The Government of Pakistan, together with a number of international donor agencies, has been focusing on rapid poverty alleviation. President General Pervez Musharraf, in his recent address to the overseas Pakistanis, highlighted the importance of reducing poverty and unemployment to defeat extremism on the long-term basis. In his words — “it has been realized that the menace of extremism cannot be eliminated by force because we have to change the mindset of a handful of people who turn extremists due to their poor economic conditions.”
With its marked success, microfinance has been considered as a useful tool in poverty reduction and improving the employment levels of less privileged communities.
Recently, the Government of Pakistan approved a strategy to expand microfinance outreach from the present one million to three million households by 2010. According to State Bank of Pakistan, the microfinance banking had witnessed a considerable growth in recent years. However, keeping in view the existing large unmet demand in microfinance sector and the need for strengthening institutional capacities of microfinance institutions, certain changes in the existing legal and regulatory framework have been made, such as limiting the maximum per individual borrowing to Rs 150,000 (US$2500), and that the loan amount commensurate with the business requirements and repaying capacity of the borrower.
Recently, the socio-economic scientist and Nobel Prize winner professor Yunus offered Pakistan to start a microcredit bank. Speaking about the success of his programs in Bangladesh he noted that “microcredit is a social business, and that Bangladesh has witnessed dramatic changes in the society, especially because of women empowerment”.
With a population of about 160 million, of which 24% live below the national poverty line, there certainly appears a sizeable need for microfinance in Pakistan. However questions remain about the ability of microfinance institutions to reach out to the masses. It has been observed that there is a general lack of awareness about the availability of such credit among the poor. It is yet to be seen how the stakeholders come together to promote microfinance initiative in a strategic manner to generate the level of economic activity desirable to reduce poverty in the country.
Published Date: March 23, 2007