Microfinance can help start new business, reduce poverty

Published: November 22, 2019
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PHOTO: REUTERS

PHOTO: REUTERS

KARACHI: Microfinance can steer financial inclusion in Pakistan as it provides required capital for starting small businesses and reduces poverty in the country, said Akhuwat Foundation Chairman Dr Amjad Saqib.

Speaking at a seminar titled “Practical Implications of Microfinance” at the Institute of Business Administration (IBA) main campus on Thursday, Saqib said microfinance schemes could promote entrepreneurship culture in Pakistan and also help increase the number of small and medium enterprises (SMEs). He pointed out that microfinance supported wealth creation which, in turn, sparked a multiplier effect in the economy and enhanced economic activity.

Wealth creation and increasing the number of SMEs is part of the government agenda aimed at creating millions of jobs in the economy.

“People with an entrepreneurial mindset having no capital can utilise microfinance schemes for starting their business and can contribute to economic growth,” he said.

Saqib emphasised that microfinance also encouraged women empowerment and their participation in the workforce. “In fact, 42% of the recipients of Qarz-e-Hasna (interest-free loan) from our organisation are women.”

Microfinance banks crucial for economic growth

He clarified that microfinance was often confused with microcredit, which was itself a part of microfinance. Elaborating, Saqib said microfinance included microinsurance as well as micropayment systems.

He regretted that around 30% of the people willing and able to work could not participate in the workforce due to certain reasons like being handicapped or widows having the responsibility for children.

He expressed hope that microfinance would help the excluded mass enter the workforce and alleviate poverty in Pakistan.

He expressed concern that banks had adopted microfinance and capitalised on it by charging exorbitant service charges, which the poor segment of society was unable to repay. “Still 85% of microfinance in Pakistan is disbursed by the banking sector,” he said.

Concluding the session, Saqib said his organisation would soon introduce microfinance for housing needs to provide shelter to the poor segment of society.

Published in The Express Tribune, November 22nd, 2019.

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