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Three dimensional aspects of CSR — remittances, financial inclusion and microfinance

South Asia is the world’s fastest growing region but economic growth alone could not be relied upon to end poverty. The region is also vulnerable to natural disasters. From Afghanistan to Bangladesh, much of South Asia is located in one of the highly seismically active regions in the world. More than 600 million people live along the fault lines across the Himalayan belt that runs through Afghanistan, Pakistan, India, Nepal and Bhutan.

As part of the region, Pakistan’s growth must benefit the poorest and unlock opportunities for today’s much poor to get better jobs tomorrow and beyond. Disaster preparedness is a must as these disasters fall hardest on the poor. In the last few years, Pakistan faced many natural calamities, like earthquake, floods etc through which millions of people were affected very badly. Though aids from neighbor and international countries and multinational companies as well as national companies were granted for the affectees. but still there is much more to do especially if the great deal of concentration played in the funding through remittances, making proper implementation of financial inclusion and even full filling the microfinance needs, the achievement for overcoming the poverty can be made at some extend.


Corporate Social Responsibility (CRS) has become an important part of planning to get and sustain the competitive advantage in the globally competitive companies. Companies can gain great benefits from participating in CSR and that these benefits are the reasons for their engagement in Corporate Social Responsibility. CSR affects the financial performance of the firms. In today’s global world, organizations have many challenges to operate and earn profits. People have more knowledge about the organizations, their products and services and the way organizations operate their businesses. People are more conscious about the organization’s work for the prosperity of the society, the environment in which they operate and earn profits. In the world, companies are facing many problems with a new role, which is to fulfill the demands of the present generation in a socially responsible way. Organizations must take responsibility for the ways they operate in the societies and natural environment because their operations impact societies and the natural environment.


Remittances play a very important role in eliminating poverty of a nation.It is hypothesized that remittances, trade openness, GDP growth, inflation, urbanization and tax rates are the possible variables affecting poverty. Remittances are also poverty cushion as increased money supply to stimulate the demand and increased consumption expenditures on goods and services would ultimately benefit the poor.

Low level of economic activity has created unemployment for skilled labor while the remittances have created the opportunities even for unskilled labors. The micro impact of remittances on poverty has been much discussed in literature but at macro-level remittances and poverty nexus is missing particularly in case of Pakistan. A 10 percent increase in international remittances in developing economy will decline the poverty by 3.5 percent in that country. Increased remittances reduce poverty also in short span of time. Inflation enhances the poverty levels insignificantly while economic growth significantly. Trade-openness and urbanization decline poverty while high rate tax imposition tends to raise poverty in Pakistan.


In the past, the poor have simply been excluded from the mainstream financial system. Their transactions were too small, the distances were too long, and, generally, it was just too costly to reach them. In the last few years, however, the digital revolution has changed the cost calculation radically, to the point where banks are starting to rethink all their presumptions. Mobile phones have become ubiquitous as today 85 percent of the world’s population has access to one. For the first time, transaction costs are being cut dramatically, and distances are no longer insurmountable. At the same time, the global microfinance industry has grown to serve hundreds of millions of the world’s poor and their families. So, a safe, affordable place to save is vital, and access to appropriate credit, insurance, and payment mechanisms are arguably more critical for this class of client than any other.


Microfinance is just one tool in the war against poverty. For microfinance to be successful at poverty reduction, it must be used in conjunction with education, health and other social interventions. Microfinance becomes a multiplier force in such a scenario. Not only does it reduce poverty, it creates an even playing field by bringing the marginalized population into the banking net. The reality is that this customer-base pays an exorbitant price for the services that the banked population uses.

Savings is a key part of the poverty-reduction agenda. The microfinance industry has been successful in opening mobile accounts, but has yet to make these accounts active. The microfinance industry has had healthy growth in Pakistan, but now needs to grow exponentially if it is to become a major player in addressing financial exclusion and poverty. Apart from microfinance, agriculture and small business are critical sectors in Pakistan’s economy that play a significant role in job creation and poverty reduction.

Promotion of sustainable economic growth through boosting private investment in infrastructure and human capital since child’s early years will make the biggest difference to country’s ability to grow and compete. The recent example is that of Benazir Income Support Programme (BISP), which reaches more than 5 million people through making payments to female head of households.


The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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