Microfinance sector , the parallel economy in Pakistan

By; Farhat Abbas Shah

A few years before when the economic sanctioned were imposed on Pakistan owing
to continuing her nuclear program. The experts of imposing such type of sanctions
became very disappointed by unexpected results because in spite of there efforts to
put into effect, Pakistan was not ready to put her knees down. According to reliable
sources the authorities or the forces behind the scene to analyze that the two
sectors in Pakistan were providing strength to the country as a safe guard. One was
the agriculture sector and the other was private sector. That were the reasons
Pakistan survived under the international economic pressures.

After the recent global financial crisis Pakistan has again come under the heaviness
of financial disaster. But at this time there is no such parallel economy existing to
prop up Pakistan. More over the fall down of energy has enchained the country as a
whole. Unfortunately Pakistani government like former governments is not paying
its full attention and still not willing to design any proper and reliable strategy.

Pakistan is most lucky piece of land because when ever any difficulty comes
towards her, the nature pull her out of that; for example for last 40 years the
microfinance industry has been emerging through out the world as a parallel
financial system as it is for the missing persons (unbanked) of the world who were
not any where in the global banking and were not able to get financial services and
those were poor people of the world. According to a rough estimate approximately
33% to 35% of Pakistan’s population is living bellow poverty line and 70% is poor.

Fortunately due to a few enthusiastic persons like Roshaneh Zafar CEO Kashf
Foundation, Tabinda Jaffery CEO of Asasah, Dr. Bajwa CEO of NRSP, Mis Naghma
CEO of Dameen, DR. Amjad Saqib of Akhuwat and some other microfinance
institute have successfully materialized all over Pakistan. More then 1.8 million poor
house holds have started getting benefits out of it. They have getting 10,000 to
150,000 rupees per households as a borrower yearly in the shape of loans,
investing in their small enterprises, businesses and entrepreneurships. These are
the microfinance institutes under the leadership of the persons mentioned above
who have disbursed more than 30 billions rupees to these poor households with a
very valuable package of non financial services like basic education, entrepreneurial
trainings, cleanliness and healthcare related awareness.

Although the State Bank of Pakistan is taking initiative and trying to stream line the
rules and regulations regarding microfinance sector but at the government level still
there is a lack of awareness about the sector and even the higher authorities are
totally unacquainted of the perspective. There is an other bad luck is making fun of
Pakistani poor is unconsciousness of members of parliament of Pakistan about the
microfinance while the country like Indonesia and Bangla Desh have setting the
bench marks of microfinance. The value of Bangali currency is 100% high than
Pakistani rupee, only because of microfinance, its international stake holders and
donors. They are bound to secure the economy of the country due to their own
interests.

The current economic situation of Pakistan needs very serious attention with full
global financial awareness but the high ranking officials seemed totally blind from
the importance of microfinance for Pakistan.

Surprisingly the finance minister also never looks around in spite of IMF. Otherwise
there can be an economic cushion in the form of microfinance to support the
mainstream financial system. International political scenario regarding terrorism
and the threats of war from the neighbor is also creating very crucial situation for
Pakistan. Investors are hesitating to invest their money in the country. Even the
local investor is also in search of opportunities outside Pakistan and most of them
have already shifted their money from local to foreign banks, but only the
microfinance sector is growing with all its social responsibility.

High rate of food prices, continuous increase in inflation and suicidal trend by
hunger and poverty are the constant pressures pushing the poorest community as
well as the lower middle class to the wall of helplessness and vulnerability. In these
critical circumstances and very sensitive monetary conditions the microfinance
sector is providing financial and non financial services as well to the poor and not
ready to take a step back, while they don’t have noticeable support from public
sector, on the contrary some MNAs and MPAs are encouraging the borrowers of
microfinance to break the credit discipline only for the sake of their vote bank, un
knowingly the sensitivity of their unlawful and un ethical act. However, the Prime
Minister of Pakistan has taken a positive step and appointed Mis Hina Rabbani Khar,
the advisor on the request of Pakistan Microfinance Net Work to look into the issue
and sort out the solution. Still it is necessary that a strong massage from The Prime
Minister of Pakistan must be delivered in favor of microfinance sector to educate the
parliamentarians as well as the public, because the 40 million poor are still existing
as the potential market in the country waiting to be productive and to become
financially sustainable. It is obvious that the government of Pakistan cannot support
the poor alone. Government has chance to help the poor through microfinance
sector only by facilitating it.