as compared to other micro finance institution in the field and lead the
industry in key financial indicators. the bank also involves in non financial performance
such as employee training and recognition. khushali bank provide their employee a good
working envoirment, It also contribute towards the commercial and developmental role.
Khushali bank looking forward to have some improvement in their HR department IT
department and conversion of its branches to full banking facility’s n short Khushali bank is
playing a vital role in the economic development of the country by increasing the
productivity and reducing the poverty which is the main problem of our country.
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Khushhali Bank
Table of contentProject of NBFC........................................................................................................................2
Submitted to:.......................................................................................................................2
Submitted by:......................................................................................................................2
Dedication...............................................................................................................................3
Acknowledgment....................................................................................................................4
Executive Summary.................................................................................................................5
Table of content......................................................................................................................6
Need and importance of assignment.......................................................................................8
Selection of specialized financial institution with strong reason...............................................8
Overview of organization........................................................................................................9
Vision......................................................................................................................................9
Mission....................................................................................................................................9
Values.....................................................................................................................................9
No of branches and head office..............................................................................................10
Shareholders.........................................................................................................................11
Historical Back ground...........................................................................................................12
Development and commercial role........................................................................................13
Earthquake livelihood restoration program......................................................................13
Small infra structure projects............................................................................................13
Management Supports Women.........................................................................................14
Distance learning programs..............................................................................................14
Scholarship program.........................................................................................................14
Jafakash Aurat Program....................................................................................................15
Product line...........................................................................................................................15
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Khushhali Bank
Micro credit products........................................................................................................15
Agriculture loans............................................................................................................15
Live stock loan................................................................................................................17
Asset purchase loan.......................................................................................................17
Working capital need.....................................................................................................18
New business loan..........................................................................................................19
Micro insurance products..............................................................................................20
Current account.............................................................................................................20
Product success and failure....................................................................................................21
Future outlook of the organization........................................................................................22
Human Resource...............................................................................................................22
IT department....................................................................................................................23
Full banking services.........................................................................................................23
Financial performance of khushali bank.................................................................................23
Comparative analysis with other banks.................................................................................25
Credit Rating of Khushali Bank Limited............................................................................25
Non financial performance....................................................................................................27
Client’s loyalty...................................................................................................................27
Job knowledge test............................................................................................................27
Employee recognition........................................................................................................27
Refresher trainings............................................................................................................27
Recommendations.................................................................................................................28
Bibliography..........................................................................................................................29
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Khushhali Bank
Need and importance of assignment
Pakistan is a poor country most of people living their lives below the poverty line. In this
condition micro finance bank is last hope for the revival. Micro finance bank provide short
term loan to investors so that they can spend in a useful purposes and can earn a useful
return from them. specially as we know that success of each country depends upon the
strong footings of the hosue and cottage industry(eg china).so in a country like Pakistan
where there is a high inflation and high intrest rates there must be a institution which
provide loan to the people at low cost.so that theycan save themselves from sahukars.
As far as we people are concerned this assignment is very important for us.As,this will
provide us with a better understanding of NBFC with refrence to micro finance.this will
provide us with some subjective information which we will implement practically in near
future
Selection of specialized financial institution with strong reason
Poverty—the malignant malady ailing today’s world—has posed a major challenge to
emerging nations in their pursuit of economic growth and social development. And rightly
so, because macro-economic growth does not always filter down to the last legs of society.
And millions are left to suffer poverty, trapped without spite. Even with Pakistan averaging
an impressive GDP growth rate of over 7.5 per cent over the last several years,
unemployment has rated above 5 per cent while literacy is estimated at only 54 per cent.
Every fourth Pakistani is surviving below the poverty line.
Tackling these deep-rooted issues is beyond the very structure and scope of mainstream
commercial banking and that’s not even their objective. About 80 per cent of Pakistan’s
population does not at all have access to financial services by the commercial banks. Hence
microfinance is a targeted strategy to bring about change in the lives of millions for whom
it is by far the only true hope of improving their lives. Khushhali Bank Limited—one
microfinance institution that is convincingly dispelling this misconception through its
pioneering performance. With initial funding from the Asian Development Bank, and the
paid-up capital subscribed by 16 commercial banks, Khushhali Bank Limited was
established in August
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Khushhali Bank
Backed by a strong banking expertise and an in-depth knowledge of the emerging socio-
economic markets, and driven by a deep and compassionate understanding of the poverty
factor, Khushhali Bank Limited is today the largest microfinance institution in Pakistan in
terms of coverage. Its operations and impact span across all the four provinces of the
country, Jammu and Kashmir and the Federally Administered Tribal Areas. And being a
pioneer, born and bred on a solid home ground, Khushhali Bank Limited is fully prepared to
offer viable answers to how poverty can be alleviated and optimistically.
Overview of organization
Founded in the year 2000, Khushhali Bank Limited was a part of the Government of Islamic
Republic of Pakistan's Poverty Reduction Strategy and its Microfinance Sector
Development Program (MSDP). MSDP was developed with the facilitation of Asian
Development Bank (ADB). With its headquarters based in Islamabad, Khushhali Bank
Limited operates under the supervision of the State Bank of Pakistan (SBP) and many
central (commercial) banks are its shareholders. The mandate remains to retail
microfinance services and to act as a catalyst in stabilizing the country's newly formed
microfinance sector.
Vision
To be a premier financial Institution in the microfinance Industry.
Mission
To strengthen the economic base of low Income populace across
Pakistan by improving their accessibility to financial services. By
supporting a diverse product suite with exemplary service and by
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Khushhali Bank
deploying cost efficient next generation delivery systems, we intend
achieving our core objective of outreach and sustainability.
Values
Empower Excel Ethics
No of branches and head office
Northen region 2
Eastern region 27
Central region 31
Southern region 35
Total No of branches: 114
Head office: Islamabad, blue area.
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Khushhali Bank
Shareholders
The shareholders of the Bank are as follow:
National Bank of Pakistan
Habib Bank Limited
MCB Bank Limited
United Bank Limited
Allied Bank Limited
Standard Chartered Bank (Pakistan) Limited
Askari Bank Limited
Bank Al Habib Limited
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Khushhali Bank
Soneri Bank Limited
Habib Metropolitan Bank Limited
Faysal Bank Limited
KASB Bank Limited
Silk Bank Limited
Mybank Limited
Citibank N. A. Pakistan Operations
Historical Back ground
The history of microfinancing can be traced back as long to the middle of the 1800s when
the theorist Lysander Spooner was writing over the benefits from small credits to
entrepreneurs and farmers as a way getting the people out of poverty. But it was at the end
of World War II with the Marshall plan the concept had an big impact.
The today use of the expression microfinancing has it roots in the 1970s when
organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer
Mohammad Yunus, where starting and shaping the modern industry of microfinancing.
Another pioneer in this sector is Akhtar Hameed Khan. At that time a new wave of
microfinance initiatives introduced many new innovations into the sector. Many pioneering
enterprises began experimenting with loaning to the underserved people. The main reason
why microfinance is dated to the 1970s is that the programs could show that people can be
relied on to repay their loans and that it´s possible to provide financial services to poor
people through marketbased enterprises without subsidy. Shorebank was the first
microfinance and community development bank founded 1974 in Chicago .
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Khushhali Bank
An economical historian at Yale named Timothy Guinnane has been doing some research on
Friedrich Wilhelm Raiffeisen´s village bank movement in Germany which started in 1864
an by the year 1901 the bank had reached 2million rural farmers. Timothy Guinnane means
that already then it was proved that microcredit could pass the two tests concerning
peoples paybackmoral and the possibility to provide the financial service to poor people.
Another organization, The caisse populaire movement grounded by Alphone and Dorimène
Desjardins in Quebec , was also concerned about the poverty, and passed those two tests.
Between 1900 to 1906 when they founded the first caisse, they passed a law governing
them in the Quebec assembly , they risked their private assets and must have been very
sure about the idea about microcredit.
Today the World Bank estimates that more than 16 million people are served by some 7000
microfinance institutions all over the world. CGAP experts means that about 500 million
families benefits from these small loans making new business possible. In a gathering at a
Microcredit Summit in Washington DC the goal was reaching 100 million of the world´s
poorest people by credits from the world leaders and major financial institutions.
Development and commercial role
Earthquake livelihood restoration program
The objective of ELRP was to provide substantial and immediate response to the poor in
the nine districts declared as disaster affected areas with an objective to restore income
flows, reduce dependence on relief, revive local economies and provide shelter whilst
undertaking livelihoods. To achieve these objectives Khushhali Bank with its extensive
network of branches was the designated implementing agency. KBL used its own
organizational structures and personnel and coordinated with service providers for
immediate outreach to affected households. For immediate response, State Bank of
Pakistan (SBP) issued licenses and KBL in addition to its existing branches in Abbottabad &
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Khushhali Bank
Muzaffarabad established six new branches in the affected districts of Neelum Bagh and
Poonch in AJK province and Batagram, Kohistan and Shangla in NWFP.
Small infra structure projects
The objective of Small Infrastructure Projects (SIP’s) was to increase access of poor
communities to infrastructure for improving their livelihoods through efficient and
productive use of local resources. For this purpose a Community Investment Fund (CIF)
was established to finance the Small Infrastructure Projects through participatory process.
The involvement of local stakeholders in identifying, planning, executing & monitoring
community infrastructure projects greatly empowered them
The Small Infrastructure Projects were undertaken on equity participation of 40% from the
Community Organization against the total project cost while 60% cost was funded through
the Community Investment Fund (CIF). A Service Provider was engaged to work on
technical side of the projects and as a result 1569 SIP’s were completed during the period
of Fund. These projects include Roads & Bridges (122), Farm irrigation (689), Domestic
Water Supply (164), Drainage & Sewerage (27), School Building (49), Rural Electrification,
Computer Centers, PCO’s and Community Halls (518).
Management Supports Women
KB’s female orientation is reflected not only in the clients they serve, but in their hiring
policy as well. More than 30% of KB’s staff are women, with 2 women occupying seats in
the board of directors to ensure gender orientation in policy making.
Distance learning programs
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Khushhali Bank
Distance Learning programs’ (DLP) objective was to spread business development services
and corporate image building materials by mobile training units that were well equipped
with media technologies, raising the confidence of existing and potential borrowers and
communities at large thus enabling the Bank to develop its’ market and client loyalty.
Scholarship program
In line with overall strategy of Khushhali Bank Limited (KBL) to strengthen its’ role and
brand image in marginalized territories and attract to promote education and enhance
accessibility to educational institutions as part of its social corporate responsibility
mandate, KBL commenced Khushhali Bank Scholarship Scheme (KBSS) in 2005.
A total of 332 scholarships amounting to PKR 76,890,465 have been awarded as of
September 30, 09, to domicile holders of Sindh, Balochistan and FATA, of which 244
scholarships valuing PKR 52,548,012 were awarded to domicile holders of tribal areas. A
total of 62 students have completed their degrees as of September 09.
Jafakash Aurat Program
kB started a unique project for women folk who only believes in hard work but also
confidence themselves. The purpose of this project is to generate income for the poor
women by developing and strengthening their skills. The project was started in Gawadar
that was a itself a challenge because unavailability of school and college and second
accessibility and availability of raw material. When KBL covered initial problems then it
started Training Need Assessment (TNA). After finding potential lucrative and most
demanded skills KBL started short courses e.g. beautician, cooking on commercial basis,
designing and computer literacy etc. this project was successfully running and now total
trained 4500 women. 695 women enjoys the micro credit loans.
Product line
Micro credit products
Agriculture loans Details
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Product Features Details
Product Name Agriculture Loan
Product Type/Category Group Based
Product DescriptionFor the purchase of seed, fertilizer,
pesticides. For irrigation, rental of
agricultural equipment, transportation
etc.
Loan Eligibility Criteria
Age: 18 – 58 years, Maximum for repeat
clients: 65 years
Income: Total annual income is less than
Rs.300,000
Permanent resident of the locality for 2
years
NADRA NIC Holder
2 years experience
Loan Amount PKR 3,000 / 15,000
Tenure/Repayment Options 3-12 Months
Quarterly/Semiannual/Annually
Guarantors Cross Guarantees
Collateral None
Khushhali Bank
Product
Features
Product Name Live Stock Loan
Product
Type/CategoryGroup Based
Product
DescriptionFor the purchase of livestock
Loan Eligibility
Criteria
Age: 18 – 58 years, Maximum for
repeat clients: 65 years
Income: Total annual income is less
than Rs.300,000
Permanent resident of the locality
for 2 years
NADRA NIC Holder
2 years experience
Loan Amount PKR 3,000 / 15,000
Tenure/
Repayment
Options
3-12 Months
Monthly/Quarterly/Semiannual/Annu
ally
Guarantors Cross Guarantees
Collateral None
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Live stock loan
Khushhali Bank
Asset purchase loan
Product Features Details
Product Name Asset Purchase Loan
Product Type/Category Group Based
Product Description
For the purchase of new assets
having minimum useful life of one
year.
Loan Eligibility Criteria
Age: 18 – 58 years, Maximum for
repeat clients: 65 years
Income: Total annual income is less
than Rs.300,000
Permanent resident of the locality
for 2 years
NADRA NIC Holder
2 years experience
Loan Amount PKR 3,000 / 15,000
Tenure/Repayment
Options
3-12 Months
Monthly/Quarterly/Semiannual/Annu
ally
Guarantors Cross Guarantees
Collateral None
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Khushhali Bank
Working capital need
Product
FeaturesDetails
Product Name Working Capital Loan
Product
Type/CategoryGroup Based
Product
DescriptionFor managing a running business
Loan Eligibility
Criteria
Age: 18 – 58 years, Maximum for repeat
clients: 65 years
Income: Total annual income is less than
Rs.300,000
Permanent resident of the locality for 2 years
NADRA NIC Holder
2 years experience
Loan Amount PKR 3,000 / 15,000
Tenure/
Repayment
Options
3-12 Months
Bullet/Quarterly/Semiannual/Annually
Guarantors Cross Guarantees
Collateral None
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Khushhali Bank
New business loan
Product FeaturesDetails
Product Name New Business LoansProduct Type/Category Group Based for both rural and urbanProduct Description For establishment of new business.
Loan Eligibility Criteria
Age: 18 – 58 years, Maximum for repeat clients: 65 yearsIncome: Total annual income is less than Rs.300,000 Permanent resident of the locality for 2 yearsResident for 2 yearsNADRA NIC Holder
Loan Amount PKR 3,000 / 15,000
Tenure/Repayment Options 3-6 MonthsEqual Monthly Installments
Guarantors Cross GuaranteesCollateral None
Rates & Fees StructurePlease refer to our current schedule of charges
Micro insurance products
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Product Features Details
Product Name KBL Micro loan insurance Scheme Product Description Credit Life Insurance
Insurance Coverage ofDeath / Permanent Disability of Borrower
Eligibility All eligible borrowers Period Covered Equal to loan term Sum Insured Outstanding Loan Amount
Khushhali Bank
Current account
Product Features Details
Product NameKhushhali Bank Current Account
Product DescriptionCurrent Account (non-interest bearing)
Cheque BooksAvailable (conditions apply)
Eligibility Criteria Age: 18 years and aboveNADRA NIC Holder/Valid Pakistani Passport2 Passport Size Photographs, terms apply
Account Opening Charges Rs.50.Minimum Balance Required
Rs. 500
Fees & ChargesPlease refer to our current schedule of charges
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Khushhali Bank
Product success and failure
Agriculture products are more successful because our country is a agricultural country.
people need loan for there short term needs to purchase seeds and fertilizer etc. mostly
they earn revenue through this agriculture products. we can say that their major part of
loan portfolio is consisted of the Agri loan. ZTBL is the specially based organization fot the
development of Agriculture sector but we cannot deny the role played by khushali and
other micro finance banks
Entrepreneur loan is provided to the small investor who want to start their new business in
a new way.this is the second most popular and successful product of the khushali bank.
people meaty need working capital loan to meet their regular expenses of their business.
moreover there is no guarantee required other than the cross guarantee.
The third successful product of khushali bank is the loan for new assets purchase. it is
popular because this is the era of technology. one has to install new machines if he want to
be competitive. khushali bank provides such opportunity to it potential clients so that they
can increase their productivity and increase overall GDP. this loan is provided on a lenient
conditions and borrower doesn’t have to toil to much as in the case of other loan specially
from the commercial banks. in Pakistan small and cottage industry is flourishing these day
that’s why its wastage is increasing day by day in the loan portfolio of Khushali bank
Livestock loan, this is the type of loan which is not so popular and successful loan of the
KB. the big reason behind this is that in Pakistan livestock is not popular with respect to
the agriculture sector in the country. the livestock industry in Pakistan is confined to some
backward areas such as cholistan and some of the tribal areas. Although Khushali bank
have no such cluster of branches in such areas .the failure of loan may be due to the low
development of the livestock sector in Pakistan.
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Khushhali Bank
New products such as term deposit certificate have been introduced by the Khushali bank
as a step forward to full banking service. its offers a good rate of return on the TDR
certificates. the edge that khushali bank gets over the commercial banks in this regard is
the minimum amount through which a term deposit certificate can be purcahsed. this
product has a very good future.
Future outlook of the organization
Human Resource
Perusing the business objective hr strategy for 2011 as under employee selection strategy focusing on person job fit and a person organization fit Employee management strategy changing from controlling self management and
empowerment. Employee motivation strategy built around creating family like environment supported by
reward and recognition culture. Reinforce timely communication of the performance obj periodic reviews completion of annual
appraisals and compensation reviews. Align induction policy of branch retail staff from local need perspective, quality and minimum
time to hire. Manage staff performance through automated HRMS Build people management capacities at supervisory and managerial cadre with emphasis on
customer services and leadership development. Reinforce work life balance so that people enjoy working for khushali bank.
IT department
IT team has a challenging role in term of role out of integrated banking application acroos network.
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Khushhali Bank
Plans include conversion of 2/3rd of our network on an integrated banking application system in 2011 while remaining branches would follow in the next year.
Full banking services
Khushal bank is going to start full service banks in Pakistan.now the KB has some branches
offering products like commercial banks.this is the main objective of the Khushali bank for
the future.
Financial performance of khushali bankindicator 2010
(000)
2009
(000)
2008
(000)
2007
(000)
Outreach Active
Borrowers
325,523 329,421 312,851 283,965
Number of Savers 205,962 74,995 3,477 -
GLP PKR 3,722,152,79
7
3,630,204,658 3,093,335,635 2,652,915,785
Amount of Savings
PKR
1,000,328,62
5
190,032,590 18,168,500 -
Total Revenue
PKR
1,471,489,80
9
1,318,331,158 1,013,196,990 813,828,031
Total Revenue
PKR
1,471,489,80
9
1,318,331,158 1,013,196,990 813,828,031
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Khushhali Bank
Net Profit/(Loss)
PKR
188,138,462 252,004,780 60,911,974 156,306,062
Average ROA
% ---
0.8% 0.4% 4.9% 3.9%
Average ROE
% ---
2.6% 1.3% 17.9% 14.8%
Operational Self
Sufficiency (OSS)
105.0% 98.6% 75.5% 80.5%
Operating
Expense/GLP %
28.0% 29.3% 31.6% 31.9%
Personnel
Expense/GLP
%
13.7% 14.0% 13.3% 14.1%
Borrowers per
Staff
150 165 156 152
Savers per Staff 95 37 2 -
Comparative analysis with other banks
SBP has published the stretigic framework for the MFIs for 2011 reflecting microfinance
bank progressKB stands on the top of all.
MFBs Branches Borrowers Advances Deposits Asset Borrowing Equity NPL%
KBL 114 352743 4129635 198782 6620837 4019160 2230746 1.96
FMFB 83 204301 3181759 5291011 6051049 - 523428 4.97
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Khushhali Bank
Tameer 40 104726 2835506 2296135 4136529 513379 1089686 0.92
Kashf 27 18142 449178 474050 1271234 300000 402065 3.65
Pak
oman
17 8113 109214 28125 719455 - 677300 9.09
Network 5 6224 84251 40686 278122 - 230747 38.51
Rozgar 4 14 726 23221 122826 - 96963 64.46
Total 290 694263 10790269 8352010 19200052 4832539 5250975 3.00
Credit Rating of Khushali Bank Limited
JCR-VIS Credit Rating Company Limited (JCR-VIS) upgrades the entity ratings of Khushhali
Bank Limited which is as follows:
Medium to long-term A (Single A) from A-
(Single A Minus)
Short-term A-1 (A One) from
A-2 (A-Two)
We recorded a profit before tax of PKR 188 million forthe year 2010 which is lower than
last year’s of PKR 252 million primarily as a result of fall in non-core grant Income from
PKR 250 million to PKR 98 million.
The bank continues to pursue a sustainable growth strategy with reliance on core business
reducing grants/subsidies and the overall sustainability indicators reflect improvement
from 99% last year to 105% in 2010.The devastating floods of August 2010 affected a large
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Khushhali Bank
part of the branches and business in some of the most potential areas of the country, and
correspondingly suppressed growth in portfolio and revenues.
However, a comprehensive risk mitigation mechanism is in place to monitor and address
the situation and was successful in curtailing the impact to a large extent in 2010 and
efforts will continue in the next year as well. The conversion of branches to full service
banking continues as per plan while simultaneously moving onto a new core banking
platform providing capability to develop new products & services and pursue new business
avenues. This is supplemented by strengthening of our business faculties resulting in
upsurge in retail deposits that will provide funding at competitive costs for future growth
and profitability.
Non financial performance
Client’s loyalty
For khushali bank client’s loyalty is the long term financial success. KB has the strong
customer base with some of their regular customers. it also offer some benefits for their
regular customers. clients who are loyal to the organization create good word of mouth for
the organization which will increase customers for the KB.KB main focus through the start
of its operation is to create the loyalty of the customer
Job knowledge test
Job knowledge test of all branch retail staff was conducted in two phases in phase 1 middle
managers were tested, whereas officers cadres were tested in phase 2, this will increase
the efficiency of employees and provide them opportunity to weigh themselves on a yard
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Khushhali Bank
stick. f further this will be recognized. This will increase the non financial performance of
the organization
Employee recognition
In khushali bank there is a culture of appraising employees on regular basis. in addition to
the recognition at the site, it also publish a newsletter outreach on a quarter basis.KBL
management congratulates their employees on their well deserved promotion
Refresher trainings
Khushali bank offers regular training programs for their employees, which will increase
efficiency and thus effect the overall profitability of the organization. the best example is
the certified bank teller program.specially with the FSB program emergence it is the need
of the hour to have your employees trained.All the ROM and OM were trained as master
trainers
Recommendations
Open the branches in rural areas Support the community based loans Formulate incentive program for their employees There are many alliances of KB it must reduce its dependency on others Providing employees to latest technology so that they can urge potential customers in a proper
way.(for E.G videos on large screen such as success stories)
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Khushhali Bank
Bibliography
http://www.microfinanceinfo.com/history-of-
microfinance/
http://www.microfinanceconnect.info/au_history.php
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Khushhali Bank
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