62935920 research report

Chapter – 1 Chapter – 1 INTRODUCTION INTRODUCTION

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CHAPTER – 1 CHAPTER – 1 INTRODUCTIONINTRODUCTION

1.1 INTRODUCTION TO REPORTThe topic that I have chosen for my research report is “Role of Microfinance to

Empower Women in Pakistan; A case study of NWFP”. Microfinance plays an

important role in improving the living standard of the people especially the poor.

For example to eradicate poverty and hunger, achieve universal primary

education, promote gender equality and empower women, reduce child mortality

and to develop a global partnership. However, this research is based on micro-

finance in general, with a special focus of its impact on women empowerment.

1.2 BACKGROUND OF STUDYMicrofinance is relatively a new term. But most societies have a long background

of traditional or informal saving and credit arrangements.

Microfinance is the provision of financial services (whether loans, deposit

accounts, insurance or otherwise) to poor and low-income individuals and

households. The thing that distinguishes microfinance from the traditional

financial services, aside from the small sums of money involved, is the absence of

any collateral as security for loan.

Role of Microfinance to Empower Women of Pakistan; A Case studyRole of Microfinance to Empower Women of Pakistan; A Case study of NWFPof NWFP

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The outbreak given to microfinance in a real sense was by Grameen Bank of

Bangladesh in 1980’s. And this model remains central to microfinance today.

MUHAMMED YUNUS, the founder of Grameen bank believes that charity is not

an answer to poverty, but it only helps poverty to continue. In fact it creates more

dependency and reduces the motivation to stand on its own. So Grameen brought

credit to the poor, WOMEN, the illiterate and to the people who did not know

how to invest money and earn income.

1.3 PURPOSE OF REPORTMain purposes of this research report are as following.

To find out is microfinance in real terms working on authorization and

development of women of Pakistan and in specific N.W.F.P?

To find out if microfinance is increasing women’s income levels and

control over income leading to greater levels of economic independence?

To find out if an access to networks and markets giving wider experience of

the world outside the home, access to information and development of

other social and political roles?

To find out is there any difference made in the field of employment

generation of female?

To find out the impact on the economic development of the province by

empowerment of women through microfinance?

To find out any more general improvements in attitudes to women’s role in

the household and community?

1.4 SCOPE OF WORKIn order to have a more focused study, I have focused my work on the women of

NWFP. Studying different micro-finance institutions that provide micro-finance

facility to both the rural and urban sector women.

1.5 METHODOLOGY OF REPORTMethodology of my research work will be based on the secondary data from the

following sources:

Journals


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Internet

Newspapers

Magazine

1.6 SCHEME OF THE REPORT

This report will be divided in four sections.

SECTION 1: Introduction to Research Report

SECTION 2: Literature Review

SECTION 3: Analysis

SECTION 4: Findings and recommendations.


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1.7 LIMITATIONS OF STUDY

The basic limitation which I am facing in this research report is that

microfinance is relatively a new term, so there is not much awareness

regarding among people this program.

Secondly role of women in N.W.F.P is not recognized much in any field of

life. So not much relevant data is available.

Thirdly time factor, is a great limitation but full efforts will be made to

reduce this limitation.

Fourthly due to unstable conditions of our country people especially

women are not motivated to start any work.


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Chapter – 2 Chapter – 2 LITERATURE REVIEW LITERATURE REVIEW

CHAPTER – 2 CHAPTER – 2

LITERATURE REVIEWLITERATURE REVIEWAccording to Zaman 2001, Simanowitz and Walker 2002 microfinance and

microfinance institutions have played valuable roles in reducing the vulnerability

of the poor, through asset creation, income and consumption smoothing, provision

of emergency assistance, and empowering and emboldening women by giving

them control over assets and increased self-esteem and knowledge. Several recent

assessment studies have also generally reported positive impacts.

According to Kabeer 2000 empowerment is defined as the processes by which

women take control and ownership of their lives through expansion of their

choices. Thus, it is the process of acquiring the ability to make strategic life

choices in a context where this ability has previously been denied. The core

elements of empowerment have been defined as agency (the ability to define one’s

goals and act upon them), awareness of gendered power structures, self-esteem

and self-confidence. 1

Research done by UNDP (United Nations Development Programme), UNIFEM

(United Nations Development Fund for Women), and the World Bank, among

others, indicates that gender inequalities in developing societies inhibit economic

growth and development. For example, a recent World Bank report confirms that

societies that discriminate on the basis of gender pay the cost of greater poverty,

slower economic growth, weaker governance, and a lower living standard of their

people. The UNDP found a very strong correlation between its gender

empowerment measure and gender-related development indices and its Human

Development Index. Overall, evidence is mounting that improved gender equality

is a critical component of any development strategy.2

As CIDA (Canadian International Development Agency) recognizes in its gender

policy, “Attention to gender equality is essential to sound development practice

and at the heart of economic and social progress. Development results cannot be 1 http://www.unescap.org/drpad/publication/bulletin%202002/ch6.pdf2 World Bank, Engendering Development: Through Gender Equality in Rights, Resources and

Voice Summary (Washington, D.C.: World Bank, 2001); www.worldbank.org/gender/prr/engendersummary.pdf.


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maximized and sustained without explicit attention to the different needs and

interests of women and men.”3

It is generally accepted that women are disproportionately represented among the

world’s poorest people. In its 1995 Human Development Report, the UNDP

reported that 70 percent of the 1.3 billion people living on less than $1 per day are

women.4

According to the World Bank’s gender statistics database, women have a higher

unemployment rate than men in virtually every country.5

In general, women also make up the majority of the lower paid, unorganized

informal sector of most economies. These statistics are used to justify giving

priority to increasing women’s access to financial services on the grounds that

women are relatively more disadvantaged than men. Microfinance has come to

play a major role in many gender and development strategies because of its direct

relationship to both poverty alleviation and women.6

According to Susy and Lisa the basic theory is that microfinance empowers

women by putting capital in their hands and allowing them to earn an independent

income and contribute financially to their households and communities. This

economic empowerment is expected to generate increased self-esteem, respect,

and other forms of empowerment for women beneficiaries. Involvement in

successful income-generating activities should translate into greater control and

empowerment.

One of the often articulated rationales for supporting microfinance and the

targeting of women by microfinance programs is that microfinance is an effective

means or entry point for empowering women. By putting financial resources in

the hands of women, microfinance institutions help level the playing field and

promote gender equality. Access to resources alone does not automatically

3 Canadian International Development Agency (CIDA), “CIDA’s Policy on Gender Equality” (Hull, Canada: CIDA, 1999).4 UNDP, 1995 Human Development Report (New York, UNDP, 1996).5 World Bank’s Web site at genderstats.worldbank.org.6 Cheston, Susy and Lisa Kuhn, 2002. “Empowering women through microfinance”, unpublished

background paper for the Microcredit Summit + 5, New York, 10-13 November, available at <http://www.microcreditsummit.org/papers/papers.htm>.


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translate into empowerment or equality, however, because women must also have

the ability to use the resources to meet their goals. In order for resources to

empower women, they must be able to use them for a purpose that they choose.7

According to the statement from the Fourth United Nations World Conference on

Women “Empowerment of women and gender equality are prerequisites for

achieving political, social, economic, cultural, and environmental security among

all peoples.” So women’s empowerment is a critical part of sustainable

development. Yet microfinance’s great potential to empower poor women to a

large extent often goes unrealized. Although studies show that microfinance can

and does empower women, it has the potential to empower many more, even more

greatly.8

According to Maria Otero, President and CEO of ACCION International "a

sustainable institution that empowers women can do so by first paying attention to

the following:

1. Understand the characteristics of women's economic activity: (for example,

smaller businesses than men, smaller cash flow, more likely reaches a

smaller market)

2. Know the skill and time constraints of women (less literacy, fewer

marketable skills, and domestic and child care responsibilities)."9

According to Working Women Forum evidence suggests that participation in

microfinance programs may give women the means to escape from abusive

relationships or limit abuse in their relationships. Working Women Forum found

that 40.9 percent of its members who had experienced domestic violence stopped

it because of their personal empowerment, while 28.7 percent were able to stop it

through group action.10

7 Cheston Susy and Lisa Kuhn, 2002. “Empowering women through microfinance”, unpublished background paper for the Microcredit Summit + 5, New York, 10-13 November, available at <http://www.microcreditsummit.org/papers/papers.htm>

8 Beijing Platform for Action, Fourth United Nations World Conference on Women (Beijing, 1995), paragraph 41.9 E-mail message to Cheston Susy and Lisa Kuhn from Maria Otero, President and CEO of

ACCION International, on 6/27/0210 Working Women’s Forum, 22.


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According to Annette Brooke Micro Finance programmes have generally targeted

women as clients because women's performance on repayment often proves to be

better than men. They are also more likely to invest increased income in the

household and in the family's well-being. Most important, microfinance can

empower women to become more assertive, which is a good thing. Women are

then more likely to be participative in family and community decisions.11

Linda Mayoux in her e-paper of Micro-finance and the empowerment of women

concludes that women’s empowerment needs to be an integral part of policies.

Empowerment cannot be assumed to be an automatic outcome of micro-finance

programmes, whether designed for financial sustainability or poverty targeting.

According to Linda Mayoux (1997) microfinance programmes targeting women

have been a welcome corrective to previous neglect of women's productive role.

For some women in some contexts microfinance programmes have indeed set in

motion a process of empowerment.12

Noeleen Heyzer of UNIFEM (United Nations Development Fund for Women)

'Micofinance is about much more than access to money. It is about women

gaining control over the means to make a living. It is about women lifting

themselves out of poverty and vulnerability. It is about women achieving

economic and political empowerment within their homes, their villages, their

countries.'13

11 In her speech on microfinance to House of Commons (Westminster Hall)http://www.libdems.org.uk/home;sphinx_search?q=microfinance+and+women+empowerment

12 Mayoux L (1997) The Magic Ingredient? Microfi nance and Women’s Empowerment, A Briefi ng Paper prepared for the Micro Credit Summit, Washington

13 Part of the paper 'Empowering Women with Micro credit ' presented by the Micro credit Summit Campaign to the Beijing +5 Conference in New York June 2000


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http://www.libdems.org.uk/home;sphinx_search?q=microfinance+and+women+empowerment


Malhotra (2002) emphasises that even after identifying empowerment as a

primary development goal, neither the World Bank nor any other major

development agency has developed a rigorous method for measuring and tracking

changes in levels of empowerment.14

14 Malhotra A, Schuler S, and Boender C (2002) Measuring Women’s Empowerment as a Variable in International Development, Gender and Development Group, World Bank, New York


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Chapter – 3 Chapter – 3 OVERVIEW OF OVERVIEW OF TOPICTOPIC

CHAPTER – 3

OVERVIEW OF TOPIC

3.1 BACKGROUNDThe concept of microfinance is not new. Savings and credit groups that have

operated for centuries include the "susus" of Ghana, "chit funds" in India, "tandas"

in Mexico, "arisan" in Indonesia, "cheetu" in Sri Lanka, "tontines" in West Africa,

and "pasanaku" in Bolivia, as well as numerous savings clubs and burial societies

found all over the world.

Formal credit and savings institutions for the poor have also been around for

decades, providing customers who were traditionally neglected by commercial

banks a way to obtain financial services through cooperatives and development

finance institutions. One of the earlier and longer-lived micro credit organizations

providing small loans to rural poor with no collateral was the Irish Loan Fund

system, initiated in the early 1700s by the author and nationalist Jonathan Swift.

Swift's idea began slowly but by the 1840s had become a widespread institution of

about 300 funds all over Ireland. Their principal purpose was making small loans

with interest for short periods. At their peak they were making loans to 20% of all

Irish households annually.

In the 1800s, various types of larger and more formal savings and credit

institutions began to emerge in Europe

From 1870, the unions expanded rapidly over a large sector of the Rhine Province

and other regions of the German States. The cooperative movement quickly

spread to other countries in Europe and North America, and eventually, supported

by the cooperative movement in developed countries and donors, also to

developing countries.

In Indonesia, the Indonesian People's Credit Banks (BPR) or The Bank

Perkreditan Rakyat opened in 1895. The BPR became the largest microfinance

system in Indonesia with close to 9,000 units.

In the early 1900s, various adaptations of these models began to appear in parts of

rural Latin America. While the goal of such rural finance interventions was


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usually defined in terms of modernizing the agricultural sector, they usually had

two specific objectives: increased commercialization of the rural sector, by

mobilizing "idle" savings and increasing investment through credit, and reducing

oppressive feudal relations that were enforced through indebtedness.

Between the 1950s and 1970s, governments and donors focused on providing

agricultural credit to small and marginal farmers, in hopes of raising productivity

and incomes. These subsidized schemes were rarely successful. Rural

development banks suffered massive erosion of their capital base due to

subsidized lending rates and poor repayment discipline and the funds did not

always reach the poor, often ending up concentrated in the hands of better-off

farmers

The outbreak given to micro finance in a real sense was by Grameen Bank of

Bangladesh in 1980’s. Among the clients of this bank 94% were women, which

reflect Dr. Yunus’s philosophy that women show more responsibility towards

family prosperity and development.

The history of microfinance institution in PAKISTAN is dated back to 2000

around nine years back, when the first ever microfinance bank was established

under Khushhali bank ordinance 2000.

3.2 MICROFINANCE DEFINATIONSAccording to Grameen foundation microfinance is sometimes called “banking for

the poor,” microfinance is an amazingly simple approach that has been proven to

empower very poor people around the world to pull themselves out of poverty.

Relying on their traditional skills and entrepreneurial instincts, very poor people,

mostly women, use small loans (usually less than US$200), other financial

services, and support from local organizations called microfinance institutions

(MFIs) to start, establish, sustain, or expand very small, self-supporting

businesses.’

Microenterprise access to banking services (MABS) defines microfinance as ‘an

economic development approach intended to benefit low-income groups. The term

refers to the provision of financial services to low-income clients, including the


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self-employed. Financial services generally include savings and credit, and some

microfinance organizations also provide insurance and payment services.

Wikipedia defines microfinance as ‘a term for the practice of providing financial

services, such as microcredit, microsavings or microinsurance to poor people. By

helping them to accumulate usably large sums of money, this expands their

choices and reduces the risks they face.’

Robinson also provides a definition of Micro-Finance as , ‘Micro-Finance refers

to small-scale financial services for both credits and deposits that are provided to

people who farm or fish or herd; operate small or micro-enterprises where goods

are produced, recycled, repaired, or traded; provide services; work for wages or

commissions; gain income from renting out small amounts of land, vehicles, draft

animals, or machinery and tools; and to other individuals and local groups in

developing countries, in both rural and urban areas’.

Schreiner and Colombet (2001, p.339) define microfinance as “the attempt to

improve access to small deposits and small loans for poor households neglected.

Another fairly precise definition of Micro-Finance by CGAP (Consultative Group

to Assist Poor) of Pakistan Micro-Finance is the supply of the loans, savings, and

other basic financial services to the poor.

According to microfinance gateway site ‘microfinance means providing very poor

families with very small loans to help them engage in productive activities or

grow their tiny businesses. Over time, microfinance has come to include a broader

range of services (credit, savings, insurance, etc.) as we have come to realize that

the poor and the very poor that lack access to traditional formal financial

institutions require a variety of financial products.’

Hulme and Mosley (1996) say that ‘when loans are associated with an increase in

assets, when borrowers are encouraged to invest in low-risk income generating

activities and when the very poor are encouraged to save; the vulnerability of the

very poor is reduced and their poverty situation improves’ this is microfinance.


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http://en.wikipedia.org/w/index.php?title=Microinsurance&action=edit

http://en.wikipedia.org/w/index.php?title=Microsavings&action=edit

http://en.wikipedia.org/wiki/Microcredit

http://en.wikipedia.org/wiki/Financial_services

http://en.wikipedia.org/wiki/Financial_services


3.3 MICROFINANCE AND MICROCREDIT Microcredit is the extension of small loans to very poor people for self-

employment projects that generate income, allowing them to care for themselves

and their families.

In other words Microcredit is a small amount of money loaned to a client by a

bank or other institution.

Microfinance, on the other hand, is used in a broader sense and refers to the

supply of financial services to poor individuals or groups of individuals that do

not have access to formal financial services. The extension of small loans to

entrepreneurs too poor to qualify for traditional bank loans is also part of

microfinance. The objective of the process is for the borrowers to meet the needs

of their households or their micro enterprises. Microfinance has proved to be an

effective and popular measure in the ongoing struggle against poverty, enabling

those without access to formal lending institutions to borrow and start a small

business. Definitions differ of course, from country to country.

Microfinance refers to loans, savings, insurance, transfer services, microcredit

loans and other financial products targeted at low-income clients.

3.4 SOURCES OF MICROFIANANCEThere are three types of sources of microfinance

Formal institutions - i.e. rural banks and cooperatives. Semiformal institutions - i.e. non government organizations.

Informal sources - i.e. money lenders and shopkeepers.

Institutional microfinance includes microfinance services provided by both formal

and semi-formal institutions. Microfinance institutions are institutions whose

major business is the provision of microfinance services.

3.5 MICROFINANCE ACTIVITIES

Microfinance activities generally include: Small loans typically for working capital. Informal appraisal of borrowers and investments. Collateral substitute, such as group guarantees of compulsory saving. Loan disbursement and monitoring. Secure saving products.


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3.6 MICROFINANCE PROVIDERS

Microfinance providers are called micro-finance institutions and include NGOs,

savings and loan cooperatives, government banks, commercial banks, and non-

banking financial institutions. Microfinance providers are of various types. The

criteria for distinguishing these service providers are based on the following

points:

Provision of microfinance services to the business start-ups coming out of

unemployment, or to businesses already existing but requiring working

capital, or capital for expansion.

Services provided: only microfinance or also non-financial services.

Legal form and ownership of the microfinance services provider

Mission statement: position on the continuum between outreach and

sustainability.

Scale of operations.

Link to banks.

Link to other enterprise creation agents (Chambers).

Link to Government agency supervising self-employment program.

CRITERIA FOR THE PERFORMANCE EVALUATION OF MICRO-FINANCE PROVIDERS

The following factors indicate the success of a micro-finance service provider:

The outreach of the micro-finance services provider to the targeted

population,

Performance in terms of outreach

targeting

client selection

lending technology and financial innovations

And, the financial sustainability of the micro-finance service provider.


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3.7 CLIENTS OF MICROFINANCEMicrofinance clients are often described according to their poverty level -

vulnerable non-poor, upper poor, poor, very poor. This can obscure the fact that

microfinance clients are a diverse group of people – and require diverse products.

While women clients make up a majority of clients - and in some instances

comprise 100 percent of an MFI’s customers, 33 percent of all microfinance

clients are men. These clients operate small businesses, work on small farms, or

work for themselves or others in a variety of businesses – fishing, carpentry,

vegetable selling, small shops, transportation, and much more. Some of these

microfinance clients are truly entrepreneurs – they enjoy creating and running

their own businesses. Others become entrepreneurs by necessity when there are

few jobs available in the formal sector.

Table – 3.1: Clients of microfinance in Pakistan

Active Clients Value (Pkr Millions)

2008-Q2 1,754,118 19,648

2008-Q3 1,871,508 21,427

Increase (Net) 117,390 1779

Increase (%) 7 9Source: Micro watch 2008 for PMN

3.8 MICROFINANCE BANKINGMicrofinance banking is the provision of financial services to the poor through

simplified transactions. Microbanking is not a new topic in the sustainable/

development community or in the world in general. What is beginning to gain a

strong footing is the idea that microbanking and microfinance initiatives can break

from traditional non-profit or government subsidized programs and become for-

profit enterprises.

3.9 HISTORY OF MICROFINANCE BANKINGAs discussed above microfinance has existed in many forms in early times from

century to century. A very early form of microcredit took place in Ireland in the

1700s where at its peak, 20% of households obtained these small loans.


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The modern concept of microcredit was developed in the mid-1970s by U.S.-

educated professor of economics, Muhammad Yunus. In 1974, Professor Yunus’

work in Bangladesh (one of the world’s poorest and famine-ravaged countries), is

highlighted as the first modern day use of microcredit. Yunus discovered that the

smallest loan could make a huge difference to an individual’s life. The first loan

was for US $27 to a woman who made bamboo furniture to support her family,

which Yunus paid for from his own pocket.

In fact, 94% of all microcredit loans are made to women. The reason is that

women typically undertake projects that benefit the entire family. Microcredit

enables those in the developing world who rely on the informal economy to

improve their lives. It prevents these people from being trapped in a poverty cycle

and enables them to obtain low interest loans which can be used to improve their

lives.

Professor Yunus realized that large financial institutions were unwilling to make

these small loans because they perceived poor people as posing a high risk of

default and viewed the costs and lack of infrastructure as barriers to entry. In

1976, Yunus opened the Grameen Bank to make small loans to poor Bangladeshis

and, over a 16 year period, US $3 billion was loaned to 2.4 million borrowers.

Despite the concerns of the large international banks, repayment rates have

remained at over 95%. Such high repayment rates may be explained by

Grameen’s use of a system of ‘solidarity groups.’ Solidarity groups are informal

groups that together apply for loans and whose members act as guarantors for the

repayment of the loan. In this way, a group of people can benefit from the loan

while decreasing the risk of default to the bank. The success of Grameen Bank has

stimulated many similar ventures in both the developing world as well as

industrialized countries such as the USA.


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Chapter – 4 Chapter – 4 MICROFINANCE COMPARATIVE EXPERIENCE MICROFINANCE COMPARATIVE EXPERIENCE

CHAPTER - 4

MICROFINANCE COMPARATIVE EXPERIENCE OF SOUTH ASIAN COUNTRIES

4.1 BANGLADESHBangladesh, with a population of more than 140 million, is one of the most

densely populated countries (1061 persons per square kilometer) in the world.

Poverty is pervasive. Almost half of the total population is still living below the

poverty line - earning less than $1 a day. The various dimensions of the country’s

poverty are manifested in terms of inequality in income distribution (in favor of

urban areas), wage differentials between the formal and informal sectors, dramatic

increases in the cost of living, less than adequate calorie intake by the vast

majority of the population, unemployment and internal migration.

The government of Bangladesh faces an enormous challenge in reducing poverty.

However, the government can not act alone as it can not command all the resources,

personnel, administrative outreach or expertise necessary to maintain progress in

poverty alleviation. The MFIs have taken a key role in poverty alleviation efforts and

they have been providing credit to these poor people who lack savings and capital but

want jobs in the farm and non-farm sectors. The origins of the current microfinance

model can be traced back to action-research in the late 1970s to deal with the relief

and rehabilitation needs of post-independence Bangladesh. At that time, many NGOs

started as relief organizations but, over time, they turned into development

organizations and gradually many of them have become MFIs by focusing on savings

and microfinance programs. Microfinance was first initiated by Grameen Bank and

was developed by a team led by Professor Mohammad Yunus.

The early 1990s was a period of rapid expansion of the Grameen-style microcredit

approach. The growth was picked up largely by a ‘franchising approach’ whereby

new branches replicated the procedures and norms that prevailed in existing branches.

In the early 1990, unhindered experimentation in the fields led to a quiet resolution of

the debate and the country experienced a massive expansion of microfinance

activities during the 1990s.


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4.2 INDIAThe new generation microfinance was slow in coming to India. Low levels of

grants to microfinance institutions, an unfavourable policy environment,

substantial traditional banking infrastructure and a search for context specific

solutions has constrained rapid scale up. The first breakthrough emerged from

policy support to enable informal self help groups of 15-20 members (mainly

women) to transact with commercial banks. These groups build up and rotate

savings amongst themselves, open bank accounts and take responsibility for

lending and recovering money financed by banks. With the missionary zeal of the

National Bank for Agriculture and Rural Development (NABARD), insights

gained by NGOs, the increasing enthusiasm of bankers and politicians and

emerging successes in repayment and social impacts, this national movement now

encompasses 1.4 million such groups (over 20 million members).

At a time when many questioned the need for specialised microfinance institutions

(MFIs) in India, the Small Industries Development Bank of India recognised the

opportunity and started implementation of an ambitious national programme.

Providing loan and capacity building support to MFIs and capacity building and

rating support for sector development, this programme already supports 70 MFIs

and has disbursed US$46 million.

Assuming the entire poor population of India is potential microfinance clientele,

the market size for microfinance in India is in the range of 58 to 77 million clients.

If we assume that the low-income but economically active population including

small and marginal farmers, landless agricultural laborers, and micro-

entrepreneurs, are also potential microfinance clients, the annual credit demand

goes up to an estimated 245.7 million individuals and USD51.4 billion Indian

microfinance is dominated by two operational approaches: self-help groups

(SHGs), and microfinance institutions (MFIs), in addition to a few cooperative

forms. Today the SHG model, which links informal groups of women to the

mainstream banking system, has the largest outreach to microfinance clients in the

world. MFIs emerged in the late 1990s to harness social and commercial funds

available for on-lending to clients. Today there are over 1,000 Indian MFIs. And


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almost 3 million SHGs have linked to nearly 500 banks since the program started,

reaching over 11 million households across.

Microfinance programs have been increasingly pomoted in India for their positive

economic impact and the belief that they empower women. Within the South

Asian context, women empowerment is a process in which women challenge the

existing norms and culture, to effectively improve their well-being.

Most microfinance programs target women with the explicit goal of empowering

them. However, their underlying premises are different. Some argue that women

are amongst the poorest and the most vulnerable of the underprivileged. Others

believe that investing in women’s capabilities empowers them to make choices,

which will contribute to greater economic growth and development. Finally, some

proponents emphasize that an increase in woman’s resources results in higher

well-being of the family, especially children.

Women empowerment is essentially through two mechanisms direct and indirect

empowerment effects. The direct empowerment through microfinance takes place,

when women become members of a group and/or when they are exposed to

training or workshops leading to greater awareness creation.

It is difficult to say which factors are more important for empowering women. The

differences in pace of empowerment might be a result of various factors:

household and village characteristics, cultural and religious norms within the

society, behavioral differences between the respondents and their family

members; and the kind of training and awareness programs that women have been

exposed to.

For SHG programs, the results seem to indicate that the minimalist microfinance

approach is not sufficient. Additional services like training, awareness raising

workshops and other activities over and above microfinance programs that merely

focus on financial services are also an important determinant of the degree of its

impact on the empowerment process of women.

4.3 SRI LANKA

Microfinance, one of the widely accepted instruments for poverty alleviation

throughout the world, has been used in Sri Lanka spanning for over several


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decades. Despite the long history and the large number of institutions providing

microfinance services particularly to the poor, there is limited knowledge on the

impact of microfinance on poverty alleviation in Sri Lanka. Currently, there is a

wide range of institutions that are involved in providing microfinance services to

low income groups. These include hundreds of local and international Non-

Governmental Organizations (NGOs), commercial banks (both state-owned and

private) and development banks such as the Regional Development Banks (RDBs)

and the Sanasa Development Bank (SDB). Despite the large number of

institutions involved in providing microfinance facilities in Sri Lanka, their impact

on reducing poverty or improving household welfare is not very clear. Only a few

studies have been undertaken to assess how microfinance has impacted on poverty

and living conditions of the households in Sri Lanka.

The core problem is the poor quality of the microfinance services offered,

indicated by insufficient outreach, low repayment, low cost efficiency and

financial products which are not client driven. This seriously threatens the

sustainability of the offered financial services and their outreach to poorer

households, micro and small enterprises. The main causes of the poor

performance of MFIs lie in the inadequate qualification of the MFI staff and the

fact that the Government of Sri Lanka has not yet designed a national sector

policy for a sustainable microfinance sector. Another problem lies in the lack of a

cohesive regulatory and supervisory structure which encompasses all MFIs.

However, most NGOs engaged in microfinance are neither regulated nor

supervised although most mobilize savings deposits from the public. These

institutions are weakened by politically motivated debt relief, often ahead of

elections, and presently as a consequence of the tsunami disaster, which seriously

destroy the repayment culture among its clients. Further cause lies in the

insufficient infrastructure for training, further education and advisory services to

provide immediate and relevant practical advice.

4.4 NEPALNepal has developed a considerable history in microfinance activities. The official

policy recognition of the importance of this sector in poverty alleviation came in


19


the Sixth Plan (1980/1 - 1984/5.) Programmes to ensure that the poor, and

particularly poor women who traditionally have not had access to formal credit.

Since 1991 the momentum in this sector has increased considerably, resulting in

the emergence of various issues potentially hindering the successful long-term

provision of financial services to the poor. This has led His Majesty’s Government

(HMG), supported by USAID, to seek proposed solutions and recommendations

for the continued and expanded provision of microfinance in Nepal. In particular,

it is necessary to identify which models work best for both expansion and

sustainable provision of microfinance services to those who need it most -- rural

poor women.

Microfinance programs are currently being promoted as a key strategy for

simultaneously addressing both poverty alleviation and women's empowerment.

Women make up 52% of Nepal’s population and have a life expectancy of 53.4

years (1991 figures), making Nepal one of only three countries in the world where

females’ life expectancy is lower than that of males. UNICEF (1996) estimates

less than 18% of Nepali women are literate. Women work on average 3-4 hours

more per day than males, but their land holdings are marginal, and income levels

and formal labor force participation are 20% lower than that of males. Women are

predominately confined to agriculture, account for the majority of unpaid family

workers, and are heavily concentrated in low-paid jobs.

The aggregate data depict women’s contribution to be heavily focused: 86% of all

domestic work and 57% of subsistence agricultural activities. Women work

mostly as semi-skilled or unskilled general wage workers. Less than 5% of civil

servants, elected leaders, or judiciaries are female. In addition, women in Nepal

cannot inherit property, have little access to education, information or credit and

have less control than males in their households over economic decisions.

Providing immediate and sustained assistance to women in the field of small and

micro enterprises and microfinance is a key factor to facilitate economic

upliftment and the empowerment of women.

4.5 MALAYSIAMalaysia is classified as an upper middle income country by the World Bank.

Malaysia has a modern financial system with a diverse range of institutions, both


20


private and public, including Islamic banks. Microfinance is the provision of a

broad range of financial services such as deposits, loans, payment services, money

transfers, and insurance to poor and low-income households and their micro-

enterprises. Microfinance is not new in Malaysia. It has been operated by credit

unions, and co-operative banks. Majlis Amanah Rakyat (MARA), council of trust

to the Bumiputera and Credit Guarantee Corporation (CGC) are some of the

pioneers to introduce microfinance loans to its borrowers.

Malaysia's dominant MFI, Amanah Ikhtiar Malaysia (AIM), was established in

1987.

Up to 1998 it made some 103,000 loans and disbursed a total of RM 328 million

($86 million at the current exchange rate). Some 80 per cent or more of all funds

loaned were for economic purposes, the remainder for 'social' purposes (Sukor

Kasim 2000). AIM's activities have been directed almost entirely to the alleviation

of poverty among poor Malaysia. It was set up with a charter 'to disburse small

loans on reasonable terms exclusively to the very poor households to finance

additional income generating activities but for all practical purposes has confined

its attention to the Bumiputera, the indigenous (principally Malay)people.

Table – 4.1: Micro-Finance clients in six countries in South Asia

Country 1. Microfinance clients (Millions) 2. Comparative figures

Bangladesh 16.00 13.30

India 15.00 1.63

Nepal 0.50 0.16

Pakistan 0.58 0.50

Sri Lanka 2.50 0.37

South Asia 34.70 23.09

Source: Column 2 – data collected by the World Bank for a forthcoming report.


21

Chapter – 5 Chapter – 5 MICROFINANCE IN MICROFINANCE IN PAKISTAN PAKISTAN

CHAPTER – 5

MICROFINANCE IN PAKISTAN

Pakistan is among the largest potential microfinance markets in the world with an

estimated potential microfinance market of 10 million adults. This conservative

estimate is likely to expand dramatically with Pakistan’s high population growth

rates. The provision of small scale credit has been present in Pakistan for many

decades but modern-style microfinance began in the late 1990s. In 1999, the

Government of Pakistan made microfinance an explicit priority in its official

Poverty Alleviation Strategy. This contributed to a massive up-front investment of

at least US $400 million from 1999 to 2005 largely funded from multilateral

resources such as the World Bank and the Asian Development Bank. As a

newcomer to microfinance, Pakistan has learnt the importance of establishing an

enabling environment for microfinance from global experiences. It now has:

A supportive regulatory window for specialized Microfinance Banks (with

6 obtaining licenses).

An apex funding organization for microfinance (Pakistan Poverty

Alleviation Fund).

A well organized national association for microfinance providers (Pakistan

Microfinance Network).

Pakistan is among very few countries that have comprehensive financial

transparency reporting on a large majority of its microfinance sector.

The microfinance market in Pakistan remains a single product market with most

services being micro-credit loans from US$170 to US$300 for livestock, trade or

agriculture. More recently, the more aggressive institutions have begun offering a

wider set of credit services such as consumption loans and larger individual loans

for small businesses in urban markets. Savings services have not been emphasized

until more recently as newly licensed Microfinance Banks, which can

intermediate savings, have paved the way for the expansion of micro-savings.

Some institutions have begun providing micro-insurance and remittances as well.


22

http://www.microfinancegateway.com/content/article/detail/34693

http://www.pmn.org.pk/

http://www.pmn.org.pk/

http://www.ppaf.org.pk/

http://www.ppaf.org.pk/




5.1 MICROFINANCE PROVIDERS IN PAKISTAN

The Pakistan Microfinance Network (PMN) is a network of organizations engaged

in micro-finance and dedicated to improving the outreach and sustainability of

micro-finance services in Pakistan.

5.1.1 MFB

Microfinance Bank licensed and prudentially regulated by the State Bank of

Pakistan to exclusively service microfinance market.

5.1.1.1 Khushhali Bank Limited

Initialized in 2000, Khushhali Bank Limited was established as a part of the

Government of Islamic Republic of Pakistan's Poverty Reduction Strategy and its

Microfinance Sector Development Programme (MSDP). MSDP was developed

with the assistance of Asian Development Bank. With its headquarters in

Islamabad, Khushhali Bank Limited operates under the supervision of the State

Bank of Pakistan and various central (Commercial) banks are its shareholders. Its

mandate is to retail microfinance services and to act as a catalyst in stabilizing the

country's newly formed microfinance sector.

5.1.1.2 Tameer Microfinance Bank Limited

TAMEER is a Microfinance bank set up by a group of highly experienced bankers

committed to go where no (commercial) bank has gone before. It is a private

commercial Microfinance bank licensed by the State Bank of Pakistan under the

Microfinance Ordnance 2001.

Tameer serve low-income, salaried, self-employed and micro entrepreneurs with a

range of financial products designed to allow them to grow their businesses and

produce significant economic multiplier effects throughout the local economies.

They also provide home improvement products and term deposits.

5.1.1.3 Pak Oman Microfinance Bank Limited

Pak Oman is a nation wide microfinance bank with a paid up capital of RS 500

million. Sponsors are Govt. of Sultanate of Oman with shareholding of 67% and

Pak Oman Investment Company with 33% shareholding. The basic function of


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organization in itself contributes towards a social cause –its believe that Pak

Oman Microfinance Bank as a member of society has a moral obligation to do

more to help society deal with its problems and to contribute to its welfare. They

are continuously looking for opportunities to take steps that shall contribute to the

wellbeing and interests of society. One such step towards this cause is with there

alliance with GSK – by way of this alliance, they shall be promoting medical and

health awareness to the poor masses residing in localities surrounding there

branches, and in addition shall be providing preventive medicines at discounted

prices (in installments in cases) to there clients.

5.1.1.4 Rozgar Microfinance Bank Ltd. (RMFB)

Rozgar Micro Finance Bank Ltd (RMFB) was incorporated at Karachi as a public

company limited by shares, under the Companies Ordinance, 1984. It was

inaugurated by the Prime Minister, Mr. Shaukat Aziz on January 04, 2005 and it

commenced operations on April 8, 2005. The bank has an authorized capital of

Rs. 250,000,000/- divided into 25,000,000 ordinary shares of Rs.10/- each. It has a

paid-up capital of Rs.100,000,000/- which has been fully subscribed by the

directors and their friends.

Empowering women to achieve economic and social emancipation

Ensuring financial services at the bottom of the empowerment ladder

Recognizing every single human being as a potential and creditworthy

entrepreneur.

Providing basic training in micro-enterprise initiation; managing funds and

savings concepts; simple book-keeping and accounting; economic and

social strategies.

The Bank has so far disbursed loans of Rs. 144.033 million to 7487 borrowers

as on 29-02-2008 with an average loan size of Rs. 26,332.

5.1.1.5 Network Microfinance Bank Limited

Network Microfinance Bank Limited started its operation on 1st January 2005

as a Public Limited Company listed on Karachi Stock Exchange. It is in-fact a


24


transformation of Network Leasing Corporation Limited, having the privilege of

being regarded as the micro leasing pioneer in Pakistan since its inception in

1995.

The bank's main focus is on poverty alleviation by providing access to the poor

to micro finance facility whereby they could establish their new micro

enterprise or bring improvement in their existing business. The bank is

concentrating on two main areas i.e. providing of financial services for

mobilization of small savings and extending help to poor entrepreneurs

including women through individual and group based financing to support

income generation on sustainable basis, so as to bring improvement in their

quality of life. The bank’s strategy is well aligned with the national policy

development on poverty alleviation as well as with Pakistan Poverty Alleviation

Fund working under the aegis of the Government of Pakistan and the World

Bank.

5.1.1.6 First Microfinance Bank

The First MicroFinanceBank Ltd. of Pakistan (FMFB-P) established in 2002

as the first private sector micro-finance bank in Pakistan, is a premier non-

commercial bank licensed by the State Bank of Pakistan under the regulatory

framework of the Microfinance Institutions Ordinance 2001. FMFB has

recently been ranked as 14th amongst the top 100 Micro-Finance Institutions

in the world by CGAP. In a short span of six years, FMFB has established 89

automated branches all over Pakistan, of which more than 57% branches are

in rural areas. The Bank has reached out to thousands of poverty-stricken

households by disbursing over 340,000 loans amounting to US$ 88.25

million. The Bank reaches out to the poorest segments of society. Given that

71% of poor in Pakistan are women, FMFB has focused on providing

financial services to women and as a result, about 40% of FMFB borrowers

are women entrepreneurs. With the vast majority of the poor residing in the

rural areas of Pakistan, over 70% of the cumulative loan amount disbursed is

in rural areas. FMFB has 89 branches spread over 39 districts and 10 regions

all across Pakistan.


25


5.2 MFI Microfinance institution providing specialized microfinance services

5.2.1 Akhuwat

Akhuwat was established in 2001 with the objective of providing interest free

credit to the poor so as to enhance their standard of living. At that time Dr.

Saqib was working at the Punjab Rural Support Programme (PRSP) and found

the 20 percent interest charged on the loans, disturbing. One reason was the fact,

he felt, that it was in direct conflict with the teachings of Islam, and the other

was that in the formal banking sector the interest was much lower, which was

available to ‘creditworthy’ affluent individuals. Therefore, he wanted to start a

microfinance programme where the loans were in the form of Qarz-e-Hasna.

Akhuwat was formed and the first loan was given out to a woman.

Akhuwat derives its name from ‘mua-khaat’ or brotherhood. At present,

Akhuwat has 17 branches in the Punjab and 7,150 active clients, and it has

disbursed over Rs 150 million over five years.

5.2.2 Asasah

Asasah is one of the fastest growing microfinance institutions in Pakistan working

to provide financial services to households of micro-entrepreneurs. The word

“Asasah” literally translates to assets from the Urdu language and the vision for

this MFI is “to enhance micro-productivity and eradicate poverty.” Asasah

employs group lending methodology and believes that female empowerment is a

powerful catalyst for positive social change. Hence, for this reason 100% of

Asasah’s clients are women. Asasah’s methodology provides women with

flexibility to invest in their business or their family business.. Asasah had 28,424

clients, 28 branches and 316 staff members. Asasah presently operates in the

province of Punjab of Pakistan.

5.2.3 Kashf Foundation

Inspired by the success of the Grameen Bank, Kashf Foundation (meaning miracle

or revelation i.e. a process of self-discovery) began in 1996 as an action research

program focusing, for the first two years, on determining and understanding key

factors having an impact on the demand for microfinance services by poor

women.


26


The Foundation addresses social needs of women through a creative and

interactive economic empowerment strategy including non-financial and financial

services, which are delivered in a financially and operationally sustainable

manner. Kashf is now considered one of the leading microfinance providers in

Pakistan, increasing rapidly its outreach and sustainability while maintaining a

very low risk on its loan portfolio and constantly improving its services through

innovation. Kashf operates in the poorest urban slums and poverty-ridden areas in

districts of the Punjab province and in Karachi in Pakistan.

Kashf Foundation was the first specialized Microfinance institution in Pakistan, it

was the first Microfinance institution targeting only women from low income

communities and it was also the first Microfinance institution to charge a

sustainable price for its services.

5.2.4 Orangi Pilot Project (OPP)The Orangi Pilot Project refers to a socially innovative project carried out in

1980s in the squatter areas of Orangi, Karachi, Pakistan. It was initiated by Akhtar

Hameed Khan.Innovative methods were used to provide adequate low cost

sanitation, health, housing and microfinance facilities.

The project also comprised a number of programs, including a people's financed

and managed Low-Cost Sanitation Program; a Housing Program; a Basic Health

and Family Planning Program; a Program of Supervised Credit for Small Family

Enterprise Units; an education Program; and a Rural development Program in the

nearby villages.

On the success of its five basic programs of low cost sanitation, housing, health,

education and credit for micro enterprise, in 1988 OPP was upgraded into three

autonomous institutions.

OPP-Research and Training Institute (RTI) manages the low cost

sanitation, housing, education, and research and training programs.

OPP-Orangi Charitable Trust (OCT) manages the micro

enterprise credit program.

OPP-Karachi Health and Social Development Association

(KHASDA) manages the health program.


27

http://www.oppinstitutions.org/OCTRUST.htm

http://en.wikipedia.org/wiki/Rural_development

http://en.wikipedia.org/wiki/Education

http://en.wikipedia.org/wiki/Microcredit

http://en.wikipedia.org/wiki/Family_Planning

http://en.wikipedia.org/wiki/List_of_basic_health_topics

http://en.wikipedia.org/wiki/Housing

http://en.wikipedia.org/wiki/Sanitation

http://en.wikipedia.org/wiki/Microfinance

http://en.wikipedia.org/wiki/Housing

http://en.wikipedia.org/wiki/Health

http://en.wikipedia.org/wiki/Sanitation

http://en.wikipedia.org/wiki/Akhtar_Hameed_Khan

http://en.wikipedia.org/wiki/Akhtar_Hameed_Khan

http://en.wikipedia.org/wiki/Pakistan

http://en.wikipedia.org/wiki/Karachi

http://en.wikipedia.org/wiki/Orangi

http://en.wikipedia.org/wiki/Social_Innovation


Each institution has its separate board of directors and mobilizes its own funds.

Development is self financed by the people. OPP institutions provide social and

technical guidance and credit for micro enterprise.

5.2.5 Sindh Agricultural And Forestry Workers Coordinating Organization (SAFWCO)

It started its developmental journey from a small initiative, launched in 1986 by a

group of five social activists led by Mr. Suleman G. Abro. Concerned about

depleting sources of livelihood and employment, increasing poverty and social

deprivation in rural Sindh. SAFWCO initiated a process of social mobilization in

District Sanghar initially. From beginning, social mobilization has been a key

aspect of SAFWCO's development strategy. SAFWCO started its activities with

an objective to facilitate people's participation in development on self help basis;

and facilitating to build institutional infrastructure in their villages to achieve the

goal of sustainable development. The main aim of the program is to mainstream

rural poor into socio-economic development and reduce their vulnerability.

Since 2000, SAFWCO has created a three-pronged approach to poverty

alleviation, given below:

1. Social Development and Services

2. Economic Development Services

3. Human and Institutional Development Services

The management of SAFWCO focuses on providing poor people of rural Sindh a

platform for socio-economic development and supporting them to reduce their

vulnerability.

5.3 RSPRural support programme running microfinance operation as part of multi-

dimensional rural development programme.


28


5.3.1 National Rural Support Programme

Established in 1991, NRSP is the largest Rural Support Programme in the country

in terms of outreach, staff and development activities. It is a not for profit

organization registered under Section 42 of Companies Ordinance 1984.

NRSP's mandate is to alleviate poverty by harnessing people's potential and

undertake development activities in Pakistan. It has a presence in 32 Districts in

all the four Provinces including Azad Jammu and Kashmir through Regional

Offices and Field Offices. NRSP is currently working with more than half a

million poor households organized into a network of more than 29,000

Community Organizations. With sustained incremental growth, it is emerging as

Pakistan's leading engine for poverty reduction and rural development.

5.3.2 Sarhad Rural Support Programme Microfinance Program

Approach to rural development in the northern mountain regions of Pakistan in the

eighties, Sarhad Rural Support Programme (SRSP) is registered under company's

ordinance 1984; SRSP is the largest non-profit/non-government organization of

NWFP.

SRSP from its experience and understanding of the target group understands that

poverty reduction can may be in the form of imparting skill enhancement training

with low cost training programs, providing financial support in the form of loans,

improving physical infrastructure by not only constructing farm to market roads

but also fulfilling the dire need of rural water supply and proper

sanitation. Moreover, providing assistance in developing social infrastructure is

also necessary to address the issue of poverty especially in rural areas. SRSP has

its microfinance operations spread currently in 60 union councils of the 8 districts

of NWFP

Over Rs. 500 million disbursed since inception of MF programme to almost

50,000 men and women members. The average loan size is approx. Rs. 10,000.

Rs. 212 million (58% women) has been disbursed under the new programme

started since October 2004. 11 Village banks of which 8 are women have been

established in 11 union councils covering almost 120 community organizations.


29


5.3.3 Thardeep Rural Development ProgrammeThardeep Rural Development Programme (TRDP) is a non-profit

organization, registered under the societies Act, working in the rural areas of

Tharparkar, Mirpurkhas, Dadu and Khairpur districts of Sindh, Pakistan. The

programme is aimed at facilitating the rural communities in a way that they

can be empowered to secure their rights with command over resources and

capabilities to manage the process of sustainable development. Thardeep

also extends services in the areas of primary health care, education and

water. One of its programme is Micro Credit & Enterprise Development

(MED) Unfortunately, in developing countries like Pakistan, the access and

availability of capital is very limited. In order to alleviate conditions of

poverty it becomes crucial to inject credit into the rural economy to enable

the poor to meet their essential credit needs. To combat the growing menace

of rural unemployment, the MED Section of TRDP reaches the rural poor

and small entrepreneurs to provide an easy access of credit and enhance

opportunities for people to increase their capital for establishing or

expanding income generating activities.

5.3.4 Punjab Rural Support ProgramPunjab Rural Support Program was the latest of the RSPs until SRSO was

established in 2003. PRSP's activities are confined to 8 regions of the Punjab,

namely: Lahore, Sahiwal, Sargodha, Faisalabad, Gujranwala, Multan,

Muzaffargarh, and Sialkot, covering a total of 20 districts. The PRSP has

developed strong links with the Punjab Government and is currently

implementing a number of projects including community primary schools,

small village infrastructure, natural resource management and innovative

initiatives such as village electrification and provision of primary healthcare.

PRSP has developed a strong partnership with the Pakistan Poverty

Alleviation Fund (PPAF) to expand its outreach.

5.4 NGO Non-government organization running microfinance operations as part of

multidimensional developed programme


30


5.4.1 Center for Women Co-operative Development While the World is focusing on uplifting of 100 million poor above poverty line

through Micro finance. The biggest challenge faced by Micro finance

organizations in Pakistan is of sustainability, which cannot be achieved without

expanding out reach and more comprehensive financial and business plans.

Another important area which need immediate attention is the need for support

services for business development to micro finance borrower, without which the

pace of poverty alleviation will remain slow. LAHORE.

5.4.2 Taraqee FoundationTaraqee Foundation is a National level NGO working for poverty alleviation since

the last 14 years. Currently it is serving in 13 districts of Balochistan and NWFP

through its 35 offices with the support of 625 staff members. It started off its

journey with meager resources as a Community level Organization when

established in 1994. TF is now an eminent NGO of Balochistan with enough

resources to provide need-based services to marginalized communities in

Balochistan and NWFP. It is estimated that since its inception, TF has been able to

benefit more than one million people through its different programs.

5.4.3 Sungi Development Foundation (Group Lending)

The program was started on a theme of saving first-credit later; which reflects the

importance of community saving for their economic uplift. The major

responsibilities:

To support in mobilization of community savings.

Credit disbursement to the of village committee members for economic or

critical social needs.

Training to the communities for financial management (Saving, Credit and

Entrepreneur ship"

Vocational Skill Enhancement Support.

5.4.4 Khwendo Kor

Khwendo Kor (KK) is a non profit, non government and non partisan organization

striving for development of the women and children, strong families and


31


communities progressive society. KK is a Pushto word meaning Sister's Home.

The organization came into being in February 1993 and is registered under

Societies Registration Act. 1860. One third of Pakistan’s population lives below

the poverty line. Women are among the poorest owing to many reasons, including,

lack of mobility and cultural constraints. One of its programme is Women Micro

Enterprise Development. The WMED component of KK supports village

women in enhancing their skills and entrepreneurship potential. They are provided

with credit and their linkages with markets are established. This leads to

confidence building, increase in their mobility and self-reliance. This activity has

resulted in raising the income level of the families and especially has improved

the women access to the economic resources. It is important to note that a much

larger number is involved if one considers the benefit received by the families of

these women entrepreneurs.

5.4.5 Community Support Concern

Is a non-governmental, non-profit organization; born in 1989 has been working

for social uplift of the society, mainly the rural & semi urban communities. It

started working with Education and Health and has paved way for integrated

approaches. CSC has adopted participatory approaches right from planning to

implementation, involving communities at every level. This led the organization

to have very deep roots in the communities. Women and adolescents have always

been receiving priority attention in CSC’s programs. Ever since its inception, CSC

has empowered thousands of women economically and socially. Huge number of

adolescents have been empowered and made to adopt a healthy lifestyle. Men

were never ever neglected in CSC’s programs, leading towards an attitudinal

change. Its objective are

To awake, educate motivate and organize communities for their improved

quality of life or living standards.

To enable and encourage communities to become self reliant.

To train the women as agents of change for socioeconomic development.

At present CSC is working in District Lahore, Kasur, Multan, D G Khan &

Sheikhupura & intends to focus on Southern Punjab in the next five years.


32


5.4.6 DAMEN (Development Action for Mobilization & Emancipation DAMEN (Development Action for Mobilization & Emancipation) is a non-profit,

non-governmental organization established in May 1992 working for alternative

development at grass-root level in Pakistan.DAMEN visualizes “Development” as

a process of capacity building of the people in order to empower them to solve

their socio-economic problems through collective action and their own

participation.

DAMEN concentrates on the social and economic uplift of communities,

especially in rural areas/urban slums, by encouraging people to ascertain their own

needs. This leads to build capacity and local resources to an extent that enables

them to eradicate the real and most tangible problems. The emphasis of the

Organization therefore is on such programs that:

Concentrate on activities for integrated, self-reliant and long-term

development of the communities through various programs of education

and health.

Enhance the cause of women development by initiating programs for

income generation, provision of credit and awareness of their legal and

basic rights.

Train and support human resources for devising, implementing and

overseeing development projects and programs.

DAMEN is presently working in 3 districts of Punjab namely, Lahore,

Shiekhupura and Qasur.

5.4.7 Aga Khan Agency for Microfinance

Since its establishment in 2005, the Aga Khan Agency for Microfinance (AKAM)

has taken over 25 years of microfinance activities, programmes and banks that

were administered by sister agencies within the Aga Khan Development Network.

The underlying objectives of the Agency are to reduce poverty, diminish the

vulnerability of poor populations and alleviate economic and social exclusion.

AKAM is a not-for-profit, non-denominational, international development agency

created under Swiss law. Its headquarters are in Geneva, Switzerland. It is


33


governed by an independent Board of Directors. The Chairman of the Board is

His Highness the Aga Khan.

5.4.8 SWWS

Swabi Women Welfare Society was established in November 1991. At the time of

inception it was no more than a group of progressive and dedicated volunteers

who could not bear the grim realities about the women health, illiteracy and poor

social and economic status.

To increase women access to financial resources micro-credit Programme was

started. SWWS facilitate group formation and builds capacities of the

beneficiaries as well as link them with mainstream financial institutions. Women

are mobilized to open bank accounts. By June 2007, total 1223 women and 220

men benefited from this programme. And they were provided Rs.19991000/- as

micro credit.

5.4.9 Bangladesh Rural Advancy Commission

Bangladesh Rural Advancy Commission one of the largest MFIs in the world and

is a leader in linking to the microfinance to capital markets In April 2007, it

signed a memorandum of understanding with the Government of Pakistan to work

in the fields of microfinance, education, and health. BRAC is now in the start-up

phase of our microfinance programme in two provinces - Punjab and North-West

Frontier. It is gaining substantial local knowledge and experience of implementing

microfinance in Pakistan as well as increasing the capacities of national staff to be

able to scale up the programme in the near future.

5.5 CFICommercial financial institution providing microfinance services as separate

function.

5.5.1 Orix Leasing Pakistan Limited

Micro Finance ORIX provides reliable short to medium term financial products

for the establishment and growth of micro businesses and enterprises. The

microfinance programme is targeted to strengthen the economic base of urban and

rural poor by increasing income earning members of a community. Micro


34


Leasing Financing is provided to micro entrepreneurs on a profit-making basis all

over the country. Under the micro leasing scheme for equipment and machinery,

ORIX finance productive assets like generators, photocopiers, lathes etc.

5.5.2 Bank of Khyber

Bank of Khyber started a new unit called micro finance unit was instituted in

November 1999, which presently functions as Micro Finance Department (MFD)

under the umbrella of Credit Division. BOK aims to be the largest Micro Finance

provider in NWFP on sustainable basis. Our main Objective is providing access to

financial services to the low income and disadvantaged segment of the society to

raise their standard of living with specific emphasis upon women. The pursuit of

this objective will significantly contribute to the improvement of employment

opportunities, income generating activities and subsequently poverty alleviation.

Pursuing its objective the BOK provides micro enterprise and group loans for

existing and new enterprises engaged in value addition process, requiring

technology improvement or working capital

5.5.3 First Women Bank Limited

FWBL launched a small loan facility for women from low-income groups with an

initial allocation. Of Rs. 30(m) by using a group guarantee NGO warranty or

personal surety from- two Government officials Approximately 11,000 women

have benefited from this scheme in the last 13 years.

Chart – 5.1: TOTAL MFP IN PAKISTAN


35

Chapter – 6 Chapter – 6 MICROFINANCE AND WOMEN EMPOWERMENT MICROFINANCE AND WOMEN EMPOWERMENT

CHAPTER – 6

MICROFINANCE AND WOMEN EMPOWERMENTMicrofinance and Women Empowerment are strongly related. Microfinance

programs specially designed for women can alleviate poverty among women, can

help them in attaining financial-self sufficiency and this way can lead to women

empowerment by reducing gender inequality.

Microfinance for Women is an important issue in today’s' world as there is no

doubt that proper microfinance facilities can lead to women empowerment. But,

even today women's accessibility to microfinance services are quite less as

compared to that of men.

6.1 MICROFINANCE PROGRAMS FOR WOMENIn the 1970s, women movements were taking place in different parts of the world.

These movements made it clear that non availability of loans and credits were

posing serious problems for women in earning income through self employment.

After this realization, significant number of measures were taken to raise the

availability of credit for the women.

Many Women's Organizations across the world included savings activities and

microfinance activities in their work programs. In the 1980s, many new

microfinance institutions emerged through out the world. The most significant of

them was Grameen Bank of Bangladesh. According to a study, almost 97%

borrowers of this microfinance institution are women.

The 1990s saw further emergence of many micro-finance programs which were

specially designed for women. The microfinance facilities were made available

for women on a greater extent as it was found that women have a record of high

repayment rates.

6.2 PERSPECTIVES OF MICROFINANCE PROGRAMS TARGETING WOMEN

The increasing number of Microfinance Institutions and Microfinance Programs

were taking place all over the world in order to achieve three objectives which

were Poverty Alleviation, Financial Self-Sustainability and Women


36


Empowerment. But, in each of these objectives special focus was on providing

microfinance facilities to women.

When, the microfinance programs targeted poverty alleviation, it was found that

level of poverty was even higher in women and women were more suffering from

poverty as they had a strong responsibility towards the well being of their

respective families.

When, the microfinance programs concentrated on attaining financial self-

sustainability, then also the major focus was on women because it was already

proved that women maintain higher loan repayment rates and the economic

activities of women contribute significantly to the economic growth of the

country.

In case of Women Empowerment objective of microfinance programs, it was quite

obvious that the main focus would be on women. Different, microfinance

programs were specially designed for women to reduce gender inequality and to

establish human rights.

The increased focus on women for micro-finance has been supported by certain

reasons and assumptions as follows:

Women's human rights: Official commitments to gender equity and

gender mainstreaming on the part of most governments, donor agencies,

NGOs and the Microcredit Summit Campaign itself.

Financial sustainability: Increasing evidence in micro-finance of much

higher repayment and savings discipline among women than men.

Poverty reduction: Increasing evidence that not only are women

overrepresented amongst the poorest people, but they are also more likely

than men to spend their incomes on the welfare of children and

dependents. Therefore poverty reduction programmes which target

women are likely to be more effective.

6.3 WOMEN EMPOWERMENTWomen's empowerment has five components: women's sense of self-worth; their

right to have and to determine choices; their right to have access to opportunities

and resources; their right to have the power to control their own lives, both within


37


and outside the home; and their ability to influence the direction of social change

to create a more just social and economic order, nationally and internationally.

Women empowerment takes place when women challenge the existing norms and

culture, to effectively improve their well being.

6.4 ROLE OF MICRO-FINANCE IN WOMEN EMPOWERMENT (THE CASE OF PAKISTAN)

Women are vital contributors to the economic survival of poor households and

family reliance on women’s earnings increases with the extent of poverty. A

survey showed that the earnings of women in poor households of Karachi which is

the largest city of Pakistan with a population of about 14 million comprised half of

the total family income. Despite being active participants in the economically

productive process, their efforts remain “invisible” and are not represented in the

economic decision making.

In the rural areas, the weight of poverty falls most heavily on women who have a

very low level of education and who are subject to a multitude of cultural and

other social constraints. A comparison of Male and Female Human Poverty index

(HPI) indicates that women in Pakistan have always been poorer, less healthy and

less educated than men. It is estimated that 42% of the 22.8 million economically

productive persons in agriculture are females, where more than 38% of these are

unpaid family workers as compared to 6% who are self-employed.

Empowerment and developing an environment for women to work and contribute

in improving the economic condition of their families has become a priority in

Pakistan. And with the availability of micro-financing for those that are otherwise

ineligible to use the regular banking channels for funding the small business

ventures, the situation is gradually improving.

Former Governor State Bank of Pakistan Dr Shamshad Akhtar in her keynote

address at a seminar on “Beyond Charity: Commercial Opportunities in Micro and

Small Lending” recently organized by USAID & Shore Bank International at

Islamabad, said that at present six Micro Finance Banks with a combined network

of 92 branches and 145 service centers were operating throughout the country.

She stressed the need for promotion and development of microfinance sector to

alleviative poverty in the country.


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6.5 WOMEN EMPOWERMENT AS A RESULT OF MICROFINANCE

Here are few points which show us that the microfinance is an effective tool for

women empowerment.

In a survey, 86% of clients of different microfinance institution of Pakistan

clients claim that they have more self-confidence as they feel they have

more control over their lives.

Impact on Women’s Involvement and Status in the Community Several

microfinance and micro enterprise support programs have observed

improvements in women’s status in their communities. Contributing

financial resources to the family or community confers greater legitimacy

and value to women’s views and gives them more entitlements than they

would otherwise have.

Women said they get more respect and participation in household activities

from their spouses and relatives than in past. And they felt of some use to

their family in hard times.

Microfinance has not only empowered individual woman but with her, her

family too. Due to women working, and increased income from their

businesses due to micro-finance, they can now afford better education,

health-care, and improved nutritional level for her children in particular and

their family as a whole.

Male dominance in negative manner has decreased and the domestic fights

due to financial problems have also decreased

Empowerment as a result of participating in a micro-finance program has

made women politically more aware. By giving vote according to what

they feel, not just following the foot steps of their husbands or males.

After joining the microfinance program women felt a sense of

responsibility towards society.


39


Women became aware of the outside world and saw that they are not the

only victims of poverty, which gave them encouragement to fight against

their problems.

There are instances where women who used to work outside their home on

daily wages; now work at home after borrowing micro-loans, as they can

now afford the raw materials or other equipments needed to work on their

own. This enables them to work as well as to take good care of their home

and children.


40

Chapter – 7 Chapter – 7 ANALYSIS ANALYSIS

CHAPTER – 7

ANALYSIS

7.1 OUTREACH OF MICROFINANCE IN N.W.F.P DISTRICTS

N.W.F.P is relatively a backward province of Pakistan, here gender discrimination

is on its peek, women are not given their rights, so when half of the population of

this province is not working as they should have because of norms and culture of

society how can one expect that this province will be economically stable. In

N.W.F.P total number of 8 microfinance providers provide services of

microfinance. In which just one NGO that is KK (Khwendo Kor) is wholly and

solely working on women empowerment in Peshawar. KB is working hard to

introduce the concept of women empowerment by providing its services,

encouraging people especially women to play their role. Then rural support

programs like NRSP and SRSP are also working to provide microfinance to the

people of this province and enlighten them with the benefits of women working

and sharing the responsibilities. Here is the table which shows how much

microfinance has penetrated in N.W.F.P, and how many MFP are working, and

what the number of active borrowers in different districts is.

TABLE – 7.1 OUTREACH OF MICROFINANCE IN N.W.F.P DISTRICTS

District MFP Branches Active borrowers

Gross loan portfolio

Abbottabad KBSRSP

3 6180 23,072,747

BATGRAM KB 2 860 2,151,787

CHARSADDA BRACKB

NRSP

20 13,071 129,624,789

CHITRAL BOKFMFBL

6 8827 181,667,305

D.I. KHAN BOKKB

2 5776 70,090,953


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HARIPUR SRSPKB

4 4568 53658772

KARAK KB 1 2167 15,496,442

KOHAT BOKKB

SRSP

3 5565 34767888

KOHISTAN KB 1 368 664800

MALAKAND KBNRSP

20 11,476 157,294,916

MANSHERA KBPOMFB

3 4322 20541414

MARDAN BOKKB

NRSP

45 33301 387,190502

MINGORA BOKKB

2 1929 20777185

NOWSHERA BRACKB

NRSPSRSP

18 18,029 132,503,405

PESHAWAR BOKBRAC

KBOLPSRSPNRSP

KK

13 18136 162,026,641

SHANGLA KB 1 1189 4,894,701

SWABI KBNRSP

SWWS

13 11434 113,288,572

SWAT NRSP 9 3563 34,802,697

Source: Micro watch 2008 for PMN


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7.2 MFP’s WITH LARGEST GEOGRAPHIC SPREAD IN N.W.F.P

Khushhali bank is the MFB with largest spread in N.W.F.P working in 16

districts; it has not only largest geographical spread in N.W.F.P but all over

Pakistan with total branches of 113 in 89 districts. On 2nd number is NRSP with an

outreach of 6 districts which are Charsadda, Malakand, Mardan, Nowshera,

Peshawar, Swabi and Swat. NRSP is also country wise largest with an outreach of

55 districts in Pakistan. SRSP is another rural support program working in 5

districts of N.W.F.P, Abbottabad, haripur, kohat, Nowshera and Peshawar.

Table – 7.2: MFP’s With Largest Geographic Spread IN N.W.F.P

S. No. MFP District

1 KB 16

2 NRSP 6

3 SRSP 5Source: Micro watch 2008 for PMN

7.3 LARGEST MICROFINANCE PROVIDERS OF N.W.F.PThe largest microfinance providers of N.W.F.P are NRSP and KB according to

number of active borrowers; they are not just the largest according MFP of

N.W.F.P but also in Pakistan.

Table – 7.3: Largest Microfinance Providers of N.W.F.P

S. No MFP Active Borrowers

1 NRSP 604,776

2 KB 377,486Source: Micro watch 2008 for PMN

7.4 ACTIVE BORROWERS OF MICRFINANCE BY GENDER (N.W.F.P)

N.W.F.P is relatively a backward province of Pakistan in terms of economic and

social condition; it has less literacy rate as compared to Punjab and Sindh. Here

concept of empowerment is not known, women working is not socially

acceptable. It is not easy to intervene in a sensitive issue like women

empowerment in such a conservative area where women interaction even with


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outside women is looked with suspicion. If we look at the borrowers, female

borrower’s percentage is less as compared to male, and it even fell more in the last

year. This is probably due to the unstable conditions of this province which is

getting worse with time. It was 39% in year 2007 and it fell to 36% in year 2008

(statistic till June 2008). Although women repayment rate is higher than male but

still their percentage is less as compared to men.

Graph – 7.1: Active Borrowers by Gender

7.5 TOP 5 MFPs OF N.W.F.PFirst Microfinance Bank Limited, National Rural Support Program, Khushhali

Bank, Bngladesh rural Advancy commission, and Bank of Khyber are top five

MFP in term of increase in active borrowers in year 2008.

Figure – 7.2: TOP 5 MFPs of NWFP: Increase in active borrowers (Net)


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TABLE – 7.4:PERCENTAGE OF WOMEN CLIENTS IN DIFFERENT

MFP (N.W.F.P)

S. No. MFP Female Percentage1 KK 100%

5 SWWS 84%

2 SRSP 58%

3 NRSP 46%4 KB 34%

Source: Micro watch 2008 for PMN

7.6 SUCCESS STORIES OF MICROFINANCE WOMEN EMPOWERMENT NWFP

Virtually every MFI has a stack of case studies which focus on success stories.

Most show how women’s lives have been transformed with the provision of a loan

they have invested in their own businesses. There is the dramatic impact on

increase in income and well-being.

The position of women in the society and economy of NWFP is particularly

constrained in relation to enterprise development. Cultural norms limit their

mobility outside of the homestead to engage in economic activities such as

production and trade. It's not just the fact that these areas are so much more

conservative and women are not seen anywhere and are bound by tradition not to

venture out of their homes, it's just that it is so much harder. There are additional

problems which include access to materials, access to market, lack of roads and

communications, isolation from not just the rest of the country but even

neighboring villages and towns in the winter months. Life in the north is very

hard, the winters are long and severe, in most areas there is one seasonal crop, no

industry, little or no tourism and people live not only in isolation from the outside

world but in a state of abject poverty.

The diversity of users' socio-economic circumstances even within what might

appear to outsiders to be a homogeneous environment will affect demand for

financial services. Even poor women will differ significantly in their socio-

economic status, lifecycle effects being a particular feature: the needs of young

unmarried women will differ from those of young married women with growing


45


families; and from the needs of older women with grown-up sons or those who are

widows.

CASE – 1: National Rural Support Programme

Ms. Samina Shaheen took a loan of Rs.30,000/- from NRSP in April 2007. Taking

a loan was a first time experience for her and this brought her to her first ever

contact with NRSP. Samina has put the loan amount in to her existing business of

garment making. She has a small workshop next door to her place of residence.

She runs this factory with the help of 6 employees. Samina buys all material

locally. The garments are then stitched and embroidered and supplied to the local

market as well as to some outlets up country. At times, she supplies to some shops

abroad. She has been in this business for about 10 years.

MUSSARIT NAZ runs two businesses from her home; a beauty parlour in which

she is currently the sole employee and a shop selling clothes, bags and little knick

knacks. She took a RS 30,000 loan from NRSP to buy cosmetics and electrical

goods for her salon and to purchase cloth for her shop. Mussarit is hoping to

improve business by running a publicity drive for her salon in her neighbourhood.

Case – 2: Swabi Women Welfare Society

The woman, who is 22 years old, and lives in Swabi with her husband and three

small children, described their main sources of cash income as the clerical salary

her husband earns (Rs. 2000 per month) and her own occasional embroidery

(Rs. 200-400 per month). Her husband went to market to purchase the two goats

she bought with her loan of Rs. 4500. She carries out most of the tasks associated

with the goats' upkeep and her husband provides loan repayment installments

from his salary. Sometimes there are arguments with her husband when she needs

cash. The goats themselves do not provide an income stream; in fact, one of them

died. However, the remaining one is a source of milk for the children, and she

hopes to earn some cash when she sells the animal. Although she very much

values the savings component of the women's organization’s work, she has had to

oppose her brothers who advised her to deposit money in the bank to gain more

interest.

Another woman borrower, much better-off and living with her husband and three

salaried sons. Her monthly income is over Rs. 4000. She received Rs. 5000 for


46


rope-making (for string cots) and traveled to Faisalabad herself to purchase the

raw material. The income she makes, which was not revealed, is controlled by her

alone. She attends monthly meetings regularly and plans to apply for a loan for a

bigger business.

A third woman, 35 years old and an office-holder in the Swabi took a two-year

loan of Rs5000 to start a shop. She lives with her five children. Her husband is

employed as a daily laborer in Islamabad. He brings back Rs1300-1500 per month

and she earns Rs320 per month for stitching clothes. Once this loan is repaid she

plans to take another loan for livestock rearing. She is more confident that she will

be allowed to manage the work involved herself.

Case – 3: First Women Bank Limited

Sabiran Bibi has about seven acres of cultivable land on which they have

cultivated rice these days. Their whole family works in the field at different

phases of crop cultivation. Women's most important role is in the beginning of the

cultivation and at the harvesting time. Sabiran Bibi availed a loan of Rs 5000 to

purchase seeds and fertilizers for her crop. Her crop will be harvested in

November. Sabiran, like many other women in rural areas is thrilled by the idea of

a bank that is exclusively devoted to provide services to poor women.

Samina Shafiq is a very enthusiastic young woman who is running this school

with her husband in her own house. She is also teaching in ILO's NFE for carpet

weaving children but in the morning she is running this school. FWBL provided

her with a loan of Rs 8000 as she decided to renovate the school and purchase

stationery items. She has about 200 children studying in her school.

Azra was living below the poverty line and facing severe-financial problems. Her

husband was a mechanic and earned a meagre wage of Rs. 3,000 a' month. To

support her husband she decided to start a business of producing bags and related

products. In 2003, she took a Micro-Finance Loan of Rs. 10,000 from FWBL.

After acquiring the loan, she added a variety of bags and other accessories to her

inventory and her business started flourishing. Today she is not only a successful

entrepreneur but along with she is now able to provide her children quality

education. She now owns two stalls at weekly bazaar.


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Case – 4: Khushhali Bank

Mrs. Sameena from Nowshera started her own business a couple of years back.

Before that she went through financial hardships, as her husband, an ordinary

plumber, earned only 3500-4000 PKR a month. It was very difficult for her to

educate her daughters and pay for the household expenses including rent, with the

monthly income of her husband. Therefore resolute in her mission to keep her

daughters in school, Sameena decided to start her own business which she could

manage from home in a small budget. She felt that the most viable option for her

was to start a Beauty Parlour. After completion of a six-month course from a

nearby Training Academy, she started her own parlour by the name of Muskan

Beauty Parlour in her house. Her initial customers included those that she had

already worked with during her training. In order to attract more customers, she

started going to people’s houses to provide her parlour services and this coupled

with positive word-of-mouth from her customers increased her permanent

customer base to 15 and her monthly income to 3,000 PKR. With the grace of

God and her own hard work, Sameena was able to increase her clientele to 40.

With the increase in the number of customers, Sameena had to expand and

upgrade her parlour for this reason Sameena approached Khushhali Bank Limited

for a loan. The bank provided her with a loan of 10,000 PKR. With the help of the

loan, Sameena introduced new services and techniques and her income rose from

3,000 to 7,000 PKR. With the increase in income Sameena is able to contribute

not only to the household expenses, but also to provide quality education to her

daughters. The key to Sameena’s success has been her hard work, dedication, and

her ability to market herself to potential customers. It helped her in growing her

business and achieving her dreams of supporting her family and becoming an

important member of her locality. All of Sameena’s goals are directly linked to

her economic condition, social status and her children’s education, and as such,

her future plans include expanding her business to include bridal photo shoots and

a training centre. She wants to make her parlour a high standard one. This will

mean employing more people, thereby giving a chance to other girls of the locality

to earn a livelihood and support their families.


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Case – 5: Kashf Foundation.

Baji Parveen, who believed self respect was far more important than accepting

hand outs to meet adverse circumstances. Baji Parveen’s husband, when faced

with the growing indignities of poverty and his inability to meet his family’s

needs, decided to take his own life. In the aftermath of this event, Baji Parveen

was not only left with the social stigma of her husband’s suicide but also with the

responsibility of providing for her young children.

As a consequence, many of her neighbor’s collected money to help her deal with

her crisis, however, instead of spending this money on daily requirements, she

decided to start her own business with the amount collected. This decision

catapulted her into many unknown realms; she left the safe environs of her

community and took a 350 kilometer journey to the north west of the country to

the city of Peshawar. All around her was a terrain where women were barely

visible, where their faces are forever shrouded by layers of tradition – it was in

such an environment that Baji Parveen struck her first business deal, negotiating

with hardy Pathan traders to purchase fabric. She returned with this stock and

managed to sell if for a small profit.

Armed with confidence after this initial transaction, she learnt about Kashf

Foundation’s loan programme and quickly enrolled herself as a member of

Kashf’s credit group. Today Baji Parveen has not only built her own house but

most importantly has been able to educate her children – children who had been

orphaned so early on in their lives, instead of growing up on people’s hand outs

now live with dignity on their mother’s growing income.


49


Microfinance success for a number of reasons. The first is that it is a true

innovation in the development world. It was thought that very poor people

couldn’t afford to borrow money, they wouldn’t be able to do anything with it,

they didn’t have the educational levels or the skill levels to be able to start

businesses. Microfinance has proven that very wrong. In fact, there’s a whole

class of entrepreneurs among very poor people, and there are great examples of

people starting all sorts of businesses. They have started a lot of home-based

businesses, including buying a cow and serving the whole community with dairy

products; buying chickens and providing the community with eggs; buying start-

up materials for handicrafts. And there are cell-phone ladies roaming all over

Africa who will buy a cell phone and go village to village lending out minutes on

the cell phone and making a profit on that.

There are many reasons why women have become the primary target of

microfinance services. At a macro level, it is because 70 percent of the world’s

poor are women. Women have a higher unemployment rate than men in virtually

every country and make up the majority of the informal sector of most economies.

They constitute the bulk of those who need microfinance services. Micro-finance

is still in the initial stages of development in Pakistan, so a lot has to be done to

improve its reach to the target groups and to improve the benefits that it can bring

with its proper implementation. However, the people to whom this facility has

reached; are getting the benefits. Through research, it does give an insight on the

trends of borrowing, economic activities, level of borrowers’ satisfaction and

benefits obtained from the micro-finance facility among women. The major

findings are illustrated in the following pages:

7.7 WOMEN WITH MAJOR FAMILY-RESPONSIBILITIES

Most of female borrowers are middle aged and married. This shows that the

micro-finance services are going in the right direction to help the female help their

families, because these age groups can be marked as having higher responsibilities

to support their families. It is difficult for a single person earning to make the

both ends meet, so if the other family member also gets involved in some

economic activity, it can make the life easier. In middle-aged groups of females,


50


generally, the children are of school-going age, and mostly only the father is the

earning member. In such a case, if the women have access to such smaller loans

for starting or expanding business activities, it can increase the income of the

family.

Data from case studies shows that a large number of women generally claim that

education of children is a high priority for them and that they borrow and save for

children’s education. Women are usually the primary or sole family caretakers in

many developing countries. Helping them gain additional daily income improves

the condition of their entire household. Putting extra income in women’s hands is

often the most efficient way to affect an entire family, as women typically put

their children’s needs before their own. Children are more likely to complete their

education and escape the poverty trap than their parents are. Giving women access

to microfinance loans therefore generates a multiplier effect that increases the

impact of a microfinance institution’s activities, benefiting multiple generations.

7.8 WOMEN SPEND MORE OF THEIR INCOME ON THEIR FAMILIESWomen have been shown to spend more of their income on their households;

therefore, when women are helped to increase their incomes, the welfare of the

whole family is improved. Women’s success benefits more than one person.

Several case studies confirmed the well-documented fact that women are more

likely than men to spend their profits on household and family needs. Assisting

women therefore generates a multiplier effect that enlarges the impact on the

economic conditions of society. Women’s increased income benefits their

children, particularly in education, diet, health care, and clothing

7.9 ACCEPTABLE BUSINESS SECTOR FOR FEMALE BY SOCIETY

Many cases have been recorded, where women have been able to cast away the

shackles of mobility and travel regularly to bordering countries like Afghanistan

or India to purchase tradable items like cloth, costume jewelry and tinsels. Most of

the female belonged to retail business, and most of them used to sell cloths, bed-

sheets, cushions, electric appliances and other things on installments. Some of

them were involved in value addition such as stitching, and in services such as


51


beauty parlor business. Women choose the business in which higher return is

associated and found the business easier way of earning money. As the nature of

business of majority of the responding business-women is such that allows them

to work single-handedly, therefore, even an expansion in business result in an

increase in generation of much employment. That, in a rural and also an urban

setting, there is a women’s space (the domestic arena) and a male space (the

public arena) and that gender relations are boxed into these spatial realities.

However, when this myth is tested with the field reality; many such instances are

found where women are transacting businesses and have been successful micro-

managers, even when faced with many economic and social hurdles. Hundreds of

women are actively working as commodity traders and shopkeepers even in South

Asian villages.

7.10 PURPOSE BEHIND FEMALE WORKING

It was due to increase in inflation that it is difficult for one person to earn for the

whole family so they started working to increase the income for their family.

Women were working as they were widows and there was no one else to earn in

their family, other working as their husbands bears the home-expenditures but

they wanted to have a personal source of income so that they do not have to ask

their husbands for daily expenses and that is the reason for their being in business.

However, it was seen that they were spending their earnings not only on the

different good or bad occasions in the family for which their husbands did not

allow money but also for the better schooling and clothing of their children, which

is again a help in lessening the financial burden of their spouses.

7.11 EFFICIENCY AND SUSTAINABILITYIt is found that women’s repayment rates are typically far superior to those of

men. Lower arrears and loan loss rates have an important effect on the efficiency

and sustainability of the institutions. Studies have also found women to be more

cooperative and prefer to work with them for this reason as well

Most of the females had complete control over the loan amount they borrowed

and they could utilize it the way they wanted without any interference from their

spouse or any other family member.


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7.12 EFFECTIVENESS OF INCREASED INCOMEThe after doing the case studies, they provided the following utilities of the

increased income as a result of micro-finance borrowing:

a) Majority expressed that there is ease in bearing the day-to-day expenditures as

compared to before borrowing.

b) Some have managed to send their children to private schools considering it a

better source of education. Some clients have also arranged tuition for their

children from the increased income.

c) A widow easily managed the wedding of her son and daughter due to

increased income.

d) Most of the women were pleased with the fact that they do not have to ask

their husbands for day-to-day monetary requirements and they feel more

liberty in spending their earnings according to their wishes.

e) Some borrowers have managed to buy such appliances as refrigerator, air-

conditioner, and steel safe that they earlier could not afford.

7.13 CHANGE IN CONSUMPTIONA case study of BRAC showed that the impact on household consumption was

twice as great when the borrowers were women. Women who participated in

microfinance programmes increased their net wealth and their status within the

household, and improved the lives of their children as well. All of the measures of

impact of borrowing by women were significant; and the impact on consumption

was about twice as great as it was for men. Borrowing also increased household

net worth, with a greater effect for men than for women.


53

Chapter – 8 Chapter – 8 FINDINGS FINDINGS

CHAPTER – 8

FINDINGSThe findings of this research report can be summarized in this flowchart which

shows how our economy boost due to women empowerment with the help of

microfinance.


Microfinance Women Empowerment

Rise in Income level

Increase in employment

↑ In female economic participation- Gender equality-↑ Role in family decisions

Fertility rate-↑ in family well being

Small population Size

Better provision of health and educationServices

Better nutrition- Health opportunities ↑- Access to education ↑

Increase in productivity- ↑in per capita income

Improvement in standard of living (SOL)

Increase in consumption of goods and services-Aggregate Demand ↑

-↑in investment and employment opportunities-Aggregate Supply ↑As a result economy grows

54


8.1 INCREASE IN EMPLOYMENT GENERATIONThe result of case studies show that the microfinance clients having an additional

member of the family join the labor force. Almost every second woman after

establishing her business has hired an employee to help her. Which results in

employment generation.

8.2 INCREASE IN INCOME LEVELAfter examining the impact of microfinance on incomes of women from case

studies it is found that household income is derived from multiple sources

particularly in the rural areas. A study conducted by KASHF foundation found

that about 73% of micro-finance female clients reported an increase in income, in

which 59% showed an average increase and 14% tremendous increase.

8.3 INCREASE IN FEMALE ECONOMIC PARTICIPATION When women empowerment happens it encourages female participation in the

economic activities. They realize their role and also come to know if they won’t

work they will never come out of their misery. While their participation increases

in economic activities it leads to increase in gender equality and their role in

family decisions.

8.4 INCREASE IN PRODUCTIVITYWhen female economic activities will increase and whole population will

participate in economic development without discrimination of male and female

this will increase the productivity of a country. As a result per capita income will

also increases.

8.5 HEALTH, NUTRITION, AND FERTILITY RATERole of Microfinance has significant and positive impact on schooling, especially for

girls. Borrowing by women (but not by men) improved the nutritional status of both

male and female children. Microfinance affected social variables, including children’s

schooling, their nutrition and health, fertility and contraception use. With increase in

knowledge fertility rate has also decreased.

8.6 IMPROVEMENT IN STANDARD OF LIVINGWith increase in income the standard of living also get better. This was also

because of reduction in fertility rate because of which population size decreases


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which leads to better provision and education to service. With improvement in

standard of living the consumption of goods and services increased. As a result

aggregate demand of things also increase which is an indicating factor for

flourishing economy.

8.7 INCREASE IN INVESTMENT AND EMPLOYMENT OPPORTUNITY

When standard of living increases, people have money so they start to save little

by little. When saving happen people will have greater chance of investment, as a

result of investment new projects start which increases the employment

opportunities.

8.8 GENDER EQUALITYBy empowering women, they come to know about their rights, they know what’s

their role in society which gives them confidence, strength and motivation to

work. They realize that they are not inferior to men which promotes gender

equality.

8.9 IMPACT ON THE COMMUNITY AND WOMEN ROLE AND STATUS IN IT

Although leadership skills, self-confidence, and solidarity play an important role

in changing women’s role and status in the community, women’s economic

success plays a role in shaping the community’s perception of them as well.

Several of the women have been invited to participate in community meetings

because they are now in a position to contribute and are also now able to make

contributions at funerals, a major symbol of social status among the people.

Women’s giving advice is another positive sign of empowerment for several

reasons. First, women are learning and putting into practice what they learn.

Furthermore, they are sharing their knowledge and helping others, which mean

that the knowledge benefits of the program are having an impact beyond its

members. Second, women have enough self-confidence to offer advice and

assistance to others.


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8.10 CHALLENGES FACED BY MICROFINANCE TO EMPOWER WOMEN

It does tend to reach those who are not among the poorest of the poor. If

people are in a situation where their children are literally on the brink of

dying from hunger or disease or starvation, or if they’re in a war-torn

society, a small mircocredit loan is not on the forefront of their mind.

They’re probably thinking of survival. In that case, microcredit is perhaps

not going to be so successful. The reasons for this are clear. The poorest

need tiny loans which are not cost effective even for microcredit programs.

The poorest also place the greatest demands on microcredit training

programs, which makes the cost of lending even higher

Though introduced late yet micro-finance sector in Pakistan is improving

steadily. It is estimated that nearly seven million households in Pakistan

need micro-finance services. However, so far, less than one million of these

poor households have been served only.

Investments may not turn a profit. In this event the money to repay the loan

must come from reduced consumption or borrowing from some other

source, usually on worse terms. Another problem is capture of the loans by

male relatives. In some cases, male relatives use female borrowers as fronts

to get relatively low interest loans. These loans may or may not be used to

benefit the family, and the female borrowers rarely see any benefit at all.

And yet, the women are still held responsible for repayment of the loans.

Since large number of target clients live in villages and the lack of MFIs

(specifically banks) in these areas restricts their reach to their target clients.

The current Microfinance products do not necessarily target the bottom

poor. Special research and innovative products that can target this group is

required.

Women experience poverty in diverse ways they are last to eat, the last to

access health care, when the household falls into poverty they are the last to

attend school. Women do not enjoy equitable access to vital assets such as

land and water and services such as health care and education.


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Chapter – 9 Chapter – 9 RECOMMENDATIONS RECOMMENDATIONS

CHAPTER – 9

RECOMMENDATIONS

9.1 THE CULTURAL AND SOCIAL ENVIRONMENTThe cultural environment is a key factor in the economic and social empowerment

of women. Social and cultural change does not happen quickly and easily.

However, if we focus on women empowerment, it is possible to identify some

general actions that can certainly improve the current situation. It is necessary to

keep the door open to gender-sensitive men. They must be directly or indirectly

involved in at least some of the women’s group or MFI activities. Simple things,

such as accompanying their wives to group meetings, may have a remarkable

effect on both men and women, especially in very traditional rural contexts.

Women feel that their husbands support them morally and men are exposed to

some gender-related aspects of daily life that they are not attuned to.

9.2 GOVERNMENT POLICYThe impact of micro-finance will be much stronger if the national government

adopts a policy for poverty alleviation and in favour of women. At the same time,

strong public interventions in micro-finance may result in MFIs which are

inefficient and not financially sustainable.

9.3 LEGAL FRAMEWORKA non-discriminatory legal framework granting equal rights to men and women is

necessary for micro-finance, which calls for flexible and non-traditional

procedures. If women have no property rights or suffer discrimination in this

respect and in regard to inheritance law and contract law, they cannot obtain

financial resources or properly manage a microenterprise. A non-discriminatory

legal framework requires social and cultural change, gender-sensitive decision

makers and appropriate government policies.

9.4 COMPLEMENTARY SERVICES The category of “complementary services” is very broad and diversified. The

findings indicate that group meetings are vital for the empowerment of women;


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Chapter – 9 Chapter – 9 RECOMMENDATIONS RECOMMENDATIONS

they raise women’s self-esteem and self-confidence. If the “complementary”

category to training in marketing and business development, it can be concluded

that these services are important for enterprise development. Demand for such

services is not very high among women, possibly because MF clients do not

expect them. Business development training could nevertheless play an important

role in upgrading women’s enterprise. It can also help avoid limited business

expansion which stops when husbands use borrowed money for their own

enterprise. Business development services are therefore important, but they should

not necessarily be provided by financial institutions. If meetings strengthen

women’s empowerment, it can be concluded that those MFIs are to be encouraged

who provide these complimentary services because they are more beneficial in

terms of empowerment.

9.5 SIMPLE PROCEDURES FOR MICRO-FINANCE BORROWING

The lending procedures should be kept easier and simple for the poor people, so

that access is not denied to the potential clients due to strict and difficult policies.

9.6 MICRO-FINANCE STAFFThere should be adequate number of staff for carrying out the micro-finance

activities. It is also recommended that there should be separate office and field

staff with close coordination on the progress of the clients. This will lessen the

staff burden and improve the repayment rate. For female borrowers, female field

staff is strongly recommended as the male staff cannot go into their homes that

frequently, thus providing a hiding for defaulter female clients.

9.7 THE FUNCTION OF EDUCATION IS INDISPENSABLEThe first step in alleviating the poverty of women is to educate them. Education is

the means by which women will be able to participate in an increasingly global

economy, which requires a workforce with a minimum level of technical skills,

literacy and managerial education. Literate women of a country become

entrepreneurs.

9.8 OUTREACH SHOULD BE MAXIMIZEDMore MFIs are needed to be launched or the branches of existing MFIs be opened

in areas (villages) which lack access to this facility.


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CONCLUSION CONCLUSION

CONCLUSIONLending money to women entrepreneurs in Pakistan is believed to be a risky and

costly endeavor. MFIs use group collateral in most circumstances and this has

been very successful among women clients. Micro-finance is not a new concept;

however Pakistan has to go a long way in this sector.

The findings presented in this section are according to the analysis done, in order

to give the concluding remarks about the state of micro-finance services in

NWFP, specifically and whole of Pakistan generally. It is seen that the micro-

finance providers see poor femaleS as their main target, but in the case of the

NWFP under study, the result don’t show this fact. Here the male micro-finance

clients are in thousands whereas female clients were only few in number.

However, the reasons behind these are numerous from the cultural impacts to the

majority women not being business-minded due to perhaps certain constraints.

However the trends are changing, and the second reason for less female clients is

of less number MFP in NWFP. Third major reason of MFI’s inability to attract

more female clients is the lack of female staff, lack of technical expertise and the

fact that they are located outside the villages and do not have real insight into the

problems that new investors face. And another restriction is that in many rural

areas credit is held in contempt because Islam forbids the use of interest in

business transactions.

However, despite the lower number of female clients, it has been observed that

micro-finance borrowings has indeed a positive impact on the lives of poor

people, where these borrowings have been properly utilized, and such clients are

also able to repay their installments regularly. The acceptable repayment rate is

largely due to the work MFIs do with borrowers’ organizations prior to lending,

and to the advice and training that they give to their women clients.

Therefore, as a whole, it can be said that the micro-finance facility has played a

good role in improving the lives of people.

In a concluding remark for the micro-finance industry in Pakistan, as found in

literature review; bright prospects can be forecasted for the growth and success of

this industry in Pakistan.


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