Microfinance sector: Gross loan portfolio increases 39.3%

Amounts to Rs93 billion in 2015, value of savings up 48.7%

KARACHI: The gross loan portfolio of the microfinance sector increased 39.3% year on year (YoY) to reach Rs93 billion at the end of 2015.

According to the latest microfinance statistics, released by the Pakistan Microfinance Network (PMN), the value of savings posted an annual growth of 48.7% in 2015. The number of active savers grew 63.8% over the same period.

On a quarter-on-quarter basis, the gross loan portfolio of the sector increased 9.5% in Oct-Dec, PMN data shows.

The microfinance sector is divided in peer groups - such as microfinance banks (10), microfinance institutions (16), rural support programmes (6) and ‘others’ (16) - based on their regulatory structure and nature of business.

According to the PMN, quarterly growth in microcredit outreach was primarily fuelled by the microfinance banks’ peer group whose active borrowers and gross loan portfolio increased 5% and 13.5%, respectively.



Khushhali Bank (KBL) and APNA Bank (AMFB) were the largest contributors to the annual increase in the gross loan portfolio. The number of active borrowers went up 3.4% quarter on quarter, as the largest contribution came from Akhuwat that financed 42,000 new clients mainly in the services and manufacturing sectors. It expanded its outreach in the quarter to cover 78 districts as opposed to 72 districts in the preceding quarter, the PMN said.

Microfinance providers use two lending methodologies - individual and group - in order to minimise default risks and control loan processing costs. The share of individual lending methodology increased from 34% to 41% in the last three months of 2015, which reflects a growing preference of individual lending to group lending. The sector-wide ‘portfolio at risk’ declined from 1.6% to 1.4% in Oct-Dec on a quarterly basis as a result of write-offs by microfinance banks.

The value of savings posted considerable growth of 21% on a quarter-on-quarter basis whereas the number of active savers grew 4.5%. Microfinance banks were the sole contributors to the increase in the value of savings during the quarter. They added Rs11.1 billion worth of deposits in Oct-Dec. KBL witnessed the greatest increase in the value of deposits (Rs4.4 billion), followed by AMFB (Rs2.3 billion).

The average deposit balance of the microfinance banks’ peer group increased 18% in the last quarter from Rs5,000 to Rs5,900. Waseela Bank witnessed the greatest increase in the number of depositors (39%) mainly on the back of its branchless banking platform. Among the non-bank microfinance providers, only National Rural Support Programme (NRSP) witnessed a significant increase in the number of active savers (343,000) in Sindh and Punjab.

Micro-insurance also exhibited growth in the fourth quarter of 2015. The number of policyholders increased 4% while the sum insured depicted an increase of 6% quarter on quarter. The penetration rate of the microfinance sector increased only marginally from 13.3% to 13.7% in Oct-Dec. However, the total number of branches grew by 200 mainly in the region of Punjab and Sindh due to an increase in the outlets of Akhuwat (88), AMFB (39) and NRSP (28), the PMN said.

Published in The Express Tribune, March 3^rd, 2016.

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