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Microfiance Industry of Pakistan and it`s Future

The very basic objective of microfinance is to reduce or eliminate poverty. For last decades

Pakistan is suffering from this state of poverty and right now the last recorded rate of poverty inPakistan is about 40% (2009-2010). Only investment or investors can reduce this poverty byproviding opportunities in the market. Microfinance is playing a very vital role in order to get

everybody beneficial by investment programs, loans, insurance and fund transfer.

Following are the list of microfinance banks in Pakistan which helps in order to get economicallystrong and these are;

y Tameer Microfinance Bank Limitedy NRSP Micro Finance Bank Limitedy The First Micro Finance Bank Limitedy Khushali Bank Limitedy Karakuram Banky Network Micro Finance Banky Pak Oman Micro Finance Banky Rozgar Micro Finance Bank, Karachiy Kashf Microfinance Bank Limited

Articulate in your own words the following paragraph about Grameen Bank only set as an

example

The origin of Grameen Bank can be traced back to 1976 when Professor Muhammad Yunus, Head

of the Rural Economics Program at the University of Chittagong, launched an action research

project to examine the possibility of designing a credit delivery system to provide banking servicestargeted at the rural poor. The Grameen Bank Project (Grameen means "rural" or "village" in

Bangla language) came into operation with the following objectives:

extend banking facilities to poor men and women;

eliminate the exploitation of the poor by money lenders;

create opportunities for self-employment for the vast multitude of unemployed people in rural

Bangladesh;

bring the disadvantaged, mostly the women from the poorest households, within the fold of an

organizational format which they can understand and manage by themselves; and

reverse the age-old vicious circle of "low income, low saving & low investment", into virtuouscircle of "low income, injection of credit, investment, more income, more savings, more

investment, more income".

The action research demonstrated its strength in Jobra (a village adjacent to ChittagongUniversity) and some of the neighboring villages during 1976-1979. With the sponsorship of thecentral bank of the country and support of the nationalized commercial banks, the project was

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extended to Tangail district (a district north of Dhaka, the capital city of Bangladesh) in 1979.With the success in Tangail, the project was extended to several other districts in the country. InOctober 1983, the Grameen Bank Project was transformed into an independent bank bygovernment legislation. Today Grameen Bank is owned by the rural poor whom it serves.Borrowers of the Bank own 90% of its shares, while the remaining 10% is owned by thegovernment.

An Economic Perspective

Taking into consideration are the economic effects of micro financing that contributes the growthof the economy. As we know that, micro financing provides facility for those who are unable to

get jobs in real terms known as unemployed population. Taking it to an individual level, a personis financed, who starts up a business for example as a manufacturer. His business as a result

contributes in the creation of employment, products for consumers and income for someone.Such activity increases the purchasing power of people earning who purchases other goods and

services produced by other business men similarly financed; finally the impact is positive growthof economy which enhances the components of positive economic growth which are:

y Consumptiony Investmenty Net Exports

The same growth level can be impounded into Pakistans economy to provide people with the

amount of capital, so that they mobilize it to make jobs and products for the economy.

Risks involved in Micro Finance in Pakistani Perspective

Credit Risk: we can observe a natural aspect of a person of not making timely payments or may

even default on the loan obtained. Such issues are observed in the Pakistani economy.

Business Risk: the question here is that What if a person being financed is unable to run tobusiness to generate enough income to repay the loan?

Event Risk: a business well established may encounter server carnage as a result unable to

produce enough cash flows to satisfy the obligation.