Globally, poverty continues to be a disproportionately rural problem, with an estimated 79 percent of the worldwide poor living in rural areas. We see a similar trend in Pakistan where the financially included population remains predominantly urban (68 percent). The microfinance sector by virtue of working on the frontlines of poverty by extending credit to those typically considered uncreditworthy by the banking sector has become key players in battling this disproportionate lack of financial inclusion, particularly in rural areas.
While U Microfinance Bank Private Limited (U Bank) remains devoted to progressing the national agenda of financial inclusion, our approach towards this mission is vastly different from the norm. At U Bank, our primary customer segment is the economically active poor i.e. farmers, small entrepreneurs and daily wagers and while their needs are vastly different from the affluent customer segments in cities they do have similar aspirations for creating wealth, managing their savings and improving the quality of their lives beyond their need for credit.
Despite this reality, there is a gross absence of banking facilities in rural Pakistan. At U Bank our customer’s needs have always driven our strategy and as a result today we have the largest on-ground presence in the microfinance sector with 201 branches and ATMs across 183 rural and urban areas in the country. Moreover, U Bank is strategically located in places, where the bank’s branch and ATM network is the nearest formal banking option available to customers, thus ensuring the availability of modern banking facilities to the rural population. These customers otherwise have to rely solely on retail agents to meet their basic financial transaction needs, a system which faces liquidity and exploitation of customer related issues which spoil customer experience and erode their trust.
Furthermore, being a full menu bank, we have constructed a diverse product suite that caters to clients in both rural and urban areas. Considering the former, our dedicated product team conducts extensive market research to pin-point the needs of rural customers and develop bespoke products for them. All of these products stimulate progress and prosperity in rural areas through the creation of income generating opportunities. We also recognize that women are less likely to escape poverty as they experience greater social and financial risk.
Therefore, U Bank has designed products to ensure the health and well-being of women in poverty. Our work goes beyond working on just lending product innovation and we devote significant energy and resources towards designing pilot projects which help us improve the value-chains in which our key customers operate. An example of this comes via our work within the agri value-chain where we are piloting with a startup to gain satellite imagery-based crop health and harvesting data as well as micro-weather insights for our farmer customer. This pilot has been showing promising results for both internal portfolio management and crop health management for the farmers.
As a bank operating in the rural space we have also been extremely mindful of the impacts of the Covid-19, also referred to as a ‘developing country pandemic’ due to its disproportionate impact on poor and vulnerable populations. Due to this consideration even despite the difficult condition due to imposed nationwide lockdown, U Bank took a determined stand to not discontinue lending to our core customer base.
We are aware that our customers are dependent on day-to-day activity for survival and would not be able to recover from reduced cash flow. This decision was not made without evaluating the associated business risks, and the bank made the strategic decision to help our customers use their non-productive gold assets as collateral to meet their emergency cash needs while securing more of our portfolio at the same time creating a win-win situation for all parties involved.
We believe that the future of finance is the brightest if it is targeted towards typically excluded segments i.e. the poor, rural and vulnerable. Our core values of merit, commitment, innovation, ethics and transparency guide us towards greater penetration, outreach and efficiency and improving access to low-income communities throughout the country and hence elevating the economic, social and environmental impact that our organisation has.
We are committed to keeping advancing our way of doing business, and building a bank of the future, that not only creates greater ease of doing business but also considers convenience and ease for our customers, all whilst innovating and adopting technological developments to offer unique and innovative product and service offerings that meet the ever evolving needs of our clientele.