Challenges to microfinance industry in Pakistan

By: Farhat Abbas shah

Micro finance industry is almost forty years old but in Pakistan
It is merely a grooming plant and has a number of areas to pay full attention and pull this industry out of problems. There are so many fogy and mist full aspects waiting for appropriate solutions.
The major flaw of this very industry is the concept whether it is a NGO based activity or a commercial institution. This dilemma can be observe generally in the whole world and especially in Pakistan. In this perspective it is not a difficult job to analyse that why it is happening and what are the issues being generated by this. Categorically speaking these were the NGOs which acquired this project and try to serve the people with the passion of social responsibility, but it generated adverse affects. The basic reason is when a non-commercial organization tries to sell money by calling it financial services and start getting interest with the title of services charges, people took it negative and never accepted the services as poverty support and productivity oriented. With reference to a recently conducted research by a Micro finance institute of Pakistan, not a single Microfinance institute has even a countable numbers of loyal clients. All clients are acquiring services from every accessible MFI. The role of activist (non-declared intermediary) is another off shoot of this turmoil and the MFIs are still facing helplessness in the field regarding client management relationship. During a social performance audit conducted first time in pakistan by a MFI, the main cause of client’s lack of owner ship towards microfinance industry came out as delinquency .Clients are not ready to accept it as any sort of social service. Their sensitivity becomes stronger when they face a very nasty behaviour during problematic recoveries. They see the very different look of loan officer with flat face soft words but unkind heart. This very contradictive attitude has been taken by the poor clients as a typical conduct of a SAITH or a BUNIA who ever gives money with smile but recovers it by any means.
It accurse spatially during the days of political or environmental disasters. According to an international microfinance expert from I L O <>. The transformation of MFIs to microfinance banks is also at the agenda but sustainability and human recourse is the major obstacle to make it succeed.
There is an other issue has been measured of legal steps required by State Bank of Pakistan. Many of microfinance institutes have not legal authority to deal with financial matters like that but in spite of all these irregularities MFIs are busy to increase their out reach.
Pakistan microfinance net work (the watchdog) has taken so many steps to align the system and regulate different channels to make this industry smooth and sustainable spatially in the area of human resource regarding capacity building by organizing different training programs. Pakistan microfinance industry network is also emphasizing on partnership between commercial banks and MFIs.
There is another development can be seen in the area of information sharing. According to a senior official from PMN the information, sharing system is at the final stage of launch.
The united nation had proclaimed 2005 as a year of microfinance with the main objective of raise the public awareness and sharing the information exchange between working people for the poverty alleviation. However, in fact there is a lot of need to improve the pace of work and increase of resources, although the growth rate with the latest figures of 1.5 million clients declared by Pakistan microfinance network is worth able and is an arrow to success.
MNP has also a high hope to achieve the target of three million active borrowers till 2010.Increas of outreach may indicate the growth of the industry but the understanding of the clients about the MFIs is still there, which needs a full fledge opinion changing program with serious effort of implementation.

About the writer
Farhat Abbas Shash is popular most poet of masses in pakistan having 67 published books on his credit. He is also the member of pakistan psychological association. He is a renowned anchor and broadcaster of
Radio and tv with well liked shows, recently working on microfinance as a gross root expert .