Mi­cro­fi­nance needs tech­nol­ogy up­lift in Pak­istan

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Mi­cro­fi­nance is an ef­fec­tive tool to trans­form com­mu­ni­ties and up­lift the eco­nom­i­cally marginalised out of poverty. Mi­cro­fi­nance brings peo­ple, who are liv­ing at the bot­tom, two steps up by em­pow­er­ing them with fi­nan­cial tools.

It takes a lot of courage for a mi­cro­fi­nance in­sti­tu­tion to pro­vide poor peo­ple with even small loans as they lack any col­lat­eral. In ad­di­tion, small land­hold­ers and other mi­croloan re­cip­i­ents of­ten lack busi­ness acu­men.

Glob­ally, women are the main re­cip­i­ents of mi­cro­fi­nance loans as they are bet­ter clients and pay­back loans on time. More­over, they use their prof­its for ar­rang­ing food for the fam­ily, ed­u­cate their chil­dren and re­pair homes.

One of the top rea­sons why mi­cro­fi­nance has not taken off in Pak­istan is be­cause the ma­jor­ity of mi­croloans are still sanc­tioned to the men.

An­other fac­tor is that loans are sanc­tioned in­di­vid­u­ally, while in all suc­cess­ful mi­cro­fi­nance ven­tures, the loans are sanc­tioned to groups prefer­ably com­pris­ing women, with each woman get­ting the same amount for the busi­ness ven­ture.

On top of that, the lend­ing agency does not pro­vide train­ing for the use of loans. If the ben­e­fi­cia­ries are trained and guided, the re­sults can be bet­ter.

When the lend­ing is sanc­tioned to a group, it meets with

the rep­re­sen­ta­tive of the mi­cro­fi­nance provider weekly and dis­cusses the prob­lems. They also de­velop com­rade­ship and if by chance a mem­ber of their group is ab­sent ow­ing to ill­ness or due to any other rea­son, they look af­ter her busi­ness as well.

For in­stance, in cases where the women es­tab­lish vend­ing bases for var­i­ous goods in a mar­ket, the woman with a stall next to her ab­sent com­rade, would look af­ter her sales as well. The group wants all its mem­bers to be up­dated on their loans.

This type of loan­ing and as­so­ci­ated train­ing is not in vogue in Pak­istan, which is the rea­son that mi­cro­fi­nance has not been a vis­i­ble suc­cess story here.

It is from these small groups that peo­ple with en­tre­pre­neur­ial acu­men sep­a­rate from the oth­ers. De­spite be­ing un­e­d­u­cated, they have bet­ter sense of busi­ness and on the strength of train­ing they get from the mi­cro­fi­nance in­sti­tu­tion they stand out among their group. They might not have achieved this suc­cess had they not been trained in tools needed for do­ing a busi­ness.

The ad­vent of tech­nol­ogy has helped the gen­uine mi­cro­fi­nance lender to em­power its clients.

There have been in­stances where women pro­vided with small loans to open a school in their back­yard at very nom­i­nal fee of Rs500 per month, pros­pered and now own larger ed­u­ca­tional in­sti­tu­tions with 500-900 stu­dents. Use of tech­nol­ogy helped them im­part bet­ter ed­u­ca­tion, and em­ploy more teach­ers. This type of mi­cro­fi­nance helps not only ed­u­cate the chil­dren but it cre­ates jobs as well.

Mi­cro­fi­nance in­sti­tu­tions across the world are us­ing tech­nol­ogy to roll out bank­ing prod­ucts for the un­banked pop­u­la­tion.

This tech­nol­ogy is rapidly sur­pass­ing any­thing that has reached de­vel­op­ing coun­tries. Train­ing the mi­croloan re­cip­i­ents is cru­cial, but un­til now, it was a costly af­fair. It is ex­pen­sive for the clients to en­sure their pres­ence in weekly meet­ings. It was also ex­pen­sive for the mi­cro­fi­nance in­sti­tu­tion to send the staff at the place where the group re­sides.

Tech­nol­ogy has solved this is­sue and train­ing can now be im­parted through tablets or smart­phones. Ev­ery mem­ber in the group has a de­sire to come out of poverty and they are keen learn­ers. Their smarter col­leagues in the group step in to sup­port a fal­ter­ing mem­ber.

Tech­nol­ogy is slowly pen­e­trat­ing the poorer seg­ments of the so­ci­ety. There is hardly a house­hold with­out a cell phone.

Since the use of smart­phones is in­creas­ing rapidly, soon ded­i­cated mi­cro­fi­nance in­sti­tu­tions would be able to serve their clients ef­fec­tively and at a lower cost.

The land­scape of mi­cro­fi­nance in Pak­istan is chang­ing at a fast past. The glob­ally known Finca (mi­cro­fi­nance) bank has al­ready es­tab­lished over 100 branches in Pak­istan almost all of them in ru­ral ar­eas where the poverty is deeply rooted.

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