Pakistan Microfinance Review 2006: Shades of Growth

This paper focuses on the examining the growth in the microfinance sector in Pakistan. It analyzes the effect of growth on cost and efficiency in the sector as well as on credit risk and the sectors sustainability.Pakistans microfinance sector witnessed an unprecedented expansion in outreach during 1999-2006. Its client base increased from 60,000 to 1,000,000 borrowers. This was the result of a focused strategy and investment from the government and a proactive response from all stakeholders. Features of this growth include:

• Interest from policy makers leads to the development of a strategy for microfinance with a target to reach three million active borrowers by 2010;
• State Bank of Pakistan is authorized to make changes to facilitate sustainable growth;
• Growth is steep and evenly spread;
• Competition is leading to product diversification;
• Sustainability remains stagnant despite increase in yields
• Capital structure continues to be under-leveraged;
• Debt continues to drive growth;
• Growth has led to increased costs and lower efficiency;
• Growth continues to target vulnerable populations and lower end of the pyramid.