Challenges and Prospects - Microfinance in Pakistan

This paper introduces the demographic and socio-economic profile of Pakistan and presents the thrust areas of the policy of the Government:

• Reducing poverty;
• Improving governance and administration;
• Improving the fiscal and the balance of payments positions;
• Restoring investors' confidence;
• Achieving higher growth on a sustainable basis;
• Improving social indicators.

Enumerating the core principles the drive the Governments' poverty alleviation strategy, the paper presents the characteristics of the microfinance sector in the country:

• Clients and client characteristics;
• Demand conditions;
• Supply situation.

The paper identifies the following initiatives for strengthening the microfinance sector in the country:

• Conducive policy to encourage emergence of MFIs as depository institutions;
• Creation of a supervisory and regulatory system for orderly sector development;
• Flexibility to adopt practices and procedures for banking with the poor, such as mobile banking and group collateral;
• Free limit to accumulate a non-collateralized loan portfolio;
• Insulation from political interference.

The paper also details the types of microfinance service providers in the country and their relative strengths and weaknesses. It lists the policy initiatives made by the Government in order to support microfinance for poverty alleviation:

• Facilitating the establishment of a lead institution;
• Developing a framework for institutional diversity in microfinance sector;
• Supporting social intermediation;
• Enhancing outreach of basic community services.