The Lessons in Development: The AKRSP Experience

This paper argues that the Aga Khan Rural Support Program (AKRSP) is a pioneer in the field of microfinance in Pakistan. It states that the purpose of this study is to analyze the lessons that can be learnt from the AKRSP experience.

The paper discusses AKRSP's experiments in the area of savings, credit and financial sustainability and lists the following failures of the program:

• AKRSP deviated from its original objective of providing microfinance to the poor, especially after the establishment of the first microfinance bank, which focused on lending to urban clients;
• The policy of financial autonomy of the village organization (VO) and women's organization (WO) led to their branching out on their own. It also led to huge losses for unsuspecting savers;
• The policy of using collective savings as collateral for individual default led to embezzlement by members-in-charge of savings and to the destruction of the VO and WO;
• AKRSP failed in its attempt to develop a truly village based system of banking with local ownership and management, linking the VO with the formal sector.

The paper concludes by stating that despite its failures, AKRSP succeeded in the following areas:

• Implementing a successful training program, where village activists were trained in all areas of microfinance operations;
• Helping in enterprise development, providing loans for investment in the social sector and housing;
• Reducing the vulnerability of poor households by helping them meet consumption needs;
• Encouraging women to save and thereby helping in their empowerment.