Muslim Aid Pakistan

MICROFINANCE


The first goal of UN Millennium Development Goals (MDGs) is to Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day. Though various steps were taken to achieve this target even today 25% of the world population is living below poverty line. The Task Force on Food Security based on the World Bank estimates of poverty head count ratio of 29.2 % in 2004-05 estimated that poverty head count increased to 33.8 % in 2007-08 and 36.1 % in 2008-09 or about 62 million people in 2008-09 were below the poverty line in Pakistan. In most of developing countries the tool that is being used today in order to alleviate poverty is micro finance. There is an increasingly large body of evidence which shows that microfinance (MF) can have an impact on poverty reduction and in reductions of vulnerability to poverty. In addition there is an emerging body of literature that MF can impact positively on health, nutritional status and primary school attendance The main purpose of microfinance is to break the vicious circle of ‘low income low investment-low profit’ by inserting capital from outside into the economic life of poor people. According to Adam Smith “Money, says the proverb, makes money. When you have got a little, it is often easy to get more and the great difficulty is to get the little” . Microfinance provides “the little” money where even there is total absence of capital or profit as living is based on subsistence only. Thus microfinance seeks to improve the condition of the poor by raising income and profit, thereby making people free from poverty and improving living standard. Currently in Pakistan, a variety of institutions ranging from NGOs to private and government sponsored rural support programmes are delivering microfinance services to the poor. Two Commercial banks i.e. First Women Bank and Bank of Khyber are also providing lines of credit for the microfinance sector. Similarly large scale microfinance provider NGOs are now emerging as Microfinance Institutions (MFIs) with range of products and services as per the state bank regulations. In Pakistan, the poor usually acquire loans from informal sources. Lack of income and resources force them to take loans at high interest rate to meet basic necessities of life and the hurdle of collateral leave them at the mercy of the informal avenues. It is recognized that people living in poverty are innately capable of working their way out of poverty with dignity, and can demonstrate creative potentials to improve their situation when an enabling environment and the right opportunity exists. It has been noted that in many countries of the world, micro-credit Programmes, provide access to small capitals to people living in poverty, which enable them to initiate small enterprises for sustainable solution to their livelihood..

Microfinance Annual Report 2009.pdf
Microfinance.pdf

The first goal of UN Millennium Development Goals (MDGs) is to Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day. Though various steps were taken to achieve this target even today 25% of the world population is living below poverty line.

The Task Force on Food Security based on the World Bank estimates of poverty head count ratio of 29.2 % in 2004-05 estimated that poverty head count increased to 33.8 % in 2007-08 and 36.1 % in 2008-09 or about 62 million people in 2008-09 were below the poverty line in Pakistan.

In most of developing countries the tool that is being used today in order to alleviate poverty is micro finance. There is an increasingly large body of evidence which shows that microfinance (MF) can have an impact on poverty reduction and in reductions of vulnerability to poverty. In addition there is an emerging body of literature that MF can impact positively on health, nutritional status and primary school attendance

The main purpose of microfinance is to break the vicious circle of ‘low income low investment-low profit’ by inserting capital from outside into the economic life of poor people. According to Adam Smith “Money, says the proverb, makes money. When you have got a little, it is often easy to get more and the great difficulty is to get the little” . Microfinance provides “the little” money where even there is total absence of capital or profit as living is based on subsistence only. Thus microfinance seeks to improve the condition of the poor by raising income and profit, thereby making people free from poverty and improving living standard.

Currently in Pakistan, a variety of institutions ranging from NGOs to private and government sponsored rural support programmes are delivering microfinance services to the poor. Two Commercial banks i.e. First Women Bank and Bank of Khyber are also providing lines of credit for the microfinance sector. Similarly large scale microfinance provider NGOs are now emerging as Microfinance Institutions (MFIs) with range of products and services as per the state bank regulations.

In Pakistan, the poor usually acquire loans from informal sources. Lack of income and resources force them to take loans at high interest rate to meet basic necessities of life and the hurdle of collateral leave them at the mercy of the informal avenues.

It is recognized that people living in poverty are innately capable of working their way out of poverty with dignity, and can demonstrate creative potentials to improve their situation when an enabling environment and the right opportunity exists. It has been noted that in many countries of the world, micro-credit Programmes, provide access to small capitals to people living in poverty, which enable them to initiate small enterprises for sustainable solution to their livelihood..