Share this story!            

Interview with Laurie J Spengler and Zubyr Soomro

Ayesha Tammy Haq is a corporate lawyer. She hosts 24seven, a current affairs programme on Business Plus TV, and is also a columnist.

‘I think today a lot of aid money that is being offered to Pakistan will be linked to assurances of its proper use. So to be able to get that money, if you have the right models with right checks and balances; which will automatically make the money flow faster’ Zubyr Soomro

Ayesha Tammy Haq spoke to Laurie J Spengler, President ShoreBank International, and Zubyr Soomro, former chairman Pakistan Banking Association.

ATH: Are you looking at Pakistan as a scary place or is it this fantastic opportunity the world should know about?

LS: It is more the latter than the former. We have been here, I mean the ShoreBank has been in Pakistan for twenty years so it is not a new market for us, we have been working since 1988 and we are here to strengthen local financial institutions in the area of micro-finance, small business finance and housing finance. Intermittently we did work in Pakistan, and in 2005 we opened up permanent presences in Islamabad and Lahore, with the same orientation, that is to strengthen local financial institutions. At that time we worked with a number of institutions, and did what we call capacity building. That involved going inside the institutions and working with them, their business plans, their strategies, the training of people, and the design of loan products to reach under-served borrowers in Pakistan. So we see it as an opportunity because there is such unmet demand or unmet need, there is tremendous demand here in Pakistan and we are trying to support that.

ATH: All that is really fantastic, but you spoke about capacity building and I have been reading up on what you have been doing internationally, one of the things I noticed was Bangladesh and your work with BRAC. If you look at their model, you are working with micro-finance, micro-credit, housing projects and these are all for low income sectors, taking people up the economic ladder. When you talk about capacity building, in Bangladesh BRAC has not only gone into capacity building but also they have also provided market access. Do you see that happening in Pakistan?

LS: Not so much. It is interesting, in Bangladesh if you look at BRAC, they call themselves a development organisation, they wouldn’t call themselves a micro-finance organisation, they do micro-finance and its their starting point. They go into a village and build small organisations and micro-finance, being an access to the capital, is available. They then think about what else a small community needs and build additional tools and instruments in response to those needs, and you are exactly right, they have been very thoughtful about market linkages. There is some work going on in Pakistan and more work is being developed in that area, but so far I think it has been an underdeveloped area and most micro-finance institutions are, so far, focusing on the credit component and not the additional components yet.

ATH: You talked about small communities; you are not just a hotshot, highflying international banker, you also have rural ties and are fairly involved with upper Sindh. Do you see yourself being able to pick up these models, take them to rural Sindh, apply them there, take the community, bring it together, work with the entire community, then provide the access to the markets?

ZS: We need to step back a moment, one of the strategic issues with us here, has been that we came up with the regulations for micro-finance before the industry evolved, so the regulations preceded the evolution of the industry, instead of learning from the industry as it evolved and putting in the restrictions thereafter. I think this does directly affect growth. To move from there to this upper Sindh situation, my son and I were doing an analysis recently and we found that in Jacobabad, for example, where the population is approximately a million, there are only two micro-finance institutions. The total number of borrowers in the area is eleven thousand. Of those eleven thousand, almost nine thousand are from one bank and that bank has decided to stop lending further.

ATH: Is that a state run bank, or is it a private bank?

ZS: It is a mixture. So the point is, I think the opportunities in those places for social development, that is sustainable and effective, the opportunities are immense. So far, people haven’t found the models, but I think if you take it piece by piece, keep the Government out of it and don’t complicate it.

ATH: Everybody says that, I wonder why?

ZS: The way to succeed is to keep government out of it, at all levels. The less regulation the better and that is something I can come back to but I think when you take education, when you take health, if you find NGO’s that have succeed, they have the right models and you can attract them into those places then give them the support that they need. I think that is a cleverer way to go about it. So a lot can be done, but not with the kind of approaches that we have been taking so far.

LS: I would like to mention NRSP here, because I think that they have been very active in focusing and really diagnosing the needs of the people.

ATH: I thought NRSP was only in the North and they had different SP’s that worked in other parts of the country?

ZS: Well NRSP itself is the national one, and then there are various provincial ones, like one for Sindh, one for Punjab and so on.

ATH: You talked about keeping government out of it, you talked about building institutions and models, then you go back to BRAC and Bangladesh, when I looked at BRAC, I thought it was running like a parallel government, short of people sitting in the assemblies, they were doing the work government should do, they were providing every service that government should provide; education, health, insurance, telecom etc, and that too at a very minimal cost so people were happy to work, they were happy to pay and it all seemed to be working, but still somehow you don’t see Bangladesh as this country with a first world booming economy. They are a developing country, the economic situation is still pretty bad, but their economy appears to be doing better than ours. If we go back to what you said earlier and about not over regulating, how did they do it in Bangladesh when they started micro-finance? How did they evolve, they couldn’t have had the regulations from the very beginning?

ZS: I know less about that then Laurie does, but what I would say is what I clearly gathered from friends there, that micro-finance institutions, as opposed to banks, were allowed to evolve without intrusion and regulation.

ATH: Because they weren’t borrowing from the capital market, they were grant funded.

LS: I think you are absolutely right, and I also think there was recognition by that time, that they were stepping into the role that government should have been playing, but frankly couldn’t play it, they just didn’t have that ability. BRAC today runs 63,000 one-room schools. 63,000 is an astonishing number and they are very cooperative with the government so the government is aware of what they are doing and they are appreciative in many ways, so there was a collaboration and a dialogue, but you are absolutely right, no regulatory interference and that’s quite different.

ATH: That’s all great, you run 63,000 schools but you don’t get funding from government, it doesn’t come out of the education budget, it’s a parallel system.

ZS: Again, if I can step in there and give you the example of the Jacobabad area, we found there that there are 233 primary schools for girls in that area, and 85% of them are shut, they are just buildings for people to use as homes or whatever. So the point is that if one can keep arguing that you should make buildings and then push or encourage the governments to make those work, I think the wiser approach is to find people that can run those schools, not even bother about the staff that’s already hired, let them continue and let the government keep paying them, but if you can take advantage of the funding programs, donor programs and so on, and say that we will take in teachers and have a teachers training college, and just focus on say, starting 50% of those schools over the next two years. The impact that would have in terms of dealing with that society would be enormous. I don’t think one can wait for government.

ATH: You can’t wait for government but maybe you can take the funding away from them, why should they have budgets then? That’s my money and I am concerned about it. If my tax money is not being used to provide any service then what’s the point of paying tax? Why not just pay it to some micro-finance entity or an NGO who can actually deliver the service? It all comes down to the money at the end of the day.

ZS: Well, I think today a lot of aid money that is being offered to Pakistan will be linked to assurances of its proper use. So to be able to get that money, if you have the right models with right checks and balances; which will automatically make the money flow faster.

ATH: Thank you both for your time, I hope our readers have a better idea about the microfinance, the services it can provide and how it is possible to bring about real change in the poorer segments of society.

Home | Boss

Share this story!