EXPANDING MICRO-FINANCE IN BALOCHISTAN

SYED FAZL-E-HAIDER
Apr 28 - May 11, 2008

Balochistan is a cash-starved province. It only generates Rs.2 billion from its own resources. Over 50 percent of its population lives below poverty line. The development of micro-finance sector can help alleviating poverty in the province. It can bring about a real change in the lowest strata of the society and improve the socio-economic status of the poor segments of the society.

Balochistan is trapped in poverty and under development. Micro-credit may be used as an important and effective tool to combat wide spread poverty in the province. Only 20 per cent of its people have an access to safe drinking water compared to 86 per cent in the rest of Pakistan. Village electrification is only 25 per cent compared to 75 per cent in the rest of the country. Infant mortality rate per 1,000 people is 108 as against national rate of 100. The situation of basic amenities and access to education is also far below the ratio of other provinces. Presently, the poor are recovering from the devastating drought that plagued the province for the last five years. The groundwater is depleting rapidly. Only six per cent of the land is cultivable and productivity is low because of the arid conditions. The rugged and inaccessible terrain, limited water resources for irrigation, large illiterate population, ethnic diversity and traditional women's status are added challenges to economic growth and human development.

For the last five years, Khushhali Bank has been promoting micro credit in the public sector in the province. It has however not achieved its key objective of poverty alleviation. In other words, the strategy of Khushhali Bank has not been affective in targeting the abject poverty in the province. The lack of adequate human and institutional capacity, shortage of local expertise and weak coordination among various stakeholders are the main hurdles in expanding micro-finance in Balochistan. These hurdles need to be removed for proper growth of micro-finance sector in the province. Khushhali Bank was established by the former government to provide access to sustainable micro-finance services for the poor to enhance their income earning capacity. It is the country's largest micro-finance bank with a shareholding of over 1.7 billion from private, multinational, public sector commercial banks and is funded by Asian Development Bank with a credit line of $ 150 million. The bank set up the country's largest retail micro-finance network spanning 38 districts in first three years of its establishment.

In Balochistan, the recovery area has been weak and problematic for Khushhali Bank. People borrowed from micro-credit bank and escaped. There are several cases in which loans could not be recovered. Some people say that loans were not given to the serious and genuine people. The regulators and practitioners of microfinance should devise an efficient and effective strategy to address the issue of prevailing poverty in the province. They should give loans to the people according to their capacities. The people, who apply for a loan, must be verified on grounds of their financial position, experience and reputation and their business proposals should be scrutinized by the experts before sanctioning of loans.

A different policy should be formulated for loaning to the people living below poverty line. It is a hard fact that the majority of people in Balochistan live below poverty line, and hence provision of micro-finance services to the local people will primarily help in their economic rehabilitation. The province lacks human capital. A bulk of unskilled population lacks the employment opportunities. The promotion of micro-finance sector will create more job opportunities for the local people.

The micro credit banks should broaden their branch network and client base amongst the local communities in Balochistan. The private sector should also come forward to set up further micro credit banks. Micro credit banking in private sector can play a vital role in accelerating economic growth, facilitating finances to the down trodden sections for their socio-economic uplift and eradicating poverty from the province.

Balochistan with its challenging geographical terrain and scattered population needs a comprehensive micro-finance development strategy to alleviate poverty. A strategy should be devised to ensure the access of poor and low-income households to institutional financial services. It is suggested that the new provincial government should take all possible steps to provide propitious environment for micro credit banking in private sector and remove all hurdles in this regard.

There is dire need for ensuring transparency in microfinance sector. Only the deserving persons fulfilling criteria should have the access to financial services. Secondly, the system of providing microfinance services must be sustainable and on permanent basis. Sustainability can be achieved through diversification of financial services. Thirdly government must encourage the micro finance practitioners and help them develop a formal and sustainable finance system for expanding micro finance supply across the country. An informal credit supply is not the answer to eradicate poverty, as the poor frequently turns to the informal credit suppliers that put crippling terms and conditions for micro-credit. Finally, efforts should be made to maximize to outreach of the clients for promotion of private banks willing to invest in the micro credit.

Micro financing is a vital approach to alleviate poverty and combat joblessness in the province, as it would help build human capacity that is evident from the experience of other developing countries. Provision of credit to the people at grassroots level and small firms is an excellent strategy to boost economic activities and generating job opportunities. The government should try to increase the number of beneficiaries and volume of credit in this context in order to spread micro-finance throughout the province.

Over 75 percent of population in Balochistan is directly or indirectly linked to raising livestock in the province. Micro-credit services may be extended to the local people for launching small livestock-based projects in the province. Such projects will significantly target and alleviate the higher poverty in the province.