ACKNOWLEDGEMENTS

All praises are attributed to the sole creator of the universe The Almighty Allah The Compassionate, The Merciful, The Source of all Knowledge and Wisdom. For this research study, I would like to mention the persons without whom it could not have come up into its present shape. First of all, I am really very grateful to my parents. Then a deep measure of gratitude is expressed to my research supervisor Dr. Tanveer Abdullah, Associate Professor, Institute of Management Studies, University of Peshawar. His guidance, continuous help and encouragement that I received at all stages of my research study helped me learn through the course of this research dissertation.

WAJIHA HASSAN

LIST OF ACRONYMS
ADB AKRSP BoK CGAP MFPs MF MFI MFP MSDP NABARD NBFI NGO NRSP NWFP OPP PMN PPAF PRSP ROSCA RSP SACCO SBP SME SRSP SEWA Asian Development Bank Aga Khan Rural Support Programme Bank of Khyber Consultative Group to Aid the Poorest Microfinance providers Microfinance Microfinance Institution Microfinance provider Microfinance Sector Development Programme National Bank for Agricultural and Rural Development Non-bank financial institution Non-governmental organization National Rural Support Programme North West Frontier Province Orangi Pilot Project Pakistan Microfinance Network Pakistan Poverty Alleviation Fund Punjab Rural Support Programme Rotating Savings and Credit Association Rural Support Programme Savings and Credit Co-operative Society State Bank of Pakistan Small and Medium Enterprise Sarhad Rural Support Programme Self-Employed Womens Association

CHAPTER 1

INTRODUCTION
1.1 OVERVIEW OF THE TOPIC UNDER STUDY
The topic that I have chosen for the research is Analysis of the role of microfinance to empower women in Pakistan (A case study of NWFP). Microfinance plays an important role in improving the life of poor people. This topic is very wider in scope due to its impacts in different forms on clients. Like Poverty elimination, income generation, employment generation and women empowerment. However, this research is based on microfinance in general, with a special focus on its impact on women empowerment.

1.2 IMPORTANCE OF THE RESEARCH

Microfinance has been viewed as a very successful tool to eliminate poverty from overall world. In Pakistan, however, the microfinance sector is still in its early stage. But, since its significance in having positive impact on poor lives and resulting overall economic development cannot be denied, so we should notice the benefits and problems associated with this sector. Microfinance targets women as their major clients, as she is more concerned about her children improved lives and overall running of the home affairs.

1.3

RESEARCH QUESTION
Before microfinance the poor people were not financed properly as they were

considered the non-bankable because they could not fulfill the necessary condition in obtaining loans. Now, when the loan facility for these poor people is present in the form of microfinance, is it really achieving its targets? Is it really playing role to empower the women.

1.4
1 2

MAIN OBJECTIVES OF RESEARCH

To find out the impact of microfinance facility on the development of women. To find out the benefits of the microfinance programs to the borrowers as well as the difficulties faced by them associated with the borrowing.

To find out the impact on the employment generation regarding womens business activities.

To find the impact on the income earning, savings and life-style of the female microfinance borrowers.

1.5
1

ISSUES
Microfinance targets women as their major clients, with the belief that the women earnings can bring more fruits to her family, as she is more concerned about her children improved lives and overall running of the home affairs.

Microfinance empowers women by enabling them to start or expand their businesses, and thus by earning for their families gives them the confidence to have more say in the financial as well as other matters of the family decisions.

There is a very high rate of repayment among female microfinance borrowers;

1.6

SCOPE OF RESEARCH
In order to have a more focused study, I focused my research on the womens of

NWFP. Studying different MFIs which provide microfinance facility to both the rural and urban sector women.

1.7

RESEARCH METHODOLOGY
My source of research is based on secondary sources.

i.

Books

ii. iii. iv. v.

Journals Internet Newpaper Magazines

TIME LINE

1.6

SCHEME OF STUDY

The thesis has been divided into six parts or chapters. Chapter-1 gives an introduction to the thesis by informing the readers about the topic of study, as well as the significance and purpose of conducting such a study. It also tells about the way the research has been conducted, through research design and research methodology. Chapter-2 is based on the literature review. It also gives an insight into the concept, background, and lessons learnt from the successful models of microfinance. Chapter-3 is on Microfinance in Pakistan. It tells about the microfinance activities that have taken place in Pakistan and the current stage of this industry in this country. Chapter-4 onwards is based on the primary research conducted through the Bank of Khyber. And in this respect, Chapter-4 is the Tabulation and Data Analysis of the research conducted. Whereas, in Chapter-5 the findings and conclusion of the primary research have been presented, followed by the last chapter on recommendations for further improvements in the microfinance sector with special emphasis on Bank of Khyber (since the research was based on their clients).

CHAPTER - 2

LITERATURE REVIEW
2.1 BACKGROUND
The concept of microfinance started to evolve in the 1980s as a result of the doubts on the states delivery of subsidized credit to the poor farmers, which was also revealed from the research findings. Before this, in the 1970s, government was a predominant source of provision of productive facilities to poor especially the small landholders, as it was seen a good way to promote agriculture. These loans were considered productive as it offered the poor people with lower interest rates, and more importantly these loans were provided to the people who earlier had no access to credit facilities, as they were considered un-bankable. But, in 1980s, more microfinance institutions (MFIs) started operating besides government agencies, as the need was felt that these poor people should also be taught how to save along with provision of credit facility. Thus, microfinance started evolving, and gradually other sectors were also given more consideration for microfinance facilities. And, in the mid-1980s the famous Grameen Bank was established by the Bangladeshi economist Dr. Muhammad Yunus, which also served as a model for many countries. Among the clients of this bank 94% were women, which reflects Dr. Yunuss philosophy that women show more responsibility towards family prosperity and development.

2.2

DEFINITION

Wikipedia defines microfinance as a term for the practice of providing financial services, such as microcredit, microsavings or microinsurance to poor people. By helping them to accumulate usably large sums of money, this expands their choices and reduces the risks they face. (Reference: wikipedia) Robinson also provides a definition of Microfinance as , Microfinance refers to small-scale financial services for both credits and deposits that are provided to people who farm or fish or herd; operate small or micro-enterprises where goods are produced,

recycled, repaired, or traded; provide services; work for wages or commissions; gain income from renting out small amounts of land, vehicles, draft animals, or machinery and tools; and to other individuals and local groups in developing countries, in both rural and urban areas. Another fairly concise and useful definition of Microfinance by CGAP (Consultative Group to Assist Poor) of Pakistan Microfinance is the supply of the loans, savings, and other basic financial services to the poor. Microfinance is a broad term and it refers to the provision of financial as well as nonfinancial services to low-income clients. Financial services are in the form of microcredit, savings, insurance and payment services. Whereas the non-financial services are aimed at supporting the financial services, and include group formation, development of self-confidence, and training in financial literacy and management capabilities. And, as it can be noticed, the non-financial services are coupled with the financial services to make the financial services more fruitful to the poor, so as not only to enable him/ her to improve his/ her living standard but also enable him/ her to repay the borrowed amount.

2.3

MICROFINANCE ACTIVITIES

Microfinance activities can be pinpointed as involving: Small loans, typically for working capital Collateral substitutes, such as group guarantees or compulsory savings Access to repeat and larger loans, based on repayment performance

In microfinance, the relationship between the lender and borrower is different than in general banking, and that is due to the qualitative dimension attached to microfinancing. The lender, along with lending money, also provides advice and technical assistance, guidance and instructions to the borrower. The financial transaction is, in fact, embedded in various non-financial transactions. The microfinance lender uses collateral substitutes, like group liability or personal, unmarketable belongings. It is this multi-faceted nature of microfinance, somewhere between the hard-nosed

financial market and softer social concerns that makes it challenging to review its applicability to self-employment programs.

2.4

MICROFINANCE PROVIDERS
Microfinance providers are called microfinance institutions and include NGOs,

savings and loan cooperatives, government banks, commercial banks, or non-banking financial institutions. Microfinance providers are of various types. The criteria for distinguishing these service providers are based on the following points: Provision of microfinance services to the business start-ups coming out of unemployment, or to businesses already existing but requiring working capital, or capital for expansion. Services provided: only microfinance or also non-financial services? Legal form and ownership of the microfinance services provider? Fiscal status: non-for-profit vs. for profit vs. public. Mission statement: position on the continuum between outreach and sustainability. Scale of operations. Link to banks. Link to other enterprise creation agents (Chambers). Link to Government agency supervising self-employment program. CRITERIA FOR THE PERFORMANCE EVALUATION OF MICROFINANCE PROVIDERS The following factors indicate the success of a microfinance service provider: The outreach of the microfinance services provider to the targeted population, Performance in terms of outreach targeting

client selection scope of and limits to up-scaling lending technology and financial innovations And, the financial sustainability of the microfinance service provider.

Performance in terms of sustainability how do different programs define performance, success? mission, scale of operations and range of services pricing of services internal governance: self-monitoring, control, transparency, benchmarking (for example, tools for determining and reducing transaction costs) external accountability funding (diversification, stability, terms and conditions) Sustainability Microfinance service providers should adopt such pricing policies that help them to stay in the market in the long term. Eventually, they should be able to survive without Government grants, subsidies or donor money. The sustainability of a microfinance service provider also depends on its type. If a microfinance service provider only provides loan; it is easier to price such service at its full cost, as compared to the microfinance service provider that also provides the advisory and training services complementing the loan provision. Therefore, the former type of microfinance provider is potentially more sustainable than the later type. However, the later type can term the provision of advisory service as vital and use it to secure Government grants.

2.5

MICROFINANCE CLIENTS

Generally, the microfinance clients are the self-employed, low-income entrepreneurs in both rural and urban areas. Clients are often traders, street vendors, small farmers, service providers (beauticians, tailors) etc. Although they are poor, they are generally not considered to be the poorest of the poor.

2.6

MICROFINANCE BANKING (MICRO-BANKING)

INTRODUCTION Microfinance banking is defined as the provision of financial services to the poor through simplified transactions. Microcredit is defined as small loans extended to poor people for self-employment projects that generate income allowing them to provide for them and their families. HISTORY OF MICROBANKING Microfinance has existed in various forms for centuries. A very early form of micro-credit took place in Ireland in the 1700s where at its peak, 20% of households obtained these small loans. The modern concept of micro-credit was developed in the mid-1970s by U.S.educated professor of economics, Muhammad Yunus. In 1974, Professor Yunus work in Bangladesh (one of the worlds poorest and famine-ravaged countries), is highlighted as the first modern day use of micro-credit. Yunus discovered that the smallest loan could make a huge difference to an individuals life. The first loan was for US$27 to a woman who made bamboo furniture to support her family, which Yunus paid for from his own pocket. More than 94% of Grameens micro-credit loans are made to women and as Grameens Model is followed the world over; similar pattern can be found in other microfinance institutions. The reason is that women typically undertake projects that benefit the entire family, and also the perception that women have higher rate of repayment than men . Micro-credit enables those in the developing world who rely on the informal economy to improve their lives. It prevents these people from being trapped in a

poverty cycle and enables them to obtain low interest loans which can be used to improve their lives. Professor Yunus realized that large financial institutions were unwilling to make these small loans because they perceived poor people as not creditworthy posing a high risk of default and viewed the costs and lack of infrastructure as barriers to entry. In 1976, Yunus opened the Grameen Bank to make small loans to poor Bangladeshis and, US $4.9 billion is disbursed to 4.76 million borrowers since its inception. Despite the concerns of the large international banks, repayment rates have Grameens use loan. In default in both remained at over 95%. Such high repayment rates may be explained by of a system of solidarity groups. Solidarity groups are informal groups this way, a group of people can benefit from the loan while decreasing the risk of to the bank. The success of Grameen Bank has stimulated many similar ventures he developing world as well as industrialized countries such as the USA. Historically, micro credit lending has been pioneered by non-profit organizations. As micro credit has evolved around the world, these non-profit organizations have either become profitable and economically sustainable businesses, or global banks that have made investments in consumer lending in developing countries.

that together apply for loans and whose members act as guarantors for the repayment of the

CHAPTER - 3

MICROFINANCE COMPARATIVE EXPERIENCE

3.1. BANGLADESH

Bangladesh is known as the birthplace of microfinance revolution towards fighting against poverty. Since late 1970s the wave of this revolution has been spread over to most parts of the world especially in Asia, Africa and the Latin America. Today, microfinance has become the global revolution against poverty and demonstrated how the poor can reduce their vulnerabilities. The microfinance sector in Bangladesh has so far reached to more than 15 million poorest borrowers. Thus we see, the sector has grown in both supply and demand side. On supply side, thousands of microfinance organizations have been professionally managing these services to the poor people through innovation, diversification of products and delivery mechanism. On the other hand, the credit worthy poor have been demanding higher amount of credit, differential savings services and so on. Thus the sector has been gradually becoming dynamic in nature as it is constantly accommodating the supply lines according to the demands, i.e. the microfinance sector is a demand driven sector. The microfinance sector in Bangladesh is one of the worlds largest. Bangladeshi MFIs are best known for their pioneering, large-scale microfinance services. The four largest MFIs ASA, BRAC, Grameen Bank and Proshikaaccount for 86 percent of the 14.3 million active borrowers in the country.

3.2.

AFGHANISTAN
In 2002, the banking sector had completely collapsed and no operational financial service providers were available in Afghanistan. Microfinance services were in great demand, in order to help Afghans access financial services to improve their livelihood. Microfinance is a key element in the reconstruction of Afghanistan. A Microfinance Investment and Support Facility (MISFA) was set up to provide funds, technical assistance and training to a wide range of retail financial intermediaries that serve the

poor. The overall objective of MISFA was to provide flexible and high quality support to help establish a healthy microfinance sector. Many poor Afghans have been able to access financial services for the first time. Sustainable and growing financial service provider organizations are being created and the first steps taken towards an inclusive financial sector.75 percent of the clients have been women ,35 percent of them from rural areas. Case studies have shown that the availability of microfinance services not only increased household incomes, it also contributed to women'sempowerment, particularly in the public sphere.The sector has reached out to serve the special needs of people with disabilities, traveling people, and returning refugees, in addition to contributing to the anti-narcotics program. Within three years of beginning the program, 14 microfinance institutions had been established with more than 220 branches in 22 of the 34 provinces.

3.3.

MALAYSIA
Microfinance is not new in Malaysia. It has been operated by credit unions, and

co-operative banks. Microfinance services of financial credit range for about RM10,000 (USD2,631) and mostly to finance small businesses, agricultural loans and loans for poverty reduction. Majlis Amanah Rakyat (MARA), council of trust to the Bumiputera and Credit Guarantee Corporation (CGC) are some of the pioneers to introduce microfinance loans to its borrowers. The rural credit institutions comprising of Agriculture Bank of Malaysia (BPM), Farmers Organisation Authority (LPP), Federal Land Development Authority (FELDA), and agro-based Co-operative Societies provide micro credit for the agriculture sectors. There are a number of non-government organisations (NGOs) that engaged in microfinance. These include Yayasan Usaha Maju operating in Sabah, Koperasi Kredit Rakyat in Selangor and the best and significantly known microfinance institution (MFI) is Amanah Ikhtiar Malaysia (AIM). The objectives of AIM is to give out generous loans to finance income generating activities to the poor households and eventually move out from the poverty group.

3.4.

SRILANKA
Over the years Sri Lanka has developed a widely diversified microfinance system.

However, by international standards it operates at a very low level The core problem is the poor quality of the microfinance services offered, indicated by insufficient outreach, low repayment, low cost efficiency and financial products which are not client driven. This seriously threatens the sustainability of the offered financial services and their outreach to poorer households, micro and small enterprises. The main causes of the poor performance of MFIs lie in the inadequate qualification of the MFI staff and the fact that the Government of Sri Lanka has not yet designed a national sector policy for a sustainable microfinance sector. Another problem lies in the lack of a cohesive regulatory and supervisory structure which encompasses all MFIs. However, most NGOs engaged in microfinance are neither regulated nor supervised although most mobilize savings deposits from the public. These institutions are weakened by politically motivated debt relief, often ahead of elections, and presently as a consequence of the tsunami disaster, which seriously destroy the repayment culture among its clients. Further cause lies in the insufficient infrastructure for training, further education and advisory services to provide immediate and relevant practical advice.

3.5.

NEPAL
Nepal is one of the poorest country in the world and the poorest in the South Asia

region. Its poverty reduction rate is low. The main reasons for this low poverty reduction rate are: (i) low per capital income, (ii) concentrated urban growth, and (iii) high population growth rate. Out of a population of 23 million, 38% are in below the poverty line. Most of the poor people live in rural areas and have little opportunity. Microfinance could help poor people who have no collateral, but a willingness to work and a desire to do some business activities from which he/she will acquire employment as well as income.

Although many programmes have been implemented for poverty alleviation in Nepal, only microfinance programs are seen as a poor targeted and rural based. In Nepal agriculture based co-operatives were initiated in the 1950s as a first step in microfinance. Poverty alleviation rural based programs were initiated through the small farmers development program (SFDP) on a pilot test basis in 1975 by the ADB/N. The success of the pilot tests in Dhanusa and Nuwakot districts encouraged policy makers to expand formal rural based microfinance programs. Other microfinance development programs, such as Priority Sector Lending Program (PSLP), Intensive Banking Programme (IBP), Production Credit for Rural Woman (MCPW) and Rural Self-Reliant Fund (RSF) have been implemented.

3.6.

INDIA
There are some 60 million poor households in India, and while microfinance

institutions (MFIs) have made a start in providing financial services to these households, their outreach is minuscule compared with the effective demand. The Reserve Bank of India and a closely associated institution, NABARD, have undertaken a wide range of activities designed to support microfinance. However, many of these have been"developmental" initiatives of a financially repressive nature (such as directed credit requirements and refinancing of loans to priority sectors) and have not contributed to the emergence of a sustainable microfinance sector. There is a need to shift the focus further in favor of promotional activities such as training and capacity building, and to promote understanding of the need for market-related interest rates. It would also be appropriate to establish prudential regulation and supervision for larger MFIs with client deposits. Due to the sheer size of the population living in poverty, India is strategically significant in the global efforts to alleviate poverty and to achieve the Millennium Development Goal of halving the worlds poverty by 2015. Microfinance has been present in India in one form or another since the 1970s and is now widely accepted as an effective poverty alleviation strategy. Over the last five years, the microfinance industry

has achieved significant growth in part due to the participation of commercial banks. Despite this growth, the poverty situation in India continues to be challenging.

CHAPTER - 4

MICROFINANCE IN PAKISTAN
In Pakistan poverty has many dimensions. The poor in Pakistan have not only low income but they also lack access to basic needs such as education, health, clean drinking water and proper sanitation. Poverty in Pakistan was reported at 31.8%, which comprises of 22.39% urban and 38.65% rural population in the country, Musharaf (2002) says that Pakistan is well aware of the challenges poverty poses to humankind. Inequalities between the richest and the poorest people are widening. Women are worst hit by poverty, and with them the family unit gets entangled in a inhuman cycle of poverty, ignorance, diseases and even more poverty. Microfinance is one instrument that holds the greatest promise for transforming the lives of the economically underprivileged. According to estimate, there are about 6.5 Million clients requiring Micro Finance services in Pakistan. Pakistans Microfinance strategy has a multi branched approach. A dedicated legislation has been formulated to facilitate the growth of this factor. The Government has set up apex institutions like the Pakistan Poverty Alleviation Fund as well as retail institutions like the Khushhali bank for providing retail micro finance services. In addition, the Rural Support Programmes in Pakistan are pursuing a holistic approach which includes microfinance services for poverty alleviation. There is also a network of most NGOs and RSPs in the form of the Pakistan Microfinance Network that publishes performance indicators on a half-yearly basis; something very few

4.1.

MICROFINANCE SERVICE PROVIDERS

Microfinance services are provided by informal, semi-formal and formal sources

and institutions. Informal sources of finance account for approximately 83% of the credit supply and are provided by moneylenders, shopkeepers, traders, middlemen, family and friends for consumption and production purposes. Every village has at least one informal committee that collects regular savings and offers loans to members in a similar

management arrangement to RoSCAs (Rotating Savings and Credit Associations). Compared to the other sources of micro-financing, common interest rates in informal sources are much higher, ranging from 50% to 120% per annum. In the semi-formal sector, NGOs and participatory organizations such as Rural Support Programs (RSP) have been the primary promoters of microfinance services in Pakistan. RSPs are multi-functional as they provide a range of services and aim to achieve provincial and national coverage. These participatory bodies operate in urban or rural areas, sometimes in both, focusing anywhere from one village to the entire nation. The Rural Support Programs in Pakistan consist of the National Rural Support Programme (NRSP), the largest, Balochistan Rural Support Programme, Sarhad Rural Support Programme (SRSP) and the Aga Khan Rural Support Programme (AKRSP). Originally seen as a group of government-assisted NGOs with a mandate to promote rural development, they now see themselves as something between a government body and an NGO. NRSP has the largest member base in Pakistan, with approximately 293,000 members gathered in Community Organizations (COs). Some NGOs, like Kashf Foundation and the Orangi Pilot Project, now specialize in microfinance and have reached a substantial and growing number of clients. In the formal sector, two commercial banks, the Bank of Khyber and the First Women Bank, provide microfinance services to low-income clients, directly through their branches, or as wholesale funds to partner MFIs. The microfinance specific ordinances promulgated in 2000 and 2001 by SBP allowed for the establishment of two specialized microfinance institutions, the Khushhali Bank, a retail microfinance bank jointly owned by public and private banks, and The First Microfinance Bank Limited, established from the transformation of the microfinance activities of the Aga Khan Rural Support Programme. Orix Leasing and Network Leasing are two leasing companies involved in microfinance by providing leasing products to low-income clients. Network leasing has been granted a license to set up a microfinance bank. The outreach of all MFIs in Pakistan is only 5% of the total demand or need for microfinancial services (Sadia Saeed, 2004). In Pakistan, most private sector lending

institutions achieve only an eighty-seven to ninety-four percent recovery rate, compared to the international average of ninety-seven percent.

4.2.

PAKISTAN MICROFINANCE NETWORK (PMN)

The Pakistan Microfinance Network (PMN) is a network of organizations

engaged in microfinance and dedicated to improving the outreach and sustainability of microfinance services in Pakistan. Lending methodologies of major MFIs in Pakistan as part of the Pakistan Micro Finance Network (PMN) is as follows: RSP RSPs made a major contribution to the microfinance sector by accessing lines of credit from commercial banks to provide micro-credit to low-income people living in rural areas. The RSPs uses the forum of COs for delivering small loans. Loans are given through CO to individual members for productive purposes only. The RSPs continue to be the largest service providers in the Microfinance sector. Their combined outreach is almost 2/3 rd of all micro credit activities in Pakistan NRSP The National Rural Support Program is the largest MFI in the country. It was set up with a grant from the Government of Pakistan. It is the largest microfinance provider

with national coverage. However, RSPs find it difficult to view microfinance activities as anything other than a supporting component of their larger, integrated programme, resulting in difficulties to separate costs specific to microfinance. AKRSP In the 1980s, the Aga Khan Rural Support Programme (AKRSP) was established in the northern region to build community-based organizations and infrastructure, and assist in resource mobilization through credit and savings. The success of the AKRSP led to the creation of Pakistans other RSPs, which formed the primary approach to microfinance during the 1980s and part of the 1990s THE BANK OF KHYBER Besides direct lending to individual micro-entrepreneurs, BOK uses the concept of financial intermediation for linking up with remote communities through NGOs. Group loans to men and women organizations are also introduced. BOK also has the privilege to explore lending relationships with industrial clusters and skill-based organizations. BOK has the following four strategies: Direct lending to individual micro-entrepreneurs Group lending through facilitators in rural areas Lending through business clusters in urban centers and Small towns wholesaling of funds to facilitators for on-lending in rural areas DAMEN (Group-Lending) DAMENs Revolving Loan Fund Program was initiated in October 1996 with the aim of social and economic empowerment of women engaged in income-generating activities. While formulating the program policy special consideration was given to the fact that women were at liberty to opt for the business of their choice. KASHAF FOUNDATION (Group-lendingGrameen approach) Kashfs approach is where women from low-income communities form into centers comprising of core groups of five, who then take responsibility for each others repayments. The strategy also relies on setting up decentralized operations through a

network of local branches, which are staffed by women from the local area. This ensures confidence building, trust and the ability to cater to womens economic needs on an ongoing basis. OPP (Individual Lending) The Orangi Pilot Project (OPP) developed an individual lending methodology adapted to urban slums, by targeting entrepreneurs in Karachi region. Orangi Pilot Project (OPP) as an NGO began work in Orangi in 1980. Orangi situated in the periphery of Karachi is a Katchi Abadi with a population of 1.2 million. SRSP (The RSP Approach) SRSPs Credit Program aims at increasing the access of the rural poor to credit for productive purposes, ensuring that a local pool of capital is generated for long term community access to credit and encouraging micro-enterprise development initiatives for increasing productivity and income. SAFWCO (Group Lending) aims to enhance the socio-economic status of vulnerable groups through sustainable income generation activities. It specifically operates to: Mobilize the community groups for saving Form male and female saving groups in the villages Provide credit facility to the poor/vulnerable groups specially women Accelerate economic development through local investment Create job opportunities Train potential entrepreneurs for managerial and technical skills The program area consists of District Sanghar, Sindh. SUNGI DEVELOPMENT FOUNDATION (Group Lending) The program was started on a theme of saving first-credit later; which reflects the importance of community saving for their economic uplift. The major responsibilities :

To support in mobilization of community savings. Credit disbursement to the of village committee members for economic or critical social needs.

Training to the communities for financial management (Saving, Credit and Entrepreneur ship"

Vocational Skill Enhancement Support

TARAQEE FOUNDATION (Group lendingGrameen approach) The main objective of Taraqee is to improve the living conditions of the rural and urban population of Baluchistan, especially the least prosperous and deprived section of communities. In order to achieve this objective TF works for: Awareness creation regarding the concept of true development, aiming at quality of life improvement based on self-help reliant community organization participants. Resource mobilization, which identifies the resources, human materials, finances that already exist and/or may be needed in addition. Assisting the communities to establish self-help organizations for

implementation/realization, which is the actual process of satisfying the needs. TRDP (RSP Approach) TRDPs credit programme as it stands today was developed and implemented in March 1997. It extends microcredit to the community organizations (COs) without collateral, and on the basis of social guarantee. Micro credit is extended in the field of enterprise, livestock development, and small infrastructure development schemes, agriinput, etc. TAMEER BANK TAMEER is a Microfinance bank set up by a group of highly experienced bankers committed private to go where no (commercial) transformed, bank has gone before TAMEER distinguishes itself from other Microfinance Banks by being one of the first nation-wide, sector, non-NGO commercially sustainable

microfinance institutions in Pakistan. We aim to provide dedicated services to the economically active poor and to be demand driven, client centered and responsive to the special needs of our customers. FWBL FWBL launched a small loan facility for women from low-income groups with an initial allocation. of Rs. 30(m) by using a group guarantee NGO warranty or personal surety from- two Government officials Approximately 11,000 women have benefited from this scheme in the last 13 years. ABP & AW The Association of Business, Professional and Agricultural Women (ABP &AW) is an NGO with 16 branches in all four provinces. The Small Credit Scheme of ABP&AW was initiated in July 1992, when UNDP allotted a sum of Rs. 2,00,000/- (Two lacs) for it. The National Association allocated an amount of Rs. 30, 000 to its Rawalpindi/Islamabad (IR) Branch to be disbursed as 6 loans of Rs. 5,000/- each. The scheme was initiated to provide financial assistance and counseling to the lower income group of women who wanted to start micro-enterprises but were not familiar with formalities of banks and other credit agencies. KK Khwendo Kor which means Sisters Home was registered in Peshawar in 1993. To fulfil its mission KK has under taken an ambitious programme whose main objective is to disseminate and improve female education in one of the most underdeveloped and impoverished segments of the society. Stretched across the most rugged and dry plains and mountains of NWFP, KK has ventured their projects into areas where no one has intervened before. KHUSHALI BANK In August 2000, Khushhali Bank was established as part of the Government of Islamic Republic of Pakistan's Poverty Reduction Strategy and its Microfinance Sector Development Program (MSDP) that was developed with the assistance of Asian

Development Bank. It is headquartered in Islamabad and operates under the central bank's supervision (State Bank of Pakistan) with commercial banks as its shareholders. Its mandate is to retail microfinance services and act as a catalyst in stabilizing the country's newly formed microfinance sector. Khushali Bank, which is owned by several leading financial institutions - private, public and foreign - rather than by the Government of Pakistan. the Khushali Bank is a retail bank and has already reached out to 100,000 customers and is targeted at 700,000 by 2007. Khushali Bank has given 200,000 loans across 125,000 households, more than one third of the clients being women.

Total Number of Borrowers of Selected MFIs Organisation Annual Borrowers

Commercial Banks 140,000 and DFIs Khushali Bank NGOs PRSP Kashf NRSP AKRSP Damen TRDP Taraqee BOK SAFWCO SRSP OPP 100,000 141,874 42,928 36,103 28,768 12,232 5,365 4,728 3,846 2,166 1,876 1,804 1,617

Sungi TOTAL

441 381,874

Active Clients NGOs 26%

MF Banks 30%

MF Banks Leasing Bank

Leasing 1% Bank 2% RSPs 41%

RSPs NGOs

4.4

FUTURE PROSPECTS OF MICROFINANCE IN PAKISTAN Prime Minister Shaukat Aziz said microfinance is a capable system of eradicating poverty and ensuring basic needs of life, including education, health and community development to improve the living conditions of the poor. Addressing the concluding session of first ever conference on 'Microfinance in Pakistan, Innovating and Mainstreaming', held at the Convention Center, Islamabad the prime minister said the government has accorded high priority to fight against poverty, and initiated a number of projects, including Khushhali Bank.

CHAPTER - 5

MICROFINANCE AND WOMEN EMPOWERMENT

5.1. INTRODUCTION
A large number of microfinance institutions (MFIs) have already identified women clients as their primary market niche. For many this is rooted in an institutional mandate to promote womens empowerment through the provision of financial and other related services. For others, it has been a more pragmatic decision tied to womens

typically higher repayment rates and a desire to ensure financial sustainability. For these MFIs, the focus on women has necessitated an understanding of the way womens needs have been translated into an effective demand for financial services, and of the constraints women face in gaining access to traditional financial services. It recognizes that microfinance can play an important role not only in financing womens incomeearning activities, but also in helping to reduce the vulnerability of their families by supplying resources that can be invested, borrowed against, or used as insurance to mitigate economic risk. Microfinance programs targeting women became a major plank of donor poverty alleviation and gender strategies in the 1990s. Increasing evidence of the centrality of gender equality to poverty reduction and womens higher credit repayment rates led to a general consensus on the desirability of targeting women. Not only reaching but also empowering women became the second official goal of the Micro-credit Summit Campaign.

5.2

FROM ACCESS TO EMPOWERMENT: GENDER ISSUES IN MICRO FINANCE

Microfinance programmes targeting women have become a major focus of donors poverty alleviation strategies, internationally, since the 1990s. Consultative Group to Assist the Poorest (CGAP) is a major international collaborative initiative arising from the 1993 International Conference on Actions to Reduce Global Hunger and was formally constituted in 1995. The 9 founding members are Canada, France, the Netherlands, the United States, the African Development Bank, the Asian Development Bank, the International Fund for Agricultural Development, the United Nations Development Programme\United Nations Capital Development Fund and the World Bank later followed by Australia, Finland, Norway, Sweden, the United Kingdom and InterAmerican Development Bank. Approximately US $200 million (including existing budget commitments) was pledged to Microfinance programmes for the poorest groups in low-income countries, particularly women (World Bank, 1996). Actual amounts disbursed by individual CGAP members is however considerably higher. The CGAP

member donor agencies have taken certain initiatives that will further increase the funding. The increased focus on women for microfinance has been supported by certain reasons and assumptions as follows: The evidence that there is a higher repayment rate among women. Increasing womens access to microfinance is assumed to initiate a series of virtuous spirals of economic empowerment, increased well-being for women and their families and wider social and political empowerment. The underlying assumption is that these mutually reinforcing spirals of empowerment can occur following womens access to microfinance without explicit support for women to increase their incomes, to defend their interests within the household or for wider social and political changes in gender or class relations.

5.3.

FOCUS ON WOMEN FOR MICROFINANCE SERVICES

It is widely believed that women have an important part in the economic

development. But, they are mostly dependent on their male counterparts and are the most vulnerable members of society. The proponents of targeting women as clients for microfinance claim that when women earn the benefit goes to the entire family. Believing in their importance and the role that they can play in the financial improvement of their homes leading to economic development overall; the MFIs target women as their main focus. Women have proven to be the best poverty fighters. Experience and studies have shown that they use the profits from their businesses to send their children to school, improve their families living conditions and nutrition, and expand their businesses. During a Microfinance Summit in India in 2005 issues raised were focusing on women beyond they being target groups for micro credit programs. It was pointed out in the summit that targeting women for micro credit is more fruitful, as women are better at repayment of loan as well as better at planning and utilization of loan amount

5.4

EMPOWERMENT
Empowerment refers to increasing the spiritual, political, social or economic

strength of individuals and communities. It often involves the empowered developing confidence in their own capacities. An empowered person is one who has control of the decisions which impact his/her life. The same applies to a group. Empowering people is merely working toward helping the people gain the kind of control of their lives that the rest of us enjoy. To get it, they have to do it for themselves.

5.5

WOMEN EMPOWERMENT
It defines as is the participatory process through which women, who are currently

most discriminated against, achieve gender equality and equity. Where the extent of women's disadvantage means that they are unable to fully promote their own interests, this will require support by developmenagencies at household, community and macro levels. This will include support for men to change those of their behaviour, roles and privileges which discriminate against women. (Reference: http://lindaswebs.org.uk) However, empowerment must also involve a transformation in how women define themselves in the context of an evolving society. It can be seen as a process through which they are able to transform their self-perceptions.

5.6

ROLE OF MICROFINANCE IN WOMEN EMPOWERMENT

(THE CASE OF PAKISTAN)

Women experience inequality all over the world and Pakistan is no exception to the norm. The gender perspective acknowledges the importance of both the sexes contributing to the development and promotes the equitable distribution of resources opportunities and benefits. In Pakistan women constitute more than one half of the population- a fact, which cannot be ignored. There is a link between womens empowerment and their access to microfinance services. History shows that microfinance programmes are appropriate not only for alleviating poverty but also for influencing gender issues in development in a positive way. Microfinance strengthens womens social and economic worth to a great extent if implemented properly. Roshaneh Zafar, founder of Kashf foundation in Pakistan also believes that microfinance can be effective in not only fighting poverty but also empowering women. This belief of hers is based on the interviews that she conducted of hundreds of women, who responded by saying:

You think we dont want a better future for our families? You think we dont want to provide a better life for our children? Give us money and we will make better choices.

5.7.

CAUSES OF POVERTY
To establish the link between microfinance and womens empowerment, it is

necessary to determine how poverty impacts on womens lives. The following statistics from Kashf (2001) illustrate the female face of poverty. The household budget of a poor family in Pakistan (one earning less than a $A1 a day) is spent on the following: 55 per cent on food, 25 per cent on rent and utilities, 12 per cent on some form of savings, and less than 8 per cent for investing in human capital. Over 76 per cent of women in low-income communities are illiterate; only 24 per cent have completed less than five years of formal schooling. The majority of the women and their families have poor diets, and cannot afford luxuries like meat more than twice in a month. Most women suffer from regular, minor illnesses, which take their toll on the household economy and the well being of the family. In terms of spending money on their health, women usually prefer to access the local faith healer rather than a Western doctor or hospital. On average, they visit a health care practitioner at least six times a year, irrespective of their age. Almost half of the women have lost a child of under two years of age, an incidence which has far reaching traumatic implications for their mental and emotional health. Most households live in highly congested one-room houses, with an average family size of seven members. The above statistics reveal that the realities of poverty in terms of human capital generation are quite severe. The strains on the household budget lead to a deprioritization of longer-term investments like education and health. A combination of the above factors generates low self-worth and self-abnegation by women of their basic rights, and so the vicious cycle continues.

5.8

SIGNALS OF WOMEN EMPOWERMENT AS A RESULT OF MICROFINANCE

In a survey, 86% of the Kashf Foundation clients claim that they have more selfconfidence as they feel they have more control over their lives.

54% women said they get more respect and participation in household activities from their spouses than in past.

44% said that domestic fights due to financial problems have decreased. Due to women working, and increased income from her business volume due to microfinance, she can now afford better education, health-care, and improved nutritional level for her children in particular and her family as a whole.

Participating in a microfinance programme makes women politically more aware. They do not simply vote as their husbands or males do, rather they vote for the candidates who build schools, better roads, provide electricity and clean water.

And, above all she enjoys more control over financial decisions and her life. There are instances where women who used to work outside their home on daily wages; now work at home after borrowing micro-loans, as they can now afford the raw materials or other equipments needed to work on their own. This enables them to work as well as to take good care of their home and children. Kashf Study

Increase in Income Change in Consumption Change in Education Expenditure Change in Health Expenditure Womens Empowerment

30% 27% 13% 22% 80%

5.7. DOES MICROFINANCE IMPACT MEN AND WOMEN DIFFERENTLY?

Graph shows that microfinance has a more positive impact on women than men Women have behaved very responsibly towards the return of the loan which has lead to a positive attitude towards increasing their knowledge and a marked enhancement in their self-confidence. There is a visible feeling of togetherness and the willingness to cooperate with each other. There is a definite improvement in the way they conduct themselves while outside, and in the company of our members, the bank or at other functions. There is a marked improvement in their household lifestyles - in terms of dress, what they wear and how much money they have to spend.

CHAPTER - 6

SUCCESS STORIES OF MICROFINANCE IN WOMEM EMPOWERMENT IN NWFP

Virtually every MFI has a stack of case studies which focus on success stories. Most show how womens lives have been transformed with the provision of a loan they have invested in their own businesses. There is the dramatic impact on increase in income and well-being The position of women in the society and economy of NWFP is particularly constrained in relation to enterprise development. Cultural norms limit their mobility outside of the homestead to engage in economic activities such as production and trade. It's not just the fact that these areas are so much more conservative and women are not seen anywhere and are bound by tradition not to venture out of their homes, it's just that it is so much harder. There are additional problems which include access to materials, access to market, lack of roads and communications, isolation from not just the rest of the country but even neighbouring villages and towns in the winter months. Life in the north is very hard, the winters are long and severe, in most areas there is one seasonal crop, no industry, little or no tourism and people live not only in isolation from the outside world but in a state of abject poverty The diversity of users' socio-economic circumstances even within what might appear to outsiders to be an homogeneous environment will affect demand for financial services. Even poor women will differ significantly in their socio-economic status, lifecycle effects being a particular feature: the needs of young unmarried women will differ from those of young married women with growing families; and from the needs of older women with grown-up sons or those who are widows.

6.1

CASE 1: KHWENDO KOR

Khwendo Kor, a local NGO is seeking grant to expand its Better Life programme in which woman will be given financial assistance of $170 for business establishment. The women will be fully supported in establishment and running of small businesses. As a result women will contribute in income generation and supporting the family to improve their livelihood.they will also be able to send their children to school and to avail the health facilities. In an area where literacy levels among women are a mere 8% (amongst the lowest in the country), KK's effort to impart education in the most neglected areas is an achievement few organisations can match. KK has helped strengthen women's role in society by providing them with not only primary education but other facilities as well such as micro credit, vocational training, micro-enterprise development and advocacy issues to empower women.

6.2

CASE 2: NWFP BARANI AREA DEVELOPMENT PROJECT

ADB approved a loan of US$30 million for the project in September 1992. The

Project's major objective was to improve the economic, social and nutritional well-being of the rural population, including women in rainfed farming areas of North-West Frontier Province (NWFP). Using the local traditions of communal action, the Project involved the provincial government, village organizations and women's organizations in meeting the development needs of the Project area. The Project consisted of five components: (i) strengthening of a range of agricultural support services; (ii) expansion and improvement of physical and social rural infrastructure including 20 irrigation and 10 potable water systems, and about 90 km of roads; (iii) engagement of NGOs to establish village organizations, and women's organizations to plan, execute and manage small scale, village-level investment schemes; (iv) provision of a credit line to provide production, development and cottage industry loans to individuals, and groups of small farmers, landless persons and women; and (v) establishment of a Barani Development Office (BDO) to coordinate Project implementation and plan future barani development programs.

6.2

CASE 3: TAMEER BANK

Ms. Samina Shaheen took a loan of Rs.30,000/- from Tameer in April 2007. Taking a loan was a first time experience for her and this brought her to her first ever contact with Tameer. Samina has put the loan amount in to her existing business of garment making. She has a small workshop next door to her place of residence. She runs this factory with the help of 6 employees. Samina buys all material locally. The garments are then stitched and embroidered and supplied to the local market as well as to some outlets up country. At times, she supplies to some shops abroad. She has been in this business for about 10 years.

6.3

CASE 4: SUNGI PROJECT

The woman, who is 22 years old, and lives in Barilla village with her husband and three small children, described their main sources of cash income as the clerical salary her husband earns (Rs2000 per month) and her own occasional embroidery (Rs20-40 per month). Her husband went to market to purchase the two goats she bought with her loan of Rs4500. She carries out most of the taska associated with the goats' upkeep and her husband provides loan repayment instalments from his salary. Sometimes there are arguments with her husband when she needs cash. The goats themselves do not provide an income stream; in fact, one of them died. However, the remaining one is a source of milk for the children, and she hopes to earn some cash when she sells the animal. Although she very much values the savings component of the women's organisation's work, she has had to oppose her brothers who advised her to deposit money in the bank to gain more interest.

Another woman borrower, much better-off and living with her husband and three salaried sons, was the mother of one of the leading members of the Barilla village organisation. Her monthly income is over Rs4000. She received Rs5000 for rope-making (for string cots) and travelled to Faisalabad herself to purchase the raw material. The income she makes, which was not revealed, is controlled by her alone. She attends monthly meetings regularly and plans to apply for a loan for a bigger business.

A third woman, 35 years old and an office-holder in the Karach women's organisation, took a two-year loan of Rs5000 to start a shop. She lives with her five children. Her husband is employed as a daily labourer in Islamabad. He brings back Rs1300-1500 per month and she earns Rs320 per month for stitching clothes. Once this loan is repaid she plans to take another loan for livestock rearing. She is more confident that she will be allowed to manage the work involved herself

6.4

CASE 4: FWBL

Sabiran Bibi has about seven acres of cultivable land on which they have cultivated rice these days. Their whole family works in the field at different phases of crop cultivation. Women's most important role is in the beginning of the cultivation and at the harvesting time. Sabiran Bibi availed a loan of Rs 5000 to purchase seeds and fertilizers for her crop. Her crop will be harvested in November. Sabiran, like many other women in rural areas is thrilled by the idea of a bank that is exclusively devoted to provide services to poor women. Samina Shafiq is a very enthusiastic young woman who is running this school with her husband in her own house. She is also teaching in ILO's NFE for carpet weaving children but in the morning she is running this school. FWBL provided her with a loan of Rs 8000 as she decided to renovate the school and purchase stationery items. She has about 200 children studying in her school.

CHAPTER - 7

ANALASIS
Microfinance success for a number of reasons. The first is that it is a true innovation in the development world. It was thought that very poor people couldnt afford to borrow money, they wouldnt be able to do anything with it, they didnt have the educational levels or the skill levels to be able to start businesses. Microfinance has proven that very wrong. In fact, theres a whole class of entrepreneurs among very poor people, and there are great examples of people starting all sorts of businesses. They have started a lot of home-based businesses, including buying a cow and serving the whole community with dairy products; buying chickens and providing the community with eggs; buying start-up materials for handicrafts. And there are cell-phone ladies roaming all over Africa who will buy a cell phone and go village to village lending out minutes on the cell phone and making a profit on that. There are many reasons why women have become the primary target of microfinance services. At a macro level, it is because 70 percent of the worlds poor are women. Women have a higher unemployment rate than men in virtually every country and make up the majority of the informal sector of most economies. They constitute the bulk of those who need microfinance services. Microfinance is still in the initial stages of development in Pakistan, so a lot has to be done to improve its reach to the target groups and to improve the benefits that it can bring with its proper implementation. However, the people to whom this facility has reached; are getting the benefits. Through research , it does give an insight on the trends of borrowing, economic activities, level of borrowers satisfaction and benefits obtained from the microfinance facility among women. The major findings are illustrated in the following pages:

7.1

WOMEN WITH MAJOR FAMILY-RESPONSIBILITIES

Most of female borrowers are of middle aged and married. This shows that the

microfinance services are going in the right direction to help the female help their families, because these age groups can be marked as having higher responsibilities to support their families. it is difficult for a single person earning to make the both ends meet, so if the other family member also gets involved in some economic activity, it can make the life easier. In middleage groups of females, generally, the children are of school-going age, and mostly only the father is the earning member. In such a case, if the women have access to such smaller loans for starting or expanding business activities, it can increase the income of the family. Data from case studies shows that a large number of women generally claim that education of children is a high priority for them and that they borrow and save for childrens education. Women are usually the primary or sole family caretakers in many developing countries. Helping them gain additional daily income improves the condition of their entire household. Putting extra income in womens hands is often the most efficient way to affect an entire family, as women typically put their childrens needs before their own. Children are more likely to complete their education and escape the poverty trap than their parents are. Giving women access to microcredit loans therefore generates a multiplier effect that increases the impact of a microfinance institutions activities, benefiting multiple generations.

7.2

BUSINESS SECTOR OF FEMALE CLIENTS

That womens mobility is constrained and women are restricted to pursuing economic opportunities within their direct households or communities. Many such cases have been recorded, where women have been able to cast away the shackles of mobility and travel regularly to bordering countries like Afghanistan or India to purchase tradable items like cloth, costume jewelry and tinsels. Some women are

pushing into previously male-dominated professions like taxi driving and public transport. Most of the respondents belonged to retail business, and most of them used to sell cloths, bed-sheets, cushions, electric appliances and other things on installments. Some of them were involved in value addition such as stitching, and in services such as beauty parlour business. Women choose the business in which higher return is associated and found the business easier way of earning money. As the nature of business of majority of the responding business-women is such that allows them to work single-handedly, therefore, even an expansion in business result in an increase in generation of much employment . That, in a rural and also an urban setting, there is a womens space (the domestic arena) and a male space (the public arena) and that gender relations are boxed into these spatial realities. However, when this myth is tested with the field reality; many such instances are found where women are transacting businesses and have been successful micro-managers, even when faced with many economic and social hurdles. Hundreds of women are actively working as commodity traders and shopkeepers even in South Asian villages.

7.3

PURPOSE BEHIND FEMALE WORKING

It was due to inflation so it is difficult for one person to earn for the whole family so they started working to increase the income for their family. Women were working as they were widows and there was no one else to earn in their family, some needs microfinance facility is that their husbands bears the home-expenditures but they wanted to have a personal source of income so that they do not have to ask their husbands for daily expenses and that is the reason for their being in business. However, it was seen that they were spending their earnings not only on the different good or bad occasions in the family for which their husbands did not allow money but also for the better schooling and clothing of their children, which is again a help in lessening the financial burden of their spouses.

7.4

LEVEL OF CONTROL OVER LOAN BY FEMALE CLIENTS

Most of the females had complete control over the loan amount they borrowed and they could utilize it the way they wanted without any interference from their spouse or any other family member.

7.5

UTILITIES OF INCREASED INCOME

The respondents provided the following utilities of the increased income as a result of microfinance borrowing: a) Majority simply said that there is ease in bearing the day-to-day expenditures as compared to before borrowing. b) Some clients have managed to send their children to private schools considering it a better source of education. Some clients have also arranged tuition for their children from the increased income. c) A widow easily managed the wedding of her son and daughter due to increased income. d) Most of the women were pleased with the fact that they do not have to ask their husbands for day-to-day monetary requirements and they feel more liberty in spending their earnings according to their wishes. e) Some borrowers have managed to buy such appliances as refrigerator, air-conditioner, and steel safe that they earlier could not afford.

7.6

PROBLEMS ASSOCIATED WITH MICROFINANCE

It does tend to reach those who are not among the poorest of the poor. If peoplere in a situation where their children are literally on the brink of dying from hunger or disease or starvation, or if theyre in a war-torn society, a small mircocredit loan is not on the forefront of their mind. theyre probably thinking of survival. In that case, microcredit is perhaps not going to be so successful. The reasons for this are clear. The poorest need tiny loans which are not cost effective even for microcredit programs. The poorest also place the greatest demands on microcredit training programs, which makes the cost of lending even higher Though introduced late yet microfinance sector in Pakistan is improving steadily. It is estimated that nearly seven million households in Pakistan need microfinance services. However, so far, less than one million of these poor households have been served only. Investments may not turn a profit. In this event the money to repay the loan must come from reduced consumption or borrowing from some other source, usually on worse terms. Another problem is capture of the loans by male relatives. In some cases, male relatives use female borrowers as fronts to get relatively low interest loans. These loans may or may not be used to benefit the family, and the female borrowers rarely see any benefit at all. And yet, the women are still held responsible for repayment of the loans.

Due to small amounts that are lent in microfinance to individual borrowers, theres a need to reach many borrowers to have higher gross amount disbursed by an MFI to achieve financial sustainability.

Having large number of clients of an MFI, and the supervision involved (specifically going to their door-steps) results in higher costs for the MFIs.

Since large number of target clients live in villages and the lack of MFIs (specifically banks) in these areas restricts their reach to their target clients.

Most MFIs are unable to recover the financial or even the operational costs. The current trend of deckling interest rates is further going to aggravate the situation.

Microfinance is not about micro loans only. It involves other products like savings; micro insurance; micro leasing etc. Most MFIs in Pakistan only pursue the Micro Credit option

Most Microfinance programs offer a single loan product for their clients. There is a need to diversify the products

MFIs do not focus on the entire cycle of Business development Services. For them, provision of loans and maintaining good recoveries is an ultimate end.

Major portfolio of Micro credit in the rural areas is for Agriculture that is traditionally susceptible to droughts, floods or natural calamities. This require rigorous risk measures

The current Microfinance products do not necessarily target the bottom poor. Special research and innovative products that can target this group is required.

Women experience poverty in diverse ways they are last to eat, the last to access health care,when the household falls into poverty they are the last to attend school

Women do not enjoy equitable access to vital assets such as land and water and services such as health care and education

CHAPTER - 8

RECOMMENDATIONS
The presence of demand for microfinance services in the country and the very inadequate supply of such facilities, it is needed to give a boost to this sector through the joint efforts of government and private sector.

8.1

CALCULATED SELECTION OF TARGET CLIENTS

First of all, the MFIs, although are aimed at improving the lives of the poor, cannot lent loans to every poor; it has to keep in mind the repayment factor which is must for its own sustainability and to better serve the people it is serving.

8.2

FACTORS ENSURING HIGH REPAYMENT RATES

Especially those MFIs that are in the early developmental stages should ensure their long-term sustainability. This is possible only if the repayment rate is good. To improve repayment rate, the MFIs must find the appropriate clients. This means, that it should be ensured before disbursement that the client, especially female, has a genuine business and the client is capable to run it from all aspects such as the business know-how to her and the support of her family (her spouse) in running that business.

8.3

MORE WEIGHT-AGE TO BUSINESS KNOWLEDGE & EXPERIENCE THAN THE BUSINESS CONDITION
The business know-how of the client is more important than the present condition of the business. Even if a business if not doing well, the business-woman can be lent the loan if there is a potential for the business to earn profits for the client on the investment of more money in it.

8.4

APPROPRIATE LOAN AMOUNT

The loan amount should not be very small so that investing that in the business has no significant impact on its earnings. But, at the same time, it should not be

that big amount that result in higher installment amount making it difficult for the borrower to repay on schedule. So, the amount should be lent on the basis of the nature of the business and the potential for growth in it.

8.5

AVAILABILITY OF REQUIRED MICROFINANCE STAFF

There should be adequate number of staff for carrying out the microfinance activities. It is also recommended that there is separate office and field staff with close coordination on the progress of the clients. This will lessen the staff burden and improve the repayment rate. For female borrowers, female field staff is strongly recommended as the male staff cannot go into their homes that frequently, thus providing a hiding for defaulter female clients.

8.6

RIGHT JUDGMENT OF REQUIRED FLEXIBILITY IN REPAYMENT FROM CLIENTS

Since the microfinance borrowers belong to very poor segment of the society, they may face problems at times in paying their installments, so a little flexibility in that is good. But, it has also been recorded that some clients are able to pay in time when they fear the supervision and strictness from the lenders. So, the flexibility is a matter of judgment and should vary from case to case.

8.7

NEED FOR REALIZATION OF RIGHT LOAN-UTILIZATION AMONG CLIENTS

The clients should be guided as to the proper utilization of the borrowed money. They should be made to realize the fact that if these borrowings are invested in the business, it will not only expand their business, but also increase their income and make them able to pay installments in time thus opening the doors for future borrowings from the same institutions.

8.8

PROVISION OF TRAINING TO MICROFINANCE CLIENTS

Apart from this guidance, if the clients could be trained in their business fields, this will also bring improved results. At least, if they are trained in record keeping, itll help the policy-makers to gauge the impact in exact figures.

8.9

APPROPRIATE NUMBER OF MEMBERS IN A GROUP

For lending in groups, the ideal number of members in a group range from 4-8. A higher number makes the access and supervision difficult, and it also increases the chances of clashes within the group.

8.10 REDUCTION IN CHANCES OF GROUP PROBLEMS

After the group is formed, a meeting should be arranged with all the members before loan disbursement, and they should be informed of all the costs (interest) associated, so that they are not looted by the group leaders or anyone in the name of commission etc.

8.11 INCREASED & AUTHENTIC KNOWLEDGE OF BANKS MICROFINANCE FACILITY TO THE POOR
The bank staff should go to the doorsteps of the poor to inform them of the microfinance facility in order to increase the reach of this effective tool.

8.12 INCREASED REACH OF MICROFINANCE SERVICES

More MFIs are needed to be launched or the branches of existing MFIs be opened in areas (villages) which lack access to this facility.

8.13 SIMPLE & EASIER PROCEDURES FOR MICROFINANCE BORROWING

The lending procedures should be kept easier and simple for the poor people, so that access is not denied to the potential clients due to strict and difficult policies.

8.16

TARGETING POOR WITH THE AIM TO TRANSFER BENEFITS TO THE LARGER PART OF THE SOCIETY Although loan should be disbursed to poor even if that does not increase the number of workers, but special attention should be given to the businesses with a potential to generate employment, thus one loan disbursed will have many beneficiaries the loan borrower, the personnel employed as a result of business expansion, and the dependents of the newly employed personnel to name a few.

8.17 EFFORTS FOR ENSURING CONTROL OVER LOAN BY BORROWERS

The microfinance lender should ensure that the client, specifically the female borrower has a complete control over the loan amount, and it is not snatched from her for purposes other than for which the loan had been borrowed

8.18 EDUCATION SHOULD BE IMPARTED TO WOMEN

The first step in alleviating the poverty of women is to educate them. Education is the means by which women will be able to participate in an increasingly global economy, which requires a workforce with a minimum level of technical skills, literacy and managerial education.3 Studies have shown that generally only the more educated, trained and compute literate women of a country become entrepreneurs

8.19 TO EMPOWER WOMEN

to improve women efficacy in local and national bodies of governance. To eliminate socio-cultural retrictions on womens participation in the political process and implement affirmative policies to substanitallly increase the proportion of women in all decision making bodies.including judiaiary and finanacial institution.

Conclusion Microfinance is not a new concept, however Pakistan has to go a long way in this sector through learning from others success stories as well as her own experience in the sector. The findings presented in this chapter are tested to the hypothesis set in Chapter-1 in order to give the concluding remarks about the state of microfinance services in NWFP, specifically and whole of Pakistan generally. It was said in the hypothesis that microfinance providers see towards poor female as their main target, but in the case of the NWFP under study, the statistics doesnt match this fact. Here the male microfinance clients are in thousands whereas female clients were only few in number. However, the reasons behind these statistics are numerous from the cultural impacts to the majority women not being business-minded due to perhaps certain constraints. But, the trends are changing, and the MFI in NWFP has also a major hand in having lesser number of female clients. The major reason of MFIs inability to attract more female clients is the lack of field staff, especially the absence of any female field staff. . However, despite the lower number of female clients, it has been observed that microfinance borrowings has indeed a positive impact on the lives of poor people, where these borrowings have been properly utilized, and such clients are also able to repay their installments regularly. Therefore, as a whole, it can be said that the microfinance facility has played a good role in improving the lives of many poor, but to make this institution more sustainable and beneficial, certain improvements are required which have been presented in the form of recommendations . In a concluding remark for the microfinance industry in Pakistan, as found in literature review; bright prospects can be forecasted for the growth and success of this industry in Pakistan.

Bibliography Women and Microcredit in History: Gender in the Irish Loan Funds By Aidan Hollis, 1999 MICROFINANCE BANGLADESH, AND WOMENS EMPOWERMENT IN RURAL

H. Elaine Lindgren, Montarin Mahal. Available online at:

http://www.misu.nodak.edu/research/Microfinance.pdf Grameen Bank At a Glance, by Muhammad Yunus, June 2005. Available online at: http://www.grameen-info.org/bank/GBGlance.htm Pakistan Microfinance Network, Performance Indicators Report; 2004. Roshaneh Zafar,Development Dialogue turns into Miracle for Pakistani Women. Available online at: http://www.globalenvision.org/library/4/575/6/ Sadia Saeed, Fighting Poverty and Improving Lives through Microfinance in Pakistan, 2004. http://www.pmn.org.pk/link.php?goto=aboutus http://www.pmn.org.pk/link.php?goto=history http://www.pakboi.gov.pk/News_Archive/2004/December/16-12-04.html http://www.cfr.org/pub6543/cfr/microfinance_in_pakistan_a_silver_bullet_for_de velopment.php

http://www.geocities.com/jasonmeade3000/Microcredit.html The Daily Dawn 8th Feb. 2001 CGAP (2002a) Apex institutions in microfinance, CGAP Occasional Paper No. 6, January.