About this pageGiveWell aims to find the best giving opportunities we can and recommend them to donors. We tend to put a lot of investigation into the organizations we find most promising, and de-prioritize others based on limited information. When we decide not to prioritize an organization, we try to create a brief writeup of our thoughts on that charity because we want to be as transparent as possible about our reasoning. The following write-up should be viewed in this context: it explains why we determined that we wouldn't be prioritizing the organization in question as a potential top charity. This write-up should not be taken as a "negative rating" of the charity. Rather, it is our attempt to be as clear as possible about the process by which we came to our top recommendations.
A note on this page's publication dateThe last time we examined FMFB was in 2010. In our latest open-ended review of charities, we determined that it was unlikely to meet our criteria based on our past examination of it, so we did not revisit it. We invite all charities that feel they meet our criteria to apply for consideration. The content we created in 2010 appears below. This content is likely to be no longer fully accurate, both with respect to what it says about FMFB and with respect to what it implies about our own views and positions. With that said, we do feel that the takeaways from this examination are sufficient not to prioritize re-opening our investigation of this organization at this time.
SummaryFMFB is a microfinance institution in Pakistan. FMFB offers both loans and savings products.1 Our review of FMFB consisted of reviewing materials FMFB submitted to us and a phone conversation with Amir Hussain, FMFB's Head of Social Performance Research and Special Projects. We do not currently recommend FMFB, feeling that the Small Enterprise Foundation provides a better opportunity for donors interested in supporting microfinance.
Table of Contents
Key questions about social impact: LendingIn evaluating FMFB, we asked our key questions for evaluating microlending charities. The sections below cover what its to our key questions (see the previous link for why we consider these questions important).
Is the organization focused on social impact?
How frequently do borrowers drop out of the program?FMFB reports its drop out rate as of May 31, 2010 as 12% and its retention rate as 82% as of that date.2 We do not know how FMFB calculates these rates. According to FMFB's Social Performance Standard report for 2008, its drop out rate was 23% in that year (calculation details in footnote).3 We have not seen drop out rates for other years. For more information on microfinance drop out rates and how they are calculated, see our microfinance glossary.
Does FMFB monitor why borrowers drop out?According to FMFB's Social Performance Standards report for 2008, FMFB does not collect information on why clients drop out.4
Does FMFB prevent client over-indebtedness?FMFB told us that it conducts assessments of borrowers repayment capacity, which include house visits, visits to borrowers' businesses, questioning borrowers family members neighbors, and checking credit history through the State Bank of Pakistan.5 We have not seen reports from this process.
Are borrowers protected against harassment by loan officers and group members?FMFB told us that clients meet with loan officers once a month at which time they may voice complaints, which are reported to management. Loan officers are evaluated and given incentives for holding these meetings and discussing key topics, and for client attendance at them.6 We do not know whether there are mechanisms for ensuring that complaints are reported completely and accurately or how complaints are dealt with.
What interest rates does FMFB charge?FMFB provided a list of loan products and associated duration and interest rate ranges.7 FMFB told us that it does not require clients to save a portion of the loan.8 However, because we do not know the size of fees charged on each loan type, we are unable to calculate the full cost of credit to a borrower.9 For more information on microfinance interest rates and how we calculate the cost of a loan to borrowers, see our microfinance glossary.
What is FMFB's repayment rate?FMFB told us that it does not currently track a repayment rate, specifically.10 We asked FMFB for past data on value of loans dispersed, written off, in arrears and rescheduled in order to give us a complete picture of FMFB's repayment history. FMFB provided this data as of May 31, 2010, but we do not know what period this data covers and have not seen data for other periods.11 FMFB reported low portfolio at risk and write-off ratios in 2005-2009, and did not report any rescheduled loans to Mix Market.12 For more information on collection rates and other forms of microfinance repayment rates, see our microfinance glossary.
What are FMFB clients' standards of living?FMFB conducted a survey of clients' standard of living in twenty of its branches in 2007 with the Progress out of Poverty Index.13 Branches were chosen based on their location and size,14 and comprised about a quarter of FMFB's total branches.15 All clients within each selected branch were surveyed for a total of 7,036 respondents.16 Because branches were not selected randomly, we do not know whether the sample is representative of all of FMFB's clients. In addition, the report notes that respondents may have been motivated to provide inaccurate responses because the survey was administered in conjunction with the loan application.17 The survey found that 16.8% of respondents were likely living under the national poverty line.18 Depending on location, 27%-71% reported owning a radio, 10%-20% owning a scooter, 25%-63% having at least one household member with salaried employment, 55%-98% having a flush toilet, and 9%-65% owning a refrigerator.19 For more information on standard of living surveys of microfinance clients, see our microfinance glossary.
Key questions about social impact: Savings
Are savers able to access their funds when they need them? What are the interest rates/fees on the accounts?FMFB offers five types of savings accounts:20
- Gharana Bachat Account: "This account mainly targets the poor. However, any person can open his/her account with an amount as low as Rs.5. Any amount can be deposited with any frequency, however, 3 withdrawals are allowed per month. 5% to 6.5% profit [per year] is given on this account."
- Current Account: "Any person can open this account with an amount as low as Rs.5. Transaction can be done with any frequency. No profit applicable on this account."
- Term Deposit: "There are various terms ranging from 1, 3, 6 months, 1, 2, 3 years and so on. Profit increases as client goes for a longer tenure. 6% to 12% [per year] profit is given on this account...Minimum amount required is Rs.5,000."
- Micro Cash Maximiser: "Transactions can be done any frequency. Profit 3% to 5% [per year] is given on daily product basis. Minimum amount required to open this account is Rs.25,000."
- First Bachat Tanzeem: "It's a contractual saving product made specifically for the poor which helps them in capital formation over the period of time. Client agrees to save a lump sum amount over the specified period of time in the form of equal monthly installment as per his cash flow. A group of 3 to 5 persons is needed to open this account. Minimum installment per month needed is Rs.100, Rs.300, Rs.500 and Rs.1000. Client can withdraw his/her amount on maturity of contract, however in certain cases they may withdraw before maturity as well. Life insurance is also given along with this product with addition amount of Rs.5 to Rs.10. In case of natural death family of the client is given the total contractual amount (saved amount plus balanced amount). In case of accidental death family of the client is given deposited amount plus lump sum Rs 40,000."
Who are the customers?We do not have information on FMFB's savers. We would like to know whether they lack other savings options and what their standards of living are.
Room for more fundsFMFB told us that additional donations would be used for staff training focused on social impact, social performance research, business development services such as financial literacy and entrepreneurship training, and asset transfer programs for the poorest. FMFB estimated that such programs would cost $500,000 to $1 million in the first year, with staff training accounting for $100,000-$200,000 of this.22
- Repayment rate. Can FMFB share data on loans disbursed, written off, rescheduled, and in arrears over time?
- Interest rates. Can FMFB provide full repayment schedules for each of its loan types? What fees does FMFB charge its loan clients?
- Client drop out. What percentage of clients have dropped out of the program each year? How does FMFB calculate this rate? Why have clients dropped out of the program in the past?
- Client indebtedness. Is there a process for monitoring whether procedures for preventing over-indebtedness are effective?
- Client protection. Can FMFB share reports on how client complaints were resolved? Does FMFB have information on how effective this and other practices are at protecting clients from harassment? How is staff performance evaluated and rewarded?
- Savers. What are the characteristics of savers? IS FMFB expanding access to savings to people who previously lack such services? Has FMFB surveyed savers to determine their satisfaction with FMFB's saving services?
- First MicroFinanceBank. Consolidated report. We have requested permission to post this document.
- First MicroFinanceBank. Social performance standards report (2008) (XLS).
- Government of Pakistan, Federal Bureau of Statistics. Monthly review of price indices (May 2010) (PDF).
- Hussain, Amir. FMFB Head of Social Performance Research and Special Projects. Phone conversation with GiveWell (DOC), June 7, 2010.
- Mix Market. Data on FMFB (2002-2009) (XLS).
- Mix Market. FMFB: Data, Indicators. http://www.mixmarket.org/mfi/fmfb-pakistan/data (accessed May 27, 2010). Archived by WebCite® at http://www.webcitation.org/5q2bpzr4K.
- Mix Market. Glossary. http://www.mixmarket.org/en/glossary (accessed May 18, 2010). Archived by WebCite® at http://www.webcitation.org/5pomL0lun.
- 1. Number of active borrowers (2009): 199,792 Number of voluntary depositors (2009): 189,878 Mix Market, "Data on FMFB (2002-2009)."
- 2. First MicroFinanceBank, "Consolidated Report," Pg 29.
- 3. FMFB, "Social Performance Standards Report (2008)." This rate is calculated as (Number of clients at the beginning of the year + Number of new clients - Number of clients at the end of the year) divided by (Average of number of clients at the beginning and at the end of the year).
- 4. FMFB, "Social Performance Standards Report (2008)."
- 5. First MicroFinanceBank, "Consolidated Report," Pg 30.
- 6. Amir Hussain, phone conversation with GiveWell, June 7, 2010.
- 7. FirstMicroFinance Bank, "Consolidated Report," Pg 29.
- 8. Amir Hussain, phone conversation with GiveWell, June 7, 2010.
- 9. Interest income for 2009: $11,856,611 Fee income for 2009: $1,275,855 Mix Market, "Data on FMFB (2002-2009)."
- 10. Amir Hussain, phone conversation with GiveWell, June 7, 2010.
- 11. First MicroFinanceBank, "Consolidated Report," Pg 29.
Portfolio at risk > 30 days (as of December 31):
- 2005: 2.57%
- 2006: 0.80%
- 2007: 2.05%
- 2008: 1.28%
- 2009: 1.37%
- 2005: 0.34%
- 2006: 0.56%
- 2007: 0.55%
- 2008: 0.87%
- 2009: 1.30%
Number of renegotiated loans (as of December 31):
- 2005: 0
- 2006: 0
- 2007: 0
- 2008: 0
- 2009: not listed
- 13. "The First MicroFinanceBank Ltd (FMFB) implemented the PPI in 20 branches during October – December 2007." First MicroFinanceBank, "Consolidated Report," Pg 3.
- 14. "FMFB is operating in 10 regions all over the Pakistan. 2 branches were selected from each region. The selection of branches was based on credit disbursement volumes." First MicroFinanceBank, "Consolidated Report," Pg 7.
- 15. Amir Hussain. Phone conversation with GiveWell, June 7, 2010.
- 16. "All clients entertained by FMFB during the months of October, November, and December for all loan products were included in the pilot for PPI in selected 20 branches from each region. Hence, the respondents included first cycle clients, as well as second or third cycle clients." First MicroFinanceBank, "Consolidated Report," Pg 7. Total number of respondents is from First MicroFinanceBank, "Consolidated Report," Pg 9.
- 17. "As field officers used to complete the PPI score card along with loan application forms, most of the respondents tried to increase their financial worth in order to get maximum loan. As such it is expected that some responses may not be authentic." First MicroFinanceBank, "Consolidated Report," Pg 26.
- 18. "The basic PPI analysis indicates that 16.8% of the clients of FMFB are estimated to fall below the national poverty line." First MicroFinanceBank, "Consolidated Report," Pg 3.
- 19. First MicroFinanceBank, "Consolidated Report," Pgs 17-24.
- 20. First MicroFinanceBank, "Consolidated report," Pgs 30-31.
- 21. Government of Pakistan, Federal Bureau of Statistics, "Monthly Review of Price Indices (May 2010)," Pg 7.
- 22. Amir Hussain, phone conversation with GiveWell, June 7, 2010.