Microfinance Summit 2013 by Headbumped Studio

MICROFINANCE SUMMIT

PA K I S T A N

2013

Conference Report: Summary and Key Insights

Bridging the Gap

Copyright ÂŠ 2013 Pakistan Microfinance Network 117, Street 66, F-11/4, Islamabad, Pakistan Telephone: +92 51 2292231 / 2292270 Fax: +92 51 2292230 www.pmn.org.pk

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MICROFINANCE SUMMIT

PA K I S T A N

2013

Conference Report: Summary and Key Insights Bridging the Gap

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Contents

1. Introducing Microfinance Summit 2013, Islamabad

2. Insights from Sessions: The Highlights

2.1. Inaugural Ceremony

2.2. Day 1: Focus on Microfinance and its linkages with Financial Inclusion

2.3. Day 2: Digging Deeper into Burning Issues

3. Summit Achievements and The Islamabad Declaration

Annex A: Summit Structure

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

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Acronyms

ADB

Asian Development Bank

NADRA

National Database and Registration Authority

Branchless Banking

NIC

National Identity Card

ICT

Information and Communication Technology

OTC

Over the Counter

IFAD

International Fund for Agriculture Development

PPAF

Pakistan Poverty Alleviation Fund

Khushhali Bank Limited

PMN

Pakistan Microfinance Network

KYC

Know Your Customer

RSP

Rural Support Programme

MFB

Microfinance Bank

SBP

State Bank of Pakistan

MFI

Microfinance Institution

SECP

Securities and Exchange Commission of Pakistan

MFP

Microfinance Provider

TRDP

Thardeep Rural Support Programme

MFS

Microfinance Summit

UBL

United Bank Limited

Micro-Insurance

Value Chains

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1. Introducing Microfinance Summit 2013, Islamabad

Development is not an exact science and hence, developing countries need to assign a high priority to the development and propagation of knowledge. Knowledge sharing remains integral to all key economic sectors today, the microfinance sector being no different. Pakistanâ&#x20AC;&#x2122;s microfinance sector has evolved and grown over the past decade and is now serving over 2.5 million clients through over 50 MFPs. Progress has also been made in product development - diversifying beyond just credit into micro-savings, micro-insurance and remittances. These developments are a direct result of strong financial commitment and support by diverse stakeholders including the Government, Central Bank, Donors, PPAF, PMN, MFPs and various private sector stakeholders. Keeping in view the need to highlight achievements of the sector and to catalyze future growth, innovation and enhance linkages with global and local stakeholders, key stakeholders of the sector organized the first International Microfinance Summit in Islamabad from 8-10 July, 2013. The summit provided a valuable platform for discussion on key policy and business concerns. The Microfinance Summit was jointly organized by Pakistan Poverty Alleviation Fund (PPAF) and Pakistan Microfinance Network (PMN), in collaboration with the Government of Pakistan, International Fund for Agricultural Development (IFAD), the World Bank and UKAID.

finance and sharing of global lessons learnt and best practices adopted. Designed as an interactive and intellectually stimulating threeday event, with over 60 speakers and panelists representing diverse stakeholders including donors, government agencies, financiers, investors, banks, telecom sector, insurance sector, microfinance institutions, academia and others, the Summit hosted over 400 international and local participants. It showcased best practices both in the Pakistan and global context, and enabled effective knowledge sharing and networking.

speakers

13 sessions over 2.5 days

Event Statistics

The objectives of the Summit were: Policy dialogue: To encourage policy level dialogue on provision of financial services especially in rural and underserved segments amongst multiple stakeholders. Knowledge sharing and exchange of ideas and experiences through an open forum on economic benefits from micro-

140 organizations represented

450 participants and delegates

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

2. Insights from Sessions: The Highlights

The event was spread over two and a half days, with the Inaugural Ceremony held on the 8th of July with summit sessions on the 9th and 10th of July. Formally inaugurated by the Honorable Minister for Finance, Muhammad Ishaq Dar, the Summit was attended by high level representatives of the government, donors, practitioners, academia and the wider microfinance community. To view the full Summit structure please refer to Annex A. The summit was packed with plenary and technical sessions as well as side events. These sessions brought together a foray of local and international microfinance experts, practitioners, policy makers, donors, investors and academics. A rich discussion ensued, and a summary of key points raised and debated are presented below.

2.1 Inaugural Ceremony Several stakeholders have played a critical role in shaping the microfinance sector in Pakistan. The Inaugural ceremony provided an opportunity to hear from a few of the institutions that have shown long standing commitment to the sector's development. These included State Bank of Pakistan, The World Bank, IFAD, Asian Development Bank and the conference hosts: Pakistan Poverty Alleviation Fund and Pakistan Microfinance Network. All speakers acknowledged the achievements of the microfinance sector over the past decade and a half but also cautioned that this success should not make the sector complacent. In a country where financial exclusion is so pervasive, microfinance credit is reaching only 2.5 million borrowers, which is less than 10 percent of the target market estimated at 30 million. Donors such as ADB, IFAD and The World Bank have invested heavily in the sector and reaffirmed their support going forward while stressing the need to aim higher and push forth the next stage of development of microfinance in the country. State Bank of Pakistan was recognized for the tremendous role it has played in creating an enabling policy environment - now globally recognized as one of the best in the world - and also in strengthening

retail capacity, industry infrastructure and promoting access to funding for the sector. Recommendations for the future from policy makers such as SBP included focusing on savings mobilization, employing cost reductive mechanisms, extending lending operations to different economic and geographic segments. The industry also recognized the need to push forth growth: 75 percent of the population of Pakistan still lives under USD 2 a day and will require all stakeholders to work together to provide this large population access to sustainable and affordable finance. The speakers thus appreciated the new government's commitment to this sector as outlined in this year's fiscal budget. One of the key objectives of this Summit identified was thus to brainstorm on how to move forward from 2.5 million clients and discuss the changes that are needed to achieve new, and bigger, targets. The Chief Guest, Honorable Minister for Finance, Revenue, Economic Affairs, Statistics and Privatization Muhammad Ishaq Dar who congratulated the hosts for organizing the Summit and affirmed the PML-N government's commitment to move the nation towards the path of economic stability and prosperity, especially targeting those whole lives are acutely affected currently by the lack of opportunity. This agenda was unfolded in the budget speech on June 12, 2013, and duly incorporated into the current IMF program being negotiated. The government is committed to supporting the microfinance sector, to ensure that our poor have access to microfinance to change their lives in the future. The Minister informed the audience that under the umbrella of the income support programs, the Government is launching a program which will include support for microfinance, for small enterprise loans, housing loans, and an internship

4. Insights from Sessions: The Highlights

program for youth. He outlined seven key principles of the Government with regards to microfinance: 1. To act as an instrument of poverty reduction by reaching out to the poorest families 2. Build sustainable banking operations 3. Train and induct a cadre of social activists who would undertake social mobilization and group formation exercises 4. Capacity building may be funded through specialty funding, but operations have to be funded from commercial sources. 5. People must be encouraged to build savings habits 6. Achieve outreach of five million clients over the next five years, from the seven million poor households below the poverty line. 7. To encourage healthy competition and simplifying procedures for easy entry into the sector. Qazi Azmat Isa, Chief Executive Officer, Pakistan Poverty Alleviation Fund delivered the vote of thanks to conclude the ceremony. He acknowledged that microfinance in Pakistan has been the product of a true partnership amongst the key players: the Government of Pakistan, the SBP with its ‘light touch in regulating the sector’, the PMN, the PPAF and most importantly, people and communities of Pakistan who we are privileged to serve. Three core values at the heart of transformation and growth in microfinance in Pakistan: Collaborative efforts at the sector level No prescriptive models and being open to diversity while developing accountable institutions

“

Microfinance in Pakistan is at a watershed, with 60 MFPs, enabling regulations in place and a new government committed to it. Partnerships need to continue, outreach needs to be doubled and for this more resources need to be allocated. We are now ready to serve different market segments, targeting them well through the poverty scorecards. In addition to being led by our values, we also need to strengthen and sharpen them: it is not enough to say that 60 percent of clients are women. There must be a continued quest for good governance, making prices more transparent, increasing our efficiency, avoiding over indebting our clients, building our clients’ production and marketing skills, ensuring overall port-folios are healthy and do not support activities that damage the environment. Globally, louder voices are being heard, demanding better performance and efficiencies, with an increasing need to for course correction and reflection.

”

Qazi Azmat Isa CEO PPAF

Passion and commitment

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

2. Insights from Sessions: The Highlights

while and access to finance remains unhindered the probability of their getting out of poverty increases. Access to finance through microfinance institutions by 55 percent of the poor population over two decades has certainly contributed to poverty reduction in Bangladesh. The improvement in social indicators such as fertility rate, maternal mortality rate and female literacy rates recorded by Bangladesh compared to other South Asian countries can either be described as the collateral benefits associated with reduction in poverty or determinants of poverty reduction. The correlation is clear but the causality is not.

2.2 Day 1: Focus on Microfinance and its linkages with Financial Inclusion The day began with the delivery of the Summit's Key Note Address on 'Microfinance for Inclusive Growthâ&#x20AC;&#x2122; by Dr. Ishrat Husain, Dean Institute of Business Administration, Karachi and former Governor State Bank of Pakistan.

Microfinance is too concentrated in the non-poor districts of Pakistan such as Karachi, Lahore etc. MFPs are either missing or doing very little in the 80 districts where most of the poor live. Unless income generation opportunities even at small scale become available to them, it is unlikely that the people of these districts would get out of the poverty trap.

Dr. Husain began by addressing the fundamental question of "Why microfinance? Why separate microfinance from other financial institutions?". He argued that capital markets in developing countries are imperfect and the poor are unable to access these markets. Thus, to address this market failure and provide avenue for low income families to access financial service the MFIs have to be set up separately from commercial banks. There is a clear â&#x20AC;&#x2DC;public goodâ&#x20AC;&#x2122; element associated with microfinance, so the role of the public sector becomes justifiable compared to commercial banks where the Government ought to be confined to regulator and supervisor only. In absence of microfinance, the access to financial services for the poor remains constrained. Their only asset i.e. labor does not earn adequate incomes to be able to cross the poverty line. But in combination with capital, they can generate additional income, repay the loan and reinvest some of the earnings in human capital i.e. health care and education of their children as well as in physical asset formation. If this process persists for a

Synergetic work between the MFBs and NGOs is needed. This will reduce the cost of borrowing as heavy administrative costs of mobilization and monitoring will be borne by the NGOs while the borrowers will be charged the actual cost of capital (thus lowering rates for them) without any whistles and bells wrapped around. Savings and deposits of the recipients of microfinance services

2. Insights from Sessions: The Highlights

remain inadequate in relation to their total funding requirements. It is also not very healthy that three fourth of the total deposits of the whole microfinance industry are concentrated in one or two banks. Dr. Husain commended the Finance Minister for his commitment to microfinance and urged the PMN and PPAF to help the Ministry in working out the modalities of the new scheme so outreach can be expanded. He recommended the government to cater to a microfinance segment that does not fall under the conventional microfinance client group, but is still below the poverty line.

Plenary 1: Microfinance and FI: What is the difference?

5. What should be the role of stakeholders in leveraging opportunities arising through this evolution and where are we headed? Takeaways: At the moment microfinance constitutes just 1 percent of the total financial system’s outstanding debt. Penetration of financial services is extremely low and increasing poverty in the country is an urgent concern. There is a need for increased segmentation of the population in order to create specialized solutions based on needs of each segment. The current government’s allocation for interest free loans provides an opportunity to address this need and can be targeted at the currently missing market i.e. between the income support beneficiaries and microfinance clients.

Session Brief: During the last decade, the Financial Inclusion (FI) landscape has expanded exponentially in terms of players, models and products while sustainability, transparency and impact have remained key considerations. This evolution has important implications for microfinance, a sector credited as one of the main tools in the FI armory for expanding access to finance for low income populations. This session will aim to expound the implications of rapid evolution in FI for different stakeholders of microfinance, such as policy makers, practitioners, donors and funders. This session thus focused on: 1. Defining Microfinance and FI– Is there a synergy in the making? 2. How is entry of new players such as telecom companies and commercial banks affecting MF landscape in Pakistan at the retail, meso and policy level? 3. MF and FI indicators –Is there a need for distinct indicators for MF? 4. New risks in the changing landscape: client protection, regulatory arbitrage, others?

Donors, like UKAID, are becoming more and more focused on demonstrating impact through rigorous methods that are objective and robust. Evidence on impact of microfinance is still inconclusive across the globe and it is imperative that scientific mechanisms to measure the impact of microfinance on the lives of the clients are developed and institutionalized. A major concern for Pakistan today is jobs: microfinance should also drive job creation while encouraging increased focus on net benefit/impact on clients.

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

2. Insights from Sessions: The Highlights

Donors such as IFAD have learnt that we need to actively include the clients in our discussions i.e. we must have representation of the poor for whom we are working at such forums. IFAD has been placing strong focus on client centric and demand driven approach while concentrating on rural development programs. Use of technology opens up the possibilities of lowering transaction costs. However, costs of technology may be prohibitive for small or even medium sized institutions. There is thus the need to adopt a shared approach, and look into development of platforms that can be accessed by more institutions. For PPAF microfinance is much more that just financial services for the poor; it seeks to improve social status and foster access to facilities such as health and education to transform lives. There is increased attention on client protection and product development in the sector and within PPAF. Support of donors such as IFAD and World Bank for promoting product development has stimulated diversification and testing of new ideas. The session concluded that all stakeholders are realizing that we need to improve our understanding of the needs of those who are not being served. Although the sector is scaling up, this is not in proportion to the magnanimity of the poverty problem in Pakistan. As we move towards a more structured sector, it is essential to avoid over-regulation in order to allow businesses to evolve while focusing on building synergies. Interventions such as branchless banking have a vital role to play towards increased financial access and lowering transaction costs.

use of technology and focus on client protection and social performance have emerged. This session explored some of these ‘new frontiers’, and focused on: 1. Demystifying microfinance for youth: Building new entrepreneurs and generating employment 2. Promoting access to finance for women – Tailored products vs. quotas on loan disbursement? 3. Serving the small entrepreneur: moving up market and enabling efficient segmentation 4. Micro-insurance: protecting the most vulnerable 5. Role of technology as driver for growth and innovation 6. Shariah Compliant Microfinance

Plenary 2: New Frontiers for Microfinance

7. Future of Microfinance – key areas to watch!

Session Brief: Just like the financial inclusion landscape, microfinance itself is also evolving rapidly in Pakistan. Many microfinance institutions are coming of age. They have built strong relationships with borrowers, established networks in their regions, and mastered the provision of financial services to the poor. What’s next? Clear trends of market segmentation, partnerships and linkages,

Takeaways: Despite having the best regulations, various donors supporting the sector and innovative branchless banking options, we have only reached a fraction of the potential market. The market needs to expand to 5-10 million active clients for any meaningful macroeconomic impact to emerge on poverty and financial inclusion in Pakistan. In terms of game changers,

2. Insights from Sessions: The Highlights

there are a number of opportunities with regards to provision of microfinance for youth, women entrepreneurs, and Shariah-compliant products. Youth Finance: The youth population in Pakistan (aged 15-24) account for 22 per cent of the total population in the country (40 million youth). Of these, 7.7 per cent (around 3 million) youth are unemployed. No information is available on the number of youth that have access to financial institutions in the country. The business case for microfinance providers (MFPs) exists, as evidence has shown that young savers have better chances of becoming life time customers, and there are also good opportunities for cross selling different products to these first time customers. The Government of Punjab and other stakeholders have been working on skills development programs. There are opportunities to support the youth being trained through these programs to graduate to loans. Market Segmentation: There are opportunities to go upscale, for example into small enterprise markets, especially now with greater flexibility in regulations. This is a market that microfinance banks are in a good position to serve. However, banks need to be careful as they enter this segment as it requires different skills and lending models than the typical MF market. There is also great potential to go downscale, with the national income support program reaching 4 million people, as well as various other cash transfer programs in the country. We need to look at women as a market segment: Findings from the World Banksâ&#x20AC;&#x2122; womenâ&#x20AC;&#x2122;s financial inclusion study showed that women are not effectively accessing MF due to the product features currently being offered, or because the loans were being utilized by male household members. Micro-insurance: A lot of efforts are also taking place with regards to micro-savings and micro-insurance, with PPAF already working on crop and livestock micro-insurance initiatives, which could have a major impact on rural microfinance. In terms of micro insurance, clients are not trained on the complex product features, which put them at risk.

Islamic Microfinance: Akhuwat, and other MFPs practicing Islamic MF have demonstrated that there is demand and the services can be scaled up. The market is large enough for all types of MFPs: those that have an interest in reaching out to clients with relatively larger loan sizes (PKR 100,000) and also those who value small, interest-free loans. It should be up to the clients to decide which is suitable for them. Technology: 120 million people in Pakistan have SIM cards, and a large section of these users are at the bottom of pyramid (using pre-paid accounts).The sector has four years of experience with branchless banking but there is still limited success of m-wallets. We need to challenge ourselves on what do we have to do from a regulation and practitioner perspective to enhance the use of m-wallets. There are many opportunities for growth in part due to the huge delivery platform already available, increased flexibility from regulators (in terms of loan amounts) and financial as well as technical support from PPAF, the loan sizes extended by MFPs remain far lower than the amounts demanded by clients. The reasons behind resistance to lending larger loan need to be understood, or lending more to women and youth, especially given the premise that MF started out for the good of the public. Principles that we need to learn and consider going forward: Making MF affordable: Without reducing cost, we cannot reach the hearts of the people. Going beyond credit, as loans alone cannot alleviate poverty. We need to adopt a microfinance plus approach and focus on the forgotten side of microfinance: savings, insurance, leasing and mobile banking Segmentation of the market Leveraging technology Collaboration and strategic partnerships between MF Institutions and MF Banks

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

2. Insights from Sessions: The Highlights

Measuring Impact and Change: Impact needs to be measured in economic and quality-of-life terms. There is a need to measure the double bottom line. Sector stakeholders should look at the Universal Standards for Social Performance Management (USSPM) and set their own social aspirations.

presentation on the sector's performance analysis followed by a panel discussion led by the PMR's editorial board.

Earlier in MF the discussion was on sustainability and setting responsible interest rates, now the same systematic and deliberate process needs to be applied for MFPs to reach their double or triple bottom lines. The bottom of the pyramid is vast (in terms of scale) but also very diverse. It is important to understand the different segments: youth (with no enterprise skills), women, different types of livelihood sources (other than rural). Behavioural segmentation is also important, since MF does not work in a vacuum. It is important to understand what emotional connections people have with MF and money. Consumer Protection: Diagnostic by the World Bank on consumer protection and financial literacy showed clients of MF need greater understanding of the mechanisms, regulations behind MF, especially with new technology driven models. It is important for clients to be aware of what services they are getting. Effective consumer protection needs to come from more specific regulations. There is perhaps a need for a holistic approach to financial literacy, rather than a variety of programs currently running under the State Bank, SECP and others.

Lunch Session: Launch of the Pakistan Microfinance Review 2012 Using the opportunity of the Summit, Pakistan Microfinance Network launched its annual state of the sector report, the Pakistan Microfinance Review 2012. The session included a

Takeaways: As the industry evolves and establishes itself as a permanent feature of the financial landscape of Pakistan, the industry continued to remain sustainable for the second year running despite a challenging macro environment. The growth in credit outreach remained the highest in the last five years and MFBâ&#x20AC;&#x2122;s continue to witness success in deposit mobilization. The industry continued to remain the focus of local and international investors which is reflected through acquisitions and launch of green field institutions. To download the Pakistan Microfinance Review 2012, please see (http://www.pmn.org.pk/articles/PMR_2012_new.pdf)

Split Session 1: Opportunities for Microfinance in Branchless Banking Session Brief: Pakistan has been called a â&#x20AC;&#x153;laboratory for innovationâ&#x20AC;? for its rapid growth and development of branchless banking. Advances present huge opportunities for microfinance to expand and deepen outreach, lower costs and diversify products. This session will provide an opportunity to discuss these opportunities and explore the potential of branchless banking in scaling up digitized financial services and payment innovations through

2. Insights from Sessions: The Highlights

4. Focus on the counter (OTC) transactions or banking â&#x20AC;&#x201C; Is the platform expanding financial inclusion?

opening accounts. The rest are not due to their technology incapacity to process KYC requirements digitally. Investment is required to do this from their providers and this is already being worked on. The other issue is usage level. The industry has not been able to convince the target market of the use of the service. Given that 2.5 million mobile wallets is not insignificant, but 69 percent of these are inactive, determined by no activity in the last six months. Most of those that are active are so because they were either opened in the last six months or payments were received in these in the last six months. Registration is important but so is the usage level. SBP has been willing to review the regulation on KYC, but this needs to be accompanied by usage of these accounts.

5. What lies ahead and what can we learn from international context? What to expect in terms of policy and innovation?

Customer education in how to use these accounts is the biggest challenge.

microfinance. This session focused on: 1. State of branchless banking in Pakistan â&#x20AC;&#x201C; an update and overview 2. Is there a natural nexus between microfinance providers? What are the opportunities, threats, and challenges? 3. Exclusivity or interoperability of services? Would an interbank service add value?

Takeaways: One of the biggest challenges is scaling up microfinance services in the country. Within this, an opportunity is using branchless banking networks for speedy delivery and reducing distance travelled. BB is going to be a huge part of facilitating exponential growth of the microfinance sector. With thin retail capacity of brick and mortar branches, scaling up of credit savings and other financial services needs other avenues. Easypaisa is an example of the convergence between BB and microfinance, where both financial inclusion and the BB streams have flourished. A second example is Khushhali Bank, SBP started the process of this divestiture, and UBL with its Omni platform realized the potential in KB. Finally, there are five telecommunications service providers operating in Pakistan, and three have already established microfinance banks or shareholding in these, so there will be more convergences going forward. BB players can help microfinance, and specifically MFBs in mobilizing deposits. There is a challenge with growth of mobile wallet accounts: At the registration level, there are technology aspects to be considered and KYC requirements to be fulfilled. As a result, only 20 percent of BB agents are

BB transactions coming in are very encouraging, however most transactions are of an over the counter (OTC) nature. Domestic remittances, which is the need of the market, has seen automatic uptake. However, uptake of mobile wallets is a concern for everyone. Two issues in this context are: Only 20 percent of BB agents are opening accounts while the rest are unable to do so due to their technology incapacity to process KYC requirements digitally. Investment is required in this area, which is underway. Another issue is usage of accounts: 69 percent of the 2.5 million

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

2. Insights from Sessions: The Highlights

BB accounts are inactive, determined by no activity in the last six months. We have not been able to offer the right products which really capture the customers' needs.

There are many opportunities for MFIs in BB and now we have examples such as Kashf Foundation and TRDP that have successfully used BB channels in their operations. BB can be used for a range of different services like savings, insurance products in communities that have not seen such products before. Also MFIs can benefit from faster generation of data that can help identify credit risk faster, lower operational risks (through handling of cash) and lower costs of service delivery. However, the model needs to be sustainable and affordable for the MFI as well as the client. Also MFIs fear losing the close contact they have with clients if they increase reliance on technology.

3. Understanding the market: What are the opportunities, threats, and challenges? 4. What kinds of products would be effective for the low income segment? 5. The business case for MI â&#x20AC;&#x201C; opportunities for microfinance providers and insurance companies 6. What is needed to jump start the sector? What can we learn from the international context? Roadmap for the immediate future

Any initiative to get the industry together on a platform for mutual learning and information exchange will be useful. It would help disseminate lessons learnt and let the new entrants benefit from the market's experience to date.

Split Session 2: Micro-insurance - Exploring the Road Less Travelled Session Brief: Out of all services within microfinance, Micro-Insurance (MI) is perhaps the least developed in Pakistan. However, that is expected to change soon. The Securities and Exchange Commission of Pakistan (SECP) is working on regulations and a strategic framework for MI in the country. This session focused on the initiatives currently underway to regulate and promote adoption of micro-insurance by MFPs in Pakistan, and the vision for this sub-sector going forward. Discussion points for the session were:

Takeaways: Insurance sector in Pakistan is quite conventional and there has been little innovation to date. Generally, commercial insurance providers view microinsurance (MI) as a CSR activity rather than a viable commercial proposition. Mainstreaming micro insurance would thus require a change in the state of mind of the industry.

1. Role of micro insurance as a tool of risk mitigation for borrowers and lenders

For the MI industry to emerge and grow, the business models would have to be sustainable, and for this the models have to be low cost and innovative.

2. Regulation and Policy Framework for MI: Why is special focus required?

Insurance companies need to start small, test and then scale up.

2. Insights from Sessions: The Highlights

Community and client needs are critical to success of MI, as it helps designing customized, niche MI products. The MFI distribution channel can help solve issue of client needs, as MFIs have established relationships with rural communities and are aware of their needs.

4. Does flexibility foster innovation? Evidence from the microfinance market

Branchless banking & technology innovations offer new distribution channels for MI, but caution is required for their infrastructure and creating awareness of products at the agent level (grocery store, telecom agent etc).

Takeaways: There is no one single model that can serve the diverse circumstances and necessities of each consumer, therefore innovation is vital to cater to the specific needs. It is unanimously agreed that innovation requires a flexible environment; in fact innovation thrives in one. Flexibility allows the organization to learn and subsequently develop products that suit the target consumersâ&#x20AC;&#x2122; necessities through community consultation and feedback.

There is a gap at the policy level w.r.t. MI i.e. there is no coordinated platform where players can come together, learn from each other and address sector level concerns.

5. How can flexibility be achieved without sacrificing transparency and accountability?

A national strategy for MI is needed.

Split Session 3: Importance of Flexibility for innovation Session Brief: Corresponding with increasing awareness on development practice and the need for demonstrative outcomes and impacts from investments made by bilateral and multilateral institutions is the realization that traditional approaches to program design and implementation may fall short in offering optimal results. An approach characterized by flexibility and path-dependence may be an alternative, partly complementary methodology for program design and implementation. Such an approach may lead to improved outcomes, impacts and foster innovation. This session will focus on strategies aimed at increasing adaptive flexibility in program and policy design leading to innovation. Points of discussion included: 1. What is adaptive flexibility in program design and implementation? 2. Program deliverables: strategic intent vs. structured interventions?

Before adopting flexibility the organization needs to be extremely clear about what objectives and/or outcomes it seeks to accomplish through a flexible mindset. There is a high risk involved where flexibility in product design or procedure can derail the program/project altogether without clear motivation. Innovation covers two dimensions â&#x20AC;&#x201C; product design and process. The microfinance industry in Pakistan has lots of room for innovation in product design; indeed more innovation is required.

3. Impact of flexibility at the micro, meso and macro levels

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

2. Insights from Sessions: The Highlights

Four conditions that encourages an environment of adaptation or flexibility: The organization's approach to solving problems should embrace curiosity and attempt to come up with emergent solutions to problems rather than deliberate. This perspective is even more vital in case of poverty as it is extremely complex with multiple perspectives, therefore it requires a different approach; more experimental than expert. The organization truly encourages creative process i.e. management is prepared to tolerate a state of disequilibrium to an extent and they possess stomach for difficult conversations. Organization has developed a proper structure around developing the pipeline or leadership. It is essential for new people to join top management. The organization is open to failure i.e. allows people to learn through the creative process and does not dismiss it upon failure. Communication is beyond boundaries i.e. organization makes use of staff feedback (frontline staff feedback is essential).

Project or product design is not the only mode to achieve innovation through flexibility. Innovation can take place during project implementation as well. However, donors or funders should demonstrate further flexibility on their part to create space for organizations to innovate during implementation. This is crucial as programs undergo unpredictable misfortunes which require innovative methods to resolve successfully. Innovation does not necessarily require substantial monetary investment but rather people that possess a proper approach towards the process of innovation.

The Grand Debate: Microfinance Growth; Should it focus on Poverty Reduction or Access to Finance? Session Brief: Microfinance is considered is one of the key tools for alleviating poverty and enabling access to finance. More recently, microfinance has also become a key pillar of strategies developed by governments and central banks that aim to expand access to formal financial services to all. The United Nations through the Millennium Development Goals reaffirmed this. All agree that expanding outreach is essential given the scope of the problem. However, different intermediate goals may need different growth strategies, track different indicators and count successes and failures differently. This session is structured to be a debate that brings this difficult question about whether growth strategies for microfinance should focus on poverty reduction or expanding financial access to the table. What should drive policy makers, donors and microfinance institutions? Is it possible to create an optimal balance or do we need to redefine our primary objectives for microfinance? What are the implications of the two approaches and how will they play out for different players? How equipped are microfinance players to tackle both these challenges? What do different approaches mean in terms of support from the state and donors? Can both objectives co-exist, or do we have to choose?

2. Insights from Sessions: The Highlights

Access Argument: Key Points Financial Exclusion is a huge issue in Pakistan, and not just for the poor. In a country where less than 15 percent of the population is banked, it is not just the "poor" i.e. people living below the poverty line that require access but a large percentage of the low and middle income households, women, youth and rural segments that are financially excluded. So why should we create a microfinance sector exclusively serving the poor but ignoring the needs of all other that are also in need of capital. These segments can pay for this access and they are already doing so through informal markets. If microfinance providers are well positioned to serve them at better rates and better service, we should serve them and in turn create social and economic impact in these families. The cause and effect relationship between microfinance and poverty reduction is still unclear and the jury is still out on this question. Financial inclusion is the bigger picture, within which microfinance is an important part. It is important that we create an enabling ecosystem. Sole focus on poverty reduction raises the issue of financial sustainability for the organization, as the organization may fail to reach the volumes needed for financial sustainability if they are only targeting the poor. Poverty Argument: Key Points MFIs were created with the objective of serving vulnerable groups of the society i.e. ultra poor, women in particular. Unabated focus on access to finance defeats the purpose of this sector. In pursuit of financial stability and profit maximization, sector players have lost the sight of their goals of serving the poor. There is a need for reevaluating whether microfinance sector today is pro-poor.

There should be a variable product price range for various strata of society depending upon their economic profile. Data shows us that though number of borrowers is on rise, they have failed to climb out of the poverty trap, because with poor it is not only the matter of lack of access to finance but lack of education, health, market information as well. Debate Takeaways: We need to develop linkages with all stakeholder involved in poverty alleviation. For instance we can conduct training for our clients providing them with entrepreneurship skills and then linking them with market as well so they can shielded from imperfect market information. We need to look into affordable solutions, technology in particular. There is a lot of discussion around branchless banking but there is still little we can demonstrate as a success. We need to develop a relationship with the community and with the client to understand her better. We have to get the volumes in order to achieve financial stability, and try as much as possible to move away from subsidized funding otherwise we shall remain dependent on donor funding. There are great possibilities in Pakistan today such as using the NADRA Smart NIC, to create an account for every Pakistani citizen but it is not just about having an account but providing valuable service to the client. Most of the institutions are still struggling with issues of sustainability, and they need to look into cross subsidies that can not just diversify our product portfolio but also enable us to go down market while remaining sustainable Audience Poll: By raise of hands only one participant thought that there is no point of reconciliation between the two sides. The debate concluded with a call for working for equitable participatory economy with opportunities for all.

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

2. Insights from Sessions: The Highlights

2.3 Day 2: Digging Deeper into Burning Issues Plenary 1: Value Chains and Linkages for improving Livelihood

3. What are the gains? Macro, meso and micro impacts 4. Does synergy with microfinance providers make sense? How can microfinance be leveraged 5. What stops the proliferation and adoption of value chains in the microfinance context? Takeaways: As the microfinance (MF) sector expands and seeks to fund more individuals it is important for practitioners to understand the need for VCs : a) as a form of risk mitigation, by understanding the competitive risks associated with specific industries; b) reaching scale in outreach through improved linkages; and c) generating MF products that meet the business needs of several groups within the chain. Our goal as change agents is not limited to providing financial access, but adding value to client’s lives by providing sustainable livelihood opportunities.

Session Brief: The value chain approach focused on the analysis of the vertical business dimensions of a chain bringing it outside the ambit of broader development programs aimed at economic growth, poverty reduction, and environmental protection. More recent pro-poor value chain concepts also integrate horizontal elements into chain development. Pro-poor value chain development promises new opportunities for improvement of livelihoods, increasing incomes and empowering communities. This session will focus on the importance of pro-poor value chains, specifically hybrid value chains in sustainable livelihoods of low income communities and how microfinance can be leveraged in this regard. Discussion points for the session included: 1. Understanding normal and pro-poor value chains: Importance of the horizontal element 2. Importance of value chains in improving financial access in economically deprived areas

It is important to understand what we mean by new types of VCs, such as ‘green’, ‘pro-poor’, and ‘hybrid’ VCs and the different industry contexts. This will help us assess where it is appropriate for microfinance providers (MFPs) to be involved in VCs. We need to think about industrial or sectoral VCs that are more inclusive of poor people (where they exist in the supply, production, processing or distribution side). Some businesses have managed to upscale this concept, such as Unilever in the production of tea, with almost half a million small tea field holders in Pakistan. This has a huge impact on the livelihoods of these people, partnered with training on bio production. Other examples include Natura, a cosmetics line in Brazil, which provides employment opportunities to over one million sales ladies. Grameen Shakti, provides solar solutions to poor people in Bangladesh. VCs provide economic benefits for poor people who are able

2. Insights from Sessions: The Highlights

to purchase new products (water purifiers, solar systems etc) at low prices through MFP linkages. In principle, there is a role for MFPs to play in VCs as they have the existing infrastructure to reach out to poor clients. In practice, challenges exist, including: MFPs are criticized for not doing the extra homework required to ensure that clients really wanted or needed the solutions - instead clients are often pushed into purchasing them. MFPs are not working in the target areas that the producers want to focus on. In cases of default, it was often perceived that the company is responsible for ensuring repayment, not the MFP.

However, there is a need to think about how to offer MFPs better incentives for entering into VC partnerships. Structure of any industry is critical. For example, the dairy VC is structured in a way that accessing small farmers is viable, as MFPs already have access to these farmers. In the case of rice, the industry size is much larger (3.3million tones produced last year) and incentives of private businesses to approach small farmers are relatively low. In larger VCs, the inherent structure means that small farmers are at a disadvantage, as the cost of contact to small farmers is higher. We need to think of ways to support small farmers so that this cost is reduced. There is a need to build capacity of poor through trainings and facilitate simple linkages in order for them to access loans. Ensuring that beneficiaries are receiving the appropriate loan size can have a beneficial impact on the VC. PPAF conducted a pilot with farmers in Gujranwala, and found that initial amounts of PKR 15,000 to PKR 20,000 were not sufficient to meet their needs, and resulted in multiple borrowing from MFPs and informal money lenders. Sufficient

loan sizes also ensure that beneficiaries do not have to sell their crop to the same sources (money lenders). Once the appropriate loan size is allocated, linkages with corporates and government institutions enabled to them to achieve better productivity. For example government provided basic infrastructure: access to water facilities, while Engro ensured their crops were bought at better market rates. In dairy experience in Larkana, appropriate loan amounts allowed beneficiaries to acquire better livestock breeds which triggered an exponential growth in dairy sector in that area. The pilot also highlighted the impact of trainings, and how critical information and skills trainings (on animal breeding, feeding practices) can increase productivity. Now MFPs would be able to extend higher size loans to those farmers. Linkages with insurance companies offering products tailored for this segment would enable MFPs to secure their higherticket loans. There is a need to develop market based approaches to VCs. Distinguish and restrict roles among the key players: private sector, farmers, Government, and NGOs/MFPs: NGO/MFPs should act as facilitators, providing appropriate finance in the form of loans and matching grants, particularly for the underserved and marginalized communities. Government should provide enabling environment to all participants in the VC. Private sector can facilitate in developing producer groups and provide skill development trainings, to achieve scale and allow farmers greater bargaining power.

There is a need to invest in research and ICTs to understand market demand and introduce cost effective interventions. In any VC, we need to first conduct an exhaustive search in local and international markets to review existing technologies, to avoid replicating those efforts.

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

2. Insights from Sessions: The Highlights

Heavy investment in exposure visits for beneficiaries may be needed. Since we are dealing with mostly traditional, conservative societies, adoption of new practices will be challenging. Taking beneficiaries to production and training centers will help them understand their potential. NRSP had a positive experience with the mosaic art VC for women groups. Women were able to apply 2-3 hours of their time at home and earn up to PKR 10,000 - PKR 15,000 a month, which has a huge impact on their quality of life. Some beneficiaries are now planning to enter the export market. Working in consultation with UNIDO (United Nations Industrial Development Organization) and Government of Pakistan to help with create an enabling environment and infrastructure. The sugarcane VC involved over 30,000 households and 40 Union Councils (covering an entire tehsil). Beneficiaries were given seeds approved by the sugar mills, credit lines, trainings and advice, as well as health care insurance. Creating links with final producers was crucial to the success of this VC. The same credit product is offered to other NRSP clients also, but the impact of this VC was much greater in terms of improved livelihoods. MFPs are not fully suited to work along the entire VC, instead collaborations are needed to cover different aspects outside of the MFPâ&#x20AC;&#x2122;s control (research, skills trainings, infrastructure, enabling environment) if VCs are to demonstrate meaningful progress in Pakistan. Innovation and risk taking behavior needs to be rewarded.

Plenary Session 2: Appreciating the differences & linkages between livelihoods, financial safety nets and financial access Session Brief: The poor are not a homogenous group. This has been long recognized by the development community. Different segments of the poor require different types of financial services, and although access is important for all of them, different instru-

ments and tailored products are needed to meet needs effectively. Simultaneously, cross group exposure may lead to gains in capacity at the bottom of the pyramid. This session aimed at unraveling some of these differences and also highlights linkages and overlaps between different groups and instruments by discussing: 1. Do Social Safety Nets and livelihood programs link up with Microfinance? 2. What is needed to create the broader interconnected ecosystem of regulatory bodies, market actors and infrastructure to capitalize on the strengths of each segment? What is the role of government, regulators, funders, microfinance providers and commercial banks, and other support organizations? 3. Can we work towards sustainability of safety net initiatives through integrating livelihoods and financial access 4. Building synergies between safety nets and livelihoods through community mobilization â&#x20AC;&#x201C; opportunities? Takeaways: Essential part of social safety nets is creating hope as a solution through social mobilization. There is no fixed formula â&#x20AC;&#x201C; we need to develop consensus through the approach of "see, observe, learn and teach".

2. Insights from Sessions: The Highlights

Cash transfers for safety nets have to follow strict guidelines such as use of poverty scorecards, focus on women, and have a unified platform to structure dialogue.

1. What bars investments into Pakistan? 2. Developing linkages at national and international level for bringing MIVs to Pakistan.

Use of technology as a distribution avenue can open new frontiers for cash transfers (e.g. point of sale, SMART cards, mobile banking)

3. Do we need technical assistance to be built into the funding structures?

Gender is an integral part in the chain of financial access and this has to be a consensus view of all stakeholders.

4. Policies required to attract MIVs at macro, meso and micro level.

Do we make the poor bankable through our social safety programs? We need to realize that financial services are futuristic, while poor live in present. Secondly, poor are risk averse and need to see bite sized success, and thirdly, individuals are isolated and invisible so cost of financial services is high. This is why the link of livelihood and safety nets is critical. Market segmentation is needed to build customized, community demand based products. Should they be given cash (traditional asset) or non-traditional (productive assets)? For this, community organizations need to empower people and understand their needs. We need to stay close to our communities, and see where we can add the greatest value. We need to go for products and technology that is cutting edge, but the overarching focus has to be to generate commitment/passion, alongside capacity.

Split Session 1: Accessing Funds - Microfinance Investment Vehicles (MIVs) â&#x20AC;&#x201C; Challenges and Opportunities Session Brief: Funding remains a significant challenge for Pakistanâ&#x20AC;&#x2122;s microfinance sector. Going forward, MIVs could become an engine for growth of the sector. This session will focus on challenges and opportunities regarding making investments in the microfinance sector in Pakistan lucrative and attractive for MIVs. Key points for discussion in this session were:

Takeaways: Regulating non-bank MF sector is important to improve ability of these institutions to attract commercial funds, both debt and equity. Risk management is an on-going concern and needs to be strengthened to attract commercial funds. Three major risks inherent in the MF sector of Pakistan are: business model risk, policy risk and macroeconomic risk. Institutional level target funding for a particular product/segment should be encouraged. The industry needs to be position itself to attract double bottom line capital. It is imperative to draw distinction between regulated and non-regulated microfinance sector as funding needs, appetite

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

2. Insights from Sessions: The Highlights

for different types of funding and ability to attract commercial funds is quite different. Deposit mobilization takes time. For example, Tameer MFB had to use own capital and loans for the initial 3 years of its operations. Deposits being utilized to access capital should supplement and not substitute other sources of finance. Local banks do have the capacity to invest and microfinance has the potential for investment. Access to commercial finance is already begun to open up with MCGF and PRSIM. The greatest challenge is to see how the eco-system of the sector evolves, becomes more credible and inclusive.

Split Session 2: Regulation and Policy for Microfinance in Pakistan Session Brief: Pakistanâ&#x20AC;&#x2122;s regulatory and policy framework for microfinance has consistently been ranked as one of the best in the world consistently for several years. This has not only enabled the local players to develop and strengthen but also attracted international investors and funders to the country. This session discussed the strengths of the existing framework and gaps that need to be addressed going forward: 1. Why is the regulatory framework in Pakistan ranked as one of the best and how can we ensure the same in future? 2. What are the gaps that need to be addressed?

Takeaways: MF sector is divided between MFBs and MFIs. While MFBs have a regulatory framework formulated and monitored by SBP, MFIs lack any framework of the sort, making them susceptible to challenges and risks of various kind. Regulatory Framework is also necessary to mitigate risk and foster healthy competition because competition leads to benefits for customer Currently NGOs are being registered under five different laws that make MFIs vulnerable to risks of various sorts. Except for cooperative law, MFIs are not allowed to carry out MF activities, which restrict functioning of MFIs. Hence one cohesive regulatory and registration framework is needed. We are seeing immense success in the branchless banking side with agent network growing and competition enhancing, but this robustness is not being seen on the credit side.

i. Need to build focus and capacity on issues of client protection: ii. Level the playing field by creating a framework for non-bank MFPs; what should that look like?

3. Policy implications of new types of industry players? What does this mean in terms of supervisory jurisdiction? Implications in terms of regulatory burden on retail players? 4. Future Vision of Microfinance Regulations in Pakistan.

SBP is revisiting the microfinance regulations to ensure they continue to enable the microfinance sector and also stay relevant. Regulations are important for sustainability and future of MFIs and to improve access to finance for the poor. Since MFIs are registered under different laws, commercial banks are reluctant to give them funding. However, the regulations should be such that they do not hinder growth.

2. Insights from Sessions: The Highlights

Views around whether non-bank MFIs should be allowed to raise deposits under the new regulatory framework draws diverse opinions. Practitioner feel MFIs should be permitted to do so as they have capability and the client base. Others felt MFIs should not be allowed as it is not just the question of capacity. Depositor’s security is a huge burden to bear. Instead of allowing them to take deposit, through branchless banking we can create synergies between MFIs and MFBs. State Bank also clearly felt that this should not be allowed. Even many MFBs have failed at it despite all their infrastructure and resources. If MFIs really want to take this up, there is an option of transformation into MFBs for those MFIs that have become operationally sustainable. Once regulatory framework is in place, MFIs will have the choice of whether they want to be registered under that regulation. However, it is clear that as more and more MFIs come under regulatory umbrella, automatically more funding from donors will go towards them and MFIs not under regulatory framework shall be automatically alienated. Also the regulatory framework is not just improvement of MFI functioning but also protection from any political action. Those that opt to stay out of the framework will then have to live with these risks and should not expect protection and privileges of those that are being regulated.

Concluding Ceremony The Summit concluded with the presentation of the “Islamabad Declaration”, which summarized the goals, aspirations and commitments of the various stakeholders for up-scaling microfinance made over the two and a half days of the event. Please refer to the next section for the full text of the Declaration.

Speakers from IFAD and SBP congratulated the government, PPAF and PMN upon holding a highly successful event and reaffirmed their support going forward. Speakers from PMN and PPAF thanked all speakers, dignitaries, participants and event sponsors for their support.

Issues around scheduling of MFBs are under process in SBP. Income restrictions on definition of MFB clients and lack of innovation has limited development of individual lending and most organizations still rely on bullet payments and group lending. Still the ticket size has grown significantly in past two years. Capacity of the credit officer is also a factor and the question how to sustain even existing customers on existent funding poses difficulties. Given there is always a resource constraint, outreach and increase of ticket size can become two contradictory goals that hinder growth of the ticket size.

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

3. Summit Achievements and The Islamabad Declaration

The Summit emerged as the biggest gathering of microfinance and allied professionals in Pakistan and was declared a great success. It achieved its objectives of stimulating policy dialogue at a time when a new government had taken charge and publicly shown its commitment to microfinance. It also succeeded in providing a platform for exchange of ideas and experiences, and for addressing some of the fundamental issues the sector faces today for promotion of sustainable as well as inclusive finance for the poor. The Summit resulted in a unanimously endorsed declaration that set new targets for the sector, with a focus on scaling up through equitable growth, sustainable institutions and practices, transparency and responsible finance. The Declaration is presented below:

Islamabad Declaration on Scaling up of Micro-finance in Pakistan - Equitable Growth, Responsible Finance, Sustainability and Transparency Statement of Resolve We, the industry stakeholders responsible for promoting and strengthening of microfinance in Pakistan, meeting in Islamabad from 8th to 10th of July 2013 for the Microfinance Summit Pakistan - 2013, resolve to employ our financial and intellectual resources, and work together to reduce poverty through financial inclusion in Pakistan, push forth the next stage of development in microfinance and endeavor to reach the following targets: Increase microcredit outreach from 2.5 million to 5.0 million within the next five years Increase micro-deposit outreach from 4.8 million to 10.0 million within the next five years

Increase micro-insurance outreach from current 3.0 million to 6.0 million within the next five years The microfinance industry has come a long way in terms of the number of clients, participating institutions, the size and quality of portfolios. It is also headed in the right direction as has been testified by the entry of major international investors, the capacity for branchless banking and the fact that the system as a whole is now in the black. It is thus poised for serious growth. To achieve these targets mentioned above, and in fact go beyond them, at this high level forum with representation from the local and international microfinance community, we resolve to adhere to our core values and commit to: Optimal and efficient use of public and private funds to foster equitable growth: The Summit appreciated the vision of the new government that was stated by the Honorable Finance Minister in his Inaugural Address. While committing to support the Prime Ministerâ&#x20AC;&#x2122;s Microfinance Program especially allocations for qarz-e-hasna, the Summit emphasized the need for market segmentation that would allow different models to coexist and prosper. Widening the menu of products and services to meet the multiple financial needs of the poor and low income segments: Promoting innovative products like hybrid value chains, solutions that create livelihoods and jobs, options to leverage additional funding for the sector, expanding the use of technology and experimenting with alternative delivery mechanisms to reduce costs and improve efficiency. This

3. Summit Achievements and The Islamabad Declaration

includes credit, savings, insurance and money transfers to meet the business/ enterprise needs at the base of the pyramid as well as household needs such as loans for childrenâ&#x20AC;&#x2122;s education and emergencies. Practicing responsible finance: We recognize that for commercial as well as social purposes, as an industry, we need to engage in practices that ensure responsible finance and protect our clients from harm. We thus endorse principles of client protection such as transparency, avoiding overindebtedness of clients, dignified treatment of clients, effective complaint resolution mechanisms, privacy of client data and responsible pricing. We believe that for appropriate product development and delivery, we need to be client centric and placing our clients at the centre of what we all that we do. Higher standards of governance and transparency: As an industry we aspire to significantly improving our governance practices and transparency standards. Corporate governance strengthening is important for all types of microfinance providers. Bringing regulatory frameworks into place for non-deposit taking microfinance providers as well as micro-insurance will contribute to putting in place minimum standards of governance and disclosure. In addition, sector players such as the PPAF and PMN need to play a role in promoting best practices and holding institutions accountable to ensure progress is being made to achieve these benchmarks. Finding ways to increase investment and focus on market segments that remain under-served such as youth, women, disabled and less penetrated areas: These segments and districts are integral to microfinance yet remain underserved today. Special focus is required to achieve breakthroughs in serving these segments and areas. Measuring and monitoring the change and impact that microfinance is creating in the lives of its clients: As an industry that endeavors to transform the lives of its clients, whether through providing them access to finance, generating sustainable employment or increasing incomes to lift them out of poverty, we need to have robust evidence to support our

claims. We need to adopt objective and rigorous methods to capture the impact and change we are creating. Fostering healthy competition that yields benefits for our clients, institutions and sector: In our quest to develop the sector and ease entry of new players into the market, we have seen entry of many players into the sector in recent years. This bears well for competition. However, competition can also result in unhealthy practices which may give short term gains for a few players but damage the industry as a whole and hamper its development. We thus commit to engaging in healthy competition which can result in benefits for clients such as lower prices and better products and services, benefits for institutions such as healthier portfolios and innovation, and benefits for the industry such as credit discipline in the market and political support. Continuous strengthening of the regulatory and policy environment to ensure it remains conducive for development of microfinance industry: Today we take pride in Pakistanâ&#x20AC;&#x2122;s regulatory and business environment for Pakistan being rated as one of the best. This however should not make us complacent but rather more committed to maintaining these standards by learning from the reasons for this success. We thus commit to working collectively to support the regulators and policy makers in their efforts to provide an enabling environment for microfinance in Pakistan. The conference appreciated that impressive progress has been made. However poverty is still a big issue and keeping up with demand remains a challenge. Now is the time to take advantage of the building blocks that are in place and reach for ambitious growth. These include the leadership of the apex institution (PPAF), the support of a strong industry association (PMN) and an enabling environment that the regulator (SBP) has actively fostered. Critical elements to achieve serious progress are a) reliable and stable funding sources until deposit generation reaches optimum levels b) strengthening the capacity of microfinance institutions and banks through building corporate governance, and c) a coordinated approach between all stakeholders so as to catalyze growth and move the sector forward.

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

Annex. Summit Structure

Formal Inauguration

Day 0 - Monday, 08th July 2013

6:00 pm to 9:00 pm Introduction and Welcome by Ms. Ayesha Tammy Haq - Master of Ceremonies Recitation from the Holy Quran IFAD’s role in developing the sector by Mr. Matteo Marchisio - Country Program Manager, Pakistan & Afghanistan, International Fund for Agricultural Development ADB’s experience in microfinance by Mr. Werner Liepach – Country Director, Asian Development Bank The World Bank’s global experience in Microfinance by Dr. Imtiaz Alvi – Rural Development and Livelihoods, South Asia Region, The World Bank Roadmap for Financial Inclusion in Pakistan by Mr. Ashraf Mahmood Wathra - Deputy Governor (Banking), State Bank of Pakistan Objectives of the Conference by Dr. Rashid Bajwa – Chairman, Pakistan Microfinance Network Inaugural Address by Chief Guest,Honorable Minister for Finance, Revenue, Economic Affairs, Statistics and Privatization Mr. Mohammad Ishaq Dar Closing Remarks and Presentation of Shield to the Honorable Minister for Finance, Revenue, Economic Affairs, Statistics and Privatization, Mr. Ishaq Dar by Qazi Azmat Isa - Chief Executive Officer, Pakistan Poverty Alleviation Fund Followed by Dinner &Musical Performance by Saeen Zahoor & Sanam Marvi

Annex. Summit Structure Day 1 - Tuesday, 09th July 2013 Focus on Microfinance and its linkages with Financial Inclusion 9:00 am to 10:00 am Recitation from the Holy Quran Keynote Address by Dr. Ishrat Husain – Director and Dean, Institute of Business Administration, Karachi and former Governor, State Bank of Pakistan Q&A

10:00 am to 11:30 am Plenary Session: Microfinance and FI: What is the difference? Session Chair: Mr. Zubyr Soomro - Chairman & Chief Executive Officer, Hikmah Consulting Panelists: Mr. Noor Ahmed -Joint Director, State Bank of Pakistan Mr. Yasir Ashfaq -Group Head, Financial Services, Pakistan Poverty Alleviation Fund Mr. Waqas Ul Hasan - Private and Financial Sector Development Adviser, DFID Pakistan Syed Mohsin Ahmed - Chief Executive Officer, Pakistan Microfinance Network Mr. Amjad Ali Arbab – Country Manager, ShoreBank International Pakistan Mr. Jan Stilke - Project Manager,Financial & Private Sector Asia, KfW Mr. Jonathan Agwe - Rural Finance Specialist, International Fund for Agricultural Development

Q&A Session

10:00 am to 11:30 am Tea & Energizer

12:00 pm to 1:30 pm Plenary Session: New Frontiers for Microfinance Session Chair: Syed Nadeem Hussain - President, Tameer Microfinance Bank Limited Panelists: Mr. Ahmad Jamal - Senior Group Head, Strategy and External Relations, Pakistan Poverty Alleviation Fund Dr. Amjad Saqib (S.I.) - Chief Executive Officer, Akhuwat Ms. Katarzyna Pawlak - Deputy Director,Microfinance Centre Ms. Aban Haq - Chief Operating Officer, Pakistan Microfinance Network Mr. Ignacio Bianco -Banking Coordinator, Children and Youth Finance International Ms. Sarwat Aftab -Senior Private Sector Development Specialist, The World Bank

Q&A Session

1:30 pm to 2:30 pm Lunch Session – Pakistan Microfinance Review 2012 Launch

Continued on page 24

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

Annex. Summit Structure Day 1 - Continued 2:30 pm to 4:00 pm Split Session 2: Micro-insurance: Exploring the Road Less Travelled

Session Chair: Mr. Abrar Mir - EVP &Group Head Branchless and e-Banking, UBL

Session Chair: Mr. Asif Arif - Commissioner Insurance, Securities & Exchange Commission of Pakistan

Session Chair: Mr. Qaim Shah - Country Presence Officer, International Fund for Agricultural Development

Scene Setting: Ms. Nasreen Rashid - Former Executive Director, Securities and Exchange Commission of Pakistan

Panelists: Mr. Asghar Memon - General Manager, Microfinance Portfolio Management, Pakistan Poverty Alleviation Fund Ms. Sadaffe Abid - Independent Consultant Mr. Agha Ali Javad -General Manager, National Rural Support Programme Dr. Sono Khangharani – Chief Executive Officer, Hisaar Foundation

Panelists: Qazi Shoaib Ahmad - Senior Joint Director, State Bank of Pakistan Mr. Omar Moeen Malik - Head of Strategy, Easypaisa, Telenor Pakistan Mr. Ghazzanfar Azam - Chief Executive Officer, Waseela Microfinance Bank Limited Mr. Azfar Jamal - Head Branchless Banking, Habib Bank Limited Mr. Kamran Azim -Chief Operating Officer, Kashf Foundation Mr. Ali Qureshi - Manager,Sector Development, Financial Services Group, Pakistan Poverty Alleviation Fund

Q&A Session

Panelists: Mr. Nasar us Samad Qureshi, Chief Executive, Alfalah Insurance Mr. Muhammad Ali Ahmed - Chief Strategy Officer, EFU Life Mr. Gulbaz Afaqi - Executive Director, Soon Valley Development Program Dr. M. Mehdi Kazmi – CEO, Asia Care Health & Life Insurance Company Ms. Kashmala Shahab Kakakhel - Program Manager Asia, LEAD Pakistan Mr. Saqib Siddiqui - General Manager, Pakistan Poverty Alleviation Fund

Q&A Session

4:00 pm to 4:30 pm Tea & Energizer

4:00 pm to 4:30 pm The Grand Debate: Microfinance growth - Should it focus on poverty reduction or access to finance? Moderator: Ms. Laurie J. Spengler, Chief Executive Officer& President, ShoreBank International Panelists for poverty argument: Mr. Anwar Rashid - Director, Orangi Charitable Trust Ms. Roshaneh Zafar - Chief Executive Officer and Managing Director, Kashf Foundation Mr. Hanif Chana - Chief Executive Officer, Sindh Rural Support Organization Panelists for access argument: Mr. Saleem Jiwani - Independent Consultant Syed Nadeem Hussain - President, Tameer Microfinance Bank Limited Mr. Atif Malik–COO, First Microfinance Bank Limited

7:00 pm Dinner& Entertainment

Split Session 3: Importance of Flexibility for innovation

Split Session 1: Opportunities for Microfinance in Branchless Banking

Q&A Session

Annex. Summit Structure Day 2 - Wednesday, 10th July, 2013 Digging Deeper into Burning Issues 9:00 am to 10:30 am Plenary Session: Value Chains and Linkages for improving Livelihood Session Chair: Mr. Farrukh H. Khan - Country Director, Acumen Fund Panelists: Ms. Jessica Graf - Network Partner, Hystra-Hybrid Strategies Consulting Dr. Rashid Bajwa - Chief Executive Officer, National Rural Support Programme Dr. Muhammad Riaz - Senior Agriculture Specialist, The World Bank Mr. Favad Soomro -Director, Engro Foundation Mr. Saqib Siddiqui -General Manager, Sector Development, Financial Services Group, Pakistan Poverty Alleviation Fund

Q&A Session

10:30 am to 11:00 am Tea Break

11:00 am to 12:30 pm Plenary Session: Appreciating the differences & linkages between livelihoods, financial safety nets and financial access Session Chair: Qazi Azmat Isa â&#x20AC;&#x201C; Chief Executive Officer, Pakistan Poverty Alleviation Fund Panelists: Dr. Rashid Bajwa - Chief Executive Officer, National Rural Support Programme Mr. Anwar Rashid - Director, Orangi Charitable Trust Ms. Charmaine Hidayatullah â&#x20AC;&#x201C; President, First Women Bank Ms. Asma Kashif - Social Policy/ Impact Evaluation Specialist, Benazir Income Support Programme Ms. Shahnaz Kapadia (Advisor) -Livelihood, Employment and Enterprise Development Group, Pakistan Poverty Alleviation Fund

Q&A Session

12:30 pm to 1:30 pm Lunch

Continued on page 26

MCROFINANCE SUMMIT - PAKISTAN, 2013 | Conference Report

Annex. Summit Structure Day 2 - Continued 1:30 pm to 3:00 pm Split Session 1: Accessing Funds - Microfinance Investment Vehicles (MIVs) – Challenges and Opportunities

Split Session 2: Regulation and Policy for Microfinance in Pakistan

Session Chair: Ms. Laurie J. Spengler, Chief Executive Officer& President, ShoreBank International

Session Chair: Syed Nadeem Hussain - President, Tameer Microfinance Bank Limited

Panelists: Mr. Jan Stilke - Project Manager, Financial & Private Sector Asia, KfW Mr. Waqas ul Hasan - Private and Financial Sector Development Advisor, DFID Pakistan Mr. Humza Khan -Portfolio Manager, Microfinance and Financial Services Investments, Acumen Fund Mr. Kabeer Naqvi - Chief Financial Officer, TMFB Dr. Parvaiz Naim - Senior Sector Coordinator, KfW

Panelists: Qazi Shoaib Ahmad –Senior Joint Director, State Bank of Pakistan Mr. Yasir Ashfaq - Group Head, Financial Services, Pakistan Poverty Alleviation Fund Syed Mohsin Ahmed – Chief Executive Officer, Pakistan Microfinance Network M. Mudassar Aqil - Chief Executive Officer& President, Kashf Microfinance Bank Limited Ms. Naghma Rashid - Executive Director, DAMEN

Q&A Session

3:00 pm to 4:00 pm Networking,Tea & Energizer

4:00 pm to 5:30 pm Concluding Ceremony Islamabad Declaration &Presentation of Summit Recommendations by Mr. Zubyr Soomro - Chairman &Chief Executive Officer, Hikmah Consulting Closing remarks by Mr. Ashraf Mahmood Wathra - Deputy Governor (Banking), State Bank of Pakistan Vote of Thanks by Mr. Yasir Ashfaq - Group Head, Financial Services Group, PPAF & Syed Mohsin Ahmed – CEO, Pakistan Microfinance Network

The Pakistan Poverty Alleviation Fund (PPAF) is the lead apex institution for community-driven development in the country. Set up as a fully autonomous private sector institution, PPAF enjoys facilitation and support from the Government of Pakistan, the World Bank and other bilateral, multilateral and corporate donors. The PPAF aims to be the leading catalyst for improving the quality of life, broadening the range of opportunities and socio-economic mainstreaming of the poor and disadvantaged, especially women. The core operating units of the PPAF deliver a range of development interventions such as support to social mobilization, microfinance, community physical infrastructure, water, energy and disaster management, livelihoods, capacity building, health & education and environment and social safeguards at the grass roots/ community level through a network of more than 100 Partner Organizations across the country. For a complete profile, please visit our website at www.ppaf.org.pk. The Pakistan Microfinance Network is an association of retail microfinance providers. Our vision is to extend the frontiers of formal financial services to all and mission is to support the sector, especially retail microfinance institutions to enhance scale, quality, diversity and sustainability in order to achieve inclusive financial services.