There is a close relationship between poverty in Pakistan and the agrarian-based rural culture

July 22 - 28, 2002


Poverty is a multi-dimensional phenomenon, which encompasses economic, political and social deprivations of the majority people in a country. The denial of basic and essential needs to the population gives rise to the concept of poverty. The dearth of resources available to the state through taxation measures and other collection methods in third world countries like Pakistan restrict the Government's maneuverability to spend more on social services for the people. The galloping rise in population as compared to slack growth rate of the economy further complicates matters for the government. Poverty in Pakistan is widespread and the incidence of poverty is increasing at an alarming pace. A person is considered poor if he is unable to get basic needs of life satisfied. According to the figures released by the Government in the Economic Survey 2001-2002, Pakistan's official poverty line signifies a person as poor if he or she falls below the bracket of Rs. 650 per capita per month. There is a close relationship between poverty in Pakistan and the agrarian-based rural culture. Crop failures in drought conditions shoot up the poverty graph and vice versa. The country is confronted with twin challenges of generating growth and reducing poverty. The socio-economic indicators of Pakistan present a gloomy picture. It is a malady that teeming millions of our countrymen are deprived of their basic necessities of life like education, healthcare, drinking water, clean environment and social justice.

In order to remedy the situation, the Government has launched a massive poverty alleviation programme which includes, among others, efforts aimed at improving income generating opportunities through strategies like creation of greater opportunities for increasing real incomes by increasing access to productive assets, mainly housing, land and credit.

Availability of easy access to credit is the major problem faced by the poor who do not have assets to offer as collateral while the fact is that small borrowers have a much better record of paying back the credits taken from the banks and financial institutions. The Government has set up the Pakistan Poverty Alleviation Fund (PPAF) with an endowment of $100 million to extend credit to the poor through NGOs engaged in providing micro financing. The PPAF has disbursed micro credit financing to the tune of Rs. 365 million during the period, July 2001 to March 2002 in 35 districts of the country. The concept of micro credit is not new. It has a long history. The main stress of the micro finance is to extend credit to the poor to enable them to generate income opportunities by utilizing their productive assets like house, land and money. Microfinance is the centerpiece of the poverty alleviation plan launched by the government with the support of foreign donors and the non-government organizations (NGOs). It aims at empowering the poorest of the poor to earn their own livelihood with the initial support provided by the micro finance institutions and the NGOs.

There is no denying the fact that industrial base can not be strengthened without putting in position a strong network of the SMEs. The role of the SMEs assumes added significance as regards the resilience of the economy to confront global recession. The SMEs constitute about 90% of businesses in the country. Unfortunately, majority of them operate in the informal sectors of the economy. They, however, represent a significant component of the national economy as regards the value addition and employment generation. They provide employment to the low-income groups. The SMEs provide 80% of total employment and contributing over 30% to GDP and generating one-fourth of the sector's export earnings.

In order to step up activities of small and medium enterprises in the country, the Government has set the Small and Medium Enterprises Bank (SME Bank) which is operational since January 1, 2002. With an initial capital of Rs. One billion, the SME Bank is assigned to promote the export oriented small and medium scale enterprises. It is extending loans ranging from Rs.50 thousand to Rs. 30 million. The needs of small and medium enterprises are now being addressed by the SME Bank which is working as a sort of catalyst to revive the SMEs.

Results of economic policies take time to mature while the patience in Pakistan is a quality very rare. The present government has addressed all issues of economic revival in their totality as envisioned in the 7-point agenda. The continuation of the economic policies for another five to seven

years would certainly pay dividends to the country. Unless the foreign investor is sure of the continuation of policies he remains scared to venture into risk-taking exercise. It is hoped that the present government would make serious efforts and impress upon the new democratic dispensation likely to return to the saddle of power in October this year for continuation of the economic policies.