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An Independent MFI Board Adds Great Value: Lessons From Pakistan

I established Tameer Bank in 2006 from scratch with three other colleagues. As of June 30th 2012 ,we have become the largest microfinance bank in Pakistan, as well as the largest bank (micro or commercial) by customer touch points. We are also the fastest growing branchless banking business in the world. The management has played a major part in this success, but in this post I wanted to highlight the importance of Tameer’s Board and its contribution.

When Tameer was established my team and I owned 60% of the company. Hence I had a major say on whom we took on to our board; of course it was subject to meeting the criteria set by the State Bank of Pakistan. And it was clear as to where we wanted to take the Bank. However at inception I had two key challenges: whom could I pick to complete the management team and whom could I propose for the board. While I was the majority stakeholder, it was clear to me that in order to create a successful brand I required a strong, independent board as opposed to a pliant one.

I weighed the downside of an independent board slowing me down in the early stages of the business versus the upside of having myself being accountable to a body as well as having the combined wisdom of the board available to me. Too often I have seen, especially in non-bank entities transitioning into regulated banks, the entrepreneur CEO does not wish to cede control and deliberately seeks a pliant board. The temptation to succumb to such a scenario is especially great when the owner manager has a large personal stake.

In Tameer Bank’s case I knew that a strong board would help our standing with the regulators, strengthen our case with depositors as well as the rating agencies and lastly, I would benefit from their experience. So we opted for a strong independent board.

Three years later we entered into a merger agreement with Telenor Pakistan. The second largest telecom company in Pakistan. Telenor is a Norwegian company with international presence. The influx of professionals from Telenor brought added value to the Board. With a 51% ownership, Tameer benefited from the board members’ ability to manage scale. We were temporarily constrained as the board took time to understand liquidity issues associated with a bank and the regulatory requirements of a Central Bank. But overall the influx of the new board members was very positive.

Telenor professionals made up four out of the seven board members. While at inception they did not know much about microfinance, and saw us through the lens of a Telco, however, this changed rapidly. This was because the board was very interested how the core banking side, as well as branchless banking worked. The chairman believed in microfinance and took personal interest.

Owner managers must understand that just like different CEO ‘s and management may be required at different stages of evolution of a company, a different skill set is also required at the board level. The introduction of board members who understood scale, had strong governance in their own organization, provided immense value to me as a CEO who was looking to achieve scale in Tameer. I continued to be held accountable regardless of being the single largest individual shareholder.

In my experience if a microfinance bank wishes to be successful then both the management team and the board must be picked with quality in mind.

Comments

09 September 2012 Submitted by Ali Atif (not verified)

There can be no argument against having a strong, diverse and independent board. And very often mission oriented organizations become prisoners of their own founders who ironically become both, the greatest strength and greatest weakness of the organization. The founders find it very difficult to let go of the institutions they gave birth to and nurtured. But only those with visionary capabilities realize that sooner to later it is time for the organization to be freed from their control. Just like letting your teenage child venture out with his/her friends for the first time.

Full marks to Tameer Bank and its founders for having taken this giant leap which has definitely paid dividends.

09 September 2012 Submitted by Sanabar Hussain (not verified)

Training improves performance of people by 22%, but one on one coaching/Meeting with executives can create up to 88% improvement in their performance.The high productivity ratio of employees in Tameer Bank is due to a positive attitude of Management and its Core values implementation.

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