Microfinance – A Poverty Reducing Agent in Pakistan

This paper provides an overview of poverty and its trends in Pakistan, and discusses microfinance as a better solution over old methods for subsiding poverty. It also provides a history of microfinance in the country, and throws light on how it functions as an approach to tackling poverty. The paper states that majority of the studies have proven that in regions that have had microfinance programs implemented, the economic and social conditions improved in the long run. It makes the following recommendations for a greater outreach and impact of microfinance at both the macro and micro level in Pakistan:

• Prioritizing group formation and networking at the local, regional, and national levels will help pool together human and material resources;
• Prioritize local knowledge and participatory planning, as microfinance initiatives that recognize and build upon local knowledge and tradition are more culturally compatible and hence sustainable with the local community;
• Legal framework, supervision, and regulation of MFIs need to be established to facilitate sound growth and improve their capacity to leverage funds in the market and provide competition;
• Investment in social intermediation programs is necessary to increase the capacity of the poor to access and productively use microfinance services.