Microfinance is a proven way of alleviating poverty through the 'virtuous spirals' of economic empowerment, increased well-being and social and political equality that it fosters among women.

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How can Micro-Finance help empower Women in
Pakistan?
15 January 2016
Shaiyanne Mall
Finance
ShARE Lums

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• Integrating supportive terms into financial and non-financial products enables
women to use them more efficiently.
• Increasing micro-banking activities in sectors which have large shares of female
participation raises their business output.
• Enhancing micro-banking activities in women intensive sectors enhances their
wealth.
• Integrating non-financial services into micro-credit packages helps empower
women.
• The Micro-banking sector in Pakistan has made significant progress towards
Women Empowerment.
• Major challenges stand in the way of successful implementation of proposed
Micro-Banking strategies
Executive Summary

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• The nature of the industry that a woman
works in determines her ability to use a
financial product most productively.
• Therefore consultation with prospective
clients is necessary as they come from
varying contexts.
• The Bangladeshi NGO CODEC found
that specialised terms enable women to
use loans more strategically.
• Assets purchased using the loan should
be registered under the woman’s name to
establish her control of her income.
Integrating supportive terms into financial products enables
women to use them more efficiently
Special
Interest rate
Calculation
Methods
&
Unique
Repayment
Schedules
Collateral
Requirements
Messages Quotes
‘repayment schedules and methods of
interest calculation preferred by women vary
between context and type of program.. In
the Bangladeshi NGO Community
Development Centre (CODEC)..women
preferred declining balance repayments
because.. It prevented this (the loan) being
diverted into other purposes by their
husbands.’
Source: Development Studies Network
‘central emphases in proposals for best
practice has been changes in collateral
requirements to include female-owned
assets and ‘social collateral’ in the form of
women’s group guarantees...assets
purchased with loans to be registered in
women’s names, both as insurance…as
means of increasing women’s control over
assets.’
Source: Development Studies Network
Types of supportive terms

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6.6%
10.2%
73.6%
0 20 40 60 80 100
Disagree
No Response
Agree
Responses from women when asked whether their output increased as a result of
Micro-banking in the agricultural sector, 2014
The majority experienced gains
in output
Increasing micro-banking activities in sectors which have large
shares of female participation raises their business output
A survey was conducted in Sub-Saharan Africa among women who had been part of a
Microfinance program for two years. Women in this region represent 49% of the agricultural
work force.
Source The Food and Agriculture Organization of the United
Nations
Source: International Journal of Academic Research in
Economics and Management Sciences

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40.6
25.4
10.9
8.3
4
10.9
10.6
45.2
29
8.6
4.6
2
0 20 40 60 80 100
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
N/A
Percentage of respondents %
Education
Health Care
An overwhelming majority reported
greater capital resources
Enhancing micro-banking activities in women intensive sectors
enhances their wealth
Survey results to gauge the effect of micro-saving on Capital Resources for Health
Care and Education among female sub-Saharan farmers, 2014
Source: HRmars

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Integrating non-financial services into micro-credit packages
helps empower women
Technical trainings given as part of micro-financial
assets are more effectual than those without
• Consultancy services for marketing
and other business or group
initiatives
• Regional network with other banks
to enhance access to more markets
• Technical assistant and follow-up
support regarding accounting or
legal services
• Information about prevailing
standards and regulations.
Non-financial features can include
28%
16%
10%
0
5
10
15
20
25
30
Bad Month Good Month Normal
Month
Marginal%IncreaseinSales
Marginal impact of the impact of business
training on female micro-entrepreneurs, 2006
Technical Trainings
result in higher business
performance consistently
Source: Yale University

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• The government has launched various initiatives to further women empowerment through
microfinance, major examples include:
- The Microfinance Sector Development Project, establishing the Rozgar Bank and the Women’s Development
Project which issues interest free loans, and The First Microfinance Bank.
- Their aims are to mobilize women and increase their role as social catalysts to spur economic empowerment
through microfinance.
• Many Micro-banking Institutions have also propped up in the last decade; major examples include,
FINCA International and U Microfinance bank, along with Microcredit NGO’s such as Akhuwat and
Kashaf foundation.
The Micro-banking sector in Pakistan has made significant progress
towards Women Empowerment
93
69
30
27
18 120
10
20
30
40
50
60
70
80
90
100
Economic Interpersonal Political
KeyEmpowermentIndicatorScores
Dimensions of female Empowerment
Gains in empowerment indicators among women through
Microfinance, 2014
After Microfinance
Before Microfinance
Source: IBA Karachi

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Major challenges stand in the way of successful implementation of Micro-
Banking strategies
• Being an emerging sector in Pakistan the rules and regulations set
down in the Microfinance Institutions Ordinance (2000) are unable
to address the on going challenges within the industry. Regulatory
norms also tend to be very complicated leading to increased cost
of operations.
Misperceptions about
Microfinance
• People remain restricted to microcredit only and are reluctant to
explore the wide range of other products like micro-insurance,
working capital loans and money transfers.
• For instance, out of the 14 million active borrowers of micro-credit
only 3.7million avail micro-insurance policies.
Inadequate
Regulations
• Many private micro-banking practitioners fear government
intervention with schemes such as the Prime Minister’s Youth
Loan Scheme and Interest Free Loans have negative
consequences for their business.
Political Interference
• Most microfinance banks lack the resilience to withstand interest
rate fluctuations and other drastic economic changes since they
can not charge higher interest rate from their clients, which leads
to a reduced portfolio quality.
Vulnerability to
economic
shocks
Source: European Journal of Sciences
Source: The Pakistan Microfinance Network

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Q&A