Bank of Khyber (BOK)

The Bank of Khyber (BOK) is a scheduled commercial bank established in 1991 under the Act of NWFP assembly for the promotion of savings and its investment in the province. It also has a strong development mandate focusing primarily on NWFP.
The economic landscape of NWFP is characterized by a number of flourishing small-scale economic activities scattered throughout the province. However, the financing needs of these entities have not been met by formal sector financial institutions because of perceived risks, high costs, and a lack of the special skills associated with microfinance. The Bank of Khyber strongly advocates microfinance and has taken up this challenge, becoming a leading provider of such services.
Contributing significantly to income and employment generation, microfinance is considered an excellent alternate economic development strategy for NWFP. The Bank launched its micro-business development programme in 1995 and began extending rural financial services in 1997. This was the first formal and structured initiative by a commercial bank to broaden the base for the microenterprise market. The initiative was further strengthened and encouraged by the Asian Development Bank (ADB), International Fund for Agricultural Development (IFAD), the German Development Bank (KFW), the Swiss Agency for Development Cooperation (SDC) and the Pak-Swiss Small-Scale Enterprise Promotion (SSEP) Programme through credit lines and technical assistance.
The Bank of Khyber believes that the poor are bankable and microfinance is commercially viable. Micro-lending operations are structured in a separate department called the Microfinance Department (MFD) under the Credit Division of the bank. The MFD aims to become the largest sustainable microfinance provider in NWFP. Its main objective is providing access to financial services to the low-income and disadvantaged segments of society with an emphasis on women. The pursuit of this objective will contribute significantly to the improvement of employment opportunities and income-generating activities, and subsequently poverty alleviation.
Microfinancing requires special skills and procedures. The Bank’s microfinance programme is therefore run by a team of professionals with both a commercial banking and development orientation. The MFD has a tailor-made outreach mechanism for a variety of client types in order to reach the maximum number of low-income clients at an affordable cost. Aside from direct lending, BOK also uses the concept of financial intermediation to assist remote communities through non-governmental organizations (NGOs). Group loans to men and women organizations using peer pressure and collective liability have also been introduced to replace traditional forms of security. The Bank has also begun to explore lending relationships with industrial clusters and skill-based organizations. BOK’s strategy for the future includes:

  • Direct lending to individual micro-entrepreneurs;
  • Group lending through facilitators in rural areas;
  • Lending through business clusters in urban centres and small towns;
  • Wholesaling funds to facilitators for on-lending in rural areas.

As of June 30, 2002, BOK had disbursed PKR 617.7 million to 11,450 entrepreneurs with an average loan size of PKR 54,000. Almost every fifth active client was a woman.

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