The Impact of Inflation on Microfinance Clients and its Implications for Microfinance Practitioners

This study attempts to understand and document the impact of Pakistan's slowing economy and rising inflation on microfinance clients. The report presents findings based on discussions with microfinance clients and MFI staff. Study findings reflecting the diverse and contradictory nature and consequences of inflation, which impact different segments of population differently, include:

• Most respondents felt that inflation did not have a negative impact on their businesses or lives;
• Many respondents felt that inflation helped them make higher profits;
• Clients found it easy to pass on inflation-imposed costs, by raising prices of goods and services;
• Most clients used their loans for productive purposes and were certain they would be able to recoup their investments;
• Not a single client complained that they were unable to repay their installments;
• Agricultural producers and rural dwellers were the greatest beneficiaries of inflation.

The study concludes that the impact of inflation has not yet been passed on to microfinance clients. If inflation rates persist, microfinance providers might have to raise their credit ceilings and increase the loan installment process by some months to ease pressure on clients.