Challenges and opportunities in micro finance

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Challenges and opportunities in micro finance

  1. 1. Challenges and Opportunities in Micro Finance Faheemullah MBA(B&f) 2 nd semester Institute of management sciences
  2. 2. Micro finance <ul><li>“ Providing very poor families with very small loans to help them engage in productive activities.” </li></ul><ul><li>To enable the poor:- </li></ul><ul><li>Build there asset </li></ul><ul><li>Develop their micro-enterprise </li></ul><ul><li>Enhance their income-earning capacity </li></ul><ul><li>Enjoy an improved quality of life </li></ul>
  3. 3. Role of Micro-Finance <ul><li>Microfinance schemes are now operating in many developing countries across Asia, Africa, Latin America. Their operations emphasize ‘strategic lending,’ i.e., lending very small short-term loans to very poor micro-entrepreneurs. </li></ul><ul><li>Microfinance is recognized as very effective developing tool for four basic reasons:- </li></ul><ul><ul><li>It is provided to poor. </li></ul></ul><ul><ul><li>It contributes to socio-economic status of the targeted community. </li></ul></ul><ul><ul><li>It empower women. </li></ul></ul><ul><ul><li>The institutions that deliver these services can develop, within a few years, into sustainable organization. </li></ul></ul>
  4. 4. Evolution of Micro-finance in Pakistan- A brief sketch <ul><li>In Pakistan the recent microfinance moment is started in 1982. </li></ul><ul><li>The first microfinance institution is Orangi Pilot project in Karachi and then Agha khan Rural Support Programme (AKRSP). </li></ul><ul><li>In 1990 it spread across the country and in 1996 Kashf foundation was established. </li></ul><ul><li>Than later Khushhali bank was established in 2000. </li></ul><ul><li>Other microfinance banks in Pakistan are:- </li></ul><ul><ul><li>Tameer Microfinance bank limited </li></ul></ul><ul><ul><li>The first Microfinance bank limited </li></ul></ul><ul><ul><li>Pak-Oman Microfinance bank limited </li></ul></ul>
  5. 5. Challenges in Microfinance <ul><li>High interest rate & high transaction cost. </li></ul><ul><li>Barriers for conventional banking. </li></ul><ul><li>Inadequate investment in Agricultural and Rural development. </li></ul><ul><li>Low level of technical understanding of banking and finance. </li></ul><ul><li>No innovative Mix of products by microfinance institution. </li></ul>
  6. 6. Opportunities in Micro Finance <ul><li>Microfinance as Development tool </li></ul><ul><li>Women oriented Financing </li></ul><ul><li>Microfinance tool for Rehabilitation </li></ul><ul><li>Commercialization of MFI </li></ul><ul><li>Microfinance sector as an opportunity for commercial banks </li></ul><ul><li>Automation of microfinance system </li></ul>
  7. 7. Conclusion <ul><li>Improved access to microfinance services can enable the poor to smooth out their consumption, manages their risks better, build their assets, develop their micro enterprises and enhance their earning capacity. </li></ul><ul><li>The landscape of microfinance is changing as a result of increased understanding of how the poor use money and diverse demand for financial services. </li></ul><ul><li>The microfinance industry is evolving into an increasingly commercial operation to serve a larger segment of the potential market. </li></ul><ul><li>Although, the achievements in microfinance are impressive but still major problems remain such as, attaining profitability, diversification of product and services etc. </li></ul>
  8. 8. Recommendations <ul><li>There should be financial transparency, i.e., gathering and reporting accurate information, the sequence extends to verifying the information, then to analyzing, comparing judging the performance described by that information. </li></ul><ul><li>Microfinance institutions can develop its commercial services on a permanent basis only if they operate in appropriate infrastructure, such as information system and training facilities. </li></ul><ul><li>There should be systems, procedure and financial technology for reducing transaction cost. </li></ul><ul><li>For the development of microfinance, it is important to have diversified products and services. </li></ul>
  9. 9. Thank You

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