About the Aga Khan Agency for Microfinance

How We Work/Our Agencies/Aga Khan Agency for Microfinance/About the Aga Khan Agency for Microfinance

The Première Agence de Microfinance (PAMF), an institution of the Aga Khan Agency for Microfinance (AKAM), was established in 2006 to serve Mali, Burkina Faso and Côte d’Ivoire.

AKDN/Lucas Cuervo Moura

The Première Agence de Microfinance (PAMF), an institution of the Aga Khan Agency for Microfinance (AKAM), was established in 2006 to serve Mali, Burkina Faso and Côte d’Ivoire.

AKDN/Lucas Cuervo Moura

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About the Aga Khan Agency for Microfinance

"AKDN’s entry into financial services came up as an extension of the work that we do to support people in some of the most deprived parts of the world. Our involvement is to achieve financial inclusion, to make an impact on people’s lives and to enable people to become self-sustaining."
Abbas Hasan, Head, Aga Khan Agency for Microfinance

AKDN institutions offered savings groups and revolving housing loans as early as the 1950s. Later, the Aga Khan Rural Support Programmes in India and Pakistan made savings groups a cornerstone of their integrated approach to development.

These programmes and others helped start businesses, create jobs, build homes and finance house improvements, purchase seed and livestock, smooth over the impact of unforeseen health costs and make higher education possible. Many of these programmes were then housed in and managed by the Aga Khan Agency for Microfinance (AKAM).

As the microfinance entities nurtured by AKAM mature, we step back and hand them to institutions. In turn, these institutions grow and expand them as commercial entities, focused on the continued improvement of the quality of life of their customers and borrowers.

We work closely with other AKDN agencies as part of a coordinated approach that brings together many inputs and disciplines. We work with the Aga Khan Foundation (AKF), for example, which is well known for its work in difficult and resource-poor areas. AKAM and AKF cooperate on a number of ongoing projects, particularly related to rural development. In many cases, this cooperation involves AKF taking responsibility for social mobilisation and the provision of technical services and training, while AKAM provides financing to the same clients.

We provide microfinance services to employees and contractors of the Aga Khan Fund for Economic Development’s (AKFED's) projects, as well as other residents in neighbouring areas. As some of AKFED’s investments are in fragile and complex environments, support to employees of the projects and residents of the area assumes critical importance.

We have built relationships with commercial banks and insurance companies in the AKFED group. Clients with a successful business and whose financial needs progress beyond the microfinance level continue to have access to financial services from AKFED institutions when needed.

Leveraging institutional connections such as these have proven essential in creating the critical mass of development activity necessary to achieve lasting improvements in quality of life in countries where we have been present.

The Aga Khan Agency for Microfinance (AKAM) established the Première Agence de Microfinance (PAMF) Burkina Faso and PAMF Mali in 2006 and now serves clients in Burkina Faso through five branches and in Mali through two branches. In 2008 AKAM established PAMF Côte d’Ivoire, which has two branches (image of Korhogo branch).

The number of beneficiaries in the three institutions was 18,036 in 2010. The value of outstanding loans was US$ 3.8 million. Women accounted for 40 percent of borrowers at the end of the year. Currently, PAMF’s activities and branches are overwhelmingly concentrated in rural areas and on rural products that work in synergy with the economic and social development activities of other AKDN agencies.

AKDN/Lucas Cuervo Moura

Loans for Individuals and Enterprises

Loans for income-generating activities continue to represent the largest proportion of loans provided by our entities. These loans cover a large spectrum of sectors and industries, ranging from livestock and planting to trading or production. Loan terms and conditions are designed to reflect the various cash flows from those sectors, and to fit clients’ needs as closely as possible.

AKAM entities also provide consumer loans to help clients invest in housing, education and health. Although these loans only represent a small portion of the overall AKAM portfolio, clients have shown increasing interest in them for cash-flow smoothing, paying medical expenses and tuition fees, and improving housing. These loans have a direct impact on the clients as they meet their day-to-day needs, and allow AKAM to improve the quality of life of the poor.

Many women must provide for their families, but have less ability than men to convince an institution that they are creditworthy. They may use credit to raise chickens or buy a cow, to start a tailoring shop or two-room school, independently supporting themselves and their children.

In addition to our main microfinance activities, we support small and medium enterprises (SMEs) to create jobs or stimulate increased economic activity. Despite their importance to economic growth and employment, many SMEs find it extremely difficult to access financial services, particularly long-term loans that fit their needs. They are often considered too risky by mainstream banks, as they are perceived to be either too small or to have insufficient collateral or credit histories to be able to secure loans or financing from traditional commercial banks. As a result, SMEs are caught in a gap between the growing supply of finance for micro-entrepreneurs and the mainstream market for traditional business financing. AKAM entities work to fill this gap and provide accessible and tailored financial services for SMEs.

We have a long-term commitment to the geographical areas in which we work. We focus on poverty alleviation through innovative product design based on the clearly understood needs of the target clients, effective management and the introduction of new initiatives to enhance access to financial services for poor and low-income households.

Mission

AKAM’s mission is to effect demonstrable, measurable, and lasting improvement in the quality of life of its clients by delivering appropriate financial services to diminish their vulnerability and enable financial, economic and social inclusion.

To achieve this mission, we invest in and develop sustainable financial institutions and financial intermediaries to deliver a full range of cost-effective, client-centred financial products and services to poor and low-income households and small businesses.

Recognising that financial services are just one part of a comprehensive set of solutions to improve quality of life, we collaborate with other AKDN agencies so that our different pursuits in health, education, habitat and rural and economic development can address the many dimensions of quality of life.

We strive to holistically understand and address clients’ needs for credit, savings, and other financial services. Our focus on deposits aims to fill a critical need of poor and low-income populations by providing them with a safe and convenient place to save while also building a stable deposit base as a long-term, local source of funding for our entities. Our institutions provide micro entrepreneurs and smallholder farmers with credit, savings, transfers and remittance services to allow them to invest in their businesses and farms, improve their homes, manage small and variable incomes, or meet household expenses; all to help them have more control over their own livelihoods. To support job creation and broader economic opportunity, our institutions increasingly serve small businesses with a range of adapted and flexible services.

Principles

Client-centricity: AKAM seeks to understand and meet the diverse needs of its clients with adapted, easy to use products and a high quality of service. AKAM considers client needs holistically beyond economic or business needs to include health, education, housing, consumption, etc. AKAM entities monitor customer satisfaction through regular surveys to capture feedback and continually improve service.
Transparency: AKAM promotes open, simple, complete and regular communication with clients, particularly with regard to product pricing, terms and conditions.
Ethical pricing: AKAM entities strive to provide clients with the most affordable and sustainable pricing. AKAM entities continually strive to lower the cost to clients by working to lower their own costs of delivery (operational and funding) and improving operational efficiency.
Sustainability: AKAM’s mandate is sustainability for all our institutions. Each entity must strive to break even as quickly as possible. Any surpluses, beyond a reasonable cushion against future shocks, should be reinvested into the business to provide better products and services, improve access and ultimately lower interest rates for clients.
Evidence-based: AKAM promotes an evidence-based approach to product design and delivery, grounded in research and evaluation; in-depth client needs analysis; and understanding client preferences and behaviours.
Dignity: AKAM and its entities endeavour to treat clients and staff fairly and with dignity.
Data-driven: AKAM entities strive to apply a data analytics approach to drive innovation and improve service delivery and outreach.

Social Performance Management

Our mission is to effect demonstrable, measurable, and lasting improvement in the quality of life of our clients by delivering appropriate financial services to reduce poverty, diminish the vulnerability of the disadvantaged and enable economic and social inclusion. Social performance is defined as “the effective translation of an institution’s mission into practice in line with accepted social values.” In other words, social performance is about making an organisation's social mission a reality.

Our Market Insights and Solutions /Research and Product Development (RPD)-based approach ensures that our products and services are reaching the disadvantaged and are helping them map their way out of poverty.

Market Insights and Solutions/Research and Product Development

We aim to deliver client-centric products, designed and delivered based on a deep understanding of clients’ needs, preferences, behaviours and aspirations. We blend different research approaches to build client insights and inform product development.

We have systems and procedures in place that ensure products are client responsive while contributing to AKAM’s financial bottom line. While the research and product development/implementation processes are led by the country teams, we provide oversight as well as technical support. Our entities benefit from a culture of experience sharing built within AKAM and AKDN.

The key objectives are to:

put innovation powered by data analytics at the core of entities’ business models;
use data analytics and key performance indicators, including social performance indicators, to inform the development of client-centric products, services and delivery channels; and
conduct research to understand client feedback and quality of life changes due to product uptake.

The objectives come to life through two broad work streams:

Monitoring, Evaluation and Learning (MEL) Framework;
Product Research and Development.

Monitoring, Evaluation and Learning Framework (MEL)

AKAM’s MEL framework uses a set of tools to link product performance, client profile data, client experience and aspects of a client’s quality of life that access to finance may arguably influence.

Through the combination of MEL tools, AKAM seeks to answer the following three core questions:

who our clients are and should be;
what their needs are and how AKAM’s products help meet them; and
how access to products contributes to changes in clients’ quality of life.

MEL tools include:

Progress Out of Poverty Index

AKAM measures clients’ poverty level using the Progress out of Poverty Index® (PPI®), a poverty measurement tool developed by Grameen Foundation for organisations and businesses with a mission to serve the poor. AKAM has collaborated with Grameen Foundation USA to fund the PPI development for Tajikistan, Kyrgyzstan and Mali. AKAM entities capture PPI data for clients through intake application forms and other periodic assessments. This data is used to report on poverty outreach, assess changes over time and inform product analysis and development by allowing client segmentation.

Monitoring, Evaluation and Learning Database

AKAM has worked with the software company MFSYS to develop the Monitoring, Evaluation and Learning Database (MELD). MELD is a web-based application that allows AKAM to collect client socio-demographic and poverty information, captured during client intake or through periodic assessments (e.g. client satisfaction surveys). MELD also extracts financial data from each entity’s core banking system. Combining different types of data allows us to:

segment clients into distinct groups;
monitor product performance and uptake across different segments; and
understand the potential effect of different products on the clients' lives.

This ultimately enables us to tailor our products to meet the needs of identified segments.

Client Experience Assessments

A key component of the MEL framework is assessing client experience with AKAM products and services. This means asking clients about their satisfaction with the institution and the products and services we provide. It also allows us to investigate how clients perceive that access to our products and services satisfies their needs, supports their livelihoods and, more broadly, changes their quality of life. We use this information to shape products and processes to better respond to clients’ needs, potentially creating a greater positive effect on clients’ lives. AKAM entities carry out client experience assessments in the form of customer satisfaction and customer exit surveys on a periodic basis. These assessments are often carried out by product or service, to ensure feedback can be translated into concrete actions aimed at improving the current offering.

Quality of Life Assessments

AKAM aims to improve the quality of life (QoL) of people by helping them to improve their incomes, become self-reliant and gain the skills needed to graduate into mainstream financial markets. Thus, the assessment of changes in clients’ QoL is a key part of AKAM’s social performance management practices. Our approach to assessing changes in QoL is informed by AKDN’s QoL assessment methodology. It aims to gauge AKAM’s contribution to changes in clients’ QoL. AKAM has a three-pronged approach to measuring changes in clients’ QoL:

Client experience plus – periodic client satisfaction and exit surveys include questions that inquire about changes in QoL (both positive and negative) that clients perceive have taken place as a result of using AKAM’s products and services.
QoL indicators captured in the MELD – analysis of changes in key socio-economic indicators captured from clients on an ongoing basis (e.g. PPI).
In-depth QoL client interviews – qualitative interviews that explore not only what changes are taking place but also the processes leading to these changes.

While the assessment of changes in clients’ QoL is focused on understanding AKAM’s contribution, through component three, AKAM also seeks to understand whether any QoL changes may be attributed to AKAM’s products and services. Attribution is based on the plausible association made by the client in their account of the changes that were made possible/facilitated by having access to AKAM’s products and services.

Product Research and Development

Our Market Insights and Solutions/RPD-based approach helps ensure that our products, services and delivery channels meet clients’ needs and preferences. At the centre of our product development process is also the need to balance social and financial performance.

We achieve this by:

conducting rigorous research to inform product development for various delivery channels (e.g. mobile) and different client segments;
building further insights from the analysis of MEL data that are used to improve the suite of products on offer and the delivery of these;
segmenting clients to better tailor and cross-sell products and services with the purpose of meeting a wide range of needs;
developing revenue streams for its products and services;
following a set of standard systems and procedures for the design, development and approval of products and solutions at AKAM entities; and
involving and getting feedback from operations, finance and risk throughout the development and implementation process.

Since the 1950s, AKDN has promoted microfinance and financial inclusion through integrated development programmes and various rural and economic development initiatives. In the 1980s and 1990s, AKDN established rural support programmes and mountain societies development programmes in South and Central Asia that promoted community-based financial services and savings and credit groups.

Building from these initiatives, we formalised our activities in microfinance, establishing formal microfinance institutions out of some of our most mature programmes and ultimately forming AKAM in 2005.

See Timeline

The Aga Khan Agency for Microfinance was set up to serve as the umbrella organisation for AKDN’s broader microfinance and inclusive finance activities. AKDN has integrated financial inclusion into many areas of work across multiple member agencies over the past 60 years. AKAM was created in 2005 to serve as a centre of excellence for design, delivery and learning related to the impact of these efforts. We contribute to the overarching vision of delivering sustainable changes to the quality of life of low-income and unserved communities in key emerging markets, ultimately creating self-actualising communities of opportunity.

The future of financial inclusion is changing rapidly today, with major new entrants including social media companies, disruptive technology service providers, peer-to-peer networks, telecommunications companies and commercial banks, among others. The continuing focus for AKAM remains grounded in a commitment to understanding and responding sustainably and ethically to the needs and desires of critical segments of unserved clients in challenging market environments, and to serving as the anchor implementing and learning agency for financial inclusion within the broader AKDN family.

Forging principled and effective partnerships with other actors in the broader financial inclusion ecosystem continues to be core to our efforts, especially in the future landscape of specialisation and mass-market technology disruption.

Therefore, while we will continue to deepen our focus on and understanding of the needs of the individual customer, partnerships with other agencies within AKDN and with leading participants of the industry will be a major component of our future strategy and plans. The transfer of majority ownership in FMFB Tajikistan and PAMF Madagascar to AKFED, and the merger of FMFC Kyrgyzstan with the AKFED majority-owned Kyrgyz Investment & Credit Bank, will best position these institutions to access the efficiency and outreach capabilities of emerging innovations in channel technology, customer experience and data applications.

We maintain our long-term and unyielding commitment to delivering financial tools, services, insights and learning to enable unserved individuals, households, enterprises and communities to exercise choice and control in realising their own financial and economic destinies within an interconnected world of opportunity. In some instances, we will deliver on our goals and objectives through partnerships with internationally reputable institutions.

The contact details of each microfinance institution are below.

The Aga Khan Agency for Microfinance

1-3 Avenue de la Paix
1202 Geneva
Switzerland

Tel: +41 22 909 72 00
Fax: +41 22 909 72 90

HBL Microfinance Limited, Pakistan

16th & 17th Floor,
Habib Bank Limited Plaza,
Jinnah Avenue,
Blue Area,
Islamabad, Pakistan

https://www.hblmfb.com/
info@hblmfb.com

FMFB Afghanistan

Lane 8, Kolola Pushta Road
District 4, Kabul
Afghanistan

www.fmfb.com.af
info@fmfb.com.af

PAMF Burkina Faso

01 BP 4392
Ouaga 01- Rue du PNUD,
Ouagadougou BURKINA FASO