Microfinance Institutes in Pakistan

Outreach and Financial Sustainability Analysis through a Socio-Political Lens

Abstract:

Microfinance initiatives introduced around 1995, are now considered an integral part of a country’s financial system. But as these initiatives have gained popularity, the question regarding their sustainability and outreach has also become a thought provoking question. In Pakistan, the increasing return on equity from -78.4 to -1.1% during 2005-06 and increasing number of borrowers’ especially females are an evidence of a flourishing MFI system. But the question that will they ever reach sustainability still remains the same. Though the trends are positive but the stream of donations and numbers of cash aids are also staggering. This paper tries to analyze the growth in sustainability and outreach of MFI’s overtime with a simultaneous review of the social and political situations faced by Pakistan. A link between socio-political condition and MFI’s financial reports has been built. This linkage is then further shown to find a refined version of the results and shows that despite the fragile legal framework, no political stability and natural disasters in the past, MFI’s have shown consistent progress. Hence, they deserve to be further explored and reviewed for improvement in this sector leading to ultimate targets.

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