Pakistan’s microfinance sector is not immune to macroeconomic crises, natural disasters or law & order breakdowns. So how has this important sector been dealing with the economic fallout of turbo-charged, import-led, unsustainable GDP growth that usually leaves a ton of misery in its wake for the bottom of the pyramid? Most recent quarterly data (Jan-Mar 2022) made available (belatedly) by the sector association – Pakistan Microfinance Network (PMN) – provides some clues for early period of current crisis.
Based on aggregate reporting by nearly three dozen microfinance providers (MFPs), the PMN sector data show that the number of active microfinance borrowers had reached 8.19 million at the end of Jan-Mar period in 2022, reflecting a growth of 8 percent year-on-year as well as an increase of 1 percent over the previous quarter. The annual growth of 8 percent is healthy compared to long-term historical comparison, albeit it is lower than the double-digit yearly growth seen on this count over the previous four quarters.
MFPs include both microfinance banks (MFBs) and non-banking microfinance providers (NBMFPs) – the former command 58 percent of borrowers and the latter 42 percent. Meanwhile, the sector’s gross loan portfolio (GLP) jumped 23 percent year-on-year and 6 percent quarter-on-quarter to reach Rs417 billion as of March-end 2022. The annual GLP growth seen during Jan-Mar 2022 is the strongest since Apr-Jun 2019. MFBs account for 73 percent of the GLP, with the rest of the loan portfolio held by the NBMFCs.
The microfinance sector’s savings department continued to deliver growth, albeit the pace of growth has decelerated a bit compared to what was seen in successive quarters during 2021. At the end of Jan-Mar 2022, the number of savers stood at 84 million – an increase of 25 percent year-on-year and 7 percent up on quarterly basis. The value of savings reached almost Rs430 billion, growing by 15 percent year-on-year and 2 percent quarter-on-quarter. Majority of savers and deposits are with the MFBs (96% and 100%, respectively), as most of the NBMFCs cannot accept public money.
Another improvement was seen in the sector’s infection ratio – which is the share of loan portfolio that is at risk for over 30 days. The portfolio-at-risk (PAR) at the end of March 2022 stood at 4.34 percent during 1QCY22, an amelioration compared to 4.9 percent at the end of December 2021. March’s PAR was also better than 4.5 percent reported a year ago in March 2021. PMN did not report the breakdown of PAR for MFBs and NBMFCs individually, so it is unclear how each peer group did on this count.
In short, if there was any economic impact in the early part of the macroeconomic crisis, it wasn’t visible by late March. The Apr-Jun quarter may be different, as the energy-driven inflation, load-shedding and overall economic slowdown is expected to have been more pronounced in this period. Let’s see what the rest of 2022 has in store for the microfinance sector. On that count, timely release of sector data to external stakeholders will help in understanding the impact of ongoing economic difficulties on this vital sector.
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