Pakistan microfinance pioneer TMBL gears up for digital banking debut

KARACHI: Telenor Microfinance Bank Limited (TMBL) will start commercial operations as a digital retail bank once it meets all regulatory requirements and receives the final go-ahead from the central bank, the acting chief executive says.

In September 2023, the State Bank of Pakistan granted in-principle approval to five players, including TMBL, enabling them to prepare for the launch of digital financial services in the country that heavily relies on cash.

HugoBank, KT Bank Pakistan, Mashreq Bank Pakistan, and Raqami Islamic Digital Bank were the other four banks that had received these approvals. These entities, including TMBL, were awarded no objection certificates by the SBP in January 2023, which allowed them to register with the Securities and Exchange Commission of Pakistan as public limited companies.

TMBL, which owns easypaisa, a digital payments platform that has evolved into a proprietary name for money transfers, explains the significance of the license conversion from microfinance to a digital bank.

TMBL aims to capitalize on its strong legacy and expertise in the microfinance industry as a pioneer of branchless banking services in Pakistan. It does, however, anticipate going beyond microfinance to meet the more extensive financial needs of underbanked populations.

“The in-principle approval received from the State Bank of Pakistan earlier recognizes our hard work and commitment to our digital-first strategy, propelling us to be on track to becoming a fully-fledged digital bank that can further financial inclusion in Pakistan through innovative digital financial services,” said Kashif Ahmed - acting CEO of TMBL/easypaisa in an interview with The News.

“We have already achieved significant progress on operational readiness as per SBP's framework. Apart from our digital payments business, our digital lending services run entirely on digital platforms, utilizing in-house data analytics,” Ahmed said.

“We have also digitized and optimized our branch banking network and merged it with our offline business.”

The regulatory approvals to commence digital banking operations are still in process, according to Ahmed.

“We are working closely with SBP to demonstrate and ensure readiness across the business, technology, operations, risk management, compliance, and other areas,” he said.

“Once we meet all regulatory criteria and SBP grants us formal approval, we will launch commercial operations as a digital retail bank and serve the financial needs of millions of Pakistanis.”

Pakistan still has a high dependence on cash, with roughly around Rs8.3 trillion in circulation as of June 2023. However, the country is ripe for mass adoption of digital financial services given the 82 percent smartphone penetration rate and 65 percent of the population aged between 15-40 years. As a bank operating on a digital-first principle, Ahmed believes, TMBL is well positioned to drive financial inclusion and digitize cash, leveraging these favorable demographics.

“Post approval from SBP, as a digital retail bank, TMBL will offer the full suite of digital financial services including payments, lending, savings, insurance, and platform services to individuals and MSMEs [micro, small and medium enterprises] in a completely digital manner. Our focus will be on frictionless onboarding, real-time digital fulfillment of services, and superior customer experience.”

“For individuals, we the bank lead with digital payments and everyday banking use cases while also servicing segments with low banking penetration like freelancers and women,” he said. TMBL will leverage its data analytics capabilities to assign credit scores and offer innovative lending products. For MSMEs and retailers, the bank will enable digital payments acceptance besides offering tailor-made lending products. A digitally empowered salesforce will facilitate lending to thin-file customers. “We aspire to drive mass adoption of digital payments and reduce the country's dependence on cash,” he added.

“Our deep understanding of micro, small, and medium enterprises as well as mass-market individuals will remain core to our mission. As a digital-first bank, we aim to continue serving these key customer groups with innovative digital financial products customized to their needs. For instance, our digitized, mobile-based productive loan disbursals already cater to microentrepreneurs efficiently.” Ahmed opined.

“That said, we recognize vast unsatiated demand for affordable credit, savings, insurance, and payments from other underserved customer groups like youth, women, and freelancers.

TMBL will broaden access to digital financial services for all these segments via innovative distribution models like digital salesforces, platform partnerships, and embedded finance solutions.”

The bank is a joint venture between Ant Financial and Telenor, a Norwegian telecom company.

Last month, Telenor Group agreed to sell its Pakistan unit to the state group Pakistan Telecommunications as a part of its strategy to build scale and market-leading players

in Asia.