MICRO FINANCE

A type of banking service that is provided to

unemployed or low-income individuals or groups
who would otherwise have no other means of
gaining financial services.
To enable low-income individuals:
Build their asset
Develop their micro enterprise
Enhance their income earning capacity
Enjoy improved quality of life

INTRODUCTION
Micro financing is not a new concept.
Small microcredit operations have existed since the mid
1700s.

Micro credit is traced back to the early 1700s when

Jonathan Swift, an Irishmen, had the idea to create a
banking system that would reach the poor
Although most modern microfinance institutions operate
in developing countries, the rate of payment default for
loans is surprisingly low - more than 90% of loans are
repaid.

Like conventional banking operations, microfinance

institutions must charge their lenders interests on
loans.
While these interest rates are generally lower than
those offered by normal banks.
The World Bank estimates that there are more than
500 million people who have directly or indirectly
benefited from microfinance-related operations.

EATURES OF MICRO FINANC

Lend
Do
Small
Cost
Prefer
not
covering
to
short
women
take
poorsecurities
term
interest
overloans
men
rates

HOW MICRO FINANCE DIFFERENT

FROM SME

Micro

INTRODUCTION MICRO
FINANCE IN
After the inception of PAKISTAN
Grameen in Bangladesh in 1984
Successful experience of Grameen Bank during 1990s, the
importance of microfinance has been recognized at international
forums.
In Pakistan, MF has started gaining importance, as a tool of social
mobilization
and poverty reduction, since late 1990s.
The first micro finance institution in Pakistan is Orangi pilot
project and then Agha khan rural support programme.(AKRSP)
In 1990 it spread across the country and in 1996 kashf
foundation was established.
Then later khushali bank was established in 2000

TYPES OF MICRO FINANCE

INSTITUTIONS
Non profit MFI

FFERENCE FROM OTHER LOAN

1. No collateral to receive loans
2. Client friendly
3. Peer support system
4. Staff members share vital information
and resources

The current interest rate on

income-generating loans is
between 22 to 28 per cent,
much higher than the 10-13
per cent rates offered by
commercial banks.

Major reasons:
1.high costs associated with lending
of small amounts
2.No collateral, higher risk is involved

INTEREST RATES OF MFI

Interest rates covers:
1. High cost of making small loans
2. Personal serving towards each client
3. Cost of managing center meetings
4. Providing information
5. MFIs pay on loans borrowed

ICRO FINANCE BANKS IN PAKISTA

Kashf Microfinance Bank (KMFB)
Khushhali Bank Limited
Pak-Oman Microfinance Bank Ltd. (POMFB)
Rozgar Microfinance Bank Ltd. (RMFB)
Tameer Microfinance Bank Ltd. (TMFB)
Waseela Microfinance Bank

KHUSHALI BANK
Khuhhali Bank Limited is the first microfinance bank
in Pakistan, founded in 2000
Operates in all provinces .
Borrowers: 481,671
Depositors: 571,406
Cumulative loans served: 3,359,614

KASHF BANK
One of the leading Microfinance Institutions of
Pakistan
KMBL operates a network of 46 branches and
offices in 36 cities throughout the country
Borrowers: 25759---

PKR 1.16 bn

Depositors: 180 268 PKR 1.73 bn

TAMEER BANK
Pakistan's Largest private commercial
Microfinance bank licensed by the State
Bank of Pakistan
110 Branches, Financial Centers,
Community Centers and Sales Centers
operating nationwide,
21000+ Mobile Banking Outlets with the
brand name "easy paisa
Rs. 1.4 billion and over 80,000 loan
customers
deposit base of more than Rs 1 billion

RITICISM OF MICRO FINANC

1. Borrowers are being taken advantage of because
they are not educated
2. Many people borrow just to pay for something to
purchase
3. Borrowers take out loans from more than one
institution at a time thinking they are benefiting from
having more money.
4. Borrow the amount of the two loans combined in
the first place and end up drowning in their loan
payments.

HURDLES FACED BY
MICRO FINANCE INSTITUTIONS
1. internal weaknesses of microfinance institutions
(MFIs).
2. lack of adequate training
3. common perception about microfinance products.
4. misuse of loan money.
5. Taking loans more than limit assigned.
6. Lack of awareness

P ACTIONS FOR MICRO FINAN

1. Micro finance credit guarantee facility
2.Prudential regulations
5.Creating market awareness
3. to provide interest-free loans to micro entrepreneurs
4.SBP encouraged micro finance institutions to
transform into regulated entities
5. Promoting banking into remote areas through
technology.
6. subsidies

FUTURE PROSPECTS
Pakistan Poverty Alleviation Fund (PPAF) and
Citibank are playing an important role
SBP in collaboration with Pakistan Post Office
(PPO)
Kashf and khushali are going really well with the
use of technology
Advancement of Islamic micro finance