The 2001 financial records of First Women Bank Limited were a banker's illustration of Murphy's Law. It wasn't only the fact that business was bad and profits were a meagre 26 million-rupees for the year 2000. With a capital of just Rs 200 million, the bank was sitting on losses worth a whopping Rs 138m. Further, pending tax assessments for the years 1995-98 represented another Rs 288m threat to the equity base. Without a trained middle-level management, management systems or an IT system to link the 38 branches, six senior executives scrambled to manually run the entire bank. When the credit rating agency PACRA alerted the bank with a 'speculative' long-term rating, no one was surprised. First Women Bank Limited was clearly on its way out. But two and a half years later, the bank has miraculously shown a clean balance sheet and Rs 269m in profits, an increase of more than 935 percent. And the critics want to know-how.

"Grit, determination and our collective belief in the model," answers bank president Zarine Aziz. "We knew that there was no other alternative and that no one else would step in to rescue us." Previously the bank's general manager for the Punjab, even Aziz had no idea of how bad the situation was till she sat at her new desk. Established in 1989, FWBL was supposed to cater to the special economic needs of women. Over the years, however, weak institutional capacity as well as a deficiency of human resource eroded the bank's linkages with the target community. In 1996, imprudent forex transactions left the discredited management holding a Rs 319m bill till regulator State Bank of Pakistan bailed them out with a Rs 200m loan. In order to prevent incidents of this nature, the Privatisation Commission hit the bank with an embargo on its credit disbursement activities. The branch expansion programme, recruitment plans and upward revisions in pay scales were also axed. With its hands thus tied, the bank was forced to park its funds with either other banks or in the low-yielding government securities. Predictably, the bank fell into dire financial straits.

Eager to cut its losses, the government put the bank up for privatisation in 1997. Although this decision was subsequently reversed in March 2001 by the government of General Pervez Musharraf, the damage had already been done. In the face of stagnant salaries and uncertainty regarding the bank's future, some of the best talent moved elsewhere. At a time when the bank desperately needed well-qualified and experienced bankers, there were few to be had. And unlike other NCBs, FWBL was not accorded the luxury of consultants in shining armour. At the insistence of SBP Governor Dr Ishrat Husain, however, the presidents of the five NCBs, which were the major shareholders in the bank, were brought back to the board of directors.

"We were advised to hire consultants to develop the business plan but we had no money," remembers Aziz. At the first meeting of the board in August 2001, Dr. Ishrat Husain set up two committees to help FWBL with restructuring. One was to assist the bank with recruitment while the other was to help formulate the business plan. Using suggestions provided by the committee as the starting point, the chief financial officer of FWBL, the head of audit and Aziz sat together to develop a business plan for the bank. "My only exposure to anything resembling a business plan was a project proposal I'd put together as a member of the task force in the Punjab," she laughs. "However, we knew the bank, its strengths and weaknesses far better than any outsider would."

That said, things weren't quite as simple. Making money was critical to the independent existence of the bank. The institution was not intended as a welfare agency but as a dynamic financial intermediary. However, mobilising resources and intelligently managing funds to secure healthy returns were not the only issues. The focus on women development was an integral part of the agenda and the charter of the FWBL clearly envisaged the institution simultaneously functioning as a developmental agency. The challenge was to reconcile the two objectives: to economically empower women while making money."

As the planners discovered, the single challenge of twin objectives spawned a host of other obstacles. First of all, capital of Rs 200m can only take one so far and no more. In order to improve outreach and impact, the bank needed to enhance its paid-up capital to one billion rupees. This would give them the ability to leverage their balance sheet to the greater advantage of their intended beneficiaries, besides being in line with SBP's directives for commercial banks.

Further, a more judicious deployment of existing resources was required to improve profitability. Government securities and credit lines to other banks were the safest investment option but did not allow FWBL to make healthy returns comparable to those offered on, say, corporate loans. Projecting further, while the conservative lending strategy succeeded in keeping the advances portfolio from becoming infected, it subverted both the commercial as well as the developmental objectives of the bank. The key was then to devise systems and mechanisms that would allow the bank to intelligently assess and manage risk while making credit decisions.

Further, the ambitious mission statement spoke of a bank, which was "dynamic, adaptive and responsive to the special economic needs of women" and offered "the best financial services and the best banking practices". In order to achieve this goal, the bank required professionals sensitive to the needs to women. Thus was born the target of human resource development and the training of 200 bankers.

With these ground realities in mind, the management set to formulating a business plan. The three-pronged strategy that finally emerged looked to strengthen operations, improve management systems and focus on women development. "It took us six months to fine-tune the plan but we had to sequence it right," reminds Aziz. The final plan was target-specific and, most importantly, doable.

In the first phase of the restructuring, qualified professionals were brought on board to head the newly minted divisions of audit, credit, finance, planning & operations, marketing as well as treasury. Where experienced women were not available, Aziz successfully inducted a few men in the hitherto all-women bank. This also succeeded in establishing a culture of meritocracy. To prevent making the mistakes of the past, financial planning & discipline as well as internal checks and balances were introduced into the system.

In order to institutionalise work methodologies, guidelines and manuals on audit, credit and treasury as well as credit and investment policies and procedures were devised and implemented. Lending was stratified according to type: corporate, SME and micro credit. For the first time in the bank's history, it finally had a committee - the Asset & Liability Management Committee - solely responsible for exploring new avenues for fund deployment.

The risk management division set up in May 2003 was responsible for managing risk and spread, a critical measure in the face of inadequate credit expertise at the branches. In order to provide technical support to the branches as well as retain control on credit decisions and risk assessments, the planners decided to centralise operations by setting up a credit pool at the head office. And a brand-new MIS system with fully integrated software was rendered operational. So far 25 branches have been fully computerised and the entire network will be computerised by end March 2004.

To improve the financial performance of the bank, the team identified key indicators and set to revamping them. A concerted lending strategy was launched and by the end of 2003, advances had shot up from Rs 604m in 2000 to Rs 1,308m. The infected loan portfolio was reduced from Rs 129m in 2000 to Rs 95m in 2003. The bank took healthy provisions against bad loans. Realising that the bank was haemorrhaging cash on high cost deposits, the management consciously tapped into current and savings accounts. "Since remaining competitive was important, we focused on improving customer services and marketing instead of merely luring depositors by offering higher rates. As a result, we succeeded in bringing back old clients of bank," explains Aziz. "We incentivised our team by offering them a percentage of the profits. The strategy paid off and we managed to pare down our cost of deposits from 6.2 per cent in 2001 to the current 2.3 per cent." Syndicated financing was another new area the bank started looking into for improving profitability.

Over the time, the products of the bank also came to reflect a certain women-centric ethos. Broadly divided into four categories - micro finance, SMEs, corporate and support services - each product is customised according to the needs of the client. Today, the micro finance portfolio, which is a development and support initiative, accounts for more than 76 per cent of total borrowers and is the star performer at FWBL. The micro-loan amount varies from Rs 5,000 to Rs 100,000. Over the last 14 years, 26,648 borrowers have availed loans of Rs 7.1 billion. Of these, 20,450 borrowers have been micro-borrowers. The bank has simultaneously generated employment for 1,007 million beneficiaries. "We inspire women to dream," says Aziz.

"Our credit policies are unique in that they are designed to encourage asset ownership by women," says Aziz. Even male-owned businesses that look towards FWBL for funding have to ensure a woman as an equal partner. "By insisting on this requirement, we are securing women both legally and financially."

Home loans are another example of pro-asset creation policies. That a house can represent the greatest security a woman has is something FWBL understands. So at a mark-up rate of just nine per cent, a woman can borrow anywhere between 0.2 million-rupees to 7.5 million-rupees to buy a house. "We introduced car loans and educational loans, for example, because we understand that the environment for women is changing. Today, mobility and education are crucial to the advancement of a woman's career," explains Aziz. Last year, the bank launched banking courses for its bankers and 44 employees have already been put through the programme.

"It's not enough to just provide an entrepreneur with cash," she insists. A woman who is going into business requires far greater levels of support. "The objective is to empower them by providing help where they need it in order to grow their business."

The bank has several such support initiatives under its belt. The first two were the women business centre and the computer literacy centre, which were launched in 1994 and 1999 respectively. The former is aimed at to provide women with skill training, helping them identify business opportunities and tap into existing resources. Further, the programme helped women develop linkages and network, essential components of running a business. The computer literacy centre sought to provide the urban poor with access to the technology that would improve their job prospects. To date, 4,857 women entrepreneurs have been developed while 6,364 women have been given computer training.

Carrying on with the tradition of support services, the bank has recently launched a financial services desk. Covering aspects such as credit management, trade finance, legal counselling, tax consultancy as well as marketing, the in-house facility provides women professionals with support in core areas where they lack expertise or understanding. Meanwhile, the bank is also developing a business women's directory, a database that will allow women to network with each other and share the benefits of their experiences. "There is not enough data available on women borrowers," complains Aziz. "As a result, it becomes hard to research trends and determine outreach. Besides, this effort also ties in neatly with the government's objective of documentation of the economy."

It is this attitude, which distinguishes the bank from its competition. "We have a niche market - women - and we want to partner with them and encourage them to do the best they're capable of, for themselves as well as the greater social good," says Aziz. She proudly narrates the example of Depilex - Smileagain, the first burns rehabilitation centre for women in Pakistan. "There have been some 3,600 cases of burn victims since 1996 and very few government hospitals have adequately equipped burn units. So when the owner of the beauty salon Depilex, Masarrat Misbah, came to us with this proposal, we jumped to partner with her," reveals Aziz. With funding from FWBL, the centre flew in a team of surgeons from Italy who have successfully operated on 10 burns victims so far.

"Banking the FWBL way is not about foisting loans on reluctant clients but about selling a lifestyle," says Aziz. "The model of FWBL is designed for women at all levels of economic activity. To our mind, a micro-borrower of today is a potential SME client of tomorrow. And it's up to us to make them realise their dreams of making it big." In line with this stated objective, the bank continues to aggressively expand its core customer base of women borrowers and depositors. In the last two-and-a-half years, the amount of financing provided either to women or to women-owned enterprises, has increased from Rs 430m to Rs 858m, an increase of almost 100 percent. Meanwhile, the number of women borrowers as a percentage of total borrowers has increased from 71 per cent to 87 per cent. Even the number of women account-holders has risen from 59,297 to 71,022.

It was this dedication and commitment to a larger social cause that caught the eye of international agencies. Initially impressed by the financial services desk, CIDA volunteered financial assistance to the tune of Rs 24m for three years and committed to run the desks at Karachi, Lahore and Islamabad. The agency also undertook the training of 200 women bankers.

The ILO became another convert to the FWBL way of thinking and approached the bank for a strategic alliance. "We joined hands with ILO-IPEC and were committed to eliminating child labour from the carpet-weaving industries in the districts of Hafizabad, Sheikhupura and Gujranwala," narrates Aziz. "We identified viable income-generating projects for the mothers of such children, equipped them with adequate skills and disbursed small loans to help them either become self-employed or set up micro enterprises." As usual, the bank provided financial as well as non-financial support such as the identification of 42 potential microbusinesses. The project was launched in 66 villages and disbursed 5.4 million-rupees among 846 families. And again, the strategy paid rich dividends. "In the short span of one year, we've successfully managed to wean the poor families off exploitation of child labour. And our recovery rate is an unprecedented 100 per cent," exults Aziz.

In two-and-a-half years - between May 2001 and December 2003 - the management has achieved the financial turnaround its detractors said was impossible. The bank repaid the SBP loan in July 2001, and due to the intervention of Federal Finance Minister Shaukat Aziz and CBR, received a tax refund of Rs 237 m in July 2002. In April 2003, the bank wiped out the entire brought forward losses as of December 2000 of Rs 139m. This was despite the fact that the bank took on the additional burden of provisioning Rs 30m for the year 2000.

Today, the bank is back in the black and looks poised for exponential growth. From Rs 2.2m a month in 2000, average pre-tax profits have shot up to Rs 22.4m in 2003. The net equity has jumped from Rs 110m to Rs 629m, an increase of more than 472 per cent. Investments, too, have soared from Rs 2,399m to Rs 7,483m. Meanwhile, the bank made fresh credit disbursements worth Rs 2,083m and renewals worth Rs 713m, making for a total of Rs 2,796m. And the icing on the cake is the fact that the loans classified as overdue are worth a meagre Rs 1.9m, just 0.09 per cent of the total fresh disbursements. Small wonder then that net profit has ballooned by an astounding Rs 269m, an increase of 935 percent. At present, earnings per share after tax stand at Rs 8.03, a huge jump from the 2000 value of Rs 2.07. Finally comfortable, the management has shifted to new head office, which symbolises the many milestones crossed on the path of financial sustainability and strength. Clearly, the strategic direction and strategies taken in the turbulent 2001 have paid off.

However, the management is not resting on its laurels just as yet. The bank is continuously restructuring itself in line with established banking norms while maintaining its women-oriented focus and adapting to the changing environment within the banking industry. "Industry wide, margins are waning. Banks are now competing on technology and marketing skills," says Aziz. "Fortunately, our focus is in sync with current government's priorities such as consumer and agricultural credit as well as lending to micro and SME borrowers."

Quite apart from the business issues are regulatory matters. With the SBP playing a dynamic and proactive role as regulator, the onus is now on the banks. "There is a lot of emphasis on the corporate code of governance and on risk management. Under the institutional risk assessment framework which will be implemented from this quarter onwards, we will be under a lot of pressure to deliver on various counts," worries Aziz. If the implementation of the KIBOR as a financial services benchmark is any indication, banking in Pakistan is rapidly acquiring greater sophistication.

There are, of course, certain challenges specific to FWBL. For example, although the SBP has deferred the one-billion-rupees paid-up capital requirement for the time being, the management is still working to this end. On the cards are online e-banking and ATM connectivity though a strategic alliance with MCB. "We've taken the first step in making ourselves a force to reckon with in the sphere of women-oriented banking. But our ultimate target is to be the natural choice for all women to bank with," concludes Aziz.

First Women Bank Ltd. UAN:(021)111-676-767, e-mail: president@cyber.net.pk