‘Covid-19 holds opportunity to transform Pakistan into cashless society’

KARACHI: Mudassar Aqil, chief executive officer of Easypaisa/Telenor Microfinance Bank talked about challenges and opportunities in corona norms, digital financial market potential and regulatory oversight.

Q: How do you see economic slowdown aggravated by Covid-19 and do the present circumstances present growth opportunities?

A: There are challenges and risks associated with every scenario and Covid-19 is no different. However, the outcomes depend on what approach we take. In Pakistan, microfinance banks have been active for a number of years and are playing a major role in the economic development of the country. Pakistan’s microfinance industry serves 7.3 million borrowers from the low-middle-income individuals, and micro and small businesses.

The current pandemic and economic slowdown presented an opportunity to make full use of a system which is already in place having the capability to serve as a channel for sustainable growth as well as focus on long-term resilience. We at Telenor Microfinance Bank are designed to operate as a fintech which uniquely positions us to cater to the country's masses by providing innovative digital financial services through our distinct payments and lending business.

Q: How do you see the practicality of digital financial services in the predominantly cash economy?

A: According to McKinsey Consulting, Pakistan’s digital financial market potential is almost $36 billion. Widespread use of digital payments can improve the GDP by 7 percent, creating four million jobs in the process and bringing more than $250 billion worth of deposits into circulation. Moreover, there are 6 million micro small and medium businesses in Pakistan and only 350,000 of them take formal credit from the banking system.

All these factors provide us with a significant opportunity that we can capitalize on. With a redefined mission of transforming Pakistan into a cashless and financially inclusive society by creating value through the power of collaboration and technology, our goal is to become the best-in-class payments platform while transforming the lives of Pakistanis through digital finance, thereby paving the way for the development of an ecosystem that ultimately results in a prosperous, digital Pakistan.

Moving forward, our strategic direction is to become a platform business model, offer digitally powered lending and become the number one payments App.

Q: Will new housing financing rules help in improving penetration of micro finance banks? What is your take on increasing regulatory oversight?

A: Enhancement of the credit limits for housing microenterprise loans is a welcome step taken by the SBP as it will promote development of low-cost housing in Pakistan. These limits have been increased considering a large unmet demand from micro and small enterprises across the country. With the impacts of the COVID-19 pandemic creating a lot of pressure on local economies, this initiative will provide added support to micro-borrowers and small enterprises allowing certain development activities to witness an early revival across the country.

The conditions for microfinance institutions have certainly become more stringent in light of the constant scrutiny by Financial Action Task Force but local banks are doing their best to make sure that all processes are in-line with the issued guidelines. In accordance with issued directives, microfinance banks have tightened regulatory oversight on customer interactions thereby conforming to anti money laundering and combatting the financing of terrorism laws within the country.

Compliance and risk management have become fundamental domains that banks have to focus on as organisations the world over are becoming extensively regulated. Additionally, a holistic approach towards compliance risk management has become critical for financial institutions because authorities are keeping a strict watch on movement of funds between entities.

With the capital injection of $70million, we are stable and on strong financial footing and are pleased to have the support from our shareholders.

The financial health of the bank remains sound. It is fully compliant of regulatory requirements to meet all financial obligations.

Q: Does your bank participate in the central bank’s loan repayment deferment scheme?

A: Telenor Microfinance Bank extended loan deferment options to customers. The bank has allowed borrowers leeway when it comes to repaying their loans.

Under the scheme, customers have been given the option to restructure or reschedule the loans that they had taken. Some of our customers took advantage of this scheme since the complete closure of economic activity during the first few months of the pandemic (March - June) stopped established revenue streams for the customers.

We have been able to successfully process over 107,000 repayment applications so far and are continuing to facilitate customers who are opting for the facility.

Some households even saw savings dwindle to a dangerously low level without knowing when things would get better and at a time like this, the loan repayment deferment came as a much-needed relief.