Micro-finance refers to the provision of financial services to low-income consumers and the self-employed including credit, savings, insurance, and fund transfers.
“MFBs now can offer mortgages of up to US$6000 to individual borrowers, particularly in remote areas in Pakistan where commercial banks do not [normally] provide credit,” Wasimuddin said. The SBP also raised the micro-credit limit to $1800 per borrower from the earlier limit of $400 per person.
Established in Pakistan in 2002, MFBs were intended to achieve UN Millennium Development Goals aimed at alleviating poverty through socio-economic development.
“The MFBs requested that SBP raise the lending limit and allow them to offer mortgage loans… to extend the outreach of banks,” Kashf Bank CEO Roshaneh Zafar said. Kashf is one of nine banks offering micro-loans. They want to reach the 10 million households identified by the government and donor agencies as those who can most benefit from micro-finance support.
“We need $12 billion to reach these people,” said First Micro-Finance Bank CEO Hussain Tejani. According to him, about one million people have benefited from existing micro-finance services over the past seven years.
The Pakistani government, World Bank, Asian Development Bank and non-government organizations (NGOs) are all supporting MFBs to reduce poverty and promote socio-economic development, he added.
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