Business plan for establishment of Qatar microfinance bank by Qatar telecom

Abstract

Wi-tribe is owned by Qatar telecom (the sponsors) and is currently operating in five cities of Pakistan and is offering broadband (data) services to its customers. Technology being used by wi-tribe is mobile wimax version 1. PTCL, Wateen, Worldcall, and Qubee are the main competitors. In Pakistan Broadband services were started in 2006 and even after long six years into the business, industry has very low penetration and all the broadband customers of all broadband companies do not even form 1% of the Pakistani population while the penetration level of mobile services industry was at 65% during the same year 2011. In 2011, wi-tribe had only 9.6% of the market share and sponsors have already injected around 10.000 billion rupees in form of paid up capital and shareholder’s loan. Company currently has net accumulated losses of over 5.000 billion rupees. Given the facts, that broadband business has very low penetration in the market, future of the industry is dismal, company has very low market share, technology being used by the company is also not successful as compared to Evdo technology used by other companies, company is incurring gross loss and have accumulated heavy losses, more than half of the equity and loan have already wiped out, and competition for technology and the business will only get tougher in the future, one does not see things improving for wi-tribe, We suggested in our proposal that wi-tribe/sponsors/BOD take a small chunk out of its business and enter into the banking industry through a micro finance bank. Banking industry has some inherent advantages for investors as it is a high leverage business with high margins. Currently minimum capital requirements for microfinance banks are very low: a. 300 million rupees if licensed to operate in a specified district; b. 400 million rupees if licensed to operate in a specified region; c. 500 million rupees if licensed to operate in a specified province; and d. 1 billion rupees if licensed to operate at national level. Microfinance banks also have the luxury to take public deposits at very low rates, can offer checking accounts to general public, can get subsidized loans for onward lending at subsidized rates from multilateral agencies, can also generate funds from money market and capital markets. Gross margins are around 50% to 70% and the book size can be increased significantly through public funds and other borrowings while earning some good money. At the same time, micro finance banks are making great social contributions by financing the needy, underprivileged and impoverished masses of Pakistan and by helping them grow financially and socially leading to the financial and social development of Pakistani society. In view of the foregoing, we make a business case for wi-tribe to invest only 300 million rupees to open a district level microfinance bank in federal capital territory mainly catering to the rural areas of Islamabad. This later on can be expanded to provincial or national levels.