1. The Microfinance Opportunity in Pakistan 1 November 2006 Gregory Chen ShoreBank International Ltd Mehr Shah Pakistan Microfinance Network

2. 2 1. Sizing the Credit Market Estimated Adult Population Non-Poor14.5 Transitory Non-Poor25.1 Transitory Vulnerable14.3 Transitory Poor13.3 Chronic Poor6.6 Extremely Poor0.9 Centre for Research on Poverty Reduction and Income Distribution (CRPRID) & Household Income and Expenditure Survey 2000 – 2001. 20.8 27.6 52.7 Household Income and Expenditure Survey: 2001 Stratification by Consumption Levels

3. 3 1. Sizing the Credit Market KIBOR = 9% Informal Markets = 100 – 1000% Total Market Size: 10 Million Loan Balance Per Client: 30,000 ($500) Advances: 300 Billion ($5 Billion) Interest Rate:30% Annual Revenue:90 Billion ($1.5 Billion)

4. 4 2. Market Penetration – To Date Active Borrowers Table

5. 5 2. Market Penetration - Projected 2006 Borrowers 143,000 Loan Portfolio US$ Millions30 2010 1,549,498 510 Yield on Portfolio35% - Operating Costs(30%) - Financing Costs(10%) Return on Assets(5%) Net US$ Millions(1.5) Sample of 3 High Growth Microfinance Providers 30% (15%) (10%) 5% 25

6. 6 3. Seizing the Opportunity Vision Physical Infrastructure Capital Staff Skills and Orientation Mgmt Systems Technology Enabling Regulation

7. 7 Seizing the Opportunity Microfinance Institutions State Bank of Pakistan Commercial Banks Capital Mgmt Systems Technology Physical Infrastructure Staff Skills Orientation Enabling Regulation VISION Donors Service Providers