Aqil leaving Telenor Microfinance

Bank (EasyPaisa), but what is he leaving behind?

g AFTER PUTTING BUSINESS ON A PROFITABLE PATH, AQIL BIDS FAREWELL TO ONE OF LARGEST MICROFINANCE INSTITUTIONS

KARACHI

MARIAM UMAR FAROOQ

More than three years after taking charge as CEO of Easypaisa, M Mudassar Aqil has decided to step down from his position to pursue an opportunity overseas. The departure marks the end of a formative period in the history of the Telenor Microfinance Bank Limited, better known as Easypaisa, in which the company came out of the smoke of fraud allegations and became profitable.

Mudassar joined Telenor Microfinance

Bank Limited (Easypaisa) as CEO in November 2019, replacing Shahid Mustafa. This was not his first stint in the microfinance sector, previously he was a CEO at FINCA, another microfinance institution in Pakistan.

At the time, a large fraud in the microfinance lending business had just been uncovered, presenting Aqil with a daunting task upon his arrival. “The bank was in a difficult situation when I joined due to the recent discovery of significant fraud in our microfinance lending business. The aftermath of fraud was what I had to deal with after my joining,” says Aqil while reflecting on his first days heading Easypaisa. How did Easypaisa come out of this mess?

When the management of Mudassir Aqil came in, they identified credit irregularities in the loan portfolio, which included cases of collusion to commit fraud between employees and people outside the bank. This resulted in a lot of controversy for the microfinance bank.

Apart from the controversy, the fraudulent loans resulted in huge losses. As of 2019, Telenor Microfinance Bank had accumulated losses of around Rs 16.5 billion which had increased to a whopping Rs 27 billion in 2020. The fraudulent loans contributed to more than half of the losses the bank experienced between 2019 and 2021.

To counter this, Easypaisa restructured their lending portfolio and wrote off loans. ”So basi- cally what we did in a nutshell was we cleaned up our lending portfolio. We restructured the book. We exited the agriculture bullet lending business where the majority of the fraud had occurred”, says Aqil. Apart from restructuring loans, Telenor injected more equity into the business. “We eventually moved the business to a new strategy where primarily it is a digital-first bank. We embedded both businesses into one business and made the entire bank on a digitalfirst strategy. And in that process, we had to take an impairment charge on the lending portfolio of roughly Rs14 billion – 15 billion.”

Telenor and Ant group, major shareholders of Easypaisa, funded the impair- ment loss which gave Aqil a clean slate to establish the business once again. The shareholders have collectively invested $270 million in the bank. More recently, the two shareholders injected equity of Rs 3.9 billion or $ 22 million in February 2022 to help the management carry out its business plan of becoming a digital retail bank. “When you are building a digital platform, you incur some high upfront costs. And then the idea is that to achieve scale and after scale profitability will follow. Scale is expensive because of the high cost of customer acquisition through digital channels.