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Pakistan’s microfinance sector is continuously developing. There is still a lot of room for improvement. Several lending organizations have emerged as a transformative force dedicated to promoting financial inclusion and promoting sustainable development.
After Bangladesh and elsewhere, microfinance has proven to be a transformative linchpin in Pakistan, helping poor families earn a living and providing critical support.
Since the establishment of Grameen in Bangladesh in 1984, the world’s first formal microfinance bank, microfinance has been recognized as an important tool for poverty reduction. Grameen Bank’s success in providing the financial needs of the poor in society on a sustainable basis made the bank a role model for private and public institutions in other countries.
Founded with the mission of bridging the gap between commercial funding and microfinance, several institutions have played an important role over the years.
For example, organizations such as the Pakistan Microfinance Investment Company, which grew out of the success of the Pakistan Poverty Alleviation Fund, have received significant international support for funding microfinance institutions as well as enterprise, microinsurance, etc. It has also worked to accelerate development in the sectors. , education, agriculture and renewable energy.
PMIC’s Chief Executive Officer, Yasir Ashfaq, says he believes in an effort that will result in, “a Pakistani society where the underprivileged are empowered”.
Guiding principles such as these target key demographics, including women, youth, and rural communities, who often have limited access to financial resources.
Ashfaq says he envisions a future where microfinance meets the immense needs of millions of people in Pakistan. “While approximately 10.5 million clients are currently benefiting from microfinance services, the potential market is much larger, approximately 41 million. Our strategy emphasizes the important role that financial support for small businesses can play in creating employment opportunities. can pay, which is necessary to stabilize the economy amid high unemployment rates and economic challenges.
Commercially sustainable funding sources are needed, as philanthropic support alone is insufficient to meet the growing demand in the sector.
According to a State Bank of Pakistan report, since the late 1990s, microfinance has gained importance as a tool for social mobilization and poverty reduction. In fact, increased international emphasis, particularly increased funding from IFIs, encouraged both the public and private sectors to develop the microfinance sector in the country.”
Ashfaq says, “The goal should be, and we are working towards this through our three-year strategy, to build Pakistan’s microfinance infrastructure with new financial products and capital raised from international impact investors. can be expanded through. “We should be able to expand the network by adding about 15 new institutions, especially in Gilgit-Baltistan, Balochistan and Khyber Pakhtunkhwa, where local microfinance institutions lack growth potential,” he adds.
A key area of focus for microfinance is agriculture, a sector that is highly vulnerable to the effects of climate change. We must work to provide accessible financing and support to smallholder farmers to help them adapt and thrive.
PMIC is prioritizing initiatives in affordable housing, renewable energy solutions and low-cost private schooling, highlighting its holistic approach to sustainable development and achieving the SDGs.
“Empowering the youth is a key aspect,” says Ashfaq. The organization supports 1,000 low-cost private schools, complete with teacher training programs and administrative support. Opportunity International, an organization based in Africa and South Asia Together, we are working to expand education infrastructure in 5,000 schools over the next three years, ensuring that Pakistan’s youth – future leaders and contributors to social stability “They are equipped with the tools they need to succeed,” he adds.
Microfinance sector in Pakistan needs further development. There is a lot of scope to expand financial services for the poor and vulnerable. The government should recognize the importance of microfinance for social mobilization and poverty reduction and increase its efforts to provide support to relevant stakeholders.
Ashfaq says the financial approach includes provision of grants, training and capacity building initiatives. investment in management information systems; and staff development for partner institutions as well as end clients.
Collaboration with key government agencies, such as the State Bank of Pakistan and the Securities and Exchange Commission, strengthens an organization’s position as a leading advocate for financial inclusion. By aligning their objectives with the United Nations Sustainable Development Goals, microfinance organizations are not only advancing their mission but also contributing to Pakistan’s broader development agenda.
The success of organizations working in the microfinance sector lies not only in their ability to support individual businesses, but also in their broader role in building a resilient and sustainable microfinance infrastructure that is conducive to Pakistan’s long-term growth and development. Can promote stability.
The author is a researcher based in Islamabad.
