British International Investment

KASHF Foundation

South AsiaFinancial services

Kashf Foundation is one of the leading microfinance institutions in Pakistan. The organisation promotes female entrepreneurship and has so far enabled more than a million low-income families across Pakistan to improve their standard of living.

This investment was made when British International Investment was named CDC Group.

Our investment

Description of the investment.

We invested in Kashf to support the Foundation in providing specialised microcredit products and capacity building services to micro-entrepreneurs, with a focus on women-owned or affiliated businesses.

Impact information

Applies to investments made from 2019 onwards. The tabs in this section define what we expect to achieve through the investment, assessing the potential impact of the investment against six dimensions of impact. You can find more details on our methodology of assessing impact here.

What?

Impact
  • Sustain and increase economic opportunities by providing access to financial services for entrepreneurs (SDG 8.3, 8.10).

  • Enhance resilience to economic shocks; maintain and increase access to microfinance for lower-income and vulnerable populations (SDG 1.4, 1.5, 5.5).

How?

How?

Direct: Our provision of a senior debt facility to Kashf enabled the microfinance institution to maintain and extend greater credit – in the form of individual loans – to its customers, namely entrepreneurs of micro-businesses, allowing them to better manage cashflow, and grow their businesses. Over 75% of Kashf's lending activity constitutes loans to micro enterprises.

Who?

Stakeholder Geography Characteristics
Employees, individuals, households

Pakistan (category ‘B’ country). Present in 40 per cent of Pakistan’s districts (37 per cent rural, 29 per cent semi-urban, and 34 per cent urban).

Women (100 per cent of portfolio are female and of this, 63 per cent are female-led businesses); low-income (82 per cent of portfolio lives at or below the poverty line of $2/day and average loan size is $260).

How much?

Scale Depth/Duration
  • Duration: three years i.e. lifecycle of the facility. Growth will be slower in terms of gross loan portfolio and new client acquisition for 2021 given COVID-19 context.

  • Depth: High as evidenced by impact assessments demonstrating that Kashf’s financial services can provide borrowers with: i) a 37 per cent increase in average revenue; (ii) improved food security for 40 per cent of clients; (iii) improved decision-making authority for more than 80 per cent of female clients; and (iv) improved access to healthcare for 40 per cent of clients.

Contribution/additionality

Contribution/additionality
  • Financial additionality: The commercial market does not offer capital in sufficient quantities to meet the company's plans or needs, and does not offer capital on the same terms.

Grid score

Grid Score

To help us direct our investments, we previously used a tool called the Development Impact Grid. It scored investments out of four, based on two factors: the difficulty of investing in a country and the propensity of the sector to generate employment. This tool was used for investments until the end of 2021. Since 2022 it has been replaced by the Impact Score.

4.0

Market context: Significant addressable market (34 per cent penetration rate of addressable market and one of the lowest rates of female participation in the workforce globally). The microfinance sector in Pakistan is smaller and less developed than India and Bangladesh (active borrowers in Pakistan is one fifth and one seventh the size of Bangladesh and India respectively) but the market is experiencing increasing competition and developing quickly in maturity.

Risk

External Risk

Relates to the risk that client protection considerations are heightened in the COVID-19 context as end borrowers are low-income/vulnerable populations. We take comfort in Kashf being SMART-certified and offering COVID-19 specific protections to their clients such as tailored rescheduling based on client need , tailored financial products such as emergency and/or top-up loans to help clients financially navigate the crisis, and implementing business continuity trainings for clients to rebuild businesses.

Evidence Risk

Relates to the risk of challenges in measuring our impact through this facility. We take comfort in Kashf’s strong research and monitoring team. Mitigant: We will be receiving a semi-annual monitoring template on key impact indicators for this transaction.

Execution Risk

Relates to the currency risk related to hedging of a US dollar facility i.e. hedging costs may be prohibitive and be transferred to microfinance institution borrowers. This risk is low as almost half of Kashf’s existing borrowings are in foreign currency and hedged to local currency and has not translated to significantly higher costs for borrowers to date. Interest rates have stayed consistent in the last two years despite a reduction in margins, indicating Kashf’s efforts at minimizing transfer of costs to their borrowers.

Environmental and social information

  • Environmental and social summary

    A high-level description of the environmental and social aspects of the investment. This may include a summary of key environmental and social risks identified during environmental and social due diligence (ESDD); key elements of an environmental and social action plan (ESAP); or ways in which we plan to support the investee improve environmental and social standards, such as through their environmental and social management system (ESMS); as well as any other priority areas agreed with the investee.

  • Environmental and social risk

    A risk category rating, which indicates the level of environmental and social risk associated with an investment. For an explanation of the categorisations used, see here. We consistently provide an environmental and social risk category for all investments screened from 2023 onwards.

Environmental and social summary

We agreed on an ESAP which required the development of a travel safety policy and implementation of emergency response policies within the branch offices.

Reporting and Complaints Mechanism

The Reporting and Complaints Mechanism allows anyone outside BII to report alleged breaches of the business integrity or environmental and social provisions of BII’s Policy on Responsible Investing. This includes breaches made by BII, a BII investee, or a portfolio company of a fund in which BII has invested. The Reporting and Complaints Mechanism Rules are available here. Reports and complaints can be submitted by email to [email protected] or by mail. See more details on our Reporting and Complaints Mechanism here.

For any other general enquiries contact us at [email protected]

  • Key facts

    Last updated

    When the last quarterly update of the website database occurred.

    :
    March 2024
    Project number

    An identifier number shared by investments in the same project.

    :
    D2094
    Status

    The current status of the investment (green flag for active and red flag for exited).

    :
    Exited
    Region

    The geographical region where the country is located. We currently invest in Africa, South Asia, South East Asia and the Caribbean. In 2023, BII’s investment mandate was extended allowing it to invest in regional funds linked to Ukraine, with the majority of activity expected to begin post-war. Investments outside these regions were made prior to 2012 under previous investment mandates.

    :
    South Asia
    Sector

    We prioritise those sectors that facilitate development and need our capital the most. Our priority sectors contribute towards many of the Sustainable Development Goals. They range from investing in the power infrastructure that will provide people with better access to electricity, to investing in financial institutions that direct capital to the individuals and businesses that need it the most.

    :
    Financial services

    We provide capital in the following ways: directly – through direct equity, direct debt, guarantees and other non-intermediated financial instruments; and indirectly – principally through investment funds.

    For direct investments and fund investments, this is the date BII committed capital to the investments. This is typically the date on which legal agreements are signed by all parties.

    For the portfolio companies of our fund investments, this is the date (either the month or the quarter) on which the fund committed capital to the portfolio company.

    For direct equity investments, this is the date at which British International Investment exited the investment.

    For debt investments, this is the date at which the final debt repayment was made.

    For funds, this is the date at which the fund was terminated.

    For underlying fund investments, this is the date at which the fund manager exited the investment.

    The total amount committed, per financial instrument, per investment, on the date BII becomes subject to a binding legal obligation to provide funding or assume a contingent liability. This information is provided in US dollars.

    For direct investments, this is the amount that BII has committed to the business or project. For fund investments, this is the amount BII has committed to the fund.

    The currency in which the investment was made.

    Investment type :
    Debt
    Start date :
    December 2020
    End date :
    December 2023
    Amount :
    $15m
    Currency of investment :
    USD
    Domicile

    The company or investment fund’s place of incorporation.

    :
    Pakistan
    2X Gender Finance

    Indicates whether the investment is ‘2X qualified’ using the 2X Challenge criteria. You can find out more here. It only applies to investments made from 2018 onwards, when the 2X Challenge was first launched.

    :
    Fully qualified

Related investments made by BII into this company:

Investment name Commitment Region Sector Start date Status
Investment 02 $15m South Asia Financial services December 2023 Active

Subscribe to receive our latest news and updates