To spark economic growth and promote prosperity, The First MicroFinanceBank Pakistan (FMFB-P) aimed to bring affordable loans and state-of-the-art banking services within reach of rural communities.
FMFB-P transformed its business model to focus on digital access channels, underpinned by new digital banking channels running on IBM Power Systems and IBM Storwize infrastructure.
10x growthexpected in the next two to three years
48-hourloan approval for customers
50% cost savingon Oracle licenses
Business Challenge Story
On a mission to reduce poverty
Pakistan is home to the world’s 25th largest economy, with its annual gross domestic product growing at a respectable 5.8 percent. Within this vibrant country, average personal incomes vary significantly, with wealth largely concentrated in cities.
An effective way to help people take the first steps up the income ladder is through microfinance – the provision of loans, bank accounts and insurance to people who otherwise lack access to financial services. In many cases, a modest loan can enable people to buy vital supplies or set up their own business, starting the journey to prosperity.
The First MicroFinanceBank Limited Pakistan (FMFB-P) was founded with the mission to provide affordable financial products to those most in need. Its portfolio includes loans to help people purchase their home, fund small businesses or cover school and university tuition fees, as well as basic bank accounts for adults and young people.
Starting life as a traditional bank, FMFB-P issued customers with checkbooks to manage their accounts and required them to visit branches to complete their transactions. As the bank’s popularity grew, busy times often saw large lines forming in branches.
Sohail Malik, Chief Digital & Financial Inclusion Officer, says: “Many people in rural areas traveled around 50 kilometers [30 miles] to visit their nearest branch to complete transactions. We wanted to bring financial services within reach of the masses and to raise service quality by giving customers more convenient ways to manage their finances.
“We recognized that digitization represented a promising solution to both our challenges, and we set out to launch new channels such as online and mobile banking. Also, we wanted to offer an offline mode of banking to help customers perform transactions in areas with low data connectivity, for example using SMS, USSD and IVR.”
Embracing digital access channels
As a first step on its journey towards digitization, FMFB-P deployed the IRIS v5 enterprise-class payment platform from TPS Pakistan to enable the digital channels to interact with the banking systems. IRIS 5 is designed to provide a complete framework from transaction switching and alternate delivery channel management on a single, user-friendly interface. Benchmarking from IBM Montpellier Client Center showed that IBM POWER8™ processors provide excellent performance for IRIS v5, processing up to 18,611 transactions per second.
To support the digital services platform and its underlying back-end Oracle Database, the bank deployed three IBM Power Systems S824 servers virtualized using IBM PowerVM® software – becoming Pakistan’s first microfinance bank to deploy IBM technology in its IT landscape. Virtualization enables the bank to deploy its compute resources in the most efficient manner, optimizing each virtual server to maximize efficiency and performance. For support during the server implementation, the bank engaged IBM Systems Lab Services.
Oracle data is stored on two IBM Storwize V7000 storage systems deployed by IBM Business Partner i3PATHFINDER Solutions. Data is automatically backed up to two IBM TS3100 tape libraries by IBM Spectrum Protect™ software.
Muhammed Yasir, Unit Head, Technology Implementation at FMFB-P, remarks: “We had no prior experience using IBM infrastructure, but we felt confident in our choice because IBM is such a strong brand and well-known for reliability. The IBM team demonstrated to us that the IBM Power Systems servers were extremely robust and powerful, and that the IBM Storwize V7000 storage offered excellent performance too.
“Furthermore, because Oracle Database runs on fewer processor cores on IBM Power Systems compared to other server platforms, choosing IBM Power Systems cut our Oracle licensing costs by 50 percent. The IBM Power Systems servers provide outstanding performance for the Oracle Database solutions, and we are highly satisfied with the ease of operation and excellent return on investment.
“The server implementation by IBM Systems Lab Services and the storage deployment by i3PATHFINDER Solutions both went well, and we were very happy with the service we received.”
Bringing banking services to new customers
Building on new digital services solutions, FMFB-P has launched digital access channels – including debit cards, mobile banking, SMS banking, a mobile app and ATMs for branch and non-branch locations such as local stores. The development of these new channels has transformed the bank’s business model, by enabling it to reach a larger number of customers without extending the physical branch network. In many cases, these services were the first of their kind in Pakistan, and gaining first-mover advantage has helped the bank to attract new customers and position itself as an innovator.
Sohail Malik comments: “Now, customers complete 15 percent of cash withdrawals using ATMs, reducing time spent waiting in line. It’s a big win for customers as they can access their money immediately and avoid a long journey to the branch. Additionally, by reducing the manual transaction workload, our employees can focus on providing better customer service and drawing in new business.
“TPS IRIS v5 with Oracle Database at back-end supported by IBM Power Systems and IBM Storwize has enabled us to introduce automated loan approvals. Previously, customers had to wait 15 days between submitting a loan application and receiving their funds, whereas now we can complete that process in 24 hours. This time saving is a huge benefit for customers and a vital source of competitive differentiation for us, because we offer faster turnaround times than other lenders.”
The new digital access channels are turning heads in the industry, and attracting customers in urban and rural areas alike, boosting market share and bringing vital banking services to new customers. The strong uptake puts the bank on track to grow its customer base ten-fold over the next two or three years, and will help to promote prosperity across Pakistan.
Sohail Malik continues: “Cutting-edge technology from IBM and Oracle enables us to differentiate ourselves from rival banks. We also gain first-mover advantage – for example, we recently announced our aim to become the first paperless bank in Pakistan by December 2018.”
Muhammed Yasir concludes: “FMFB-P has a very strong relationship with IBM and we look forward to working more closely with them in future. In future, we plan to upgrade our existing IBM Power Systems servers to support branchless banking using solutions running on Oracle Database. That is just one of our many upcoming initiatives to bring tomorrow’s forms of banking to the people of Pakistan.”
The First MicroFinanceBank Limited Pakistan
The First MicroFinanceBank Ltd, Pakistan was established in 2002 as a nationwide microfinance bank, licensed by the State Bank of Pakistan. The bank’s mission is to contribute to the social and economic wellbeing of society by providing opportunities to thousands of under-privileged households. The bank manages deposits worth PKR 25 billion (USD 216 million) from over a million people, and has issued 2.3 million loans to date.
Take the next step
i3PATHFINDER Solutions provides enterprise solutions built on innovation, intelligence and integration using cutting-edge technology. The company is headquartered in Karachi, Pakistan, and also operates offices in Islamabad and Lahore. To learn more about i3PATHFINDER Solutions, please visit: www.i3pathfinder.com