The document summarizes a presentation on financial exclusion in Pakistan and opportunities for Islamic microfinance. It finds that over 25 million Pakistani adults are financially excluded and do not have bank accounts. While access to financial services is low across urban and rural areas, exclusion is highest in Balochistan province and among women. The presentation outlines the demand and potential for Islamic microfinance in Pakistan to help reduce exclusion and poverty. Challenges to growth include increasing penetration, building human resources, and developing strong legal/policy frameworks.

1. International Conference on Islamic Microfinance CENTER OF ISLAMIC BANKING & ECNOMICS Held At: Organized By :

2. Overview of Microfinance June 2011

4. “ In developing countries financial exclusion is pervasive, Pakistan is no exception”

5. Bank Loan per 1,000 adults

6. Deposit Accounts per 1,000 Individuals

7. Insurance density in USD$ Insurance Density: Gross Premium per capita Bangladesh 2.5 India 19.7 Thailand 92.1 USA 3,790.2 Brazil 101.1 UK 4,484.4 Pakistan 4.0 Indonesia 15.8 Kenya 11.1 Sri Lanka 14.2 Malaysia 25.7 Argentina 105.4

8. Bank Branches per 1,000 Adults

9. Access Strand Page The Formally Served The Informally Served The Financially Excluded The Financial Market Development Frontiers

10. Access Strand by Province Page In Punjab, Sind, NWFP and AJK, people have access to some form of financial service either formal or informal but the issue of financial exclusion is most severe in Balochistan (84%) followed by NWFP (60%). In Balochistan not only a high percentage of people no access to formal and informal financial service but even the percentage of banked and those with access to informal financial services lags far behind other provinces. The access scenario looks relatively bright in AJK due to the earthquake in October, 2005. In order to receive government subsidies and livelihood support, people are required to have a bank account in which aid money can be deposited. According to one estimate 1.8 out of 3.5 million of Kashmiri population has been affected by the earthquake.

11. Access Strand by Urban/Rural Page Interestingly, the scale of financial exclusion - though high - is quite similar in urban and rural areas as is the scale of the informal financial services. However, the difference lies in the percentage of people who are banked or unbanked. In urban areas 15% people are banked while only 9% people are banked in rural area.

12. Access Strand by Gender Page The issue of financial exclusion along all parameters i.e. those who are totally excluded from availing any kind of financial services, informal services and the banked is most striking along gender lines. There are wide gaps between men and women who are banked, informally served and the financially excluded

13. Access Strand Page The Formally Served The Informally Served The Financially Excluded 48% or 12 million people say they would like to have their own bank account 31% or 13 million people say they would like to have their own bank account 25 million non-banked adults say they would like to have their own bank account

15. Relationship between Financial Exclusion and poverty exists…. *Source: : http://maps.grida.no/go/graphic/poverty-by-country-share-of-population-living-under-usd-2-per-day-2004

16. There is a moderate to strong relationship between GDP per capita and usage of financial services

20. Microfinance Market Source: Hashemi, Syed and Richard Rosenberg. Graduating the Poorest into Microfinance – Linking Safety Nets and Financial Services. CGAP, Washington DC. 2006 and HIES, 2004-2005 Microfinance (Credit, Deposit, Insurance and Remittances) Transitory Vulnerable (17.1MM) Transitory Poor (12.4MM) Chronic Poor (4.6MM) Extremely Poor (0.8MM) Safety Net Programs Total 29.5 MM Adults Assuming 50% adult poor require credit services: Microcredit potential is approx. 15MM Non-Poor (21.7MM) Transitory Non-Poor (32.2MM) Micro Credit Current Penetration 11.33%

21. Foot print is spread across Pakistan

23. … and diversified portfolio exposure

24. Demand for Islamic Microfinance Demand of Islamic Micro Finance Survey Surveyed Countries Respondents preference (%) CGAP 08 Jordan, Algeria, and Syria 20 - 40% PlaNet Finance 07 West Bank and Gaza 35% - 60 % USAID 02 Jordan 24.9% IFC/FINCA 06 Jordan 32% Frankfurt School of Fin & Mgmt 06 Algeria 20.7% IFC sponsored Study Yemen 40% IFC 2007 Syria 43-46% Bank Indonesia 2000 Indonesia (East Java) 49% A recently survey Conducted by AlHuda CIBE in Azad Kashmir exhibits 99% demand (4 Districts)

25. Pakistan’s Experiences Islamic Microfinance Presence in Pakistan Institution Mode of Finance Akhuwat AIM – interest free loan Qaraz-e-Hasna CWCD Murabahah, Ijarah, Salam & Istisna MicroTakaful NRSP – NWFP Murabahah Mudarabah with BOK for funding Source Khawendo Kor Murabahah but in limited scale Islamic Relief Murabahah and Qarz-e-Hassan KKCB Murabaha and MicroTakaful Helping Hand Muslim Aid Naimat Islamic Microfinance Farz Foundation Takaful Pakistan Limited Murabahah Murabahah Murabahah Murabahah - MicroTakaful MicroTakaful

27. 1 Increasing Financial Penetration Global Demand Global Outreach Pakistan Outreach India Outreach Bangladesh Outreach South Asia Outreach

28. Equity Rs.52B; Debt Rs.143B; Deposit Rs.105B Incremental Rs. 36B in 4 years Meeting Financing Requirement 2 Incremental 264B in another 6 years

29. Building the Human Resource Base 3 230 4,370 6,899 Senior Management Middle Management Field Staff Productivity Benchmarks 1% 19% 80% 150 borrowers/staff 3M 6M 10M Senior 400 600 667 Middle 6,200 9,400 12,667 Field 13,400 30,000 53,333 Total 20,000 40,000 66,667

31. Head Office: 192- Ahmad Block, New Garden Town , Lahore, Pakistan Ph: +92-42-35913096-8, 35858990, 38407850 Fax: +92 -42-35913056 E-mail : [email_address] Web: http://www.alhudacibe.com CENTER OF ISLAMIC BANKING & ECNOMICS Thank You