Pakistan Microfinance Network: Annual Report 2013 by Headbumped Studio

PAKISTAN MICROFINANCE NETWORK

ACHIEVING TOGETHER

The Pakistan Microfinance Network is an association of retail microfinance providers. Our vision is to extend the frontiers of formal financial services to all and mission is to support the sector, especially retail microfinance institutions to enhance scale, quality, diversity and sustainability in order to achieve inclusive financial services. Pakistan Microfinance Network – Annual Report: 2013

Copyright c 2014 Pakistan Microfinance Network 117, Street 66, F-11/4, Islamabad, Pakistan Telephone: +92 51 2292231 / 2292270 Fax: +92 51 2292230 www.pmn.org.pk

Designed & Produced by Headbumped Studio www.headbumped.com

All rights reserved. The data in this report have been carefully compiled and are believed to be accurate. Such accuracy is not however guaranteed. No porƟon of this publicaƟon may be reproduced in any format or by any means including electronically or mechanically, by photocopying, recording or by any informaƟon storage or retrieval system, or by any form or manner whatsoever, without prior wriƩen consent of the author and publisher of the publicaƟon. Disclaimer: Neither Pakistan Microfinance Network (PMN) nor PMN’s funders accept responsibility for the validity of the informaƟon presented or consequences resulƟng from its use by third parƟes.

PAKISTAN MICROFINANCE NETWORK

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Table of Contents

III

ACRONYMS

MESSAGE FROM THE CHAIRMAN

MESSAGE FROM THE CEO

BOARD OF DIRECTORS

GET TO KNOW PMN

PMN’s History at a Glance

Our Membership

Our Governance Structure

Our Team

Ensuring Transparency

Building an Enabling Environment for Microfinance

Our Events

2013 IN REVIEW

The Information Gateway

Strengthening Institutions: Trainings, Exchanges & Academic Linkages

FUTURE DIRECTIONS

PMN at Networking

Balance Sheet

Income and Expenditure Statement

Cash Flow Statement

FINANCIAL STATEMENTS: 2013

Statement of Changes in Funds and Reserve

Our Work

Auditors’ Report to the Members

Notes to the Financial Statements

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Acronyms A B

AGM

Annual General Meeting

ADB

Asian Development Bank

BISP

NIBAF

National Institute of Banking and Finance

NGO

Non-Government Organization

NUST

National University of Science and Technology

PMN

Pakistan Microfinance Network

Benazir Income Support Programme

P CIB

Credit Information Bureau

PMR

Pakistan Microfinance Review

CGAP

Consultative Group to Assist the Poor

PPAF

Pakistan Poverty Alleviation Fund

DFID

Department for International Development

RSP

Rural Support Programme

GIS

Geographical Information System

SAMN

South Asian Microfinance Network

SBP

State Bank of Pakistan

SECP

Securities and Exchange Commission of Pakistan

SEEP

Small Enterprise Education and Promotion

Social Performance

UBL

United Bank Limited

The World Bank

I L M

IFAD

International Fund for Agricultural Development

IFC

International Finance Corporation

LKY

Lee Kuan Yew

MFB

Microfinance Bank

MFCG

Microfinance Consultative Group

MFG-P

Microfinance Group-Pakistan

MF-CIB

Microfinance Credit Information Bureau

MFI

Microfinance Institution

MFP

Microfinance Provider

MFT

Microfinance Transparency

MIX

Microfinance Information Exchange, Inc.

MoF

Ministry of Finance

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

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Message from the Chairman I am delighted to report that 2013 was another

PMN undertook several projects with international organizations such as The World Bank (project on

program accomplishments.

Centre (research on the moneylenders in agriculture value chains), PLAN International (study on viable

It will be my honor and privilege to serve as Chairman of the PMN Board of Directors in the coming years. PMN today is recognized around

ACTED (project on linkages with MFPs for trainees of vocational training programs); SBP awarded PMN a project titled “GOVERNANCE NEEDS OF THE MICROFINANCE INDUSTRY: A Customized Training Program” under the ISF of the FIP. This project was managed by the Network;

networks and is well respected for its contributions by the local industry. The vision of its esteemed Directors, strong administrative leadership and support, and the commitment of PMN members has contributed to this success over the years.

PMN strengthened its relationship with the PPAF through a grant of PKR 12 million for Knowledge Management Initiatives in 2013;

These achievements are no small feat when considering the backdrop of slowing growth in the domestic and world economy, as well as local political uncertainties and announcement of

PMN secured funding from State Bank of Pakistan and the Pakistan Poverty Alleviation Fund, and partnered with Micro Finance Transparency and the Smart Campaign to work on pricing transparency and client protection in the sector. PMN was also awarded a

the sector in many ways. I attribute our resilience to the sector's determined focus on achieving its objectives, maintaining our quality of work and

the Universal Standards on Social Performance Management in Pakistan;

several years. Our ability to consistently deliver robust results could not have been achieved without the dedication and commitment of our most valuable asset – Our Members. The valuable support and feedback of PMN members have been instrumental to the Network’s unprecedented success. In particular, 2013 was an extraordinary year for achieved several remarkable milestones during the year. We are proud to share the following accomplishments, each of which played a pivotal role in the delivery of our results during 2013 and will continue to do so in the years to come. PMN with support from State Bank of Pakistan, Department for International Development – UK and Pakistan Poverty Alleviation Fund launched the Consumer Protection Initiative. The initiative is to inform d designed info f rm the debate on interest in nterest rates through high q quality and standardized d data, strengthen disclosu in product prices ure a provide accurate and b benchmarking data fforr the sector as well fo a take stock of client as p protection practices a against globally acce epted bench-marks;

PMN has become a key stakeholder for consultations ers in Pakistan. We are part of various forums formed by the Ministry of Finance and Pakistan Poverty Alleviation Fund from time to time. This year, PMN actively participated in State Bank of Pakistan’s Micro Finance Consultative Group and Working Group on Commission of Pakistan’s Micro Insurance Task Force; PMN also initiated a process for broadening the approached the SECP with regards to developing a framework for non-bank MFIs. As a result, a task force led by Chairman SECP has been set up for which PMN is serving as the secretariat. In addition, PMN pursued the agenda of establishment of a risk mitigation fund for the sector; In 2013, with support from State Bank of Pakistan (SBP) and Pakistan Poverty Alleviation Fund (PPAF), MicroTALK, a quarterly newsletter, was also launched by the Network in 2013; Business Recorder,r wa was as p published during the year, and; During the year,r the e go governance and membership structure of PMN wa was as rrevised and approved by the PMN Board of Directors. Dire ecto To provide a platform to market, PMN creat created ed a new tier to its membership structure and rece received eive 12 applications from the PPAFs P partner org organizations gan to become PMN Associates membe members. ers. The decision regarding approval of these app applicants plic was taken in the PMN Board meeting in January Jan nua 2014. Based on the new PMN governan governance nce and membership structure the ‘A ‘‘Associate sssoc members’ will have one seat in n the th General Body (GB) and as a group grou up will elect one member thr through rou voting within this tier. The ssam same GB member will also be p part of the PMN Board

through a reserved seat. PMN management developed a mechanism for this process in order to curb elite capture and promote rotation in representation on annual basis.

This year, too, the Network was focused especially on pursuing its sustainability. PMN was awarded a one-time grant of PKR 60M for endowment purposes by the PPAF under IFAD-PRISM Equity Fund, which is an important milestone in further In addition I am happy to report that in 2013, the Network was successful in getting the extension support under Financial Inclusion Programme (FIP) for the next two years (2013 – 2015) under the agreement Extension in Operation Support. So we are pleased to share that under the guidance of the Board and with support from PPAF and SBP, the Network closed the year with equity of PKR 135.7 million on December 2013, up from PKR 60 million on December 2012. Looking ahead, I believe 2014 will therefore be another year of ambition, growth and performance. Certainly, we will also strengthen the organizational capabilities that support our growth aspirations, maintain our high standards of corporate governance, and advance our sustainability agenda. In this report, the Network is to provide readers with an overview of its activities during the year 2013 and highlight the key milestones achieved by it and its members. Accounts for the year ended December 31, 2013: A summary of the operations is as under: Total income from all sources Governance & Management Capacity Building Enabling Environment Information Hub

PKR 195 million PKR 19.5 million PKR 13 million PKR 82 million PKR 38 million

Position of fund balances is as follows: Unrestricted Fund PKR 135.7 million

In closing, I would like to extend my heartfelt gratitude to all my fellow directors for their continued support and guidance to the Network. I also wish to express my sincere appreciation to PMN team of highly-talented people for their dedication, passion, and execution. Together, our success will be assured as we further grow PMNs leadership position in the industry that we operate. On behalf of the Board,

Syed Nadeem Hussain Chairperson Board of Directors

Pakistan Microfinance Network – Annual Report 2013

III

“You only have to do a very few things right in your life so long as you don’t do too many things wrong.”

Message from the CEO Esteemed stakeholders, it is indeed a pleasure for me to share with you some of the great achievements that the industry has been able to achieve over the last year. Interestingly some of these relate to MF-CIB achieving a major milestone of receiving data from almost all the PMN members representing above 90% of the market. We also saw the launch of a series of initiatives related to Responsible Finance, PPAF entered into partnership with the Seal of Excellence to carry out due diligence of two of its partners, PMN partnered with MF Transparency to promote pricing transparency and Smart Campaign carried out assessment of Client Protection principles under funding support from the State Bank of Pakistan (SBP) and Pakistan Poverty Alleviation Fund (PPAF). One of the milestones achieved during the year was the immensely successful and widely acknowlorganized by PPAF and PMN, which acted as a platform to present the agreed vision of the industry stakeholders in the form of Islamabad Declaration with a resolve to scale-Up with array of speakers sharing their views on banking and building synergies among Honorable Finance Minister at the Inaugural session and Deputy Governor SBP at the Summit was the highlight, which indicated eco-system. A number of other positive developments in the industry also occurred which would prove to pave the way for further expansion and issuing license to U Bank to operations at the national level as another MFB with a branchless banking license, merger of KASHF and FINCA International as another global investor takes a majority

start

improved balance sheets of the non-bank MFIs through PPAF’s equity grant injection leading to MFIs’ increasing equity and setting up a committee by SECP to regulate non-bank MFIs. Building up on these initiatives, we – as a double bottom line industry – can push building relations with corporates, be it Telcos or insurance companies or educational institutions. There is tremendous potential to

industry has a core business and the new business model is around synergies to add to each other’s strengths. As I see it, we in micronow up to us to recognize how we can collaborate and partner with other stakeholders to harness our collective capacity. Pakistan is considered to have one of the best and highly recognized business and regulatory environment. This can be leveraged to come up with innovative solutions in products and distribution channels in order to escalate outreach. PMN will be delighted to provide a platform for such interconnection, knowledge creation and promoting an enabling framework for all to foster growth with a purpose of impacting the lives of our clients. Going forward, another important area to level. In addition, promoting knowledge and creating synergies for product development and interacting with health and education sectors through credit and/or insurance products so that life time events - requiring larger resource allocation - from our clients can be addressed. Similarly providing loans to micro and small entrepreneurs is a domain that needs to be looked into. This means discussion with the government on the “Prime Minister Youth Loan Program” is essential, backed by solid research in areas of distribu-

missing middle and create jobs through micro and small enterprise development. Concerning PMN, it is indeed a matter of honor for all of us that PMN has been in the vanguard in

all the initiatives taken up by the industry as a whole, and has established strong linkages with SBP, PPAF and SECP along with donors like DFID, KFW, and The World Bank etc. Another important milestone for PMN in relation to PPAF was the approval of the endowment grant to PMN of PKR 60M under the IFAD’s PRISM equity fund. Due to this injection, PMN’s equity base is expected to reach PKR 160M by the end of 2014 to ensure its protracted viability. At the end I would like to pay my gratitude to members, Board of Directors and the donors like DFID, PPAF, Citi and FIP secretariat (within the central bank) for their support to the PMN. I would also like to thank the PMN team that worked tirelessly to ensure the quality of work and achieve most of the objectives set in 2013.

Syed Mohsin Ahmed

Our Esteemed Board of Directors CHAIRPERSON Syed Nadeem Hussain

VICE CHAIRPERSON Mr. Anwar Rashid Executive Director, Orangi Pilot Project (OPP)

DIRECTORS Dr. Rashid Bajwa CEO, National Rural Support Programme (NRSP)

Mr. Ghalib Nishtar President and CEO, Khushhalibank Ltd. (KBL)

Dr. Amjad Saqib Executive Director, Akhuwat

Mr. Amir Masood Khan MD. Mosharrof Hossain CEO, ASA-Pakistan

Mr. Mudassar Aqil Mr. Muhammad Murtaza CEO, Rural Community Development Society (RCDS)

Mr. Zafar Iqbal Junejo CEO, Thardeep Rural Development Programme

INDEPENDENT DIRECTORS Mr. Faisal Ejaz Khan CEO, 1-Link

Dr. S Akbar Zaidi Economist

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

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GET TO KNOW PMN

2013 IN REVIEW

FUTURE DIRECTIONS

FINANCIAL STATEMENTS: 2013

PMN’s History at a Glance or ‘the Network’), the national association industry, traces its beginning as an informal group by industry practitioners

1997 - 1999

Group-Pakistan [MFG-P]. At the time, the group was focused on coordinating dialogue and peer learning opportunities. Over time, with the increase in the nature and level of activities, and membership, the setup was registered with

the Securities and Exchange Commission [SECP] in April 2001 under Section 42 of the Companies Ordinance. It has since Network.

2000 - 2004

2005 - 2007

2008 - 2014

PMN officially incorporated

Membership expanded to include MFB peer group

Membership expanded to

MFB

PMN governance structure rationalized

Informal group established and championed by founding members

BoD

Network staff hired

Member performance assessed

Members

Affiliates

ASSESSMENT

Associates

Associate category created

Pakistan Microfinance Network – Annual Report 2013

GET TO KNOW PMN

PMNâ&#x20AC;&#x2122;s History at a Glance Our Membership Our Governance Structure Our Team Our Work

Vision Frontiers of Formal Financial Services reach out to all

Mission Support the especially retail providers, to enhance their scale, quality, diversity and sustainability in order to achieve services

Core Values Collaboration Innovation

Diversity Empowerment Transparency

www.pmn.org.pk

PMN’s History at a Glance Our Membership Our Governance Structure Our Team Our Work

GET TO KNOW PMN

2013 IN REVIEW

FUTURE DIRECTIONS

FINANCIAL STATEMENTS: 2013

Our Membership (PMN) is a member-based organisation

changes with one voice to foster the sector’s growth and address challenges faced by them. The Network’s strength

nance industry as well as other stakeproviders [MFPs] that collectively account sector in Pakistan. Today its membership outreach in Pakistan. This diversity of institutions is also evident within PMN’s across Pakistan. The members look towards PMN for bringing about policy

Institutions (MFI), 08 Rural Support Programs (RSP) and 09 other types of providers (see EXHIBIT 1 for a list of our current members). The diversity in membership is evidence of the Network’s positioning as a sector level association and helps in achieving the overarching Pakistan.

EXHIBIT 1: PMN’s Members (December 2013)

Khushhalibank Ltd. (KBL)

regulated by the State Bank of Pakistan to

Akhuwat ASA Pakistan Asasah Wasil Foundation Community Support Concern (CSC) Development Action for Mobilization and Emancipation (DAMEN) Kashf Foundation Orangi Charitable Trust (OCT) Sindh Agricultural and Forestry Workers’ Cooperative Organization (SAFWCO)

Members

Rural Support Programmes (RSPs) operations as part of a multi-dimensional rural development programme

Others as part of a multi-dimensional service program

National Rural Support Programme (NRSP) Punjab Rural Support Programme (PRSP) Sarhad Rural Support Programme (SRSP) Sindh Rural Support Organization (SRSO) Thardeep Rural Development Programme (TRDP)

BRAC- Pakistan Jinnah Welfare Society (JWS) ORIX Leasing Pakistan Ltd. (OLP) Rural Community Development Society (RCDS) Sungi Development Foundation Ghazi BarothaTaraqiati Idara (GBTI) Farmers Friend Organization (FFO) The Punjab Provincial Cooperative Bank Ltd. (PPCBL)

Pakistan Microfinance Network – Annual Report 2013

GET TO KNOW PMN

PMN’s History at a Glance Our Membership Our Governance Structure Our Team Our Work

Our Governance Structure PMN’s members lie at the heart of the organization’s governance.The governance and membership structure of PMN was revised and approved by the PMN Board of Directors. To provide a platform to the smaller MFIs representing the tier (see EXHIBIT 2) to its membership structure and received 12 applications from the PPAFs partner organizations to become PMN Associates members.

In response to the growing membership over the past years, the PMN has realigned itself by having an adaptable governance structure, where the 11 member Board provides the necessary oversight and strategic guidance to the management. This Board is elected by the General Body and is thus truly a communal representative of the sector. The Board is supported by two sub-committees: the Policy Committee and the

Audit Committee.1 In 2013, PMN successfully carried out one (01) Annual General Meeting (AGM), four (04) Board meetings, one Audit Committee Meeting and one Policy Committee Meeting.

EXHIBIT 2: PMNs New Governance Structure

11 members

Board of Directors

Members of the General Body

Affiliates of the PMN

Associates of the PMN

1 This was previously designated as Finance Committee

www.pmn.org.pk

13 members

22 members

17 members

PMN’s History at a Glance Our Membership Our Governance Structure Our Team Our Work

GET TO KNOW PMN

2013 IN REVIEW

FUTURE DIRECTIONS

FINANCIAL STATEMENTS: 2013

Our Team

by the Administrator, an Accountant,

team, PMN has been able to prevail over challenges, achieve its set out objectives for the year and meet the expectations of the various stakeholders. (See EXHIBIT 3 for the PMN organogram).

working to support the analysts. During 2013, with the unfaltering support of the

The team steers the Network’s within the strategic direction provided by PMN's

designed to evolve with the needs of its members. The PMN team currently

Board of Directors as well as a number of working groups, task forces and committees (see EXHIBIT 4 the direction of new initiatives and bring member buy-in into the Network’s activities.

EXHIBIT 3: PMN’s Organogram

Board of Directors

Chief Executive Officer

Chief Operating Officer

Research Analyst

Communications Analyst

Social Analyst

Technology Analyst

Finance Analyst

Support Staff (Associates & Interns)

Finance Manager

Support Staff (Associates & Interns)

Administrator

Accountant

Office Secretary

EXHIBIT 4: PMN’s Various Groups and Committees Committees • Audit Committee • Policy Committee

Task Forces • MF-CIB Task Force

Working Groups

Working Group • Social Performance (SP) Working Group • HR Working Group • MFB Risk Management Working Group

Others • Training Interview Panel • PMR Editorial Board

Pakistan Microfinance Network – Annual Report 2013

GET TO KNOW PMN

PMN’s History at a Glance Our Membership Our Governance Structure Our Team Our Work

Chief Operating Officer

Communications Team

Finance Team

As the COO, Aban provide strategic direction to the information hub, enabling environment and capacity building functions of the PMN in line with the company's business plan. She also oversees the development and execution of PMN's annual work plan, and ensures the quality of deliverables including publications, events, data analytics, media engagement, trainings and industry infrastructure development projects. Aban represents the PMN at various national and international forums, contributes to policy discussions and strives to strengthen donor relationships. Aban is also responsible for membership expansion and managing member relations at PMN.

The communications team is responsible for overseeing primarily the communications and public relations work at the PMN. The team manages the capacity building initiative which includes creating and maintaining linkages with different academic institutions and organizing trainings and workshops for the member MFPs. The team is also involved in the management of PMN’s events. In addition, the communications team is also responsible to provide input on development and implementation of PMN’s own brand equity. The team also manages the organization’s human resource function.

The Finance team comprises of a Financial Analyst and a Finance associate. The team leads the publication of PMN's annual flagship publications - Pakistan Microfinance Review (PMR), as well as MicroWATCH, a quarterly publication. In addition the team is also actively involved in facilitating linkages with investors and commercial funding sources to meet the future funding requirements of the sector.

www.pmn.org.pk

Finance and Accounts Team Finance and Accounts team is responsible for looking after and providing accurate and timely information regarding the Company's financial affairs. In

PMN’s History at a Glance Our Membership Our Governance Structure Our Team Our Work

GET TO KNOW PMN

close collaboration with other departments, the team aims to deliver a bestin-class finance and accounts service. To achieve this, the team looks after: • Book keeping for receipt and payments; • Financial accounting and reporting; • Internal & external audit functions; • Management of cash, fixed assets, pension scheme and investments; • Administration of the budgets and project grants; • Secretarial matters such as agenda and minutes for the statutory and other meetings, and; • Liaison with the tax and legal consultants.

Research Team The research team at PMN leads the different research projects and studies. . A large part of the team’s efforts are concentrated on publishing research studies and MicroNOTES about the microfinance sector in Pakistan, on topics of specific importance to both microfinance providers and clients. In addition, the research team is working towards the initiation of an impact assessment study of microfinance in Pakistan. As part of its knowledge management function, the research team also collaborates on external projects with a financial inclusion component. The research team is also involved with various microfinance policy initiatives.

2013 IN REVIEW

FUTURE DIRECTIONS

FINANCIAL STATEMENTS: 2013

Social Team

Technology Team

Social Performance Team spearheads activities related toresponsible finance and has brought recognition to PMN for its leadership role in this area internationally. We work on awareness raising, social transparency, and promotion of global standards and best practices. Establishment of Social Performance Working group (SPWG), awareness building sessions, regular participation in Social Performance Task Force meetings and materials sharing with PMN members on Universal Standards for Social Performance Management (USSPM) are some of the primary activities that comprise the work under raising awareness of social responsibility in Pakistan microfinance sector. The Social team has also initiated several projects in the area of Social Transparency:

The Technology Team concentrates primarily on areas of Credit Information Bureau and Technology Initiatives. It is responsible for initiating and establishing the Pilot Microfinance Credit Information Bureau and has played a fundamental role in ensuring its success. Currently, it is involved in ensuring that this initiative is smoothly and efficiently taken to the national level. In addition, it is responsible for various technology initiatives for the sector i.e. branchless banking, management information System, Geographical Information Systems (GIS), development of interactive softwares and promoting data standardization besides managing the internal network and support systems of PMN. The team is also in process of marketing PMN's software to other networks around the world.

• Collection, Validation and Reporting of Social Performance Data to MIX • Client Protection (CP) Monitoring Initiative in collaboration with SMART Campaign • Pricing Transparency Initiative in collaboration with MFTransparency International. Social audits of PMN members and support of developing Pakistan specific poverty measurement tools are additional areas being looked at by the social team. Moreover, the team frequently authors papers on achievements and challenges pertaining to social performance and disseminates them amongst our members so that they are cognizant of global and local standards on social responsibility in the microfinance sector.

Administrator The administrator provides both clerical and administrative support to staff members, either as part of a team or individually. The role plays a vital part in the administration and smooth-running of day-to-day operations.

Office Secretary The primary tasks of office secretary include maintaining office contact database, supporting staff members by keeping various appointments and meetings on schedule, managing the flow of visitors and providing administrative support for and during events.

Pakistan Microfinance Network – Annual Report 2013

GET TO KNOW PMN

PMN’s History at a Glance Our Membership Our Governance Structure Our Team Our Work

Our Work As a sector representative, PMN works intimately with a variety of stakeholders services to the under-served segments of the country. The overarching goal of the

Information Hub A primary objective of the PMN, serving as the information hub, is an area that

providers by strengthening them institutionally, and work towards ensuring an enabling environment for the micro-

Enabling Environment

activities, though overlapping in terms of their impact and scope, are broadly

Capacity Building country to engage in capacity building

The PMN has come a long way since its itself as the information / knowledge touch point for the industry. Under this umbrella objective, there are various

• Promoting benchmarks and international best practices; • Publishing industry information material and dissemination of the same; • Holding of events and roundtable discussion, and; • Collecting, analysing and disseminating information to various stakeholder groups.

with relevant policymakers/regulators.It has established its credibility as a practitioner’s network (representing MFBs, RSPs and NGO MFIs) resulting in policy makers and donors becoming more receptive to its views. The Network promotes an Enabling Environment through: • Interaction with policy makers, in particular the Ministry of Finance and State Bank of Pakistan; • Representing the sector at domestic and international forums; • Aims at building strategic partnerships with local and international stakeholders; • Creating linkages with both bilateral and multi-lateral donors; • Focus on creating and maintaining liaisons leverage expertise for various industry support infrastructure such as the Credit Bureau, Grievance Redressal System, Protection Code, and; • Building sector image and tackling negative perception through a professionally managed Communications and Public Relations strategy.

www.pmn.org.pk

Ever since the inception of the Network, this has been an important objective and PMN has remained focused on broadening the scope of capacity building, while at the same time evolving and targeting this function to better cater to the needs of the sector. The Network is focusing on the Capacity Building of the sector through: • International and national trainings to strengthen the human resource base of the industry; • Propagate good practice and exchange of ideas at an international level and National level through exposure visits, and; • Mechanisms to build linkages with universities that can be used to not only attract good HR to the sector but also raise understanding and interest amongst the

2013 IN REVIEW

FUTURE DIRECTIONS

As PMN continues to push the envelope

as industry infrastructure, especially the

sion of services, a number of notable milestones were achieved during 2013. Progress was made on various fronts such

(MF-CIB), networking and linkages, international positioning and knowledge management. From an institutional

FINANCIAL STATEMENTS: 2013

standpoint, PMN persisted to diversify its funding sources, through involvement in sector level projects for revenue generation built up its equity base and established strategic alliances.

Highlights From 2013 • Approvals of PPAF endowment grant of PKR 60M to PMNwas a major step in the accomplishment of its strategic objective to deepen PMN’s equity base. • The PMN CEO was designated to the Micro Insurance Task force set up by the SECP; • The Social Performance Task Force elected PMN as the regional coordinator at the Asia Group meeting in Bangkok; • PMN completed work on the Geographical Information System (GIS) based Decision Support System to locate MFI branches throughout the country; • Progression on the Client Protection front has been made possible bydeveloping client messages and disseminating of the same; • PMN and PPAF reinforce their collaboration by entering into a knowledge management agreement; • PMN CEO has been nominated to SEEP’s Advisory Council and Global Task Force for Vision 2020; • PMN’s Business Plan (2013-17) was developed and approved by the Board. • Finalized agreements with Smart Campaign and MF Transparency regarding the consumer protection and pricing transparency initiatives. • Initial NADRA verification of CNICs under the MF-CIB project completed and 3.05 million records submitted to the database. • PMN was commissioned by the World Bank for dissemination activities as a follow up to its project under the RSR Fund in 2012. It focused on promotion of technology based cash transfers for G2P programs. • PMN was selected as one of the mature networks for implementing a project under the Universal Standards for Social Performance Management (USSPM) Implementation Fund of the Ford Foundation, administered by MicroFinance Centre (MFC) Poland. • Pakistan’s first ever E-newsletter for the microfinance industry was launched, and; • PMN has introduced a sectoral overview in collaboration with Business Recorder for the Microfinance sector. • The first ever Microfinance Summitin Pakistan was held in July, organized by PPAF and PMN with the support of EAD, IFAD, UKAid and World Bank, where the Honorable Finance Minister, Muhammad Ishaq Darand Former Deputy Governor Mr. Ashraf Mahmood Wathraacted as chief guests.

Pakistan Microfinance Network – Annual Report 2013

2013 IN REVIEW

Highlights for the Year 2013 The Information Gateway Ensuring Transparency Building Enabling Environment for Microfinance Our Events PMN at Networking Strengthening Institutions: Trainings, Exchanges & Academic Linkages

The Information Gateway practices, research work and dissemination of the same, and data management and scrutiny. In addition, an online portal ensures PMN’s active online presence in order to meet the burgeoning informa-

ct: Pakistan’s Mic nne ro o C na The e c nc n a

ta l

cro

web portal was derived out of

or eP

Our Online Presence

the information is readily available for the industry players. This led to the restructuring of the original website, thereby putting up aesthetically more content online and developing online applications for the users to have informa-

Mapping Comp ye: eti E o t io icr n MicroEYE is one of the most inclusive online tools on

you a geographical visual of MF penetration based on your search query down to the Tehsil level. This tool shows the map and their related statistics. Currently, the

Visit w

nance Institutions and Rural Support Programmes are plotted and in the coming months, we aim to add other

is a host to other useful information material about the sector. There are also three interactive applications: online MicroWATCH, PMR and MicroEYE for updated, ready-toaccess data on outreach, sector’s pk performance and branch fo ra locations. c ce ss t o l d. o u r a c ce ssibl e wo r

.p m ww

ATMs and BB (Branchless Banking) agents to the map.

n. o

w Visit w

ency, promotion of international best

sector in Pakistan. Under this umbrella objective various activities are carried

tion needs of sector stakeholders. A number of research studies are published every year with the aim of strengthening the knowledge base of the industry and provide in-depth analysis of emerging trends and issues in the sector.

A key objective of the PMN, is acting as an

cr mi

donors, and policy makers operating in a progressively dynamic market. One of the challenges created by the increasing dynamism and competition is the need for up-to-date and interactive web-based application. In the current year, this software was acquired by the

www.pmn.org.pk

The

nc i al

Review (PMR) is an annual

the software was updated and is now being populated to bring it up to date. PMN is also

w. p

icro

tc wa

ion: Industry F licat i na

view and review tables, graphs and charts of any

it w

V is it w w w . m

li n

pp RA

Industry in Pakistan which highlights the overall macroeconomic situation in the country and its impact on the industry has taken digital form. With this database built on the

Vi s

network organization of MFP retailers in Afghanistan. PMN undertook a major revamp of the software and besides updating its own version, provided the customized version to AMA. PMN is also and deployment in respective countries.

l ta

Pakistan is evolving at a rapid pace with new entrants, new products and practices, and a growing cliental. These

icr

cation: Outreach ppli An A al y H C The sis AT P oW

ment and deployment in respective countries. mr on lin e . i n fo

Highlights for the Year 2013 The Information Gateway 2013 IN Ensuring Transparency Building Enabling Environment for Microfinance REVIEW2013 IN REVIEW Our Events PMN at Networking Strengthening Institutions: Trainings, Exchanges & Academic Linkages

The Written Word: PMN PMN releases a number of publications every year, ranging from research reports, benchmarking analyses to short notes e Pakistan Mic ance Review (PMR), published annually and serves as the state of the sector report. MicroWATCH – our quarterly bulletin on outreach analysis sis is also a regular feature.

FUTURE DIRECTIONS

MSMEs in Pakistan account for 30 percent of the GDP, contribute to 25 percent of export earnings and employ 80 percent of the non-agricultural labour force. As the sector moves towards achieving growth and sustainability through greater market tion, enterprise lending has become an increasingly important opportunity for micro nance providers (MFPs).

Research projects ects and reports are undertaken on n a needs basis under the guidance dance of our members and d the Board. The series ies of our MicroroNOTES acts as a l, as these briefs address any burning issue sue in the industry in a succinct uccinct and purposeful manner. nner.

According to a World Bank study,

The study also explores some of the supply-side challenges and opportunities that would ne need to be addressed in order to build M MSME lending programs, includin including the need for detailed information informati in order to build cash ow based le greater capacity and specialized g gr eater HR capaci st at the l collateral options as risk mitigation coll llat a eral optio strategies. strateg

• Wh Who ho iis the Arthi: A sstudy tud of the Role off the Informal Moneylen lender nder in Punjab, Pakistan

• Moving towards ards Micro and Small Enterprise Lending ending (MSEL)

nance sector in Pakistan vis-à-vis enterprise lending to MSMEs.

incurred.

http://www.pmn.org.pk/asse ht ttp t : ts/a /art ts/articles/Moving%20Towar ds% %2 ds%20MSEL%20Opportuniti es% es%20and%20Challenges.pdf %20

Best quality research esearch and papers has become a trademark for PMN. This trend sustained ained in 2013 as PMN put out a number mber of studies probing industry issues::

recent research study ‘Moving towards Micro and Small Enterprise Lending (MSEL): Opportunities and Challenges’

loan ceiling for MF Banks from PKR 150K to 500K, as well as the extended SME Guarantee Fund for MFBs

The full report can be accessed from: acce

Research in 2013

With an estimated mated 3.8 million micro, small and medium edium enterprises (MSMEs) in Pakistan, mostly concentrated in the trade, services and manufacturing ng sectors, sectors the segment presents a great opportunity for

FINANCIAL STATEMENTS: 2013

The research rese re search study highlighted the nancing gap p ttha hatt ex exis ists ts w wit ith h reference to MSMEs ly businesses which have a funding requirement between PKR 100K to 500K. While commercial banks are unlikely to downscale to serve this ‘missing middle’ (given the high transaction costs associated with these sectors) there are opportunities for MFPs to graduate to MSME lending. Funding to this sector via MFPs has been promoted by the State Bank of Pakistan’s 2012 revision of the

Th The he inf informal money lender orr midd middlemen (locally ca called alled tthe arti) continue to pl play lay a p pivotal role in the agricult ag agriculture supply chains in Pakistan Pa Pakistan. These middlemen negotiat negotiate the initial prices between the farmers and the wholesal wholesalers. They remain a major sou source of credit to the small farmers (ofte (often at exorbitant interest rates) and also facilitate the ow of market info thus h a major j component of the value chain but there is little formal information about who these middlemen are or what roles they play. Understanding how they function and assessing the possibility of integrating them with objective of the study. By acting as agents, these intermediaries could help overcome the challenges of high costs involved in borrower assessment,

Pakistan Microfinance Network – Annual Report 2013

2013 IN REVIEW

reduce information asymmetries between the farmer and the commercial banks and also provide value added services to the farmer that directly impacts his productivity and yield. Through interviews with arthis’ and their network (forward and backward linkages), this project aimed at a) mapping the network that the arthi works in i.e. his debtors, farmers that borrow from him (in kind or cash) and/or sell their produce to him, his buyers i.e. wholesalers or markets where he sells the produce, his agricultural inputs (seed, fertilizer, pesticides) if any, etc.; b) understanding their margins, portfolio risk, volume of business and range of services; and c) analyze whether this role can be enhanced and formalized to become integrated with the formal The project was carried out in collaboration with the National Institute of Banking and Finance (NIBAF), a subsidiary of the State Bank of Pakistan and was funded through the International Growth Centre – Pakistan, a project of the DFID.

(UBL) acquisition of Khushhalibank Limited (KBL)’, discusses the dynamics

nature in Pakistan. The UBL-led consortium included four international players equipped with operations and corporate governance. The paper focuses on the synergetic values attached to the acquisition and how both the organizations, going forward, can capitalize on the synergies which in turn will help foster innovation in products, technologies and management. The case study highlights the key areas in which both,

Standards to follow to ensure good practice in SPM.

from, including new market segments, an enhanced platform for OMNI (branchless banking) and governance - the inclusion of international players has paved the way for knowledge transfer in terms of international expertise and best practices.

three of the six sections of the USSPM and also showcases case studies on

Moreover, the study also explores the motivation behind the transaction and

The full document of the research can be downloaded at: http://www.pmn.org.pk/articles/Who%20is %20the%20Arthi.pdf

Pakistan. The full NOTE can be accessed at:

MicroNotes in 2013 The Network plans to publish occasional papers on various issues that are pertinent to the sector under this series. PMN worked on three emerging aspects in the sector during the last year.

• UNLOCKING SYNERGIES: A Case Study on United Bank Limited’s (UBL) acquisition of Khushhalibank Limited (KBL) The publication, ‘Unlocking Synergies: a Case Study on United Bank Limited’s

www.pmn.org.pk

meeting these objectives, and the related outputs and changes in the lives of clients. Social performance management (SPM) is the institutionalized process of translating social mission into practice. It involves “setting clear goals, monitoring and assessing progress towards those goals, and using this information to improve performance and practice.” The Universal Standards for Social Performance Management (USSPM),

http://www.pmn.org.pk/assets/articles/Mi croNOTE%2020%20-%20Unlocking%20Synergies%20.pdf

has published a MicroNOTE titled ‘Identifying Good Social Performance Management Practices’, taking a look at how MFPs in Pakistan fares in this

The full NOTE can be accessed at: http://www.pmn.org.pk/articles/MicroNOT E%2018%20-Identifying%20Good%20social%20Perfor mance%20Management%20Practices_201 3.pdf

• Bringing the Forgotten Half of Micro-savings play an important role in smoothening the income stream of the low income strata of society and rainy day. In addition they provide the

• Identifying Good Social Performance Management Practices The Social Performance (SP) movenance community, including Pakistan, nance providers (MFPs) into practice in line with accepted social values. SP looks at the impact of an MFP against ness of their systems and services in

sive source of funds. nance Banks (MFBs) in Pakistan have witnessed tremendous growth in the deposit mobilization. The number of MFBs operating in the country has increased to 10 and over three non-bank MFIs have also established MFBs in order to mobilize deposits. The aim of the MicroNOTE was to

conduct a cross-sectional analysis deposits especially in terms of disaggregating data into retail and institutional deposit and then with in retail from MSME versus institutional deposits. Also, to identify MFBs approach to deposit mobilization keeping in view the constraints and products available.

FUTURE DIRECTIONS

and Equity. This paper includes various

• Funding Industry Growth: Going beyond Numbers Funding the Industry requirements is one of the most important areas that need to be focused on by the industry. To determine the funding needs of the

majority of the account holders of MFBs are made up of micro-savers but they account for less than 20 percent of the total deposit base in terms of value. Due to this, these institutions have to attract large depositors to fund growth of their portfolio, which brings them in competition with commercial banks. With MFBs expected to take a deposit led approach to their funding, they face number of challenges. These include increasing awareness and branding, ability to serve both small and large depositors and policy changes like access to clearing house. Also, MFBs would be required to innovate and develop products which cater to needs of their clients especially by using branchless banking platform. In addition, there is a need for MFBs to expand to tap into the missing middle of savings i.e. informal businesses, small and medium enterprises (SMEs) and other unbanked segments of the markets to expand their deposit base. The full NOTE can be accessed at: http://www.pmn.org.pk/assets/articles/Micro NOTE%2019%20-%20Bringing%20the%20Forgotten%20Half df

FINANCIAL STATEMENTS: 2013

next four years by adjusting for the availability of resources from existing sources and tried to come up with solutions at the Macro (policy and regulation), Meso (apex and network) and Micro (MFI and MFB) level. Interactions with SBP, PPAF, commercial banks and MFPs are underand solutions to address this gap. The paper also includes that in the coming next few years the growth in the in Pakistan will be a combination of increasing outreach and increasing loan sizes. The full NOTE can be accessed at: http://www.pmn.org.pk/ articles/MicroNOTE% 2017%20-%20Funding% 20Industry%20Growth% 20Going%20Beyond% 20Numbers.pdf

• Sector Level Strategy for Managing Disaster Risk

MFIs segment a study was conducted in which over eight organizations took part based on their size, growth potential and capacity to expand further. This analysis has been dovetailed with the MFB data already available at SBP and consolidated in this paper to give a holistic picture of funding(especially debt) gap for the to 2016. An attempt to go beyond the numbers was made in this paper by disaggregating the overall gap into three main segments, Debt, Deposit

is now emerging as a mature sector on Despite the progress so far, there remains a huge upside potential in the market that is as yet untapped. As in other markets the sector is confronted by various risks, some endogenous to the sector while others exogenous. One such exogenous risk is that emanating from the now frequently occurring natural disasters and catastrophes. This paper takes a look disasters on the industry and then

Pakistan Microfinance Network – Annual Report 2013

2013 IN REVIEW

Ensuring Transparency provides recommendations for managing this risk, especially in terms of managing it at the sector level through a risk mitigation fund. The full NOTE can be accessed at: http://www.pmn.org.pk/articles/MicroNOTE %2016%20-%20Position%20Paper%20on%20Disaster% 20Management.pdf

Financial Transparency PMN has an extensive history of promotmance benchmarking amongst the sector stakeholders. This year, as always annual state of the sector report provided thorough analysis and data of all member MFPs.

formerly titled the Performance Indicators Report [PIR], is an annual publication performance of organizations and has a track record of accounting for approximately 95% of the outreach achieved by publishing the PMR is to provide a reliable information gateway to the industry. As the industry evolves and establishes a of Pakistan, it becomes essential to observe and scrutinize progress in order to inform stakeholders on multiple levels. Highlights from this year’s PMR include: • In order to facilitate commercial the State Bank of Pakistan allowed MFPs to raise funds from non-bank sources/capital markets under the Facility (MCGF) and also extended the SME Credit Guarantee Facility to • The branchless banking sector saw the entrance of two new players – Mobicash and Timepay and continued to exhibit strong growth, especially in terms of Mobile-wallet accounts.

www.pmn.org.pk

• The nationwide rollout of MF-CIB took place in June 2012 during which 2.2 million records of individuals were collected and

Consumer Protection globally to develop a code of conduct for client protection and get it endorsed by all its members in early 2009. Work in various implementation areas of this code continued in 2013. ency initiative was completed for Pakistan, with 31 MFPs publishing pricing data on mftransparency.org. ii. External client protection assessments i.e. Smart Assessments were completed for 10 large and midsized member MFPs under a partnership agreement with the Smart Campaign. iii. Smart Assessors training was held for local technical assistance

Social Transparency An 18-month social performance (SP) implementation project was initiated at the beginning of 2013 with 14 member MFPs part of the PMN’s Social Performance Working Group (SPWG). Under this project, each participating MFP worked on implementing various Standards from within the Universal Standards for Social Performance Management, as per institutional interest. This project will continue until June 2014.

purported to have a positive impact on

Consulting assignment for the World Bank to promote digital Government to Person (G2P) payments

literacy, women’s empowerment and transparency/accountability. PMN carried out advocacy with various Federal as well as Provincial Government Departments involved in G2P payments in the provinces of Punjab, Sindh, Khyber-

The PMN carried out a consulting assignment for the World Bank to promote use of digital payment instruments, as this is

3mil.

xxxx 1234 5678 9876 5432

debit cards have been distributed to women

& 34 bil.

Pukhtunkhwa and Balochistan through one-on-one meetings, workshops and various dissemination events, and also enabled linkages between commercial banks operating in the branchless banking space and these government departments.

, 16% 13% in Q1 2013

disbursed to their accounts

1 LINK

ATM

9 706

Rs.

almost

over

1mil.

FINANCIAL STATEMENTS: 2013

almost PKR

Rs.

by July 2013, over

FUTURE DIRECTIONS

10,000

&growth in value

growth in transactions

are held by women

all of which

level one accounts opened by Tameer Bank for the national ISP beneficiaries

of transactions

level one accounts

level zero accounts

almost

are

of the national Income Support Program

94%

12345-6789098-1

41mil. Q1 170bil.

increase in women now having CNICs since 2008, when tech-based cash

transactions worth PKR

introduced

were conducted

growth in the branch less banking sector

A slice of some of the material developed for this assignment

14% 8%

Income Support Program Payment Modalities and Delivery Channels

11%

DEBIT CARD

xxxx 1234 5678 9876 5432

xxxxxxxxxxxxx xxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxx

CDCP Payment Modalities and Delivery Channels

MOBILE SIM CARD

1234 5678 9876 5432 05/13

POS

WATAN CARD

0.8%

1234 5678 9876 5432 05/13

VISA

POS

ATM

MONEY ORDER xxxxxx xxxxxxxxxx xxxxxx xxxxxxxxxxx

xxxxxxxxxxx xxxxxxxxxxxxxxx

xxxxxx xxxxxxxxx

xxxxxxxxxxxx xxxxxxxxxx xxxxxxxxxxx

12345495824 xxxxxx

CP Sm I re c a r t C I i p i a rd De en re c b i t C t s i p i a rd Pa ents kis t Po an Mo st Ban bile kin g

2% CD

SMART CARD

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

POST MAN

Pakistan Microfinance Network – Annual Report 2013

2013 IN REVIEW

Building an Enabling Environment for Microfinance The Network has come a long way since with relevant policy makers/regulators in improving the policy environment for established its credibility as a practitiomembership constituting MFBs, RSPs, and NGO MFIs) with government counterparts, policymakers, regulators, donors and other key players becoming more receptive to its views. To ensure a positive advocates with its members for adoption of best practices, commitment to transparency and promoting healthy competition.

sector wide funding needs and gauge the preparedness level of the industry for credit up-scaling. PMN facilitated the process by collecting information specially assessing the funding need of MFIs.

It was thus decided in the SBP’s Micro-

• PMN played an active role in the microinsurance working group set up by the SECP to a) review and provide comments on the draft regulations for microinsurance in Pakistan, b) develop a national strategy for development of MI in the country, and c) explore the possibility and recommend regulatory framework for creation of specialized microinsurance companies.

• PMN has been in touch with FBR and met its chairman to raise issue of tax exemption and addressing certain tax

in 2012 include:

One of the PMN core objectives is advocating for improved policy and regulatory framesector in Pakistan.

Group (MFCG) Sub-committee on Funding decided to estimate the

www.pmn.org.pk

Liaison with Donors, Government Functionaries, Investors and International Agencies The Network strives to constantly network with donors, government and international agencies. PMN values its relationship with key stakeholders in the government, expressly with the State Bank of Pakistan [SBP], Securities and Exchange Commission of Pakistan [SECP] and Ministry of Finance [MoF].The PMN continued to hold dialogues with SBP through sector level discussions at one on one meeting between the PMN CEO and the Director MFD and also at operational level meetings

Policy Advocacy

• An important breakthrough in terms of regulatory framework for MF in Pakistan came about when the SECP agreed to support the industry’s agenda for creating an oversight mechanism for nonbank MFPs. In this context, a task force has been created under the leadership of Chairman, SECP and comprising of key stakeholders such as SBP, PPAF, PMN and MFPs. The task force expects to complete its deliberations and make recommendations by end of 2014.

in early 2013 that a sub-committee be created to explore the possible models for such a sector level fund. PMN is a member of this sub-committee.

Joint Directors at SBP. During the year 2013, PMN interacted initiative and discussed the risk

PMN led the process of developing a strategy document for the group. • In context of the recent natural disasters that are regularly damaging the portfolios of MFPs and eroding gains made with clients, PMN continued to pursue the agenda of creation of a risk mitigation fund for the sector.

nance industry. PMN CEO met with SBP FIP team and presented on the Governance initiative that has subsequently been approved. PMN Chair and CEO met with the Deputy Governor of SBP to discuss sector issues. There is on-going engagement with SECP on issues relating to microinsurance, especially with regards to allowing establishment of specialized micro-insurance companies.

PMN was part of the task force set up by the SECP to provide industry input on the draft microinsurance regulations and develop a strategic framework for microinsurance in the country. In addition, PMNs interaction with Chairman SECP to develop regulation on micro insurance for non-bank MFPs was important in this regard, and consequently SECP set up a task force that will thrash draft regulations for non-bank MFPs. PMN is acting as the secretariat for this task force. For the Network, interaction with key industry stakeholders including bilateral and multilateral donors is important not only to help secure funds for the sector but also to ensure that the right kinds of instruments are being made available to PMN’s relationship with PPAF (the national apex) continued engagement through the coordination committee of the two organizations, which met periodically to discuss issues of mutual interest. In addition, PMN undertook a knowledge management project on behalf of PPAF under which several notes and papers were prepared. Another important milestone for PMN in relation to PPAF was the approval of the endowment grant to PMN of PKR 60M by the PPAF Board in April 2013. This will prove pivotal in strengthening PMN’s sustain-

2013. We consistently interact widely with donors such as UKAID and the World Bank through regular interaction with their review missions and otherwise. We also work together with IFC, KFW and ADB to share our views on sector level achievements and challenges. In addition, we have engaged with ACCION International, ResponsAbility, and FINCA, regarding international investments in the sector. Moreover, linkages were developed with leading commercial banks such as National Bank of Pakistan, Habib Bank limited, United

FUTURE DIRECTIONS

FINANCIAL STATEMENTS: 2013

Bank Limited, MCB Bank, Barclays, Bank Al Habib, Silk Bank, JS Bank and NIB Bank to promote the industry and assist in placement of funds in the sector.

have submitted 4.1 million records out of which 3.05 million unique CNICs have

Microfinance Credit Information Bureau

increased the integrity of the repository

Credit bureaus play a vital role in mitigatsector ranging from information asymmetry, adverse selection, and moral hazard to over-indebtedness due to multiple borrowing. The credit informacial institutions reduce risks, loan process time, costs and default rates. For borrowers, it leads to lower interest rates, making available. The delinquency crisis in Andhra Pradesh, India, in 2009 and Punjab, Pakistan, in 2008/9 proved that improved credit information about the borrowers could have helped in averting these disasters. Consequently, to address the above mentioned issues, a pilot MF-CIB was initiated for Pakistan market in 2010. PMN, with support of State Bank of Pakistan (SBP), Pakistan Poverty Alleviation Fund (PPAF), Department for international Development (DFID) and International Finance Corporation (IFC), launched the nation-wide rollout of the MF-CIB in June 2012. The objective of the project is to make MFPs “Bureau Ready nance eco system” by ensuring that MFPs are reporting their data on time and making enquiries on every loan application received. The year 2013 saw some major developments and milestones achieved in the nation-wide implementation of MF-CIB. As of Dec 2013, 50 MFPs

tory was being used for enquiry purposes. For the partner organizations of PPAF (23 in total), collaborations with their respective vendors (Generix Systems and Verge Systems) have been made and the business rules of the Bureau reporting format have been implemented at the vendor end. It is expected that these organizations shall start reporting their Vis-à-vis enquiry generation, some institutions like PRSP, DAMEN, CSC, JWS, OLP, RCDS, Wasil and SDF have completely operationalized the enquiries; FINCA, TMFB, FMFB, KB, KF and Asasah have partially operationalized their enquiries whereas Akhuwat, Apna, ASA, BLCC, BRAC, GBTI, NRSP, SRSO, SRSP, TRDP and PPAF POs (23) have yet to implement enquiry procedures. Since enquiry generation requires change in SOPs of organizations, this activity is expected to gain full steam by the middle of next year. A major achievement in 2013 was the Conduct, delineating rights and obligations of MFPs and Bureau which has been approved by PMN BoD.

tions, rural support programmes and partner organizations of PPAF) have been registered. Collectively, these organizations

Pakistan Microfinance Network – Annual Report 2013

2013 IN REVIEW

Our Events With the development in the scope of in the Network itself, demands on the communications and networking front have burgeoned. PMN now organizes a wide range of events in any given year. These vary from small group meetings to international level seminars. Some of the major events organized in 2013 included:

the PPAF. This was a half day event including a series of presentations including (a) PMN’s client protection initiative. • Motivation and introduction, (b) introduction to Pakistan pricing transparency initiative by Mr. Chuck ency, (c) monitoring client protection;

• The Next Big Leap: Exploring Avenues for Deepening Financial Inclusion

• Smart Campaign’s journey and

remarks by the SBP. The event took place on April, 2013 at Serena Hotel in Islamabad and had an active participation of State Bank of Pakistan, PPAF, PMN members, PPAF partner organizations and other stakeholders.

• MF-CIB: The Journey So Far and The Road Ahead A half day event hosted by Pakistan

A one-day roundtable was organized on Thursday, 14th of March 2013 in Lahore on “Exploring Avenues for Deepening Financial Inclusion.” As their markets and products, this discussion was aimed at providing a platform for rediscovering existing markets and highlighting new opportunities for designed around three themes: middle and ‘S’ of SMEs; • Exploring value chains where micro• Financing women entrepreneurs through products and services that meet their needs.

• PMN’s Client Protection Monitoring and Pricing Transparency Initiatives Launch Event This event was organized by the PMN and included various stakeholders such as MFPs, donors, policy makers and other industry players. This initiative is funded by the SBP’s Financial Inclusion program with assistance from UK-Aid. A portion of the pricing transparency component is funded by

www.pmn.org.pk

experiences by Isabelle Barres of the Smart Campaign, and (d) State Bank perspective on client protection and by a panel discussion titled ‘client protection; • A necessary investment for sustainenvironment’, followed by closing

with State Bank of Pakistan (SBP) and Pakistan Poverty Alleviation Fund (PPAF) at Serena Hotel in Islamabad on 21st May, 2013. The objective of the workshop was to taking an overview of the year’s progress, discuss the successes and milestones achieved, discuss the challenges/show stoppers and decide a future roadmap for the

success of this vital initiative for the sector. The event had an active participation from the representatives of State Bank of Pakistan, PPAF, PMN members, PPAF partner organizations and other stakeholders.

• Commercial Funding Options for

FUTURE DIRECTIONS

of Pakistan” on May 28, 2013 in Karachi. Syed Mohsin Ahmed, CEO, PMN presented the audience with a brief on the state of the sector followed by a presentation by Mr. Yasir Ashfaq, Group Head Financial Services Group overlooking investments and interventions undertaken by PPAF as the apex institution and sector developer. Mr. Ashfaq encouraged commercial banks

FINANCIAL STATEMENTS: 2013

ing possibilities. In their closing remarks, Senior Group Head SER Mr. Ahmad Jamal and Dr. Rashid Bajwa, Chairman PMN, emphasized the need for creating awareness for commercial funding, both at commercial banks as well as at practitioners level leveraging PPAF and PMN’s strategic partnership to strengthen the sector and to crowd event had an active participation from

the country is vast. With an acute funding constraint limiting growth, the importance of drawing funds from

This was followed by a panel discussion moderated by Mr. Zubyr Soomro, CEO & Chairman Hikmah Consulting with senior representatives from HBL,

the representatives of State Bank of Pakistan, PPAF, Commercial Banks, PMN members, PPAF partner organizations and other stakeholders.

bottlenecks and improve investor organized a workshop with commercial banks, State Bank of Pakistan and partners titled “Commercial Financing

Bank, Kashf Foundation and JWS as panelists. This was an interactive dialogue between the banks and the practitioners to highlight the issues and challenges on both sides whilst

Pakistan Microfinance Network – Annual Report 2013

2013 IN REVIEW

EVENT OF THE YEAR:

Development is not an exact science and hence, developing countries need to assign a high priority to the development and propagation of knowledge. Knowledge sharing remains integral to all key economic sectors today, the microfinance

evolved over the past decade, with over 50 institutions serving over 2.5 million clients. Progress has also been made in product development - diversifying beyond just credit into micro-savings and micro-insurance. These developments commitment and support by diverse stakeholders including the Government, nance institutions and banks, and various private sector stakeholders. Keeping in view the sectorâ&#x20AC;&#x2122;s need to take the next leap forward as well as to enhance linkages between and amongst the global and local stakeholders of the Pakistan was felt by all the relevant stakeholders. In line with these needs and to foster the discussion on key policy and Pakistan 2013, was held in Islamabad from 8-10 July, 2013. â&#x20AC;˘ Policy dialogue: To encourage policy organized by Pakistan Poverty Alleviation Network (PMN), in collaboration with the Government of Pakistan, International Fund for Agricultural Development (IFAD), the World Bank and UKAID.

services especially in rural and underserved segments amongst multiple stakeholders. â&#x20AC;˘ Knowledge sharing and exchange of ideas and experiences through an

The objectives of the Summit were: global lessons learnt and best

www.pmn.org.pk

practices adopted Designed as an interactive and intellectually stimulating three-day event, with over 60 speakers and panelists representing diverse stakeholders including and investors, banks, telecom sector, tions, academia and others, the Summit hosted over 400 international and local

participants. It showcased best practices both in the Pakistan and global context, and acted as a platform for knowledge sharing and networking, to steer the

FUTURE DIRECTIONS

professionals in Pakistan and was declared a success. It achieved its objectives of stimulating policy dialogue at a time when a new government has taken charge and publicly shown its commit-

FINANCIAL STATEMENTS: 2013

Event Statistics

markets and the global scenario. The event was spread over two and a half days, with the Inaugural Ceremony held on the 8th of July and the summit

in providing a platform for exchange of ideas and experiences, and for addressing some of the fundamental issues the sector faces today for promotion of

speakers

140 organizations represented

13 sessions over 2.5 days

sessions on the 9th and 10th of July. The Summit was formally inaugurated by the Honorable Minister for Finance, Muhammad Ishaq Dar and was well attended by high level representatives of the government, donor community, practitioners, community.

the poor. The Summit resulted in a unanimously endorsed declaration that set new targets for the sector, with a focus on scaling up through equitable growth, sustainable institutions and practices,

The Summit emerged as the biggest The full Summit report can be viewed at:

450 participants and delegates %20Summit%202013%20-%20Conference%2 0Report%20-%20Version%204.0.pdf

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

2013 IN REVIEW

• Dissemination Event: Payments for Progress: Financial Inclusion and Literacy Outcomes for Technologybased Payments A Dissemination Event “Payments for Progress: Financial Inclusion and Literacy Outcomes for Technologybased Payments”, was hosted by the

the provincial departments that wish to take up technology based modes of transfers; 3. Continued support from SBP and NADRA to facilitate banks in reaching out to the unbanked;

and accountability. This dissemination event summarized the opportunities and shared recommendations to promote technologybased payments for wider scale implementation at the federal and provincial level.

4. Development of a technical guide

nance Network (PMN) on September 19, 2013 in Islamabad. This Event was held to share the highlights of a national dissemination inclusion and literacy via technology based payments conducted by the WB and PMN as part of a collaboration initiative during the summer of 2013. It was attended by 82 participants and brought together various Government Departments from Baluchistan, Khyber Pakhtunkhwa, Punjab, and Sindh, involved in cash transfers such as Zakat and Ushr, Education, Health, Social Welfare and the Provincial Disaster Management Authorities (PDMAs). In addition, to this other stakeholders such as the State Bank of Pakistan (SBP), National Database and Registration Authority (NADRA), Benazir Income Support Programme (BISP), donor agencies, technical assistance providers and relevant commercial and Some key recommendations were Network, based on consultations with various provincial government departments and commercial banks over the course of the initiative:

gies to facilitate interest provincial government departments in understanding the technologies and options available,

1. There is a need to form a national level platform and policy to move technology based payments forward;

at a much greater scale with a focus on the ultra-poor as a target segment;

2. Donors and multilateral institutions should consider developing technical assistance programs for

www.pmn.org.pk

• All Members Meeting 2013 An all PMN members’ meeting was nance Network on the 30th of November, 2013 in Islamabad. The meeting

6. Exploring the deployment of next step towards transparency

(PMN)sharing with members the snapshot of the current state of the industry achievements, linkages built by PMN in the recent past, and the current challenges and thereby the proposed

FUTURE DIRECTIONS

FINANCIAL STATEMENTS: 2013

PMN at Networking

The discussion progressed with the presentation by Mr. Yasir Ashfaq (PPAF)) on how PPAF is positioning itself going g forward. He further shared his point off view on changing trends, opportuni-ties and challenges in the MF industry.. Mr. Waqas-ul-Hassan (DFID) carried d forward the proceedings with a presentation on creating synergiess between the MF industry and otherr sectors. The focus was on the impor-w al sector institutions.

projects on health insurance and low sector wide ‘Request for Proposals’ on certain researches, and encouraged PMN to submit proposals. BMZ review team to visit Pakistan in September and discuss their future support to Pakistan.

seriously. At both international and local levels, our interest is to depict Pakistan’s opportunities. In 2013, PMN members, embers, various important forums. Some of these ese are itemized as:

• PMN CE CEO was invited as a pa panelist for the works workshop session on ‘F ‘Financial Sustain tainability of MFA by SAMN MFAs’ at the SEEP

Int er na tio na l

Govt. Agencies l na tio a N PMN

PMN Representation at National / International Forums • At the Funding MF growth roundtable in Karachi, the PMN CEO said that the debt requirements with modest growth over the next 3-4 years are to the tune of Rs. 50B, but requires

rs no Do

The event concluded with Dr. Rashid d Bajwa’s remarks. He was thankful to o PMN and appreciated the Network’s ’s pursuit of strengthening the sector not ot only at the national level but also o promoting it on global stage. He also o expressed his gratitude to the PMN N members for their participation and d valuable input in identifying the issues es at large and suggesting the direction n and strategy to adopt.

As a Network, our aim is to remain on top of the curve and bring home cutting edge information, tools and practices for

Sta keh old ers

future strategic direction in which PMN is moving. Ms. Aban Haq started the proceedings of the second session by giving a brief overview of the draft work plan for 2014 based on the three major areas of PMN ; Information Hub, Enabling Environment and Capacity Building.

Con Conference 2013 2013, where he shared insights from the ‘Financial Sust Sustainability Strategy’ developed by PMN in 2009. • At the ‘Financial Inclusion 2020 (FI2020) in London, PMN CEO acted as a speaker on the Client Protection Roundtable, where he served on the Credit Reporting Roadmap Working Group. • PMN was represented at the EIU Global Microscope launch at FI2020 by PMN CEO. He was on the panel which

nance and banking industry. • PMN was represented at the ‘Cracking the Nut Conference. Meetings held with KFW, BMZ and GIZ. GIZ wish to provide support through its local

Business Environment in its 2013 version. The Microscope evaluates and

Pakistan Microfinance Network – Annual Report 2013

2013 IN REVIEW

Strengthening Institutions: Trainings, Exchanges & Academic Linkages benchmarks 55 countries on the regulatory and business environment discussed how the Microscope's trends

• PMN’s role in “Responsible Finance” has received international recognition and PMN CEO has become a member of the SMART advisory board, which is a global brand in client protection.

Networking with Donors / Government Agencies / Stakeholders • In a meeting with SECP, PMN was provided input on Micro-insurance regulatory framework and was entrusted to take a lead in developing a strategy framework for the same. • PMN’s top-notch application MicroEYE and an innovative project idea - MicroLink (M-Link) were showcased at a meeting held with the Bill & Melinda Gates Foundation. • A meeting with Smart Campaign during SEEP Week was held where decentralization at Center for Financial Inclusion, ACCION was discussed. Feedback was solicited on the decentralization strategy. Rural and Agricultural Credit Association (APRACA) was approved by the APRACA executive committee.

massive potential, and a vital element to tap that potential is strengthening the capacity of retail institutions. We use several tools to achieve this goal such as trainings (local and international), exposure and exchange visits (local and international), and building linkages with academic institutions.

Trainings An important component of the capacity building function, trainings is aimed at enhancing the capacity of the existing human resource with the MFPs. PMN has helped in strengthening the human resource base of the industry, by making considerable investment in providing international exposure and training opportunities to senior management of MFPs, PMN has helped propagate good practice and exchange of ideas at an international level. Whereas, our local

their human capital and ability to implement better industry practices on a day to day basis, to eventually feed into institutional strengthening through initiating a program to build linkages with universities PMN has put in place mechanisms that can be used to not only attract good HR to the sector but also raise understanding and interest amongst the academic community on EXHIBIT 5 provides a snapshot of the year’s trainings.

Training for Risk Management and Responsible Finance After having conducted successful seminars in 2010 and 2011 covering general approaches to risk management for MFPs including Credit, Market, Liquidity, and Operational Risk, this year, PMN in collaboration with the International

EXHIBIT 5: Snapshot of Trainings during 2012 Participants Trained

Type of Training International Trainings

HBS – ACCION

4 1

Micro & SME Banking Summer Academy

Local Trainings 59

MF-CIB: Risk Management Training of Trainers (3 trainings in total)

333

MF-CIB Institutional Clinics (7 Clinics in total)

Risk Management & Risk Responsible Finance

SMART Assessors Training

451

www.pmn.org.pk

Total industry participants trained (approximate)

Finance Corporation (IFC) conducted a cally on Credit Risk and Responsible Finance on 28th and 29th January, 2013 in Lahore. The training, attended by 24 representadepartments of numerous MFPs, facilitated the candidates in examining g their existing risk and evaluating frameworks, management hods and presented methods ve the tools to improve with framework focus on credit risk. n of The exploration Responsible ging Finance, bringing the customer back and into focus ssues in discussed key issues indebtmanaging over-indebtedness, the usee of credit bureaus and customerdi d centric branding and communications to create brand recognition and loyalty. Mr. Andrew Pospielovsky conducted the session on Risk Management while Ms. Mohini Bhatia and Ms. Maelis Carraro conducted the session Responsible Finance.

FUTURE DIRECTIONS

analysts, although practitioners did not nance Network (PMN) the project titled “GOVERNANCE NEEDS OF THE MICROFINANCE INDUSTRY: A Customized Training Program” under the Institutional Strengthening Fund of the Financial Inclusion Program (FIP) - funded by UKAID and managed by SBP. Impleme Implemented by Hikmah Consulting aand endorsed byy the Pakistan Pov Poverty Alleviation on Fund (P (PPAF), the program gram ad addressed the govoveernance needss of the

The ToT was held on 10th Oct, 2013 at the Institute of Bankers Pakistan (IBP). A total of 12 participants attended this program that came from diverse backgrounds such as the legal profession, banking and consultancy and included representatives from PPAF and PMN. These individuals ar are now part of faculty pool for the fac MFCG training and are in addition to those who had tho already particialr pated in a ToT pa organized and run org by the IFC, the Pakistan Institute of Pakis Corporate GoverCorpor nance and Hikmah nanc Con Consulting.

Mi en entities investing in or lending to the ind industry on a wholesale basis.

microonce sector or and also helps MFPs build d their capacity for growth th and d tto overcome th the challenges h ll ahead.

Currently one of the challenges faced by Upon completion of the development of governance structures as this has been faced by sector stakeholders such as donors, regulators and policymakers and

with Hikmah Consulting and IBP organized a ‘Train the Trainers (ToT)’ program for those who would become part of the faculty to deliver the required training.

The faculty for the ToT included senior speakers like Mr. Zubyr Soomro, Mr. Salim Raza, and Mr. Aziz Rajkotwalla; all of whom have been on the Boards of either

Corporate Governance for Microfinance: Train the Trainers (ToT)

FINANCIAL STATEMENTS: 2013

nance Corporate Governance (MFCG) Program and agreement by all stakeholders on the same, PMN in collaboration

Academic Linkages A Th PMN initiated its Academic Linkages The Program which centers on building Pro connections between academic instituco ti sector. One of the reasons that this program has gained importance is that it allows the Network to expand its capacity building arm, and reorient itself from a strict focus on trainings to building new links for human resource development. While trainings focus on enhancing the

Pakistan Microfinance Network – Annual Report 2013

2013 IN REVIEW

PIDE students on research projects academic linkages allow for fresh and good quality human resource to be brought in to add to the existing pool of human capital in the industry. Trainings and academic linkages together provide solid ground for addressing the human resource gap in the industry as it moves towards growth and sustainability. nance data and opportunities with student groups at partner universities, informing them of projects, internships and job vacancies at all PMN member organizations. Universities are expected to inform PMN of applicants for jobs and to be displayed and distributed on undergraduate and graduate business programs is also being shared with universities interested in incorporating a Further to this, institutions on both sides are expected to encourage an exchange of dialogue and information by facilitating research forums and participating at lectures and conferences arranged by the other. On campus guest speaker sessions are also part of the overall design to encourage understanding and interest in

premier universities (LUMS, IBA, NUST, IOBM and IMS) in the country as well as NIBAF. These links are being taken forward this year by way of memorandums of understanding whereby all parties will commit themselves to the activities of this project. In addition, during 2013: • PMN organized a student talk at the Harvard Kennedy School where the PMN CEO and Chair discussed the sector successes and challenges; • Guidance was provided to a group of

www.pmn.org.pk

• The PMN COO delivered a half day training session on MF during a course at NIBAF to a group of government • PMN built an informal relationship with the Lahore School of Economics, and; • Sector Data provided to PhD students from USA, UK and France. PMN has developed a revised strategy for academic linkages to strengthen the institutions and will focus on the industry needs regarding the capacity building of the existing pool and also to attract more human resource. PMN by building partnerships with new reputable academia and by strengthening the partnership with the existing academic can cater industry needs with quality human resource.

FUTURE DIRECTIONS

PMN Board and management are committed to further growth of the Network. It continuously looks for opportunities for adding value to the sector stakeholders, especially its members.

MSE Lending The next frontier in terms of products and Experts that have worked in the Small and Pakistan are clear that there is a need to treat of policy, products and institutional support. There is a more synergetic relationship between micro and small enterprises than there is between the medium and small. This

While continuing and deepening its PMN is also looking to build linkages and activity portfolios in other areas linked to

Alternate Delivery Channels (ADCs) We live in a digital age with technological innovations changing the way we live every day. Developments in branchless banking and alternate delivery channels have created new opportunities for those

FINANCIAL STATEMENTS: 2013

the strategic retreat held in March 2014, PMN's members prioritized the following sector - and PMN - going forward:

Marginalized Segments, especially women and youth In pursuit of its vision to expand frontiers of cognizant that certain segments require a

Platforms and channels available to reach the unbanked have suddenly multiplied players in Pakistan are also looking to

more marginalized segments such as women, youth and the disabled. PMN is working to create a focus on these segments

MOBILE RD SIM CA

POS

ATM

positioned to move up market to serve this missing middle rather than expecting commercial banks to downscale. This debate has now moved into action with a number begin lending to the small enterprises. Given this direction in the sector, PMN is also positioning itself to meet the knowledge, capacity building and policy needs of its members as they enter this new market.

Along with expanding the depth and breadth of PMN's program, the institution is also focus on further strengthening its sustainability and making resources available for sector development. Furthermore, some ideas in the pipeline include the establishment of a Center of which would be a capacity building institution providing high quality middle management trainings in the country, and setting up a regional hub for the Smart Campaign within PMN which can

xxxxxx

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9876 5678

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leverage these opportunities and PMN plans to facilitate this process. PMN is thus looking to the ADCs, levering its bargaining power as a sector level association to provide an

within the sector and promoting product development, pilots and analysis on the needs of these segments. It is partnering with global leaders like Child and Youth Finance International (CYFI) to identify

industry.

Pakistan.

spearhead activities and create capacity in the client protection area in the region. PMN also looks forward to further strengthening its relationship with key sector stakeholders such as SBP, SECP and PPAF as well as donors such as DFID. With the aim of bringing PMN's governance in line with the evolving sector and PMN's future priorities, two independent directors have been added to its board: Mr. Faisal Ejaz Khan, CEO 1-Link and Syed Akbar Zaidi, awell respected and renowned independent economist.

Another independent director is likely to coming months, preferably representing the excluded segments such as women or youth. Rotation at the top will also have positive impacts on the Network's internal and external relations. Going forward PMN will continue to build upon our member relations and create value part of the Network under the guidance of a new Board and leadership.

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

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FINANCIAL STATEMENTS: 2013

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

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FINANCIAL STATEMENTS: 2013

Building a better working world

Ernst & Young Ford Rhodes Sidat Hyder Chartered Accountants Eagle Plaza 75-West, Fazlul-Haq Road Blue Area, P.O. Box 2388 Islamabad 44000, Pakistan

Tel: +9251 287 0290-92 Fax: +9251 287 0293 eyfrsh.isb@pk.ey.com ey.com/pk

AUDITORS’ REPORT TO THE MEMBERS We have audited the annexed balance sheet of PAKISTAN MICROFINANCE NETWORK (the Company) as at 31 December, 2013 and the related income and expenditur of changes in funds and reserve together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Company’s management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material missatatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit, provides a reasonable basis for our opinion (a)

in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984;

(b)

in our opinion:

(c)

(i)

the balance sheet and the income and expenditure statement together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied;

(ii)

the expenditure incurred during the year was for the purpose of the Company’s business; and

(iii)

the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Company;

in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, income and expenditure statement, funds and reserve together with the notes forming part thereof conform with the approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of funds and reserve for the year then ended; and

(d)

in our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).

Chartered Accountants Audit Engagemtn Partner’s Name: Khayyam Mushir Date: Place: Islamabad

Pakistan Microfinance Network – Annual Report 2013

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Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

BALANCE SHEET as at December 31, 2013

Notes NON-CURRENT ASSETS Property and equipment Intangible assets Long-term loan Long-term investments

2013 Rupees

2012 Rupees

1,676,957 1,121,454 186,751 32,393,084 35,378,246

1,325,873 2,288,646 21,678 20,819,086 24,455,283

33,983,326 7,429,217 1,852,179 4,077,691 1,793,927 5,774,712 33,203,043 50,195,931 138,310,026 173,688,272

27,034,947 3,102,165 450,371 4,884,550 824,516 2,403,327 23,858,602 41,948,131 104,506,609 128,961,892

73,657,987 1,257,840 74,915,827

59,494,526 819,086 60,313,612

8,225,290

35,019,496

17 18

60,800,030 29,747,125 98,772,445 173,688,272

33,628,784 68,648,280 128,961,892

5 6 7 8

CURRENT ASSETS Grant receivable Consultancy fee receivable Loans and advances Deposits and short-term prepayments Interest accrued Other receivables Short-term investments Cash and bank balances

9 10 11 12 13 14 15

TOTAL ASSETS FUNDS AND LIABILITIES Unrestricted funds Surplus on remeasurement of available- for-sale investments NON-CURRENT LIABILITIES Deferred grants CURRENT LIABILITIES Endowment fund payable Accrued and other liabilities TOTAL FUNDS AND LIABILITIES

Director

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

INCOME AND EXPENDITURE STATEMENT For the year ended December 31, 2013

Notes INCOME Grant income Training fees Membership subscriptions and registration fees Consultancy income Income from sponsorships Other income EXPENDITURE Governance and management Capacity building Enabling environment Information hub Consulting services Other expenses Bank charges SURPLUS FOR THE YEAR

www.pmn.org.pk

19 20 21 22 23

24 25 26 27 28 29

2013 Rupees

2012 Rupees

155,157,647 3,612,721 5,155,452 22,530,198 3,016,800 5,570,832 195,043,650

135,370,639 3,478,035 5,845,300 17,474,295 3,749,295 165,917,564

19,443,175 13,089,769 82,255,485 38,166,332 152,954,761 21,638,022 6,250,730 36,676 14,163,461

19,573,108 11,815,191 68,616,255 27,324,275 127,328,829 14,941,017 2,353,110 75,235 21,219,373

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

CASH FLOW STATEMENT For the year ended December 31, 2013

Notes CASH FLOW FROM OPERATING ACTIVITIES Surplus for the year Adjustments for non-cash and other items: Depreciation and amortization Provision against interest accrued Liabilities written-back Restricted funds recognized as income

Working capital changes: (Increase)/ decrease in current assets Consultancy fee receivable Loans and advances Deposits and short-term prepayments Other receivables (Decrease)/ increase in current liabilities Accrued and other liabilities Restricted funds received - net Expenses allocated to endowment fund payable Long-term loans Net (cash used) in/ generated from operating activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of property and equipment Intangible assets acquired Sale proceeds on disposal of property and equipment Short-term investments - net Long-term investments - net Investment income on bank deposits and investments Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Endowment fund received from Pakistan Poverty Alleviation Fund NET INCREASE IN CASH AND CASH EQUIVALENTS DURING THE YEAR CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

2013 Rupees

2012 Rupees

14,163,461

21,219,373

2,210,286 (43,200) 108,363 (155,157,647) (3,394,158) (156,276,356)

2,109,209 105,856 34,880 (1,129,489) 103,165 (135,370,639) (2,387,746) (136,534,764)

(4,327,052) (1,342,927) 806,859 (3,479,748)

(1,023,834) 146,509 (1,307,045) 823,489

(3,881,659) (12,224,527) 120,475,531 (761,278) (223,954) (34,847,123)

30,878,613 29,517,732 139,752,598 112,060 54,066,999

(1,115,287) (278,891) 43,200 (12,379,883) (8,099,802) 4,925,586 (16,905,077)

(1,309,083) (118,819) 15,000 (16,497,464) (15,893,418) 3,702,263 (30,101,521)

60,000,000 8,247,800 41,948,131 50,195,931

23,965,478 17,982,653 41,948,131

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

STATEMENT OF CHANGES IN FUNDS AND RESERVE For the year ended December 31, 2013

Unrestricted Funds (Rupees)

Balance as at January 1, 2012 Transfer from income and expenditure statement Gain on sale of AFS investments transferred to the income and expenditure statement Surplus on remeasurement to fair value of AFS investments Balance as at December 31, 2012 Transfer from income and expenditure statement Gain on sale of AFS investments transferred to the income and expenditure statement Surplus on remeasurement to fair value of AFS investments Balance as at December 31, 2013

www.pmn.org.pk

remeasurement to fair value of availablefor-sale investments (Rupees)

Total (Rupees)

38,275,153 21,219,373

(67,804) -

38,207,349 21,219,373

59,494,526 14,163,461

(371,412) 1,258,302 819,086 -

(371,412) 1,258,302 60,313,612 14,163,461

73,657,987

(809,722) 1,248,476 1,257,840

(809,722) 1,248,476 74,915,827

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2013

1. Legal Status and Operations 1984 (the Ordinance) as a guarantee limited company. The mission of the Company is to enhance the scale, quality, diversity and of the following three primary objectives: (i) Enhancing the capacity of retail MFIs;

(iii) Creating an enabling policy environment for retail MFIs.

2. Statement of Compliance Approved accounting standards comprise of the Accounting and Financial Reporting Standards for Medium-Sized Entities (MSEs) issued by the Institute of Chartered Accountants of Pakistan, and provisions of and directives issued under the Companies

3. Basis of Preparation investments, which are stated at fair value.

4. Summary of Significant Accounting Policies

oved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. Estimates and judgments are continually evaluated and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are In the process of applying the Company’s accounting policies, management has made the following estimates and judgment, which

Property and equipment and intangibles The Company reviews the appropriateness of the rate of depreciation and amortization, useful lives and residual values used in the calculation of depreciation and amortization. Further, where applicable, an estimate of the recoverable amount of assets is made for possible impairment on an annual basis. In making these estimates, the Company uses the technical resources available with the the related depreciation charge/ amortization and impairment.

4.2 Property and equipment These are stated at cost less accumulated depreciation and impairment, if any. Cost comprises of acquisition and other directly attributable costs. ted

Pakistan Microfinance Network – Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

useful life. The rates of depreciation are stated in not month of acquisition, with no charge of depreciation in the month of disposal.

om the

Useful lives are determined by the management based on the expected usage of assets, the expected physical wear and tear, technical and commercial obsolescence, legal and similar limits on the use of assets and other similar factors. of any adjustment to residual values, useful lives and methods is recognized prospectively as a change in accounting estimate. The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying values may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount.

proceeds and the carrying amount of the asset), is included in the income and expenditure statement, in the year the asset is derecognized. Normal repairs and maintenance costs are charged to the income and expenditure statement as and when incurred.

4.3 Intangible assets These are stated at cost less accumulated amortization and impairment, if any. Cost comprises of acquisition and other directly attributable costs. Amortization is provided for by applying the straight line method. In respect of additions and disposals of intangible assets made during the year, amortization is charged to the income and expenditure statement from the month of acquisition, and up to the e cost of intangible assets over the estimated useful lives. The carrying values of intangible assets are reviewed for impairment, when events or changes in circumstances indicate the carrying values may not be recoverable. If any such indication exists, and where the carrying values exceed the estimated recoverable amounts, the assets or cash-generating units are written down to their recoverable amounts. The recoverable amount of intangible assets is the greater of net selling price and value-in-use. Gains and losses on disposal of intangible assets are charged to income.

4.4 Long-term Investments a) Held to maturity investments management has both the intent and the ability to hold these assets till maturity. These are initially recognized at fair value plus transaction costs, if any. After initial recognition, held-to-maturity investments are subsequently measured at amortized cost the investments are derecognized, as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition, and fees or costs that are an integral part of the EIR.

b) Available-for-sale investments

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Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

investments are subsequently measured at fair value with unrealized gains or losses recognized directly in the statement of changes in funds and reserves, under “Surplus on remeasurement to fair value of available-for-sale investments reserve” until the investment is derecognized. Upon de-recognition the cumulative gain or loss is recognized in the income and expenditure statement and removed from the “Surplus on remeasurement to fair value of available-for-sale investments reserve”. has transferred, substantially, all the risks and rewards of the asset.

4.5 Consultancy fee receivable These are recognized and carried at the original invoice amounts, being the fair value less an allowance for uncollectible amounts, if

4.6 Loans, advances and other receivables These are recognized at cost, which is the fair value of the consideration given. An assessment is made at each balance sheet date to ication exists, the estimated recoverable amount of that asset is deter between the recoverable amount and the carrying value.

4.7 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet, at c equivalents comprise of cash in hand and bank balances.

4.8 Accrued and other liabilities Liabilities for accrued and other liabilities are carried at cost, which is the fair value of the consideration to be paid in future for goods and services received, whether or not billed to the Company.

4.9 Provisions Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, and it is ate ax

made by the Company and its employees, in accordance with the employment contract. The rate of employer and employee contributions is 10% of the gross pay of permanent employees. The scheme is fully funded and is being managed by the MCB Bank Limited, on behalf of each individual employee. The Company has also entered into an arrangement with an insurance company, EFU Life Insurance Limited (EFU), in respect of a charged to income. As per the scheme, EFU is required to pay, one gross salary for every year of service to permanent employees, upon completion of three years of service.

Pakistan Microfinance Network – Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

4.11 Taxation The income of the Company from voluntary contributions, investments, bank placement and business (to the extent of amount utilized for welfare activities in Pakistan) is exempt under clauses 58, 59 and 60 of Part I of the Second Schedule to the Income Tax Ordinance, 2001. The provisions of section 113 of the Ordinance, relating to minimum tax, also does not apply to the Company owing to an exemption available to the Company under clause 11A of Part IV of the Second Schedule to the Income Tax Ordinance,

4.12 Foreign currency translation currency transactions during the year are recorded at the exchange rates approximating those ruling on the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange which approximate those prevailing on the balance sheet date. Gains and losses on translation are taken to income currently. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the dates when the fair value was determined.

gally and settle the liabilities, simultaneously.

4.14 Impairment Financial assets

impairment. If any such indication exists, then the recovera

d. A n the

of oss is

value exceeds its recoverable amount.

4.15 Income recognition Grant income Grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Income related grants Grants of a non-capital nature are recognized as deferred income at the time of their receipt. Subsequently, these are recognized in the income and expenditure statement to the extent of expenditure incurred. Expenditure incurred against grants, against which s a receivable from donors. Capital grants recognized in the income and expenditure statement, on a systematic basis, over the periods necessary to match them with the carrying value of the related assets.

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Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

Consultancy income and training fees These are recognized when the related service has been rendered. Registration and membership subscription fees These are recognized on an accrual basis.

5. Property and Equipment Notes

2013

Furniture

5.1

equipment Computer equipment

Cost As at 01 Additions (Disposals) As at 31 January (Rupees) (Rupees) December (Rupees) (Rupees)

Rate (%)

1,279,837

123,703

(220,900)

1,182,640

936,056

108,554

(220,900)

823,710

358,930

2,517,566

202,760

(729,977)

1,990,349

1,850,773

246,409

(729,977)

1,367,205

623,144

2,395,929

788,824

(783,486)

2,401,267

33.33

409,240

(783,486)

1,706,384

694,883

764,203 (1,734,363) 3,897,299

1,676,957

6,193,332 1,115,287 (1,734,363) 5,574,256

2012

Furniture equipment Computer equipment

399,147

1,279,837

821,591

114,465

936,056

343,781

2,188,277

655,301

(326,012)

2,517,566

1,895,736

231,169

(276,132)

1,850,773

666,793

2,141,294

254,635

2,395,929

33.33

1,693,188

387,442

2,080,630

315,299

4,410,515

733,076

(276,132) 4,867,459

1,325,873

(326,012) 6,193,332

been purchased from capital grants, as mentioned in note 16.1.

6. Intangible Assets

2013

Notes

Cost As at 01 Additions (Disposals) As at 31 January (Rupees) (Rupees) December (Rupees) (Rupees) Rate (%)

Written Down Accumulated Depreciation Value As at 01 Charge for (On As at 31 As at 31 January the year disposals) December December (Rupees) (Rupees) (Rupees) (Rupees) (Rupees)

GIS based support system MicroEye

2,429,755

33.33

809,918

1,619,836

809,919

Accounting and anti-virus software

307,780

278,891

586,671

33.33

102,593

172,543

275,136

311,535

Bureau

273,311

33.33

182,208

91,103

273,311

1,117,555

33.33

745,036

372,519

1,117,555

- 3,285,838

1,121,454

Pakistan Micro-

2011

2,080,630 4,867,459

880,690

5,210,261 1,309,083

5.1

Written Down Accumulated Depreciation Value As at 01 Charge for (On As at 31 As at 31 January the year disposals) December December (Rupees) (Rupees) (Rupees) (Rupees) (Rupees)

1,117,555

4,128,401

278,891

GIS based support system MicroEye

2,429,755

33.33

809,918

1,619,837

Accounting software

307,780

33.33

102,593

205,187

273,311

33.33

91,104

182,208

91,103

1,117,555

1,117,555 - 4,128,401

33.33

372,518

745,036

372,519

- 1,839,755

2,288,646

Bureau Pakistan Micro-

6.1

1,390,866 2,737,535

- 4,407,292

1,839,755 1,446,083

463,622 1,376,133

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

6.1

7. Long-term Loan (unsecured, considered good) Notes

2013 Rupees

Loan to an employee - unsecured Current portion shown under current assets

2012 Rupees 126,690 (105,012) 21,678

350,644 (163,893) 186,751

7.1 Interest at the rate of 5% is charged on the long-term loan, issued during the year, to employees.

8. Long-term Investments Notes Held-to-maturity: Pakistan Investment Bonds (PIB's) Current portion shown under current assets

2013 Rupees

8.1

8.2 Current portion shown under current assets Provision for impairment

8.3 8.4

Current portion shown under current assets Available-for-sale: UBL Government Securities Fund (UGSF) UBL Al-Ameen Islamic Sovereign Fund MCB Pakistan Cash Management Fund (PCM) 8.4

2012 Rupees

20,325,522 20,325,522 499,700 (499,700) 20,325,522

982,942 (982,942) 552,200 (52,500) (499,700) 2,000,000 (2,000,000) -

131,574 678,148 10,000,000 1,257,840 12,067,562 32,393,084

10,000,000 10,000,000 819,086 20,819,086 20,819,086

8.1 Details of investments in PIBs, purchased through Pak Oman Investment Company Limited, are: Purchase date

Maturity date

Payment terms

October 11, 2013

July 18, 2018

Semi annually

11.5%

An amount of Rs. 20,000,000, herein, represents investments out of the endowment fund payable (refer to note 17 )

8.2 Detail of investments in TFCs is as follows: Issuer Pace Pakistan Limited

www.pmn.org.pk

Purchase date

Payment terms

February 15, 2008

Semi annually

Cost (Rupees) Kibor + 2%

499,700

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

8.3

FINANCIAL STATEMENTS: 2013

by Pace Pakistan Limited, are deemed to be not recoverable.

8.4 Details of investments in mutual funds are: Mutual funds UBL Government Securities Fund (UGSF) UBL Al-Ameen Islamic Sovereign Fund MCB Pakistan Cash Management Fund

No. of units

Cost

Fair value

1,344 7,590 223,214

131,574 678,148 10,000,000

134,974 766,264 11,166,324

During the year, the Company realized gain of Rs. 371,412 upon sale of units of UBL Government Securities Fund and UBL Al-Ameen Islamic Sovereign Fund, which was transferred to the income and expenditure statement.

9. Consultancy Fee Receivable Notes Considered good - unsecured Plan Finland Foundation Agency for Technical Cooperation and Development (ACTED)

2013 Rupees 1,629,489 5,444,566 355,162 7,429,217

International Growth Centre World Bank 9.1

2012 Rupees 559,296 2,542,869 3,102,165

9.1 This represents amounts receivable against consultancy income, earned by the Company, on conducting research studies and and assessment of MFIs, on behalf of various international organizations.

10. Loans and Advances Notes Loans Considered good Current portion of long-term loan

Loan to other employees Advances Considered good to employees to training institute to suppliers 10.1

2013 Rupees

2012 Rupees

163,893 5,334 169,227

105,012 76,746 8,000 189,758

1,222,153 435,799 25,000 1,852,179

235,613 25,000 450,371

10.1 Loans and advances, except for the current portion of the long-term loan, are interest free, and are due on demand.

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

11. Deposits and Short-term Prepayments Notes Deposits Short-term prepayments Rent Insurance Others

11.1

2013 Rupees

2012 Rupees

260,500

2,118,600 1,698,591 3,817,191 4,077,691

2,050,984 1,719,916 853,150 4,624,050 4,884,550

11.1 These represent security deposits paid for rent and utilities etc.

12. Interest Accrued Notes Gross interest accrued Provision against interest accrued

12.1

2013 Rupees 1,899,783 (105,856) 1,793,927

2012 Rupees 930,372 (105,856) 824,516

12.1 Movement in the provision for doubtful interest accrued is as follows: Notes Balance as at January 01 Provision recorded during the year

2013 Rupees 105,856 105,856

2012 Rupees 105,856 105,856

13. Other Receivables Notes Considered good: Membership fee Training fee Others Considered doubtful: Membership fee Provision against doubtful other receivables

www.pmn.org.pk

2013 Rupees

2012 Rupees

2,117,589 2,156,832 1,500,291 5,774,712

737,589 1,455,620 210,118 2,403,327

229,411 (229,411) 5,774,712

229,411 (229,411) 2,403,327

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

14. Short-term Investments Notes Held-to-maturity: Investment in related parties Term Deposit Receipts (TDRs) Current portion of long-term investment Pakistan Investment Bonds (PIBs)

2012 Rupees

2011 Rupees

14.1

33,203,043

20,823,160

8 8 8

33,203,043

982,942 52,500 2,000,000 3,035,442 23,858,602

14.1 Details of investments in TDRs in related party organizations are: Maturity date

Khushhali Bank Limited Khushhali Bank Limited (note 14.2)

May 20, 2014 December 27, 2014 December 20, 201 October 22, 2014

Mark-up (per annum) 10.5% 10.0% 11.00% 11.00%

2013 Rupees 6,750,000 5,377,800 11,075,243 10,000,000 33,203,043

2012 Rupees 6,000,000 4,823,160 10,000,000 20,823,160

14.2 This TDR has been purchased with funds available under an endowment fund, provided by the Pakistan Poverty Alleviation

15. Cash and Bank Balances Notes Cash at banks in local currency Saving accounts

15.1

2013 Rupees

2012 Rupees

50,195,931

41,948,131

15.1 This includes Rs. 4,486,495 (2012: Rs. 2,296,623) not available for utilization by the Company and relates to money received 6% and 8% (2012: 6% to 10.25%), per annum. Further an amount of Rs. 30,000,000 was deposited in a savings account, in respect of an endowment fund from PPAF. As at December 31, 2013, an amount of Rs. 6,113,453, out of the endowment fund, was utilized in the ongoing activities of the Company. Subsequent to the year end, the amount has been reimbursed to the endowment fund bank account, from the related grant receipts.(refer to note 17)

16. Deferred Grants Notes Capital grants Restricted grants

16.1 16.2

2013 Rupees 2,776,211 5,449,079 8,225,290

2012 Rupees 3,584,919 31,434,577 35,019,496

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

16.1 Capital Grants Notes

2013 Rupees

Balance as at January 1 Grants received during the year for: Property and equipment Intangible assets Advance for capital expenditure Transfers to the income and expenditure statement Depreciation and amortization for the year

16.1.1

2012 Rupees

3,584,919

4,345,706

1,115,287 278,891 1,394,178

1,272,083 118,819 1,390,902

(2,202,886) (2,202,886) 2,776,211

(2,101,809) (49,880) (2,151,689) 3,584,919

16.1.1 These represent the written down value of property and equipment and intangible assets acquired by the Company from grants received from various donors.

16.2 Restricted Grants DFID (Rupees) Client Protection Initiative

Governance needs of the MicroIndustry

Grants received during the year

National Rollout of Micro-

Credit Information Credit Bureau Information MF-CIB Bureau MF-CIB

Knowledge Management Initiatives

Knowledge Management & Policy Dialogue Component

Impact Assessment

TOTAL 2012 (Rupees)

Private Credit Bureau

4,399,631

(2,529,798)

(9,774,256)

1,869,724

(256,403)

1,002,081

15,217,240

40,000,000

19,792,169

12,701,865

18,315,769

256,403

2,429,095

15,466

386,032

162,442

117,390

89,726

60,337

19,417

29,553

939,530

2,568,706

(782,024)

(765,020)

1,925,000

101,971

Amount refunded to donor

Nationwide Micro-

TOTAL 2013 (Rupees)

IFC (Rupees)

11,893,253

Amount transferred to accrued and other liabilities

Financial Inclusion Program: Institutional Strengthening Fund

SEEP Network (Rupees)

(6,004,639)

placements

PPAF (Rupees)

1,479,739 (17,004,288)

Balance as at January 1

Citi Foundation (Rupees)

120,475,531 140,517,618

11,995,224

1,940,466

16,771,565

45,205,972

23,158,154

12,791,591

8,601,850

1,889,141

(768,123)

(7,613,004)

(7,262,912)

(725,780)

(2,033,115)

(6,473,811)

(6,428,458)

(187,500)

(13,089,769) (11,815,191)

(6,950,702) (36,936,113) (21,988,609)

(2,030,262)

(8,620,122)

(4,886,954)

(82,255,485) (68,616,255)

(1,889,141)

(38,166,332) (27,324,275)

3,460,729 125,814,692 139,009,482

Expenditure: Governance and management

(586,409)

(256,314)

(12,533,691)

(5,250,000)

Capacity building Enabling environment Information hub

(3,222,914)

(13,888,223) (5,506,314) (29,341,721) (57,593,865) (22,714,389)

(7,473,791)

(8,304,204)

(6,966,382)

(8,620,122) (1,889,141)

(1,040,241)

(19,443,175) (19,573,108)

- (5,927,195) (152,954,761) (127,328,830)

Others: Capital expenditure Grant receivable

(964,282)

(312,486)

(117,410)

(1,394,178)

(1,390,902)

(5,890,120)

131,279

5,317,800

5,449,079

31,434,577

(1,892,999) (3,565,848) (12,570,156) (13,352,175)

(135,682)

- (2,466,466) (33,983,326) (27,034,947)

PMN Fees (Note 16.2.1) Balance as at December 31 - deferred grant - grant receivable

www.pmn.org.pk

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

16.2.1 This represents PMN fees charged on an estimated basis, over and above the actual expenses incurred, for managing the projects, and is restricted to a maximum budgeted amount.

17. Endowment Fund Payable Notes Endowment fund received during the year Income earned theron during the year Expenses allocated to endowment fund payable

2013 Rupees

17.1

2012 Rupees -

60,000,000 1,561,308 (761,278) 60,800,030

17.1 The breakup of expenses allocated to the endowment fund as follows: Notes

2013 Rupees

2012 Rupees -

125,000 125,000 511,278 761,278

Governance and management Enabling environment Information hub

17.2 This endowment, amounting to Rs 60 million, was received during the year from the Pakistan Poverty Alleviation Fund (PPAF),

under a Financing Agreement, dated September 2013. The endowment remains restricted for a period of three years, starting from September 01, 2013, within which PPAF reserves the right to suspend or terminate the right of PMN to the use of this

a credit rating of at least A-, and/ or deposits with one or more scheduled commercial banks rated AA, under competitive expenses of PMN (except for foreign training, air conditioners and building and construction costs). The Company is also prescribed conditions.

18. Accrued and Other Liabilities Notes Accrued expenses Payable to Agency for Technical Cooperation and Development Income tax withheld Provident fund payable Other liabilities

2013 Rupees

2012 Rupees

23,020,764 5,714,075 748,083 262,878 1,325 29,747,125

30,376,685 3,214,257 5,517 31,000 1,325 33,628,784

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

19. Grant Income Notes Restricted funds recognized as income Restricted Grants Department for International Development (DFID) State Bank of Pakistan - Hybrid Value Chain - Financial Inclusion Programme - Client Protection Initiative - Governance needs of the MF industry - Financial Inclusion Programme - Institutional Strengthening Fund

2013 Rupees

2012 Rupees

19.1 19.2 19.3 19.4

13,888,223 5,506,314 29,341,721 57,593,865

11,970,119 24,647,548 47,293,672

19.5 19.6

22,714,389 7,473,791

14,804,288 -

19.7

8,620,122

23,562,726

19.8

1,889,141 5,927,195 152,954,761

962,265 1,265,397 613,969 2,208,846 127,328,830

Pakistan Poverty Alleviation Fund (PPAF) - Knowledge Management Initiatives - Grant under IFAD-PRISM Knowledge Management and Policy Dialogue Component Citi Foundation - Impact assessment - Consumer protection SEEP Network International Finance Corporation (IFC)

19.9

Capital grants Amortization of deferred grant

16.1

2,202,886 155,157,647

2,151,689 129,480,519

Unrestricted income PMN Fees

16.2

155,157,647

5,890,120 135,370,639

19.1 This grant from DFID, under the agreement "Client Protection Initiative", is for an aggregate amount of Rs 30,323,000, for a

19.2

Rs 7,700,000, for a period from August 2013 to November 2013, with the objective of addressing the governance needs of

19.3 This grant, from DFID, under the agreement "Financial Inclusion Program-Institutional Strengthening Fund", is for an aggre-

gate amount of Rs. 133 million. The grant is managed by and routed through the State Bank of Pakistan (SBP) on behalf of DFID. The grant was initially for a period of four years from July 2009 to October 2013 and its main objective is to improve the

SBP has granted an extension to the agreement via a separate agreement titled "Extension in Operation Support", with an aggregate additional grant of Rs 75,884,356, for the period from October 2013 to September 2015.

19.4

gate amount of Rs. 213,863,916, for a period of three years, from April 2012 to March 2015. The main objective of the grant is portfolio quality of MFPs.

www.pmn.org.pk

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

19.5 This grant, from PPAF, under the agreement "National Rollout of MF-CIB" is for an aggregate amount of Rs. 40,000,000, for a period from October 2012 to September 2013. The main objective of the grant is to support the national rollout of MF-CIB.

19.6 This grant, from the PPAF, under the agreement "Support for Knowledge Management Initiatives", is for an aggregate amount of Rs. 12,701,865, for a period from January 2013 to June 2013. The objective of the grant is to enhance commercial funding

19.7 This grant, from PPAF, under the agreement "Grant under IFAD-PRISM Knowledge Management and Policy Dialogue Component", is for an aggregate amount of Rs. 38,303,957, for a period of twenty one months from October 2011 to June 2013. The

19.8 This grant, from the Citi Foundation, under the agreement "Impact Assessment" is for an aggregate amount of US$ 60,000 (equivalent to Rs. 4,924,200), The grant was for the period from June 2011 to June 2013. The purpose of the grant is to conduct workshops and seminars on consumer protection.

19.9 This grant, from International Finance Corporation (IFC

into a Private Credit Bureau in Pakistan is for an aggregate amount of USD 100,000, for the period March 2012 to September 2013.

20. Training Fees Notes International visits / Exposure visits

2013 Rupees

2012 Rupees

452,957 1,028,750 591,937 1,108,165 214,912 216,000 3,612,721

Social performance task force meetings Harvard training course School of Applied MF Frankfurt School of Finance and Management Risk management training Financial institutions for private enterprise development 20.1

952,158 629,038 366,745 690,291 227,988 611,815 3,478,035

20.1 This represents training fees earned on account of arranging trainings for various member organizations.

21. Consultancy Income Notes International Growth Centre - Study "Understanding the informal money lender’s role in the agriculture supply chain” "Develop Commercially Viable Youth Friendly Financial Products in Pakistan" Plan Finland Foundation "Universal Standards for Social Performance Management" "Improving access, quality and service delivery of the TVET sector to marginalised rural communities through innovative approaches" - ACTED World Bank "Tackling Financial Exclusion of Women Entrepreneurs in Pakistan Initiative” "Financial Inclusion and Literacy Outcomes of Cash Transfers through the Banking System in Pakistan”

2013 Rupees

2012 Rupees -

559,296

2,146,137

3,852,839

7,369,686

4,200,656

9,161,536 22,530,198

12,714,343 17,474,295

Pakistan Microfinance Network – Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

22. Income from Sponsors organized by the Company in July 2013.

23. Other Income Notes

Interest income on loan to employees Investment income Income from investments in related parties Interest income earned on TDRs with associated companies Liabilities written-back Gain on sale of property and equipment Others

23.1

2013 Rupees

2012 Rupees

246,289 5,119 897,631 1,149,039

512,618 763,589 1,276,207

2,245,119

1,111,539

43,200 2,133,474 2,176,674 5,570,832

1,129,489 232,060 1,361,549 3,749,295

23.1 This includes an amount of Rs. 1,391,906 (2012: Rs. Nil), generated from the sale of software "PMR online" to the Afghanistan

24. Governance and Management Notes

Rent and utilities Meetings and conferences Communication Legal and professional Publications and printing Repairs and maintenance Entertainment Traveling Audit fee Internal audit fee Insurance Others Allocated to endowment fund payable

www.pmn.org.pk

2013 Rupees

2012 Rupees

6,359,814 1,097,843 2,471,945 2,396,729 242,108 3,856,572 765,378 469,060 125,927 71,608 331,316 660,000 309,920 296,823 113,132 19,568,175 (125,000) 19,443,175

6,704,501 1,904,993 2,720,393 1,728,781 648,524 1,851,134 839,038 219,252 1,432,770 68,069 389,884 375,000 165,750 421,003 104,016 19,573,108 19,573,108

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

25. Capacity Building Notes

2013 Rupees

2012 Rupees

13,089,769

11,815,191

2013 Rupees

2012 Rupees

52,616,417 9,212,030 13,928,335 2,328,497 4,295,206 82,380,485 (125,000) 82,255,485

49,858,454 9,999,617 4,031,373 2,370,039 2,356,772 68,616,255 68,616,255

2013 Rupees

2012 Rupees

13,701,261 17,080,833 1,143,084 4,151,122 2,601,310 38,677,610 (511,278) 38,166,332

15,719,949 5,265,764 1,572,233 3,821,967 937,415 6,947 27,324,275 27,324,275

2013 Rupees

2012 Rupees

8,868,308 9,466,670 3,303,044 21,638,022

12,541,361 933,423 1,466,233 14,941,017

26. Enabling Environment Notes Credit bureau International networking visits Communication initiative Seminars and consultative group meetings Technology initiative Allocated to endowment fund payable

27. Information Hub Notes Research Social performance measures and consumer protection Roundtables Knowledge management (microwatch, micronote etc.) Mapping of branches Allocated to endowment fund payable

28. Consulting Services Notes Research expenditure Others

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

29. Other Expenses Notes 5 6

Depreciation Amortization of intangible assets

2012 Rupees

764,203 1,446,083 108,363 1,742,678 2,186,873 2,530 6,250,730

12.1 29.1 29.2

Provision against interest accrued Networking with international stakeholders

2013 Rupees

Other

733,076 1,376,133 103,165 105,856 34,880 2,353,110

29.1 This represents expenditure incurred on international travel, lodging and related expenditure for the purpose of establishing 29.2

out of its own funds.

30. Remuneration Of Chief Executive Officer And Other Executives other executives are as follows: Executives 2013 Rupees Managerial remuneration Contribution to Bonus for the year Provident fund Contribution in respect of gratuity

Number of person(s)

www.pmn.org.pk

5,493,600 457,800 366,240 200,000 252,900 6,770,540 1

2012 Rupees 5,101,293 1,050,000 336,000 300,000 234,000 7,021,293 1

2013 Rupees

2012 Rupees

20,779,155 1,026,590 1,051,893 1,312,205 1,356,396 25,526,239 16

16,315,829 1,214,104 743,532 1,149,724 710,245 20,133,434 16

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

31. Related Party Transactions The related parties of the Company comprise its directors, key management personnel and members. Transactions and balances key management personnel, which are seperately disclosed in note 30 to

31.1 Notes Transactions during the year: Transactions with the Members Income - Training fee income - Membership and registration fee income - Interest income earned on TDRs Expenses - Expenses incurred on training Payments - Provident fund contribution - Premium to EFU Receipts - Provident fund contribution

2013 Rupees

2012 Rupees

3,612,721 5,155,452 2,456,078

3,478,035 5,845,300 1,111,539

13,089,769

11,815,191

2,604,388 1,774,500

2,128,064 1,449,724

848,345

31.2 Notes Balances as at year end with: Members Assets - Training fee receivable - Membership fee receivable Associated undertakings Assets - Short-term investment - Accrued investment income Key management personnel Assets

2013 Rupees

2012 Rupees

2,156,832 2,347,000

1,455,620 967,000

33,203,043 1,793,608

20,823,160 619,521

125,297 76,746

Pakistan Microfinance Network â&#x20AC;&#x201C; Annual Report 2013

Balance Sheet Income and Expenditure Statement Cash Flow Statement Statement of Changes in Funds and Reserve Notes to the Financial Statements

FINANCIAL STATEMENTS: 2013

32. Number of Employees as at Year End Notes Number of employees

2013

2012 17

33. Date of Authorization 28, June, 2014

34. General

www.pmn.org.pk

ASSOCIATES

AFFILIATES

MEMBERS

ALLIANCES

Banking With The Poor Network Asiaâ&#x20AC;&#x2122;s regional microfinance network

DataCheck

FINCA Microfinance Bank, Ltd.

Formerly Kashf Microfinance Bank Ltd.

South Asian Microfinance Network

SBI