Introduc)on and Overview. May 2016

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1 Introduc)on and Overview May 2016

2 COMPANY INTRODUCTION 2 Karandaaz Pakistan is a non-profit company which aims to promote access to finance for small businesses through a commercially directed investment plagorm, and financial inclusion for individuals by employing technology enabled digital soluions Formally registered with the SecuriIes and Exchange Commission of Pakistan (SECP) on August 24, 2014 under the Companies Ordinance 1984 Financial and insituional support from leading internaional development finance insituions, principally the United Kingdom Department for InternaIonal Development (UKAid) and the Bill & Melinda Gates FoundaIon Board chaired by Dr Ishrat Husain, former Governor State Bank of Pakistan (SBP)

3 FUNCTIONAL STRUCTURE OF KARANDAAZ 3 THEMES SUPPORT FUNCTIONS WOMEN Digital Financial Services YOUTH INNOVATION Corporate Investment and Credit Knowledge Management & Communications Human Resources Finance and Administration PAKISTAN KARANDAAZ ORGANIZATION WORKSTREAMS

4 4 KARANDAAZ ECONOMIC RATIONALE FOR SME FOCUS

5 5 SMEs in Pakistan ROLE 90% of 3.2 million businesses in Pakistan are SMEs Contribute 30% to the GDP 25% to country s total export earnings Employ 70% of non-agri labour force in Pakistan CONSTRAINTS Skills Energy Macroeconomic Contract Enforcement Access to finance

6 6 Private Sector Credit Constraints Source: IMF Tenth Quarterly Review March 2016

7 7 Where is the credit going? Trends in SME Financing Source: IMF Tenth Quarterly Review March 2016 Source: SBP, Quarterly SME Finance Review Jun 2015

9 CORPORATE INVESTMENT & CREDIT 9 Deepen access to finance for MSMEs to strengthen broad based economic and employment growth

10 CORPORATE INVESTMENT AND CREDIT Credit Product I: Total Return Swap BACK-UP Guarantor ( FIP ) Back-up porgolio credit loss insurance Qualify Eligibility Credit Loss Cover Established small and mid-size operaing in organized supply chains of the economy KARANDAAZ Profit & Loss PARTNER FI PROGRAM PORTFOLIO Program Loans SME OBLIGORS Capital APEX CORPORATE Karandaaz provides risk capital to Partner FI to co-fund SME porgolio. Both ParIes earn: KIBOR on their commiied capital Pro rata P&L share of PorGolio net of variable opex spread paid to FI Partner FI co-funds PorGolio at a [3]x muliple Funds PKR [3] for every PKR 1 funded by Karandaaz Partner FI originates, underwrites and services a porgolio of corporate vendor loans based on defined program guidelines PorGolio comprises defined asset-backed loans for capital equipment and expansion working capital Defined program guidelines by industry: Asset type, tenor, yield, LTV, security etc. Corporate Partner provides structured support to Partner FIs IdenIfy vendors with growth potenial and good credit history Validate current revenue, margins and cash flow Provide visibility on future revenue, margins and cash flow Establish payment escrow with Partner FI Penalize delinquent vendors 10

solu<ons to influence markets Posi<on Karandaaz

11 KNOWLEDGE MANAGEMENT & COMMUNICATION 11 & Develop and disseminate evidence based insights and solu<ons to influence markets Posi<on Karandaaz Pakistan as a thought leader in the financial inclusion space

12 KNOWLEDGE MANAGEMENT AND COMMUNICATIONS Strategy Overview 12 Develop and disseminate evidence based insights and solu<ons to influence markets. Posi<on Karandaaz Pakistan as a thought leader in the financial inclusion space. KNOWLEDGE MANAGEMENT COMMUNICATIONS 1 InformaIon SYNTHESIS 1 Industry ENGAGEMENT 2 Original Data Backed INSIGHTS 2 Company VISIBILITY 3 Company BLOG 3 Media MANAGEMENT Develop criical research and build knowledge infrastructure Build brand awareness and foster meaningful partnerships

13 13 SME RESEARCH STUDY TOPICS Product Design: Women-Rich SME Sector INFORMAL Credit Markets Five SME Success Stories (Global) Credit Ra)ng for Small Businesses Reviving Small Scale Manufacturing Industries in Pakistan

14 PRODUCT DESIGN: WOMEN-RICH SME SECTOR 14 PRIMARY LEAD SECONDARY LEAD Knowledge Management and CommunicaIons Corporate Investment and Credit PARTNERS Consultant TBD Descrip<on Examine five women-rich small enterprise sectors (educaion, e-commerce, texiles, furniture, gems and jewelry). Assess financing (supply-demand) gaps, and idenify the sectors with the highest growth potenial. In a second step a credit product will be designed for the selected sector. Topics Credit product, women entrepreneurs Reasons for engagement Refine the development of a wholesale credit product that targets women Expected outcomes Sector comparison report with presentaion deck; one wholesale credit product Tenta<ve dates June 2016 December 2016

15 INFORMAL CREDIT MARKET 15 PRIMARY LEAD SECONDARY LEAD Knowledge Management and CommunicaIons Corporate Investment and Credit PARTNERS Consultant TBD Descrip<on Trace the informal credit system in 3-4 SME value chains/sectors (manufacturing, light engineering, furniture, pharmaceuicals, transport) to idenify potenial market opportuniies for financial inclusion Topics Informal credit; value chain Reasons for engagement SMEs face considerable limitaions in access to credit with significant reliance on informal sources. The study will trace the interacion of selected value chains/ sectors with the informal financial market and idenify opportuniies (products, actors) for providing access to the formal financial sector Expected outcomes Study report; presentaion deck Tenta<ve dates June 2016 February 2017

16 FIVE SME SUCCESS STORIES (GLOBAL) 16 PRIMARY LEAD SECONDARY LEAD Knowledge Management and CommunicaIons Corporate Investment and Credit PARTNERS Consultant TBD Descrip<on IdenIfy and examine five highly successful models from around the world of SME development and financing. The study will focus on the regulatory and policy system, industry structure (contribuion to GDP, access to finance, sectors, contribuion to trade composiion), SME infrastructure (SME exchange, collateral registry, credit bureaus), financial products, business development services, among others. PotenIal countries of focus could be Turkey, China, Indonesia, South Africa, Vietnam Topics SME development models; policy and regulaion; financial products for SMEs Reasons for engagement To learn from countries that have successfully integrated their SME sectors into the formal economy Expected outcomes Study report; presentaion deck (to be followed by exposure visits) Tenta<ve dates April 2017 October 2017

17 CREDIT RATING FOR SMALL BUSINESS 17 PRIMARY LEAD SECONDARY LEAD Knowledge Management and CommunicaIons Corporate Investment and Credit PARTNERS Consultant TBD Descrip<on Conduct exploratory research on availability of and appeite for credit raing for small businesses. Conduct big data analysis to develop credit raing for small businesses using State Bank of Pakistan database, subject to regulator permission. Topics Credit raing Models; Small business Reasons for engagement Lack of credit raing model for SME sector Expected outcomes Report; Credit raing model; PresentaIon deck; blog Tenta<ve dates

18 REVIVING SMALL SCALE MANUFACTURING INDUSTRY IN PAKISTAN 18 PRIMARY LEAD SECONDARY LEAD Knowledge Management and CommunicaIons Corporate Investment and Credit PARTNERS Consultant TBD Descrip<on Awer great progress in the 1960s, small scale manufacturing in Pakistan has been increasingly crippled by muliple factors (power crises, declining skills, economy's increasing isolaion from global supply chains). The study will provide strategies for their revival linked to local, naional and internaional supply chains Topics Small scale manufacturing Reasons for engagement Single most criical driver of broad based employment generaion Focus on impacing public policy (Federal and Provincial government) Provide insight to financial partners on how and where to direct credit to strategic small industries earmarked for transformaional growth Expected outcomes Report; presentaion deck; blog Tenta<ve dates

19 KARANDAAZ PAKISTAN BLOG 19 BLOG COMMIITTEE Social Media Exp (Comms) Blog Editor (I&S) BLOG WRITERS BC MEMBERS CONTENT TEAMS PART TIME WRITER ACHIEVED (to date) LIVE POSTS: 24 UNIQUE POSTS: 20 REPOSTS: 4 AVG. SOCIAL MEDIA ACTIVITY: 69 AVG. UNIQUE VIEWS: 94 Permanent Content Exp (DFS) RotaIng Content Exp (DFS/CIC) Implement blog strategy and process Provide content sugges6ons and help writers develop outlines Review and edit all materials posted on the Karandaaz blog EXTERNAL PARTNERS TARGETS (YR 1)* UNIQUE POST TARGET: 2 per month AVG. SOCIAL MEDIA ACTIVITY TARGET: 100 AVG. UNIQUE VIEWS TARGET: 150 * Star)ng Dec 2015

20 20 THANK YOU

COMPANY PROFILE. Passion. Progress. for

COMPANY PROFILE. Passion. Progress. for COMPANY PROFILE Passion for Progress COMPANY OVERVIEW Pakistan Microfinance Investment Company Limited (PMIC) is a national-level apex institution for microfinance providers in the country. PMIC was established