Nano loans — good or evil?

In 2015, Tameer Bank, a leading microfinance and the creator of Easypaisa, started getting feedback from its bottom-of-the-pyramid customer base that the 12 months equal monthly instalment loan was not enough. There was a demand for a short-term, small-ticket consumption loan with a fast turnaround. The credit underwriting criteria that Tameer Bank was using required extensive fieldwork to determine the customers’ free cash flow and hence their debt payment ability. The potential customers were looking for an instant decision with no paperwork and were willing to provide access to the data on their phones. Or in Tameer Bank’s case, as Telenor Bank was on its cap table, GSM data could also be available. This product required alternative data for underwriting as proxies for income estimation. There was also the issue of regulation. The State Bank of Pakistan (SBP) regulations for microfinance banks required that loans could only be extended for productive loans instead of consumption loans. Although nano loans were becoming a global product, Tameer Bank decided to pass on this opportunity at that time.