Enabling the poor: Pakistan ranks 3rd in favourable microfinance environment

By Kazim Alam

According to the report Pakistan is considered to have one of the most enabling environments for microfinance. ILLUSTRATION: JAMAL KHURSHID

KARACHI: Pakistan has the third-best microfinance business environment in the world, according to The Economist Intelligence Unit’s analysis of the microfinance business environment in 55 countries.

In its recently released report titled “Global microscope on the microfinance business environment 2013,” the business information arm of The Economist Group puts Pakistan after Peru and Bolivia on the overall microfinance business environment ranking.

“Pakistan… is considered to have one of the most enabling environments for microfinance regionally and globally,” said the report, which ranks countries on the basis of two broad categories: Regulatory Framework and Practices, which examines regulatory and market-entry conditions; and Supporting Institutional Framework, which assesses business practices and client interaction.

Interestingly, Pakistan is nearly tied with Bolivia for the second position because the difference in their respective scores on the index is only 0.1 point.

“Pakistan is an extremely attractive microfinance market. We have a regulator (State Bank of Pakistan), which is ranked among the best in the world,” said Mohammad Mudassar Aqil, CEO of Kashf Microfinance Bank, one of Pakistan’s major microfinance banks, while speaking to The Express Tribune in an interview.

He said Pakistan has one of the most progressive sets of regulations for microfinance banking. “A fully functional credit bureau for microfinance banks with about 93% of the adult population of the country having a unique CNIC number is a great combination of all ingredients,” Aqil added. “What’s missing is the ability of the practitioners (of microfinance banking) to innovate. Now the onus is on us,” he observed.

Pakistan holds the third position in both ‘Regulatory Framework and Practices’, and ‘Supporting Institutional Framework’ categories. However, besides the two core categories, The Economist Intelligence Unit also adjusts each country’s score for political instability into the index.

Based on a complex scoring methodology, this category evaluates political shocks to the microfinance sector and general political stability. Pakistan performs rather poorly on this count, as it ranks 30 among the 55 economies when it comes to political stability.

The State Bank of Pakistan (SBP) tightened its prudential regulations that apply to microfinance banks by increasing minimum-capital requirements. It expanded the scope of potential microfinance clients in 2011 by raising the maximum income level for clients who can qualify for microloans.

While the regulator does not impose interest-rate caps, it does limit the size of loans.

The Economist Intelligence Unit says the launch of the Microfinance Credit Information Bureau (MF-CIB), which was rolled out in June 2012, has been a key development in microfinance business.

“The MF-CIB will be a positive registry (with information on all clients with an outstanding loan, rather than just defaulters) and will cover all types of players serving the industry,” it said.

The total number of active borrowers in Pakistan at the end of the last quarter of fiscal 2013 was 2.6 million, up 4% from the preceding quarter. The penetration rate of the microfinance banking sector has increased from 9.2% to 9.6% due to an increase in overall outreach, according to the latest data.

Gap Widens Between ACCA and ICAEW

The accountancy profession is still an attractive proposition as a career for young people in the UK, according to the Financial Reporting Council.

The latest annual key facts and trends in the profession report shows that total membership of the seven UK and Irish accountancy bodies continues to grow steadily. Over the past five years, it has increased by 2.7% in the UK to 327,000 and by 3.5% worldwide to 465,000.

Over the same period, the number of students training for UK qualifications increased by 3.4% overall (529,000), largely driven by the numbers of overseas students. In the last 12 months alone, numbers worldwide have gone up by 4.5% compared to the level in the UK which has remained broadly static (up 1.6%).

“It is clear from the report,” said Paul George, the FRC’s executive director conduct, “that the profession remains attractive with the number of students and new members indicating there is a good flow of bright, young accountants coming into the profession.”

ICAEW remains the largest body in terms of members based in the UK and Ireland. At 31 December 2013, it had 120,513 members, compared to its next largest rival, the ACCA, with 80, 442. However, when the number of members based outside the UK is added to the totals, the ACCA is by far the largest body, with 165,625 members compared to ICAEW’s 142,334.

It is also the richest institute with an income in 2013 of £160m (v ICAEW’s £88m) and has the largest number of students (85,259).

CIMA is the next largest body with 95,925 members (55,295 students), followed by CAI with 22,828 and ICAS with 20,109. CIPFA, whose numbers are in decline and which has the oldest age profile of members, has 13,328 members and the Association of International Accountants 8,545.

Although ICAEW has seen students numbers increase over the past five years by 9.5%, female representation remains woefully low.

The percentage of women ICAEW members worldwide is 26%, the lowest of all the seven bodies. This compares with an average of 35% for all seven bodies.

The ACCA is way out ahead with 45% women members, followed by the CAI which has 39%.

Julia Irvine

A Career in Accounting

If you want to be an accountant, it's no big surprise that you should have a knack for numbers. As a certified public accountant, or CPA, you'll be charged with reviewing and analyzing the financial information of client companies for auditing, taxpaying, or advisory purposes.But in reality, it's not all calculators and number crunching, particularly because advances in accounting software mean that technology takes care of the basic bookkeeping. The important thing, say both recruiters and employees in the field, is to be an excellent communicator and problem solver, since you'll likely be working in a group with other accountants or managers, and maybe even a company's chief financial officer.And as an accountant or controller for a company or private accounting firm, you could be consulting with your company's executives about financial strategy, or advising businesses or individuals about anything from expansion to retirement.

"What we really need are people who can understand our clients, talk to them, and understand what is happening with their businesses," says Dan Black, the director of campus recruiting for North and South America at public accounting firm Ernst & Young. "You're not put in the corner just to plug away at the calculator. You're going to be interacting with our clients right away."

In order to become a CPA, you do need to earn additional accounting credits beyond your bachelor's degree and pass the four-part CPA exam. The average starting salary for a CPA is about $40,500, and it's around $39,700 for a tax accountant. But with a little more experience, you can earn an average starting salary $67,400 as a financial controller and a starting salary of $84,400 as a tax manager, according to data from PayScale.com.

The beauty of the accounting field is that every company and organization—whether large or small, public or private—needs to keep track of its finances, meaning that someone with diverse interests can use accounting skills to work across many industries. And with the U.S. potentially adopting the International Financial Reporting Rules, graduates with an interest in international affairs could develop an expertise and seek experience abroad.

"A lot of people don't think accounting is a glamorous field—and it's not," says Philip Erickson, a partner at a private accounting firm in Colorado Springs, Colo. "But it's a stable field, and it's not going away."

So while jobs dried up during the economic crisis, hiring in accounting wasn't hit as hard, and cutbacks have created a need for more hiring as the economy recovers, says Amy Thompson, the U.S. campus recruiting leader at Price water house Coopers. She'll be hiring 3,000 people this year, up from 2,600 last year.

And whether it's the new financial regulations pushed through Congress or an infusion of cash for a green energy startup, accountants will always be called upon to help businesses and government agencies solve their financial puzzles. And the versatility of accounting skills means that, if you decide you don't like the field, you've gained valuable experience that's easily transferable to other careers in finance or business.

By MARISA TAYLOR