Pakistan : Microfinance

BRAC began its microfinance programme in Pakistan in August 2007 with 12 branches in the North West Frontier Province (NWFP), an area that borders Afghanistan and is one of the most challenging provinces for development organisations to operate in.

 We focus on both the economic and social needs of our target borrowers in Pakistan, recognising and understanding that communities of borrowers require multiple interventions to move out of poverty. Microfinance initially paves the way for BRAC because it harnesses the power of the group as both an economic and social unit offering support and security for the loans of its members. Microfinance groups or Village Organisations (VOs) can later become a delivery platform for community based information and services such as health care, education and other livelihood activities. This approach to development has a multiplying affect by not only helping individuals but their entire community pull itself out of the spiral of poverty.   BRAC believes that community partnerships and institution building are essential in sustainable development and in spreading knowledge to future generations.   BRAC serves women of poor families in 4 provinces. VO members in Pakistan say that no one has ever approached them before about microloans. They learnt about BRAC from the Credit Officers who came to their homes to do a survey, or by word of mouth from neighbours who have heard of BRAC.

Programme Description
BRAC aims to strengthen the income base of poor women by providing easy access to institutional lending which in turn enables them to start income generating activities.   Our policy in Pakistan is to encourage investments by poor women in productive activities. The main focus here is on women borrowers because they play a pivotal role within local and family financial networks.   BRAC’s experience, backed by worldwide evidence, suggests that investing in women with low incomes results in significant social and economic benefits for everyone. By engaging in financial activities, women find themselves independent and empowered.

Programme Components
BRAC has created a standard size loan based on women’s financial capacity. These group based loans are specifically designed for lower end poor women to assist them in undertaking income and employment generating activities.   BRAC aims at targeting poor but economically active women who are within the bottom 50% of the national poverty line. Credit Officers are responsible for identifying clients and forming Village Organisation (VO) groups from among the women in their target area.   Some guidelines for identifying clients include:  

•  Membership is open for females only
•  Aged between 18-55 years
•  Special emphasis on female-headed households and widows
•  Must not be a member of another microfinance organisation

  It is estimated that 60% of the microfinance market in Pakistan is untapped. A large number of the poor have yet to have adequate experience in dealing with banks and other financial institutions. Therefore there is a great need for BRAC’s holistic approach to poverty alleviation in Pakistan through a service delivery platform that the microfinance programme achieves in the communities it serves.   Security concerns and entrenched customs make it quite challenging to work in provinces such as NWFP and Baluchistan, but BRAC’s successes in neighbouring Afghanistan have resonated very well with the women we work with even in such restrictive places in Pakistan. We hope to reach more than half a million clients by 2013.

Microloans  At the core of the programme are microloans, which are exclusively for women participating in the VOs. BRAC lends to women who are not served by other microfinance institutions. Borrowers typically operate businesses that provide products or services to their local communities.

Key Features of a Microloan

•   Loan Range: USD 100-600;
•  Loan Security Deposit: 10% of the sanctioned amount (refundable after repayment);
•  Repayment Mechanism: Payable weekly in 48 equal instalments (or one year);
•  No collateral is required;
•  After four group meetings the loan disbursement starts taking place;
•  Group size: 15-30 members (3-6 in smaller groups).

Most popular loan uses

•  Retailing - grocery and clothing stores
• Yoghurt making
• Embroidery
• Tailoring
• Clothes trading
• Cosmetics
• Fattening cattle
• Meat preparers
• Nurseries
• Running confectionary and sweet shops
• Running beauty parlours
• Making artificial flowers
• Jewellery making