Pakistan's Profitable First Women's Bank Carves New Niche

PAKISTAN'S smallest bank in the public sector is a four-year-old institution run for women, by women.

In a male-dominated, conservative Islamic society, the First Women's Bank (FWB) is not only unique because of its character, but more importantly, due to its financial history. According to Akram Khatoon, the president, FWB far outpaces any other public-sector bank.

Initially set up with reserves of 100 million Rupees (US$3.34 million), FWB was meant to work as a development-oriented bank to provide credit to poor and middle-class women who often failed to get support from traditional banks. The government of Benazir Bhutto, who was prime minister at the time (1989), provided 10 percent of the investment, while Pakistan's five public-sector banks contributed the rest.

From its initial five branches, the FWB has expanded to 23 branches across the country. There are plans to set up two more this year.

With that expansion, profits have soared as well. Last year, the bank earned 29 million Rupees (US$985,000) in profits. Earnings this year are expected to jump to 50 million Rupees (US$1.67 million), almost a 68 percent increase.

Unlike other public-sector banks, however, where clients have defaulted on a staggering 80 billion Rupees (US$2.66 billion) in loans, FWB claims a far better record. While in the case of some nationalized banks, such loans account for almost one-half of their debts, the FWB claims that only 3 percent of its loans have gone sour. At a time when Pakistan is coming to terms with the problems in its banks, Ms. Khatoon argues that cooperation with clients and a more responsible attitude on the part of women borrowers holds the key to the bank's success.

``Basically, women feel more responsible and honest in paying back their loans,'' she says.

``We also try to help them in different ways,'' Khatoon adds, citing the recent case of a client whose small carpet-weaving business was about to go bankrupt because of a severe shortage of orders.

Instead of letting the client default, the officers of the bank began a small campaign to collect orders from friends and relatives, which finally saved the business.

According to Khatoon, the bank's improved credit history is largely due to better monitoring of its clients as well as resistance to any political or bureaucratic influence. ``We only give loans on the basis of someone's business plan and ability to pay back,'' she says. ``If someone calls us with a request, that's politely turned down.''

Given that two of the five Pakistani banks that own FWB have already been privatized, and that the government is trying to privatize at least two of the remaining three, FWB is also a likely candidate.

Each of the five banks ``wants to take over the FWB because of its good profitability,'' Khatoon says. However, senior officials say that the government in Islamabad wants to maintain the independent character of the bank because of its role in promoting women's development and its sound profitability.

Khatoon hopes that if the bank remains independent, it could then set up branches outside Pakistan. Nepal, Bangladesh, the United Arab Emirates, and the recently independent central Asian republics are all being considered as possible areas for expansion.

For now, Khatoon is trying to hire talented graduates to join the growing organization, where unlike others, there are few signs of the bank going bankrupt.