The Lahore School of Economics (LSE) in partnership with University of Oxford hosted a conference on "Microfinance and Enterprise Development." The objective of the conference was to bring together speakers from microfinance institutions, donors, academics and practitioners from Pakistan and abroad. During this one-day event there was a detailed discussion on current and future research on microfinance.
The conference was conducted as part of an on-going project on a comparison of Demand for Micro credit and Micro saving in a framed field experiment in rural Pakistan, which is funded by Economic and Social Research Council-Department of International Development (ESRC-DFID).
The conference started with welcoming remarks by Dr Shahid Amjad Chaudhry (Rector, Lahore School of Economics). The keynote speech was delivered by Dr Rashid Bajwa who showed that the microfinance sector in Pakistan has witnessed a tremendous growth - from 164,000 borrowers in 2003 to 3.3 million borrowers in 2015. At present, there are 50 microfinance providers operating in the country. Moreover, the sector continues to attract foreign investment.
The first session of the conference focused on the current state and future directions of the Microfinance sector. The chairperson for the session was Dr Rashid Bajwa (Chief Executive Officer, NRSP). The session was conducted jointly by Dr Amjad Saqib, Founder and Executive Director, Akhuwat, Syed Mohsin Ahmed, Chief Executive Officer, Microfinance Network, Kamran Azim, Chief Operating Officer, Kashf Foundation and Shahid Maqsood, Chief Operating Officer, FINCA Microfinance Bank Limited.
Dr Amjad Saqib gave a brief overview of the unique model of microfinance that Akhuwat is following based on interest free loans. Syed Mohsin Ahmed discussed an impact assessment study, which PMN is planning to conduct in the near future in order to investigate the impact of microfinance loans on employment and job creation.
Kamran Azim gave an overview of the current approach that is being followed by Kashf Foundation. The strategy focuses on (i) credit programmes with existing businesses as well as start-ups (ii) A large scale financial literacy programme (iii) a health insurance programme as well as support for schools in low income areas and (iv) microsaving products.
The second session of the day served to disseminate and invite feedback on the current research being conducted by Lahore School on Microfinance. The chairperson for the session was Kamran Azim, Chief Operating Officer, Kashf Foundation.
Simon Quinn, Associate Professor and Deputy Director, Centre for the Study of African Economies, University of Oxford presented the first paper in the session written jointly with Uzma Afzal, Giovanna d'Adda, Marcel Fafchamps, and Farah Said, while the discussant for the paper was Tahir Waqar, Senior Programme Manager, National Rural Support Programme (NRSP)).
The paper is based on a recent pilot study conducted in Sargodha, which directly tested between the demand for micro credit and demand for micro savings using a framed field experiment amongst women borrowers of NRSP participating in group lending arrangements in rural parts of Sargodha. The experiment involved randomly offering credit products and savings products to the same subject pool. The study concluded that a high demand exists for both credit products and for savings products implying that the distinction between micro-lending and micro-saving may be largely illusory; participants value a mechanism for regular deposits and lump sum payments, whether that is structured in the credit or the debt domain. Fieldwork for the study is currently underway. A scaled up version of the study will be carried out later this year.
The session ended with a presentation by Uzma Afzal, Assistant Professor and Research Fellow, Centre for Research in Economics and Business, Lahore School of Economics with Ghazala Mansuri, Lead Economist, World Bank as the discussant. It was a preliminary presentation discussing the methodology for a project to be conducted jointly with Giovanna d'Adda, Marcel Fafchamps, Simon Quinn and Farah Said to use behavioural games to understand how self-control problems and peer pressure affect take-up and outcomes of a financial product and secondly how access to saving and/or credit affect self-control problems and ability to resist peer pressures.
The third session of the day also focused on recent research that has been conducted in the Microfinance sector in Pakistan. The first paper in this session was presented by Ghazala Mansuri, Lead Economist, World Bank, which was written jointly with Xavier Gine. The discussant for this paper was Ayesha Afzal, Assistant Professor, Lahore School of Economics. The main objective of the paper was to identify the relative importance of human and physical capital for entrepreneurship. Microfinance clients were offered business training and a loan lottery of up to seven times the average loan size. The paper concluded that business training increased business knowledge, reduced business failure, improved business practices and increased household expenditures by US 46 dollars per year. It also improved financial and labour allocation decisions. Access to larger loans, in contrast, had little effect. Despite the positive impact on clients, business training was not cost-effective for the microfinance institution, explaining why few institutions offer training voluntarily.
Farah Said, Assistant Professor and Research Fellow, Centre for Research in Economics and Business, Lahore School of Economics presented the second paper in the session written jointly with Azam Chaudhry, Naved Hamid and Mahreen Mahmud. The discussant for this paper was Ommara Raza, Senion Manager Research, Kashf Foundation. The paper is based on a baseline survey for a Randomised Control Trial to evaluate the socio-economic and welfare impacts of micro-loans to female micro-entrepreneurs. The project is being conducted in collaboration with Kashf and the fieldwork is currently underway.
The final paper in this session was presented by Mahreen Mahmud, Phd Candidate, University of Kent. The discussant for the paper was Sajjad Akhtar, Member, Pakistan Microfinance Network Research Committee.
The paper explored a unique microfinance model based on zero interest loans and voluntary contributions instead of one with a fixed interest charge. This model provides more scope for signalling to the borrowers especially in the case of joint liability contracts. Thus, the author investigated if patterns of giving and repeat borrowing are consistent with what would be expected of signalling behaviour.
The conference ended with a detailed panel discussion on the role of research in helping the microfinance sector achieve its objectives and in shaping its future. The chairperson for this session was Qazi Azmat Isa, Chief Executive Officer, Pakistan Poverty Alleviation Fund.
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