An Examination of Challenges and Prospects of Microfinance Sector of Pakistan

This study discusses challenges and prospects of microfinance sector of Pakistan.

The study aims to help MFIs understand sector challenges and opportunities, encourage banks and other financial institutions to enter the sector and help the country develop new strategies for micro financing. Findings include:

• MFIs staff needs training to positively impact microfinance;
• Majority of those interviewed for the study believe that loans are used for investment activities rather than personal consumption;
• MFIs need to pay more attention to clients skill development;
• Majority of population perceive MFIs and other financial services as being against their religious beliefs;
• Norms and culture pose threats to MFIs and banks;
• Cost of microfinance is relatively high compared to other financial products;
• MFI standards, practices and processes need improvement;
• Those interviewed have a positive opinion of the alliance between commercial banking and microfinance.

The study recommends adequate training for MFI staff, research on clients skills and help to improve their skills, establishment of Islamic MFIs, aggressive marketing of microfinance, efforts to make small loans available at competitive costs, MFI risk mitigation and adoption of standard practices.