Nov 23 - 29, 2009

Pakistan achieved stellar GDP growth rates during financial years 2004 & 2005 that were 7.5 percent and 9 percent respectively but could not maintain the level in the following years.

Though the global financial meltdown had adversely affected the global economies including Pakistan yet those having a strong political and economic structure successfully weathered the pressure and maintained the growth rates.

It is unfortunate that despite having a strong agriculture and industrial base Pakistan was unable to catch up the growth rate which declined to 2.7 percent last financial year and is expected to remain below that this year. The government has projected the growth rate at 3.3 percent.

Despite all odds like war on terror, violence and worsening law and order as well as heightening political noise there is always a way out to cope up with the situation provided one has a strong will to fight back and of course the support of the people to get through the crisis.

Bangladesh is the best example that is fighting out poverty and generates economic activity through involvement of the common people who contribute in economic growth through microfinance.

A huge population both in rural and urban areas having a great potential to reinforce economic growth is sitting idle in Pakistan due to resource constrains. The present government has chalked out a Rs70 billion poverty alleviation program under the title of Benazir Support Program which is probably the biggest support program in the region yet this amount could have produced meaningful results if the poor families were given a direction through micro finance schemes instead of charity.


In fact, microfinance presently stands at a critical juncture. In Pakistan, the level of financial exclusion is evident from the most recent Access to Finance survey carried out in 2008, which revealed that only 11% of the adult population are formally banked.

The banking industry growth remained stagnant with 1.7 and 1.8 million clients in the last 4 quarters, making it difficult to achieve the goal of 3 million borrowers by 2010 as set out in the national microfinance strategy of 2007.

Syed Salim Raza, Governor State Bank of Pakistan recently stressed upon the microfinance institutions to explore various successful models and benefit from technology advancements to increase the outreach of microfinance in the country.

In his keynote address at the Third Microfinance Country Forum 2009, Mr. Raza stressed that product development and innovation was an area to be explored and microfinance banks (MFBs) needed to make a shift, away from the single-product-driven strategy. They should develop a broader set of products for their customers. "This would help MFBs build their revenue streams and attain financial and operational stability," he added.

Mr. Raza emphasized the importance of targeting niche markets and underserved areas in Pakistan. He said many countries with well-developed markets had diverse players ranging from village banks to commercial banks involved in serving the needs of the untargeted market. "It is noteworthy the success of Philippines and Indonesia," he added.

SBP Governor stressed that the onus of broadening of access of poor to financial services lies with dynamic private sector players. "The prudent way to move forward is to keep a close watch on the evolution of microfinance as a business, identify the problems timely, and take appropriate responsive measures," he said and added that the larger responsibility lies with Microfinance Banks/Institutions to build their organizations on fundamental principles of growth and sustainability.

Moreover, players ought to focus on unique approaches and markets to serve the needs of customers. The government, regulators and policy making institutions in collaboration with key stakeholders will continue focusing on developing an enabling environment, creating supporting infrastructure, and making prudent interventions for facilitating the sector's progress, he added.

Referring to performance of MFBs, he said microfinance in Pakistan had a long way to go when compared to global progress.

In Pakistan, from the year 2000 to 2007, the sector has evolved to include a variety of players and models. "The industry is, at present, led by both microfinance banks and non-deposit taking microfinance players that have experienced rapid growth in recent years," he said and added that leading international players including Bangladesh Rural Advancement Committee (BRAC) and ASA (a renowned MFI in Bangladesh) have stepped into the microfinance market in Pakistan.

Talking about challenges faced by the sector, Mr. Raza said that microfinance in Pakistan was yet to develop a sophisticated array of financial services for a wider segment of the excluded and remain heavily credit driven. Secondly, he pointed out, the current average loan size is quite low which not only suppresses the sustainability of MFBs but also limits the potential of entrepreneurship development of those who are availing micro-credit.

SBP Governor said that in order to support the microfinance sector going forward, the State Bank had devised a comprehensive policy and strategic framework, which strikes a balance between risk and growth. SBP has been a pioneer in branchless banking in South Asia that will help increase access, he said and added that State Bank recently amended the Prudential Regulations for MFBs to remove the regulatory bottlenecks as pointed out by the industry in its various interactions with SBP.

With the aim to encourage up-scaling of microfinance services, MFBs have increased ceiling on their loan limits and relaxed borrower criteria to allow for client graduation. MFBs can now extend micro loans of up to Rs 150,000 for general purpose and Rs 500,000 for housing-loan. Also, the criteria of borrowers' selection have been relaxed. Now the maximum annual income of borrower has moved upwards from Rs 150,000 to Rs 300,000 for general loans and Rs 600,000 for housing loans to allow room for graduation of microfinance clients, he added.

The closing session featured Dr. Rashid Bajwa, CEO NRSP who proposed the strategic "way forward" for the microfinance sector. He identified the key points brought out by the distinguished speakers during the day and concluded that the microfinance sector in Pakistan must recognize change in market dynamics, evolve an inclusive policy framework, strategize the need for reaching out to people for mass credit accessibility and work towards a balanced 'financial services for all' approach.


The total liquid foreign reserves held by the country stood at $ 14,123.5 million on 14th November, 2009. The break-up of the foreign reserves position is as under: -

i) Foreign reserves held by the State Bank of Pakistan: $ 10,494.0 million
ii) Net foreign reserves held by banks (other than SBP): $ 3,629.5 million
iii) Total liquid foreign reserves: $ 14,123.5 million