At the inception of the National Financial Inclusion Strategy (NFIS) in May 2015, the State Bank of Pakistan stated that only 10 percent of the adult population of Pakistan has access to formal financial services. The NFIS set an ambitious plan to ensure at least 50 percent of the adult population has access to banking services by 2020.
The SBP's objectives behind this drive are clear - benefits of financial inclusion are vast at individual as well as national economy's level. Individuals get access to finance for investment in income generating enterprises which improves their livelihood, creates more employment for others and boost the country's economy.
Small entrepreneurs and small farmers have a major contribution to Pakistan's economy and lack of access to finance poses a hindrance in their progress and business expansion. These hardworking people fail to extract the benefits of a traditionally inclusive financial ecosystem, because it simply does not cater to their needs. In this scenario microfinance banks play an important role by offering services customized to their financing requirement, thereby supporting sustainable development in the country.
Muhammad Anwar from Bahawalpur strongly encourages micro entrepreneurs to reach out to microfinance banks to meet their investment needs. Muhammad Anwar has been running his cloth shop for the past 18 years in Bahawalpur's commercial hub. While he always saw huge market potential, he did not have sufficient finances to invest and fulfill customers' demand to stock a variety of inventory.
Anwar explains that he was always hesitant to borrow from family and friends and never approached banks due to limited knowledge. During a campaign of a well-known microfinance institution - Khushhali Microfinance Bank - Anwar found the answers to his queries regarding the loan process and fully understood the procedure for a loan. Further encouraged by the simple loan application process, Anwar took out his first loan of PKR 250,000 in 2015.
He invested the amount to bring more variety to his stock. His sales and profitability improved, and he was even able to return the loan earlier than planned. Next, he used the money to rent the adjacent space and expand the size of his shop. He has witnessed a significant increase in his profitability.
Today in Pakistan, there are 4.3 million people availing loans from microfinance institutions. That is a sizable contribution the microfinance sector is making, but there is still a long way to go, because the overall size of the microfinance segment is estimated to be about 24 million potential borrowers. Pakistan's goal is to achieve universal financial access encompassing adults, including women and youth.-PR