Microfinance Banks in Pakistan Fear Losses

Sep 2010
Pakistan, September, 13 2010 - Pakistan’s microfinance banks fear massive losses:18 per cent accounted for bad loans due to floods, which have rampaged livestock and infrastructure all over the country. This has set alarm bells ringing in the concerned quarters.

The micro-financing industry in Pakistan is about to face a disastrous situation. These banks had a target of achieving 3 million customers by 2010 out of which they have a customer base of only 1.9 million people with an outstanding loan portfolio of PKR 22 billion.

These institutions provided small loans of under USD 1000 to rural families to mainly support their livestock and other agricultural activities. However, recent floods in Pakistan have crippled the livestock and infrastructure, severely impacting the ability of rural population to repay their dues. It is estimated that about 18 per cent of these loans would be irrecoverable.

The situation looks grim in the short term but it is hoped that larger corporations would step in to aid these banks. Under the Microfinance Credit Guarantee Facility, commercial banks are permitted to lend to microfinance banks, while the central bank also offers compensation of up to 40 percent of losses. The central bank has also launched a new initiative of issuing fresh loans on easy terms on a fast track basis.

It is imperative that the government takes fresh initiatives to support the nascent micro-financing industry to make it commercially viable and a catalyst for rural development.

Source : newzglobe.com

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