‘Climate change spurs microfinance sector’s shift to sustainability and social protection’

KARACHI: Pakistan’s microfinance sector is shifting its strategy to promote environmental sustainability, risk mitigation, and protection of the most vulnerable social segments from the disproportionate effects of climate change, Haaris Mahmood Chaudhary, chief operating officer of Mobilink Bank, told The News in an interview. 

He also talked about Mobilink Bank's plan to become a fully digital microfinance bank and add a staggering 50 percent more women to its customer base.

Q: Pakistan’s banking sector has exhibited strong awareness and commitment to environment, social and corporate governance (ESG) related risks and opportunities. How do you integrate the environment and what is the motivation behind your focus in this area?

A: Microfinance institutions predominantly work with low-income groups and remote rural communities. These communities are most vulnerable and disproportionately affected by the devastating impacts of climate change. That is why; environmental sustainability and climate finance are integrated as priority areas for our institutions.

Climate change is already threatening agriculture, affecting crop yields, livestock, and food security. Pakistan’s economy heavily relies on its agriculture sector and its vulnerability to climate change can disproportionately affect farmers, especially women, pushing them back into poverty. A majority of Pakistani women entrepreneurs are associated with the agricultural sector whose micro and small-scale businesses face severe risks to their sustainability and profitability.

We realise that this challenge also presents a unique opportunity for pivoting to clean and sustainable energy solutions and other ways of reducing our carbon footprint to foster environmental and business sustainability and long-term socio-economic well-being.

As per the climate targets outlined by the government, there's a commitment to reducing emissions by 50 percent by 2030. The plan also includes a shift to 60 percent renewable energy, incorporating 30 percent electric vehicles and instituting a ban on imported coal.

As a responsible corporate citizen, we are committed to leveraging our nationwide financial portfolio helping the government achieve these milestones for a safe, secure, and sustainable future of the people of this country.

Q: How do MFIs contribute to alleviating the effects of climate change on Pakistan's agricultural sector, specifically for small-scale women farmers?

A: Pakistan’s agricultural sector is particularly susceptible to climate change and climate-related disasters. It incurred losses exceeding $30 billion in 2022 alone due to severe floods, disproportionately affecting women who make up 45 percent of the agricultural workforce MFIs have proactively intervened to tackle these issues. In response to the 2022 floods, MFIs adjusted loan schedules to provide financial assistance to affected farmers. Subsequently, targeted educational initiatives have been implemented, empowering women with the knowledge and skills essential to navigate the challenges posed by a changing climate.

Despite these efforts, it remains a concern that only 5.3 percent, 1.6 percent, and 0.9 percent of rural women in Punjab, Sindh, and Balochistan respectively, own a bank account. This underscores the necessity for a collective and comprehensive approach to address this issue on all fronts. By promoting sustainable agricultural practices, facilitating access to financial resources, and fostering women's economic empowerment, a holistic approach can be employed to mitigate the impact of climate change on the agricultural sector and promote long-term adaptation. Q: What specific initiatives have Mobilink Bank implemented to address the challenges arising from the intersection of climate issues and gender inequality?

A: Our strategic approach to tackling the challenges of climate change is centered around increasing awareness of the difficulties faced by farmers, particularly focusing on small-scale women farmers. Our primary goal is to improve their resilience against future climate-related disasters through innovative financing solutions, including integrated insurance products.

We have successfully disbursed Rs1.7 billion for solar financing products and are dedicated to reaching Rs3 billion by the end of 2024.

At the core of our initiatives are women, essential contributors to the agricultural sector. We have successfully trained and upskilled 5000 women across Pakistan through our women-centric initiative, the Women Inspirational Network (WIN).

In addition to our focus on women, we are actively involved in solar financing for micro, small, and medium-sized enterprises (MSMEs) to foster better and sustainable solutions, ultimately reducing their costs. Our efforts have resulted in financing multiple solar-powered pumps, contributing to a sustainable ecosystem that positively impacts the community.

Q: Which market segments does Mobilink Bank primarily target in its promotion of green financing?

A: In our ongoing initiatives, we are channeling our efforts towards projects deeply rooted in the agricultural sector. Our primary objective revolves around fostering sustainable financing options for our borrowers engaged in agriculture. In tandem, we are also directing our efforts towards another overlooked segment, MSMEs. In our pursuit of promoting green financing for MSMEs, we are not only investing in the growth and sustainability of small businesses but also contributing to Pakistan's overall GDP. By uplifting MSMEs, we strive to create more job opportunities, thus positively impacting the economic landscape of the country.

Q: What initiatives or strategies is your bank implementing to enhance digital banking services specifically for this sector?

A: MSMEs are another priority target segment for us, as they play a crucial role in our economy. We offer a customised range of financial products and services to MSMEs, particularly those owned and run by women. We upskill these women entrepreneurs so they can make informed financial decisions and successfully navigate their businesses to success and sustainability decisions and fully leverage the digital tools at their disposal.

Q: Does the emergence of fintechs pose challenges for MFIs?

A: Fintechs and MFIs have different primary objectives, with fintechs prioritising technological innovation to improve financial services. The digital transformation in the financial landscape poses a potential challenge for MFIs, necessitating adaptation. This is why, Mobilink Bank stands at the forefront, actively promoting and leading the charge in digital banking to address the dynamic shifts in the financial sector.

Q: What strategies does Mobilink Bank employ to differentiate itself in promoting responsible borrowing, setting it apart in the market?

A: Our commitment revolves around adapting to the evolving financial needs of borrowers while understanding the banking ecosystem and identifying existing gaps. We actively promote responsible borrowing, with a specific focus on fostering the growth and substance of our borrowers, particularly among women, MSMEs and, small-scale farmers.

We have a clear mission - to uplift the underserved market segment by creating opportunities for them to access formal finance and actively promoting digital and financial literacy among those overlooked by the system. We recognise the success of digital banking compared to traditional brick-and-mortar structures and passionately advocate for a more accessible and efficient model.

We're proud to boast over 16 million monthly active mobile wallets and a vast network of 220,000+ branchless banking agents, which is a game-changer, enabling our borrowers to access cash anytime, anywhere. As we look ahead, our three-year plan is to transform Mobilink Bank into a fully digital microfinance bank and increase our women's customer base by a remarkable 50 percent. Well, I would say that it's not just a plan; it's a commitment to shaping the future of banking, making it more accessible and inclusive for everyone.