Report of KHUSHHALI BANK:

By

Komal gul, Muhammad Imran, Bushra Perveen, Hafiza Iqra Munir,M. Saqlain, Ishrak
Hussain, Naveed Ahmad:
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 MBA 6th (Morning)

Roll No.04, 10, 09, 19,14,03,45:

Report submitted as a partial fulfillment of the requirement

of the course of (CREDIT RISK MANAGEMENT) MBA-6th.

Department of Business Administration

BZU Bahadur Sub Campus Layyah.

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We dedicate my dissertation work to our family and many friends. A special feeling of gratitude
to our loving parents, our sisters, our brothers have never left our side and are very special.

We also dedicate this dissertation to our many friends who have supported us throughout the
process. We will always appreciate all they have done, especially MAM ANUM ZULFIQAR for
helping us develop our skills, knowledge and creativity activities.

We specially dedicate this work and give special thanks to our best teacher MAM ANUM
ZULFIQAR. She was positive and gave generously of her time and vast knowledge.

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 We wish to thank our group members who were more than generous with their expertise
and precious time. A special thanks to mam ANUM ZULFIQAR our course instructor countless
hours of reflecting, reading, encouraging, and most of all patience throughout the entire process.

We would like to acknowledge and thank our university division for allowing us to conduct our
project and providing any assistance requested. Special thanks go to the members of staff
development and human resources department of Khushhali Bank for their continued support.

Finally, we would like to thank the beginning teachers, mentor-teachers and administrators in
our university that assisted us with this project. Their excitement and willingness to provide
feedback made the completion of this project an enjoyable experience.

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 The concept of credit management studies has an appreciably changes in thinking and
concept about the international business over the year. International business expands globally as
the key to rapid and sustainable economic development as well as the progress and welfare of
mankind. As we are the students of MBA. A professional degree course include one subject
called international business to guide the student to become the good Knowledge and what factor
keeping in their mind while setting up the business globally. We have an immense pleasure in
presenting our views after doing hard-work in a very clear sense. We hope that this Report will
obviously satisfied subject requirement.

Introduction:
Founded in the year 2000, Khushhali Microfinance Bank Limited was a part of the
Government of Islamic Republic of Pakistan's Poverty Reduction Strategy and its
Microfinance Sector Development Program (MSDP). MSDP was developed with the
facilitation of Asian Development Bank (ADB). With its headquarters based in Islamabad,
Khushhali Bank Limited operates under the supervision of the State Bank of Pakistan (SBP).
The bank's board comprises of seven members including leading commercial bankers, fund
managers and microfinance experts from across the globe. The mandate remains to retail

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 microfinance services and to act as a catalyst in stabilizing the country's newly formed
microfinance sector.

Vision:
To be a leading microfinance bank providing financial services to enterprises across Pakistan.

Mission:
To strive for excellence and to adopt sustainable practices for the best long term interest of all
stakeholders.
Values:
 Empower, Excel, Ethics
OUR MANDATE:
Being a commercial based microfinance institution, our purpose is to:
 Establish a sustainable platform of financial services to the poor accompanied with
retail delivery mechanisms
 Facilitate an environment where microfinance can prosper within Pakistan
 Assist the central bank in setting up an appropriate and a responsive framework where
microfinance institutions operate on sustainable grounds, thereby expanding their outreach to
the poor
 Promote transparency, financial firmness and high quality governance as leading
indicators within country’s microfinance sector

Credit Policies/ Types of Loan:

Khushhali Sarmaya (Micro Enterprise Lending)
Khushhali Sarmaya is an individual loan of up to Rs. 500,000 which caters to micro-
entrepreneurs and small farmer’s/livestock owners.
Including purchase of raw material, finished goods, stocks inventory to enhance
Product description: production of goods and services
Credit for operating assets to generate income for small business
Funding for agri-business and cultivation needs of farmers i.e. for buying crops inputs,
irrigation equipment, fertilizers, seeds, pesticides etc.
Applicant must be micro-entrepreneurs who are either self-employed or employ few
individuals maximum 10 (excluding seasonal labors)
Loan Eligibility Minimum business experience of 2 years
Criteria Age: 20 – 60 Years
Holding valid CNIC Must have good credit history and not availed multiple loans
Must have good credit history and not availed multiple loans

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Tenure 3 – 36 months
Equal Monthly Installments, Warranty of 1 individual or 1 legal entity, Means of
Repayment Options
transportation, Equipment
Turnover goods, Personal property, Other movable property, Deposit funds with the
Collateral
Bank
1. Minimum Loan Amount: Rs. 150,001/-
Loan Ticket
2. Maximum Loan Amount: Rs.500, 000/-
Service charges upto 31% APR

Khushhali Cash Sahulat – Loan for Individuals:

Khushhali Cash Sahulat is an ‘Individual Loan’ collateralized through a range of
acceptable securities. The loan may be utilized to expand micro-enterprises / small
Product Description
businesses (to meet working capital requirements or purchase of assets) and offers free
imbedded credit life insurance. Household annual income less than Rs. 300,000
Age: 18 - 64 Years
Loan Eligibility
Business experience of minimum of 2 Years
Criteria
Holding valid CNIC, Not defaulter of KBL or other banks
Gold ornaments/bars as evaluated by Khushhali bank’s approved goldsmith (18 carat or
Acceptable above) Khushhali Microfinance Bank  Term Deposit Certificates
Securities National Savings Certificates (Defense Saving Certificates, Special Saving Certificates,
Regular Income Certificates)
Tenure 3-12 Months
Repayment Options Lump Sum payment at the end of the loan period Equal Monthly Installments
1. Minimum Loan Amount: Rs.25, 000/-
Loan Ticket
2. Maximum Loan Amount: Rs.150, 000/-

Khushhali Qarza:
Product Type Group Based
Product Purpose Agriculture, livestock and enterprise
Age: 20 – 63 years
Income: Less than or equal to Rs. 500,000
Loan Eligibility Permanent resident of the locality for 2 years
Criteria NADRA CNIC/SNIC holder,2 years’ experience

Tenure 3-12 Months

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Repayment Options Monthly installment/lump sum
Guarantors Group Guarantee/Social collateral
Collateral None
Loan Ticket 
(Minimum & Maximum) PKR 15,000 to 50,000

31% APR
Service Charges

Khushhali Livestock Loan:

Product Purpose
Loan Eligibility Criteria
Tenure
Repayment Options
Collateral
Loan Ticket PKR. 50,000 to 150,000
(Minimum & Maximum)
Service Charges 32% APR
free animal health
insurance
Insured perils Purchase of new animals (Cows, buffaloes and bulls)for
fattening, breeding and milking
Non Insured perils: Goats, Sheep, Poultry and Fisheries (Non-insured) 
Free animal’s life Insurance in case of death/theft and borne by the bank
(applicable for insured perils only)
Age: 20 – 63 Years
Age of animal to be purchase must be between 9 months and 5 years
Applicant willingness to tag the animal for insurance cover
Minimum 2-year experience of livestock keeping/handling
Having at least 1 animal
NADRA CNIC/SNIC holder
3-24 months for fattening and 3- 18 months for breeding & dairy
Equal Monthly Installments
Monthly mark-up and principal at maturity
Hypothecation

Khushhali Qarza Plus:

Product Type Individual Loan (available only for KQ repeat clients)
Product Purpose Enterprise, Livestock and agriculture
Age: 20 – 63 years,
Loan Eligibility Criteria

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 Minimum KBL relationship of 3 cycles (but not less than 24 months)
Previous loan of KBL to be either fully settled or only accrued mark-up to be
paid till date
Remaining tenure if the existing loan cycle to be 6 months or less
Permanent resident of the locality for 2 years
NADRA CNIC/SNIC holder
2 years’ experience
Tenure 6-18 Months
monthly/ quarterly/ semiannual installment
Repayment Options
Periodic SC & principal at maturity
Guarantors None
Collateral None
Loan Ticket PKR 50,000 to 150,000
(Minimum & Maximum)
Service charges 29% APR

Khushhali School Loan:

Product Purpose To offer private school owners involved in providing low cost education to
improve school infrastructure/acquisition of quality enhancing products and
service
Age: 20 – 63 Years
Loan Eligibility Criteria
School must be in operations from the last 2 years
Minimum 100 Students enrolment. Minimum fee Rs.350/- per month
per student, NADRA CNIC/SNIC holder
Tenure 6 to18 months
Repayment Options Equal Monthly Installments
Collateral Post Dated Cheques (PDC’s)
Loan Ticket  PKR .50,001 to 150,000
(Minimum & Maximum)
Service charges  28% APR

Product Type/Category
Product Description
Loan Eligibility Criteria
Agriculture Loan:
Group Based
For the purchase of seed, fertilizer, pesticides. For irrigation, rental of agricultural
equipment, transportation etc.
Age: 18 – 58 years, Maximum for repeat clients: 64 years
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 Income: Total annual income is less than Rs. 300,000
Permanent resident of the locality for 2 years
NADRA NIC Holder
2 years’ experience
Loan Amount PKR 10,000 / 15,000
3-12 Months
Tenure/Repayment Options
Monthly/Quarterly/Semiannual/Annually
Guarantors Cross Guarantees
Collateral None
Rates & Fee Structure Please refer to our current schedule of charges

Sarsabs Karobar Khushhali:

Sarsabz Karobar caters to the financing needs of small certified growers of Public or
Private Agro based organizations, primary /secondary milk suppliers, artisans, craftsmen,
entrepreneurs & small traders involved either in supply/ manufacturing of raw material or
finished goods, end users of technology & energy equipment’s.

 Loan Eligibility Criteria :Age: 20 – 63 Years

 Proposed Value Chain Partner’s reference
 Household annual income less than or equal to Rs. 500,000/- or less
 Business experience of 2 years
 NADRA CNIC/ SNIC holder
 Not defaulter of KMBL or other banks
 Tenure: 3- 12 months, Repayment Options: Lump Sum payment at the end of the loan
period, Equal Monthly Installments
Loan Ticket  (minimum and maximum) PKR. 20,000 to 150,000

Service charges: Up to 25% APR

Khushhali Asaan Qarza:

Product Type: group based

Product Purpose: Agriculture and Livestock

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 Loan Eligibility Criteria

 Age: 20– 63 years

 Income: Less than or equal to Rs. 500,000
 Permanent resident of the locality for 2 years
 NADRA CNIC/ SNIC holder
 2 years’ experience
Tenure: 3- 12 Months, Repayment Options, Monthly markup and principal at maturity

Collateral: Group Guarantee/ Social collateral, Loan Ticket (minimum and maximum)
PKR 15,000 to PKR 50,000

Service Charges:28% APR

Shandar Bachat Scheme:

Product Purpose:
To attract and retain small savings from KMBL’s target market segment especially
women in current account category with an additional offer of loan facility for enterprises and
livestock sector

Loan Eligibility Criteria

 Age: 20– 63 Years

 Positive & Adequate Cash-flow (financial toolkit)
 Annual income of the applicant as per prudential regulations
 Residing in the area from the last 2 years
 Business experience of minimum of 1 year
 NADRA CNIC/ SNIC/ NICOP holder
 Not defaulter of KMBL & other institutions
Tenure: 3– 24 months
Repayment Options

 Equal Monthly Installments

 Monthly mark-up and principal at maturity (only for the livestock purchased for the
fattening purposes)
Collateral
50% deposit will be lien marked against approved loan

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 Loan Ticket:  (minimum & maximum) PKR. 10,000 to PKR. 150,000

Service charges :15% APR

Enjoy monthly return on your investment

Khushhali Izafa Certificate which gives you attractive monthly returns Invest today with an
investment of Rs. 25,000/- and earn profit every month!
PRODUCT FEATURES
 Profit paid monthly
 Invest with a minimum amount of Rs. 25,000/-

Khushhali Izafa Certificate

Khushhali Izafa Certificate Monthly Rates

Profit
6 12 24
Deposit Tiers PKR 18 Months 36 Months
Months Months Months
25,000- 49,999 5.25% 7.25%
50,000-99,999 5.75% 8.25%
9.25% 9.50% 10.00%
100,000-999,999 6.25% 8.75%
IM and above 7.00% 9.00%

Manager credit risk:

Job Objective:

Manage, develop and implement the credit risk functions for the bank in line with the
Risk Management Policy and framework, adhering to best international standards and practices.

Key Responsibilities:

 Establish & strengthen governance of credit risk through the development and ongoing
review of risk appetite, policy, procedures and limits in order to ensure that losses
associated with potential default may be avoided. Propose risk limits for credit risk on
portfolio basis to assess that credit risk remains within the risk appetite approved by the
BOD.

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 Develop and review of credit risk models / monitoring tools to assess that banks overall
credit risk exposure is maintained at prudent levels and consistent with the available
capital.
 Review of credit policy, credit procedures, business strategy and collection & default
management strategies. Recommend collection & default benchmarks / efficiency rates
bank-wide basis.
 Review of product programs/manuals including financial viability/profitability based on
projections, risk/return tradeoff, expected losses, delinquency etc. Assessing that such
manuals/ programs are in accordance with the risk management policies and framework.
 Develop/Review the stress testing framework, perform stress tests using reasonable
scenarios and in accordance with the regulatory requirements (as applicable) and
generally accepted practices and reporting the results to the stakeholders on periodic
basis.
 Supervise transactional review of MSME portfolio on sample basis to determine the
overall risk profile. Random visits of branches to check whether practices are in line with
policies, procedures and regulations. Conduct trainings of frond-end staff on credit risk
culture.
 Review/ assess the overdue accounts, collections efficiency, and default concentrations,
provisions made against defaults, recoveries made against write-off cases, re-scheduling/
re-structuring, exceptions, write-offs etc. to propose recommendations for improvement
purposes. Review Banks performance against KPI, KRIs and budget/Business Plan.
 Supervise/Prepare regularly scheduled business and credit risk reports and presentations
for management, RMC, and BRMC. Compile analysis of compliance status inclusive of
explanations for trends & deviations. Ongoing monitoring, analyses and timely reporting
of credit risk to management, RMC and BRMC in compliance with risk policy and
procedures. Update the reporting requirements in the light of changing market dynamics
to strengthen the reporting framework and presentation formats for portfolio analysis.
 Regular coordination/meetings with internal and external stake holders on day to day
issues pertain to credit risk area. Responsible for development /grooming of subordinates
 Perform any other responsibility as assigned by the Risk Management Committee, Board
Risk Committee, President and any other competent authority from time to time.

Risk management/ risk assessment:

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 Khushhali bank is based on risk measurement. All the detail is assessing by the bank self
deeply. Risk factor is low due to risk management. It is the microfinance bank so that why they
give short or medium term loans to customer so that the risk is low. Modern credit process is
used most of the time. At some places traditional theory is used where loan is given on reference
base.

Khushhali Bank: With drop in market share, enthusiasm does not die;

LAHORE: Despite a drop of two percentage points in its share in the microfinance market,
Khushhali Bank President Ghalib Nishter is enthusiastic, believing that the bank will continue
to lead in the micro-loan category on the premise that around 90% of the market is yet to be
tapped.

In an interview with The Express Tribune, Nishter described microfinance as a healthy and

growing sector that had made marked progress over the last few years.

“To date, around 2.8 million active borrowers have benefited, which constitute only 10% of the
microfinance market,” he said. “Microfinance holds huge appeal for consumers with enormous
potential to grow in coming years.”

Being the first licensed microfinance bank in Pakistan, Khushhali Bank kicked off operations
in 2000 and is still a market leader. Though its active borrowers dropped to 20% of the market
in financial year 2012 from 22% in 2011, revenues grew 27% in the year.

This supported the net profits, which improved to Rs168 million, up 11% compared to
2011. Nishter attributed the growth in the balance sheet to improved non-fund income, product
diversification and recovery of bad debts, which emerged after successive floods in the
country.

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“Floods in 2010 and 2011 impacted the bank’s operations badly in rural areas; these were one
of the toughest years for the microfinance sector,” he remarked.

The bank has diversified its product line, catering to the needs of different segments of
the society, still its core focus is on rural areas of the country. Since its acquisition in 2012 by a
consortium led by United Bank Limited, the new management is making inroads into the
market much faster with the diversified product line to grab a maximum share.

Loan sizes:

Unlike commercial banks, micro loans are offered in a simpler way. Khushhali Bank’s
staff in collaboration with local communities in different areas searches for those looking for
some financing to start or enhance their small-scale businesses.

Loan amount ranges from Rs10,000 to Rs150,000, depending on the need of the
borrower. Recently, the bank has launched a microenterprise product, allowing a borrower to
secure loans up to Rs500,000.

Though interest rate for these loans stands at a high around 31%, but the bank claims
that the figure drops to 17% by applying the Reducing Balance Method.

The level further falls to 14% for the loan period, which normally ranges between three
months and one year, if the credit history of the borrower remains good. Once the loan cycle
ends, the borrower can apply for another one on the same day.

Getting the money back:

The attitude of bank staff while making recoveries is not offensive. This is endorsed by
clients like Tasleem Shahid, a resident of Lahore.

“I have taken a second loan from the bank, not me or any other borrower of my area has any
complaints, though in some cases borrowers get a little bit late in paying an instalment,” she
said.

“The friendly behaviour of bank staff encouraged me to apply for another loan, now I am
earning around Rs20,000 from my small shoe-stitching business,” she added.

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According to Nishter, the bank’s loan recovery ratio is 98% and has a retention rate of almost
75%.

SWOT analysis:
.The SWOT analysis of Khushhali Bank is presented below..

Strengths:
 Fastest growing Microfinance Institution
 Major Partners
 Extended Network
 Rural development
 Credit facilities- collatral
 Agricultural development
 Women Empowerment
 Increase Entrepreneurial Skills
 domestic marke
 high profitability and revenue

Weaknesses:
 small business units
 natural disasters
  Inefficient to Reduce Poverty
 Transitory poor are neglected
 Inefficient Sustainability
 providers must provide services efficiently over time
 drive for a “supply-push” of loans caused a focus on gaining new customers
 Inefficient to Reach Women

Opportunities:

global markets
growth rates and profitability
growing economy
income level is at a constant increase
 

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Threats:

-increasing costs
-external business risks

PEST ANALYSIS:

Political:
Political instability in Pakistan can lead to changes in laws and policies which can be in favor or
against the banking sector.

Economic:
Economy of Pakistan is facing issues about employment, inflation, illiteracy, which hinder
business growth.

Social:
Cultural issues can be there but still as there are multinational companies there, therefore,
cultural issues are not prominent.

Technology:
People are highly skilled and bank can introduce new technology to increase competencies

Why Khushhali bank:

With our strong geographical footprint across Pakistan, Khushhalibank aims to attract
and develop people for an exciting career. It is a place where people get a chance to flourish and
fulfill their career aspirations.
The bank believes in the power of people with a drive to succeed and invests in them as a
valuable resource. We promise multiple avenues of learning and growth which lead to
challenging and engaging career paths.

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Challenges and Prospects:
Social

 Inadequate Access of the Poor to Services

 Obstacles for Microfinance Outreach to for Women

 Absence of Risk Mitigation Measures

Financial

 Microfinance-Specific Policy Framework

 promotion of institutions that can target the poor

 acceptance of individuals for MF transactions

 mechanisms to ensure that social intermediation accompanies MF services

 significant investments in social intermediation

 pro-poor financial innovations

 autonomy in pricing and client selection

 proactive role of the Central Bank in developing the MF sector.

Conclusion:
 microfinance is relatively less developed sector and a large scope is available to increase
the financial services

 GOP established KB as part of the Government of the Islamic Republic of Pakistan's

Poverty Reduction Strategy with assistance of ADB

 KB’s micro credit program has positive impacts on both economic and social indicators
of welfare, as well as income-generating activities

 KB's lending is predominantly geared to agricultural households with limited micro

enterprise activities

 The existing strategy of portfolio consolidation will continue and growth of clients will
stabilize to 18-20% over next five years with an outreach to 800,000 clients

 Growth retention is still a challenge

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Recommendations:
 To reduce the poverty, it is necessary that disbursement should be focused to the point

 credit processes should have kept simple

 group members can reduce or increase according to population of working areas

 overcome the social and cultural gender biases against female participation

 increase focus on deposit mobilization to sustain their operations in future

 Establish incentives for retail providers to diversify funding sources

 Encourage innovation, new specialized actors, new approaches, and diverse financial
services

 Bring in investors for know-how, governance & equity

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