Topic: Endorsement of Microcredit System in Pakistan
Author: S. Nasir R. Zaidi (CBM, Karachi)
It is very fortunate for us, the Pakistanis, that microfinance has a rich legacy in South Asia. This region of ours is the cradle of microfinance, with organizations like Bangladesh’s Grameen Bank and India’s SEWA, having worldwide influence. South Asia has also distinguished itself by forging successful partnerships for microfinance between governments, NGOs, civil society, private sector and the communities themselves, evidenced by the self-help group bank linkage in rural support programs in Pakistan. And of course, we celebrate the latest country which has joined the microfinance movement, Afghanistan, which has enabled itself to get off to a running start in creating a vibrant microfinance sector.
Before going ahead, we must clear our concept of what microcredit is all about?
Basically, micro-credit is a kind of banking service provided to unemployed or low income individuals or groups who would otherwise, have no other means of gaining financial stability to start or expand their small and medium businesses.
Like conventional banking, microfinance institutions also charge the borrowers an interest on loans granted but these rates are generally lower than those offered by normal banking circle. For your information, let me add here that the World Bank estimates that there are more than 500 million people who have directly or indirectly benefited from microcredit related operations since its inception. Microcredit operations have been existing since the mid 1700’s. Although, most modern microfinance institutions operate in developing countries, the rate of payment default for these loans is surprisingly low. According to the World Bank re ...