A study recently published in the European Journal of Economics, Finance and Administrative Sciences draws attention to challenges faced by the microfinance sector in Pakistan. The survey, which involved interviewing executives working in microfinance institutions (MFIs) in Lahore, Karachi and Islamabad, suggests that internal weaknesses such as inadequate staff training and perceived conflicts with religious beliefs are affecting the sector. On the positive side, 78 percent of the respondents stated that the government is giving microfinance due importance.
According to 70 percent of respondents, loans are used primarily for investment purposes as opposed to personal consumption. However, only 26 percent think that MFIs give enough attention to developing clients’ business skills. Half of the respondents also believe that staff need further training. According to 80 percent of respondents in the survey, the potential MFI customer base largely perceives financial institutions as contrary to Islamic beliefs. The authors also point out other hurdles MFIs need to overcome including finding cheaper sources of financing and increasing geographic reach.
By Kristha Abores, Research Associate
Sources and Additional Resources:
[1] “An Examination of Challenges and Prospects of Microfinance Sector of Pakistan”, by Ibn e Ali Jaffari, S., Saleem, S. et al, European Journal of Economics, Finance and Administrative Sciences: Issue 31 (2011), http://www.microfinancegateway.org/p/site/m/template.rc/1.9.51221/
MicroCapital.org article, August 2, 2011, “MICROCAPITAL BRIEF: CGAP Reports State Bank of Pakistan (SBP) Removing Regulatory Barriers to Branchless Banking”, https://www.microcapital.org/microcapital-brief-cgap-reports-state-bank-of-pakistan-sbp-removing-regulatory-barriers-to-branchless-banking/
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