Non-Productivity of Microfinance Loans in Pakistan
This study examines the productivity of microfinance loans in Pakistan. It compares the success of Islamic microfinance lending methodology in Pakistan to that of conventional lending.
The study is based on field work with foundations and bank clients, and data obtained from MFI and microfinance bank employees. It discusses:
- Principles and objectives of microfinance;
- Challenges faced by Pakistan's microfinance sector;
- Principles and methodologies of microcredit;
- Microfinance programs in Pakistan;
- Comparison of microfinance methodologies in Pakistan;
- Principles of Islamic microfinance;
- Difference between productive and non-productive loans;
- United Nations Millennium Development Goals.
The study illustrates the asset delivery methodology (Farz methodology) developed by the Farz Foundation. It compares data from conventional and Islamic MFIs in Pakistan on aspects such as staff behaviour, facilities offered by MFIs, loan type preferred by clients, impact of loans on microenterprises and poverty, and productivity of loans. It identifies characteristics of a successful MFI and emphasizes the importance of trust-building with clients. The study states that MFIs in Pakistan should focus on attaining the Millennium Development Goals.
