The Grameen Foundation (GF) and the Womens World Banking (WWB) have expressed grave concern over growing crisis in the microfinance sector in Punjab following inappropriate intervention of certain political section.
The GF is an international non-profit US-based organisation working for poverty alleviation and the WWB is a global network of 54 top performing microfinance institutions and banks said that the crisis due to the improper involvement of some elected representatives, is affecting the microfinance sector in Punjab.
The President, GF, Alex Counts and the President and CEO, WWB, Mary Ellen Iskenderian wrote a letter to Punjab Chief Minister, Mian Shahbaz Sharif urging him to issue a public statement on the importance of microfinance sector. The have also urged the CM to send a letter to all members of the Provincial Assembly in Punjab and the members of the National Assembly asking them to support microfinance institutions and help curtail inappropriate interventions by local politicians.
We are concerned that the microfinance sector in Pakistan is under threat. The intervention of some local elected representatives has given rise to a crisis, a situation, which has damaged the reputation of the microfinance sector in Pakistan and could lead to a major crisis with national as well as international implications, they wrote.
They also urged Punjab CM to take swift action in support of the vital sector in Pakistan and asked him to ensure the security of Kashf staff, as they interact with clients and also reschedule Kashfs existing loan to the Pakistan Poverty Alleviation Fund (PPAF).
Even in the difficult scenario, Kashf Foundation has been making repayments of its loan to the PPAF in order to maintain its credit standing and fulfil its obligations. The PPAFs support is critical at this juncture.
Kashf has received commercial funding from banks in Pakistan as well. If they are unable to meet their debt obligations, the commercial banking sector will see a significant negative impact and may stop supporting microfinance, they wrote in the letter. The current crisis to microfinance sector affects not only Kashf Foundation and the 300,000 clients it serves but, if left unchallenged, will have repercussions for all the poor in Pakistan.
It will also dampen the efforts to expand critically needed financial services to the poor in other parts of the world as well, particularly, if loan guarantees from international institutions are called in the case of a default, the letter added. It may be mentioned that GF and WWB have been supporting microfinance in Pakistan for nearly the past decade.
It is worth mentioning that GF has worked closely with Kashf Foundation and National Rural Support Programmes urban microfinance project to support expansion of financial services to the poor in Pakistan. It has also arranged $20 million financing for Kashf Foundation in local currency by providing a guarantee of $5 million to the banks. This is the largest guarantee issued by the GF to any microfinance institution in the world and also a testament for our commitment to the growth of microfinance in Pakistan.
On the other hand, the WWB has assisted Kashfs institutional development through product diversification, strategy and organisational development, helping Kashf to maintain its position as a leader and innovator in the microfinance industry in Pakistan.
In addition, the WWB has been a source of continued financial support through its capital markets programmes and financing vehicles and most recently continued this commitment by purchasing a 10percent stake in Kashf Micro Finance Bank (KMB), valued at $l million, through the WWB Microfinance Equity Fund (WMEF).
Sources told Business Recorder that in recent years, microfinance sector in Pakistan has made great strides and currently serves about two million poor clients. Direct and indirect support from Pakistan government has been an important factor in facilitating this growth and the countrys poverty reduction goal. Yet, the need remains great and established microfinance institutions such as the Kashf Foundation are poised to play a critical role in expanding these services quickly.
Institutions like Kashf Foundation, who have adopted global best practices and have received international recognition for their efforts, are the face of the microfinance sector of Pakistan. When contacted, sources in the PML-N told Business Recorder that Punjab CM had already taken notice of the letter written by GF and WWB and formed a committee under the chairmanship of Senior Advisor, Sardar Zulifqar Ali Khan Khosa to prepare an appropriate response to resolve the issue.