From Kashf Foundation to Kashf Microfinance Bank—Changing Organizational Identities

Abstract

This case documents the challenges faced by the Kashf Microfinance Bank (KMFB) in 2012, when it was a relatively new entrant in a financial industry established by the 2001 Microfinance Institutions Ordinance. The case documents the difficulties KMFB faced in establishing itself as a microfinance bank, moved away from the unregulated NGO sector where its parent company, Kashf Foundation, was situated. As a microfinance bank KMFB faced the simultaneous challenge of surviving the start-up stage and adapting to the stringent banking regulations placed on it by the State Bank of Pakistan (SBP). The latter required learning to strike a balance between the sometimes conflicting banking and development institutional logics, a typical problem for hybrid institutions with a social mission. As KFMB grappled with trying to meet the SBP’s requirements on capital adequacy, it faced a repayment crisis originating from its parent company, wiping out a significant portion of its equity. The case focus is on a decision KMFB’s board must take, regarding whether or not to invite a new majority shareholder to bring the Bank out of the red. This includes the decision criteria for choosing a shareholder that will uphold KMFB’s mission of financial inclusion.