For years, farmer Mohammad Bin Yamin lived on a knife's edge, working a rented plot of land in central Pakistan barely large enough to support his wife and nine children.
He had no savings and relied on short-term loans for even the basics, like fertilizer for his fields.
"When you are poor you have all sorts of problems," Bin Yamin recalled recently.
But his life changed dramatically several years ago when he received a loan from the National Rural Support Program (NRSP), a non-profit organization focused on combating rural poverty.
While the loan was for just $50, it was enough for Bin Yamin to buy fertilizer and break his dependence on moneylenders. After a solid crop, he applied for more loans from NRSP, which he parlayed into a thriving farm with a dozen goats and three cows. Now, he even has a savings account, something he never dreamed possible.
"Life has changed very much in only six years," says Bin Yamin. "We have a house, we have animals, we have a future."
To help more people like Bin Yamin, NRSP enlisted IFC’s help in 2011 to transform part of its operation into a commercial microfinance bank. IFC invested in the newly-christened NRSP Microfinance Bank and gave it advisory support that helped it become one of Pakistan’s fastest growing financial institutions. Its deposits have grown 20-fold in the last two years and today NRSP bank has 190,000 borrowers, many of them farmers who previously had been shut out of the financial system.
The partnership with NRSP is part of a larger effort by IFC to drive economic growth across Pakistan by helping the country’s poorest secure loans and other forms of financing.
“There is so much entrepreneurial spirit in Pakistan, but most people struggle to find the money they need to get their business off the ground,” said Momina Aijazuddin, a principal investment officer with IFC. “By working with strong partners like NRSP, we can provide that financial access, and help change lives for the better.”
In short supply
There are an estimated 30 million people in Pakistan who could use micro-loans, but 90 percent of them don’t have access to credit.
That’s because many potential borrowers don’t know about micro-finance or live far from lender branches. Most microfinance institutions don’t offer important services like savings accounts, limiting their appeal. Lenders themselves also have trouble getting the financing they need to expand because they are often viewed as risky investments by commercial banks.
IFC is changing that by working with local partners and microfinance banks to provide Pakistan’s poorest with a range of financial services. Through a combination of investments and advisory support, IFC has helped over 450,000 people obtain micro-loans, many of them for the first time.
The organization’s work with NRSP Microfinance Bank is a prime example of that strategy. Two years ago, IFC agreed to invest up to $2 million in the newly-created lender. By launching the venture, NRSP would be able to reach out to more rural poor and offer them a wide array of crucial financial services, including savings accounts and insurance.
Meanwhile, IFC’s advisory teams helped NRSP Microfinance Bank improve its corporate governance, develop a growth strategy, and tighten its internal controls – all musts for a successful commercial lender.
Many of the changes were difficult, but chairman Rashid Bajwa says they have paid off in spades. "They say the proof of the pudding is in the eating. You just need to look at the numbers to see the difference that the changes have made.”
President and chief executive officer Zahoor Khan said the reforms have allowed the company to access financing that wasn't available before, and lay the groundwork for future expansion.
"As a microfinance bank, we are now able to reach out to more people. We are on sound footing, and now we are looking forward to growing.”
Rags to stitches
That is welcome news for clients like Shahnaz Bibi. The mother of four had never been inside a financial institution until she walked into an NRSP branch seven years ago. At the time, her husband was making about $15 a month working in a soap factory, and that was the family's sole income.
The embroidery expert took out a $50 loan, which she used to buy material.
She made some clothes, turned a healthy profit, and went back for another loan. Today, she runs a thriving embroidery business, selling clothes and bracelets to people in her village.
That has allowed her to buy a house, open a fruit stand with her husband, and put her children in private school. She recently took out another loan and is hoping to one day expand her business internationally.
Before NRSP, Shahnaz says she "had nothing. It was hard to get by on a daily basis."
But now, she is living a childhood dream.
"I loved embroidery and I always dreamt of a way to do this for a living. The loan gave me that chance."