Bucking global trend, microcredit grows strongly in Pakistan

Loans given by poverty alleviation fund rise Rs2.6b to Rs14b.

ISLAMABAD: Around 13 million fewer poorest families of the world got access to small loans and other financial services in 2011, show findings of a Microcredit Summit Campaign report launched here on Tuesday.

However, contrary to global trends, the microcredit sector achieved robust growth in Pakistan, which has been ranked among top countries by the Economic Intelligence Unit for offering a conducive environment for microfinance growth.

The maximum number of loans, worth Rs14 billion in total, were disbursed by the Pakistan Poverty Alleviation Fund (PPAF) in 2011, an increase of Rs2.6 billion over the preceding year. PPAF captured over three-fourths of the local microfinance market.

PPAF is a strategic and exclusive partner of the Microcredit Summit Campaign for reporting and in terms of realising its aims and objectives. Since its inception, PPAF has disbursed more than $850 million through 5.2 million microcredit loans.



Currently, almost half of Pakistan’s microfinance market share is financed by PPAF through over 50 microfinance banks, microfinance institutions and other civil society organisations in 92 districts across the country.

For the first time since 1998, since when the Microcredit Summit Campaign began tracking this data, the total number of clients and poorest families reached has declined. The total number of clients was reported to have fallen from 205 million to 195 million and families living in extreme poverty, defined as those earning less than $1.25 a day, fell from 137 million to 124 million.



Most parts of the world saw moderate or slow growth, with the exception of 1.4 million new clients in Sub-Saharan Africa. Despite this reversal in 2011, microfinance institutions still provided microloans to more than 124 million households living in extreme poverty.

Assuming an average of five persons per family, this means that more than 621 million people received assistance – twice the entire population of the United States.

The report argues that getting the industry back on track will require a new understanding of clients’ needs, preferences and aspirations, as well as the designing of new tools for delivering products and services at lower costs.

The report highlights an ongoing challenge — how does the sector more effectively connect with those around the world who are financially excluded? The Microcredit Summit Campaign’s continued examination of innovative ways to reach underserved communities, like the potential of digital technology combined with appropriately designed products and services, will be critical in accelerating financial inclusion.

As the lead institution for grass roots development in the country, PPAF works through civil society partner organisations to focus on the disadvantaged and marginalised across Pakistan. Adopting an integrated, multi-sector, community-led, demand-driven strategy, PPAF’s approach is to develop inclusive, representative, transparent and accountable institutions of the poor. The catalytic role of women in programme design, delivery and impact is at the core of all interventions.

Published in The Express Tribune, February 6^th, 2013.

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