A journey of microfinance institution

The launch of ‘A Bank is Born’ by Nadeem Hussain was among a few sessions that were held on the first day of the Karachi Literature Festival on Friday after its inaugural ceremony.

During a panel discussion on the book, Naureen Hyat, who is the co-founder and co-chief executive officer of the Tez Financial Services, said, “A Bank is Born is a beautiful yet candid collage of Nadeem Hussain’s personal and professional life from early schooling to his college, from an employee of multinational conglomerate to becoming a financial inclusion entrepreneur.”

Former State Bank of Pakistan (SBP) governor Dr Ishrat Husain said that microfinance took its birth in Bangladesh but when he joined the SBP, he realised that the commercial banks were all catering to a particular segment of our society that comprised corporates, high net worth individuals, trade financers and some of the big commercial houses.

“But they were not actually going to a majority of the population,” he said, adding that this population sector was excluded from the former financial system. Most of the people in informal sector, he said, especially at the lower end were resorting to money lenders “who were sharks in their way of dealing with them.”

Dr Husain said when the central bank could protect the interest of big borrowers and depositors, it should also provide protection to the small depositors. He said that he decided to introduce a regulatory framework for micro finance institutions. “This was opposed by many,” he said, adding that they got support from the government and got the micro finance ordinance passed in 2001.

“We got a loan from the Asian Development Bank to establish the Khushali Bank,” he shared. He said he wanted the private sector’s participation because his experience with the government banks had been bad. He added that he knew Nadeem as he was the country manager for some time of the consumer financing of the City Bank. “He made the proposal that he is leaving his City Bank job and bringing in all his savings and plunging into this enterprise which is a micro finance bank,” recalled Dr Husain.

The central bankers, he said, are very conservative. “My colleagues said to me how can you ask a commercial banker who has no experience in the micro finance, who has never worked with the poor segment of the population, how can you give licence to him?” the former SBP governor recalled, adding that he was convinced because Nadeem was showing passion and commitment.

The man left his job with one of the best institutions and he put all his money, so he was given a licence for the Tameer Bank. Dr Shamshad Akhtar, who also served as the SBP governor, said on the occasion that Dr Husain had sowed the seeds and made the foundation. “When I got in coming from the Asian Development Bank, and largely having the experience of South East Asia, I asked how many micro finance borrowers exist in this country,” she recalled.

She was told the figure was half a million when she was coming from countries where the numbers were running in millions. The beauty, she said, was that they had the ordinance, the framework and some fascinating people but they knew that banks were not going to do it.

“At the same time we had a lot of micro finance institutions and some brilliant brains with commitments,” she said, adding that they converted micro finance institutions, mostly non-government organisations, to banks. At the same time, she said, she tried to look for innovations in the micro finance sector.