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Future of Micro Finance in Pakistan

Future of Micro Finance in Pakistan

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Published by Farhat Abbas Shah

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Published by: Farhat Abbas Shah on Sep 01, 2010
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05/26/2011

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Future of microfinance in Pakistan
 Farhat Abbas ShahRecent floods in Pakistan have further plunged the already reeling economy. The estimation of the total damage will take some time but the need to microfinance the victims are dire as thefailure in this sector can create a famine in not too distant a future.The government is already cash-strapped and avoided default the last year with the help of IMF.Another dilemma is the trust deficit due to which the enough aid is not coming and the donorsare relying upon the non-governmental bodies.The real challenge is that of rehabilitating the destroyed businesses of the flood victims asthrough this process we can even fight the hunger and disease by reestablishing thei productivity.Pakistan is said to be a predominantly an agricultural economy and it was this sector that has been severely damaged. Through microfinance and SMEs, this damage can effectively be dealtwith in a matter next 5 to 10 years. Millions of acres of agri land has presently been under floodwaters. And the only redeeming feature is the fertility that the flood will leave behind.Here comes the role of the microfinance and SME but with a difference as the damaged has beencaused by various internal and external causes. No doubt this is the time when the investmentsare taking a very interesting twist from the conventional to Islamic and from microfinance tosmall medium enterprise as well. Although the various conventional MFIs are shifting their mode of financing also, but they could not have positive results and the mission rift issue isanother tragic story, told by these MFIs.As I ever admitted that only the microfinance could reduce the miseries of the vulnerable.However, the sector has to come with a new enthusiasm and an innovative paradigm.As the current scenario of Pakistan demands a well planned agriculture based microfinance or SME financing to ensure the rehabilitation of the flood victim rural community of Pakistan.According to a study conducted by Farz Foundation, 50% population in rural areas of Pakistanearns livelihood from agriculture and 50% from other sources. The people involve inagribusinesses also do live stock as another source of income. While the other 50% populationdo the businesses like grocery shops, and transport, embroidery along with the labor on dailywages.Instead of group methodology or village banking etc, the product of entrepreneur or SME villagethrough the vehicle of Farz Methodology could have a far wider scope as the earlier methodscould not reach out to a considerable number of people. That is the only way to have the longawaited trickle down effect so that it could lend economic stability at a macro level as wellthrough “Twist Up Economy”(
Twist up theory emerges as a rejoinder to trickle down theory. It is a course with the notion that the sustained micro and small businesses assure the sustainability of the macro economics. It increases the numbers of consumers and theicapability to buy. It also strengthens the markets and supports rich persons to expand their businesses. The Farz Methodology implements Twist Up Economy as its core strategiccomponent 
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