Thardeep Microfinance Foundation (Hereinafter referred to as 'the Foundation', 'the Company' or 'TMF') is a not-for-profit organization, registered under section 42 of the Companies Act,. as a Microfinance provider, by Securities and Exchange Commission of Pakistan (SECP).

TMF has its origins since 1998 as a community loans provider through a donor-funded relief project which then became a Rural Support Programme (RSP). These loans were given out by the Thardeep Rural Development Programme (TRDP) initially in Tharparkar, which extended to other districts of Sindh. In 2003, Thardeep Rural Development Programme (TRDP) demerged its Micro Credit and Enterprise Development Unit and incorporated a separate entity namely Thardeep Microfinance Foundation (The Company) on October 06, 2016 under the repealed Companies Ordinance, 1984 (now Companies Act, 2017).

TMF operates at a district level with a network of over ~66 branches. The principal activity of the Company is to mobilize funds for provision of microfinance services to poor persons, particularly, poor women for mitigating poverty and promoting social welfare and economic justice through community building and social mobilization with the ultimate objective of poverty alleviation.

TMF was established by a group of seven founding members. Among these individuals, several were nominated by the Thardeep Rural Development Programme (TRDP), an organization recognized for its contributions to rural development and poverty alleviation in rural Sindh. Individuals from TRDP do not possess any shareholding in TMF. Their involvement in the foundation's formation was based on their professional expertise and alignment with the organization’s development-oriented objectives. Their role was primarily consultative and strategic, intended to support the establishment of a governance framework that reflects TMF’s commitment to inclusive financial services. This founding structure was deliberately designed to ensure that TMF operates as a non-profit entity, with no financial interests held by its founding members. The absence of shareholding among the founders reinforces the foundation’s focus on transparency, accountability, and its mission to serve underserved communities through responsible microfinance practices.

In not-for-profit organizations, the underlying ideology is centered on community welfare and public service rather than financial gain. As a result, the involvement of individuals—whether as board members, advisors, or volunteers—is typically driven by a sense of social responsibility and commitment to the organization’s mission. Their association is often voluntary, reflecting a shared dedication to advancing the organization’s objectives without expectation of personal benefit or ownership. Given this voluntary and mission-driven nature, formal succession planning is generally not a primary focus within such foundations. Unlike corporate entities where leadership transitions are strategically planned to ensure continuity of business operations and shareholder value, not-for-profit organizations often rely on the goodwill and availability of committed individuals to fill leadership roles as needed. Leadership changes may occur organically, based on consensus, availability, or the evolving needs of the organization. However, while succession planning may be less emphasized, it is not entirely absent. Some not-for-profit institutions do recognize the importance of leadership continuity and institutional memory, especially as they grow in scale and complexity. In such cases, informal mechanisms or governance policies may be introduced to ensure smooth transitions and sustained organizational effectiveness. Due to the voluntary nature of member involvement and the focus on community welfare, succession planning in not-for-profit foundations is typically minimal and flexible, shaped more by values and commitment than by formalized structures.

The member profile of TMF comprises experienced professionals who bring a diverse and multifaceted skill set to the organization. These individuals possess expertise across various domains, including financial management, community development, governance, strategic planning, and social entrepreneurship. Their collective knowledge and practical experience enable them to provide effective guidance and oversight, ensuring that TMF remains aligned with its mission and operational goals. Each member contributes a unique perspective shaped by years of professional engagement in both public and private sector initiatives. This diversity not only enhances the decision-making process but also strengthens the foundation’s ability to respond to complex challenges and evolving community needs. Their leadership plays a critical role in shaping policies, designing inclusive financial products, and fostering sustainable development practices. By leveraging the strengths of its members, TMF is well-positioned to achieve its objectives of promoting financial inclusion, empowering underserved populations, and supporting long-term socio-economic progress in the regions it serves.

As TMF is a registered not-for-profit organization, its operational and financial model is fundamentally different from that of commercial or shareholder-driven entities. The primary focus of the foundation is on community welfare, financial inclusion, and social impact, rather than generating profits or distributing returns to stakeholders. Member involvement in such organizations is typically based on voluntary service, strategic guidance, and governance oversight. Members are generally appointed for their expertise, commitment to the foundation’s mission, and ability to contribute to its long-term development goals. Moreover, not-for-profit organizations like TMF often rely on external sources of funding—such as grants, donor support, institutional partnerships, and government programs—to sustain their operations and expand their outreach. This funding model ensures that the organization remains independent of individual financial interests and maintains its focus on serving marginalized and underserved communities.

The governance of TMF is vested in a Board comprising seven members. This Board includes three female directors and four male directors, reflecting a degree of gender diversity in its composition. The Board holds overall authority and is responsible for setting the strategic direction, approving key policies, and ensuring that the foundation operates in alignment with its mission and regulatory obligations. None of the Board members are part of TMF’s executive or top-tier management. This separation of governance and management functions is intentional and aligns with best practices in organizational oversight. By maintaining a clear distinction between the Board and operational leadership, TMF ensures that decision-making remains objective, transparent, and free from potential conflicts of interest. The Board’s role is primarily supervisory and strategic, while day-to-day operations are managed by a professional executive team. This structure supports effective checks and balances, promotes accountability, and reinforces the foundation’s commitment to ethical governance.

The Board of TMF comprises a group of highly experienced and well-diversified professionals, each bringing a unique blend of expertise and insight to the organization. Collectively, the board members possess extensive backgrounds in fields such as public health, social development, finance, governance, and community-based initiatives. Their prior involvement in grassroots and institutional development efforts reflects a deep commitment to social welfare and inclusive growth. At the helm of the Board is the Chairman, Dr. Naseer Muhammad Nizamani, a distinguished physician with over two decades of professional experience. Dr. Nizamani has served in various leadership and advisory capacities within internationally recognized organizations, including the United Nations Children’s Fund (UNICEF) and the United Nations Population Fund (UNFPA). His career has been marked by a strong focus on public health, humanitarian assistance, and capacity building in underserved regions. Under his leadership, the Board continues to guide TMF with strategic foresight and a strong emphasis on ethical governance, institutional integrity, and community empowerment. The collective experience of the board members plays a pivotal role in shaping the foundation’s policies, ensuring operational effectiveness, and advancing its mission to provide equitable financial services to marginalized populations.

TMF has established three specialized sub-committees to support its governance and operational oversight. These include the Audit Committee, the Information Technology (IT) Committee, and the Human Resource Committee. Each committee is tasked with specific responsibilities aligned with its area of focus, contributing to the overall effectiveness and accountability of the organization. The Audit Committee is responsible for reviewing financial reports, monitoring internal controls, and ensuring compliance with regulatory standards. The IT Committee oversees the development and implementation of technological systems, focusing on digital infrastructure, data security, and innovation. The Human Resource Committee manages personnel-related matters, including recruitment, staff development, and policy formulation. During the reporting period, attendance at committee meetings was consistently strong, indicating active participation and commitment from members. Furthermore, all meetings were properly documented, with minutes recorded in accordance with organizational protocols. These records serve as an essential reference for decision- making and demonstrate TMF’s adherence to transparent governance practices.

BDO Ebrahim & Co are the External Auditors of TMF. The auditors are on the QCR list as well as categorized - 'A' on the list of SBP approved auditors. Audit of FY25 is in process.

TMF operates under a decentralized organizational structure, which allows for the distribution of decision-making authority across various levels of the institution. This model is designed to promote operational efficiency, responsiveness, and empowerment within different functional areas of the organization. Under this structure, individual sections and divisions are granted varying degrees of autonomy, enabling them to make decisions relevant to their specific roles and responsibilities. This approach fosters a sense of ownership among departmental teams and encourages proactive problem-solving, innovation, and adaptability in day-to-day operations. Decentralization also supports TMF’s outreach efforts, particularly in geographically dispersed and rural areas, by allowing regional offices and field units to respond more effectively to local needs and challenges. While strategic oversight and policy direction remain centralized at the board and senior management level, operational decisions are often made closer to the point of service delivery. Overall, TMF’s decentralized framework enhances organizational agility, strengthens accountability at multiple levels, and aligns with its mission to provide inclusive and community-focused financial services.

TMF is led by a management team that brings together a diverse range of professional experience and specialized skills. This blend of expertise enables the organization to operate effectively across various domains, including financial services, community development, institutional governance, and strategic planning. At the helm of the organization is Mr. Sono Khangharani, the Chief Executive Officer and one of TMF’s founding members. Mr. Khangharani has a distinguished career spanning more than three decades, marked by his deep commitment to social development and rural empowerment. His professional journey began in late 1982 as a lecturer at the Agriculture University in Tando Jam, Sindh, where he laid the foundation for his lifelong dedication to education and community service. Since the inception of TMF, Mr. Khangharani and the entire management team have remained actively engaged in guiding the organization’s growth and mission. Their long-standing association with the foundation reflects a shared vision and continuity in  leadership, which has been instrumental in shaping TMF’s strategic direction and operational success. The collective experience of the management team not only enhances institutional capacity but also reinforces TMF’s commitment to delivering inclusive and sustainable financial solutions to underserved communities across Pakistan.

TMF follows a structured and systematic decision-making process that supports operational efficiency and organizational accountability. Each department within the foundation is led by a designated head who is responsible for overseeing the day-to-day activities, ensuring that departmental functions are executed smoothly and in alignment with TMF’s strategic objectives. Department heads play a critical role in maintaining internal coordination and performance standards. They are entrusted with monitoring progress, addressing operational challenges, and implementing policies within their respective areas of responsibility. To ensure cohesive governance and informed decision-making, department heads regularly engage with the Chief Executive Officer (CEO) to discuss material matters, including strategic initiatives, resource allocation, and emerging issues that may impact the foundation’s mission. These interactions between departmental leadership and the CEO foster a collaborative environment, enabling timely decisions and reinforcing TMF’s commitment to transparency, responsiveness, and mission-driven management.

TMF maintains an integrated departmental structure that facilitates effective decision-making across the organization. The close coordination among departments ensures that information flows seamlessly, enabling timely and informed decisions that support operational efficiency and strategic alignment. As part of its forward-looking approach, TMF is currently in the process of implementing a comprehensive Enterprise Resource Planning (ERP) system. This initiative is aimed at enhancing organizational performance by streamlining processes, improving data management, and strengthening internal controls. The ERP system will serve as a centralized platform for managing core functions such as finance, human resources, operations, and reporting. To support this transformation, TMF has entered into a collaboration with Aritech, a technology solutions provider with expertise in ERP implementation. The partnership is focused on designing and deploying a system tailored to TMF’s operational needs, with the goal of improving transparency, accountability, and scalability across all levels of the organization. This strategic investment reflects TMF’s commitment to institutional development and its ongoing efforts to adopt modern tools that enhance service delivery and organizational governance.

TMF has established a dedicated Risk & Compliance Department to proactively identify, assess, and manage risk-related factors across the organization. This department plays a critical role in ensuring that TMF’s operations remain aligned with regulatory standards, internal policies, and best practices in risk mitigation. In addition to its risk management responsibilities, the Compliance function within the department conducts regular inspections of all relevant operational units. These inspections are carried out on a monthly and quarterly basis, depending on the nature and scope of the department being reviewed. The purpose of these inspections is to monitor adherence to established procedures, detect potential non-compliance, and recommend corrective actions where necessary. TMF also maintains an independent Internal Audit Department, which functions separately from day-to-day operations and reports directly to the Audit Committee of the Board. This reporting structure ensures objectivity and enhances the effectiveness of internal controls. The Internal Audit Department is responsible for evaluating financial integrity, operational efficiency, and compliance with organizational policies, thereby contributing to TMF’s overall governance and accountability framework. Together, these departments form a robust oversight mechanism that supports TMF’s commitment to transparency, risk resilience, and continuous improvement.

TMF has developed a strong and forward-looking technological infrastructure that significantly enhances its operational efficiency and strategic positioning within the microfinance sector. This advanced digital framework provides TMF with a competitive advantage, enabling the organization to deliver services with greater speed, accuracy, and transparency. The foundation has successfully implemented sophisticated automated processes across all departments, fostering a fully paperless environment. This transition to digital operations has not only streamlined workflows but also minimized manual errors, improved data accessibility, and strengthened internal controls. A key component of TMF’s technology ecosystem is the Electronic Financial Information System (e-FIS). This system plays a central role in managing financial transactions, allowing for the efficient generation, tracking, and reporting of monetary activities. e-FIS supports real-time processing and ensures that financial data is securely handled and accurately recorded, contributing to improved financial governance and accountability. To further enhance its digital capabilities, TMF has partnered with Microsoft Azure, a globally recognized cloud service provider. Through this collaboration, the foundation has acquired cloud hosting services that offer scalability, high-level data security, and uninterrupted access to mission-critical applications. The adoption of cloud technology enables TMF to support remote operations, maintain system reliability, and prepare for future growth without the limitations of traditional infrastructure. TMF’s investment in modern technology reflects its commitment to innovation, operational excellence, and the delivery of high-quality financial services to underserved communities.

Pakistan’s economy has previously contended with significant macroeconomic headwinds; however, signs of stabilization have emerged in the IHFY25. This period has been characterized by a gradual reduction in policy rates and a notable decline in inflation, creating a more favorable environment for economic activity. These positive developments are expected to offer crucial support to several sectors, including microfinance. As of the latest data, the total Gross Loan Portfolio (GLP) of the microfinance sector stands at approximately ~PKR 598bln, comprising contributions from Microfinance Banks (MFBs), Microfinance Institutions (MFIs), and Rural Support Programs (RSPs). MFIs and RSPs collectively account for around ~23% of the total GLP. In CY24, the number of active borrowers under MFIs and RSPs recorded a modest growth of approximately ~1.17%. Concurrently, the average loan size increased to ~PKR 44,762, up from ~PKR 38,777 in CY23. Portfolio quality also demonstrated improvement, with the infection ratio declining to ~1.57% in CY24, compared to ~2.80% in the previous year.

TMF is positioned as a small-tier institution within Pakistan’s microfinance sector. Despite its modest scale, TMF benefits from the longstanding experience of its sponsors, who have been actively engaged in the domain of microfinance and community development since 1998. This historical involvement has contributed to the foundation’s strategic direction and operational resilience. As of June 2025, TMF holds approximately ~1% of the market share in terms of Gross Loan Portfolio (GLP), reflecting its focused outreach and niche positioning within the broader financial inclusion landscape. To sustain and expand its lending operations, TMF relies on a combination of internally generated capital and external borrowing, which enables it to maintain liquidity and meet the credit needs of its target clientele. In FY25, TMF had successfully built a borrower base of around ~4,9000 active clients, underscoring its commitment to serving underserved and low-income communities. The foundation’s operational footprint spans ~19 districts, allowing it to reach diverse populations across both rural and semi-urban areas. TMF’s strategic emphasis on localized service delivery, combined with its prudent financial management and experienced leadership, continues to support its mission of promoting inclusive and sustainable microfinance solutions.

In FY25, TMF generated an interest income of PKR ~1.1bn. This reflects a decline when compared to FY24, in which the foundation reported interest earnings of PKR ~1.3bn. The entire interest income for both periods was derived exclusively from advances extended to borrowers, indicating that TMF’s revenue model remains firmly rooted in its core lending operations.This reduction in interest income is attributed to various factors, such as changes in lending volumes, portfolio composition, interest rate adjustments, or borrower repayment behavior. Despite the year-on-year decrease, the foundation continues to rely on its loan portfolio as the sole source of interest-based revenue, underscoring its focus on microcredit as a primary financial service. The consistent reliance on advances for income generation highlights TMF’s commitment to its mission of providing accessible financial solutions to underserved communities, while also emphasizing the importance of portfolio performance and prudent credit management in sustaining its financial health.

In FY25, TMF reported a net profit of PKR ~7mln, marking a significant turnaround from the previous year’s loss of PKR ~256mln in FY24. This positive financial outcome is primarily attributed to a notable reduction in operating expenses and a decline in finance costs during the year. These cost efficiencies reflect improved resource management and more favorable borrowing terms, contributing to the foundation’s overall financial recovery. Additionally, TMF experienced a substantial improvement in its interest rate spread, which rose to ~14.1% in FY25 compared to  ~6.3% in FY24. This increase indicates enhanced profitability from core lending operations, driven by better yield on advances and more efficient cost of funds. The combination of reduced expenditures, lower financing costs, and a strengthened spread underscores TMF’s progress in stabilizing its financial position and enhancing operational sustainability. These developments position the foundation for continued growth and improved service delivery in the microfinance sector.

Looking ahead, TMF has outlined a strategic plan aimed at expanding its market presence while simultaneously strengthening its existing operational infrastructure. The foundation intends to enhance its outreach by entering new geographic areas and deepening its engagement with underserved communities, thereby increasing its share within the microfinance sector. In parallel, TMF is focused on consolidating its current branch network to improve service delivery, operational efficiency, and resource optimization. This consolidation effort involves streamlining processes, upgrading branch capabilities, and reinforcing internal controls to ensure consistent performance across all locations. By pursuing a dual strategy of expansion and consolidation, TMF aims to scale its impact, improve client experience, and reinforce its commitment to financial inclusion. These initiatives are aligned with the foundation’s long-term vision of becoming a more agile, responsive, and sustainable institution within Pakistan’s microfinance landscape.

TMF continues to face elevated levels of credit risk, as evidenced by key portfolio indicators reported as of June 2025. One of the primary contributing factors to this heightened risk is the foundation’s geographical concentration, which limits diversification and increases vulnerability to region-specific economic and environmental challenges. As of FY25, TMF’s Portfolio at Risk (PAR) was recorded at approximately ~10.3%, marking a significant increase from ~5.8% reported during the same period in FY24. This upward trend indicates a deterioration in portfolio quality and suggests growing repayment challenges among borrowers. Similarly, the infection ratio, which reflects the proportion of non-performing loans within the total loan portfolio, stood at around ~10% as of June 2025, compared to ~6% in FY24. The rise in both PAR and infection ratio underscores the need for strengthened credit risk management practices, enhanced borrower screening, and more robust recovery mechanisms. TMF’s management continues to monitor these indicators closely and is expected to implement targeted interventions to mitigate risk exposure, improve portfolio performance, and safeguard the financial sustainability of the institution.

As of June 2025, the investment portfolio of  TMF consists entirely of short-term Term Deposit Receipts (TDRs) placed with three major commercial banks: Habib Bank Limited (HBL), Muslim Commercial Bank (MCB), and Bank of Punjab (BOP). The total value of these deposits amounts to  PKR ~1,331mln. Out of this total, TMF has invested PKR ~625mln with HBL, PKR ~400mln with MCB, and PKR ~306mln with BOP. These investments reflect TMF’s conservative financial strategy, aimed at preserving capital while earning stable returns on surplus funds. By maintaining short-term deposits with reputable financial institutions, TMF ensures liquidity and minimizes risk exposure. This approach supports the foundation’s operational needs and aligns with its commitment to prudent financial management.

At FY25 long-term loans of TMF mainly includes loans from PMIC of ~1,213mln and PKR ~320mln from SBP. There is also the subordinated loan of PKR 400mln from TRDP.

As of FY25, TMF’s liquid assets were PKR ~1,475mln, showing a decline from PKR 1,795mln in FY24. This downward trend indicates a weakening in the Company’s liquidity position. To strengthen its financial flexibility and ensure preparedness for unexpected cash requirements, TMF should consider increasing its allocation to liquid assets.

As of FY25, TMF equity-to-total-assets ratio stood at ~3.5%. This reflects an improvement from the ~3.0% recorded in June 2024. When compared to industry peers, this level of capitalization is considered adequate and indicates a stable financial position.