Microcredit Program in Pakistan
Microcredit, or micro-financing, is a financial system that provides small loans to individuals who lack access to traditional banking services. The concept of microcredit began in 1983 in Bangladesh when Muhammad Yunus created the Grameen Bank. The Grameen Bank offered loans to poverty-stricken individuals trying to start small businesses. Bigger banks often exclude this subset of the population from financial assistance because institutions consider them high-risk in terms of defaulting on repayments. Thus, the poor often resort to taking loans from informal lenders and remaining within the bounds of the informal sectors of the economy. Since the invention of the Grameen Bank, the microcredit model steadily gained popularity around the world, especially in underdeveloped nations. Microcredit in Pakistan has proven to be an effective tool in promoting economic development among impoverished populations. The Kashf Foundation’s microcredit program in Pakistan aims to increase financial inclusivity while empowering the impoverished.

The Kashf Foundation

The Kashf Foundation, a nonprofit micro-finance institution based in Lahore, Pakistan, has been a leader in the microcredit movement in Pakistan. The Kashf Foundation, since its founding in 1996, has made it a priority to provide financial services to individuals, especially women, who are excluded from the formal banking sector due to high fees, strict documentation requirements, proof of creditworthiness and a lack of suitable financial products for the lower-income.

Through its microcredit program, the foundation provides small loans to individuals who need financial support to start or expand a business. One of the main benefits of the microcredit model, made evident through the Kashf Foundation’s microcredit program in Pakistan, is that borrowers receive all the profits of their businesses. This prevents the loss of revenue that workers often experience when the middleman takes a chunk of the profits from his laborers. Ultimately, over time, the poor become financially self-sufficient and are able to contribute to the local economy.

Empowering Women in Pakistan

“Women-centric and pro-poor access to financial services can promote economic growth, reduce income inequality, improve access to health and nutrition and empower women,” the Kashf Foundation’s Focus Notes Series says. According to the World Bank, in 2021, women made up just 20% of the workforce in Pakistan.

Gender-discriminating social norms contribute to this low participation rate along with safety concerns while traveling, low education levels and the burden of household responsibilities. According to Arab News in March 2022, about 82% of women in Pakistan are unbanked, meaning they do not have access to bank accounts or formal banking services.

The Kashf Foundation’s microcredit program in Pakistan makes it a priority to have a mostly female board and to serve as many women as possible. In 2022, women-led businesses accounted for 75% of Kashf Foundation’s microcredit program recipients. Additionally, in 2022, females accounted for 70% of the Kashf Foundation’s board. The Kashf Foundation’s microcredit program has helped more than 1.2 million women over the past 20 years.

Dissolving Limiting Social Norms

The Kashf Foundation is also the first microcredit institution in Pakistan to produce multiple critically acclaimed and popular television series that emphasize the “positive spillover effect of women’s economic empowerment” and raise awareness of social issues impacting women through broadcasts based on real-life stories.

By using the media to dissolve misconceptions and break social norms, the Foundation aims to reduce gender inequality and empower women in Pakistan. Over the years, the Kashf Foundation has also effectively used the art of theater by holding short performances on critical social issues impacting girls and women in the communities it serves to raise awareness and inspire change.

The Kashf Foundation’s pioneering microcredit program and social advocacy programs have had a significant impact in Lahore and beyond. The Foundation’s commitment to improving the lives of those it serves, especially women and girls, will continue to be a trailblazing force in its efforts to promote financial inclusion, gender equality and economic prosperity in Pakistan.

– Aemal Nafis
Photo: Flickr

Muhammad Yunus
Try to buy a house without a mortgage loan or start a business without a business loan. For most of the world’s population, even in developed countries, these tasked are difficult. In the developing world, where financial services are virtually nonexistent for millions of the poor, opportunity is a myth and breaking an endless cycle of poverty seems hopeless.

Bangladesh celebrated one of its own as Muhammed Yunus turned 75 years old on June 28th. Often thought of as the pioneer of the modern micro finance concept, Muhammed Yunus has, for decades, been an advocate for social business practices and alleviating global poverty.

Mohammed Yunus was born in Bangladesh India and is a social entrepreneur, banker, economist and civil society leader who was awarded the Nobel Peace Prize in 2006 for founding the Grameen Bank.

The Grameen Bank is a microfinance organization and community development bank founded in Bangladesh that makes small loans known as micro-credit or “grameencredit”, without collateral requirements to impoverished entrepreneurs.

The Oxford dictionary defines micro-finance or micro-credit as the lending of small amounts of money at low interest to new businesses in the developing world.

During his tenure as a professor of economics at Chittagong University in the 1970s, Muhammed began experimenting with providing small loans to women in the tiny village of Jobra. Today, the World Bank estimates approximately 160 million people in developing nations are using micro-finance.

Yunus Social Business, an organization co-founded and chaired by Muhammed Yunus, calls itself a company created with the sole purpose of solving a social problem in a financially self-sustainable way.

Muhammed Yunus, with the success of the Grameen Bank and his concept of social business, among many other accomplishments, has won 112 international awards, received 55 doctorate degrees from 20 universities, was ranked by Time Magazine as one of the top 100 public intellectuals of the world and has authored internationally acclaimed books, published and translated into numerous languages.

Today Muhammed Yunus, as he reaches age 75, is celebrated all over the world and is still very much involved in the mission to fight global poverty. Recently, Yunus Social Business (YSB) launched its first social business accelerator in Uganda, a land locked country in East Africa, haunted by conflicts resulting in millions of deaths and plagued with child slavery. With the implementation of the program, Yunus Social Business hopes to address social and environmental problems in Uganda in a financially sustainable manner by promoting and empowering social businesses through the provision of business development services, impact investment funds and related technical support.

Uganda, an impoverished nation and an area of operation for the Lord’s Resistance Army (LRA), a rebel group listed by the U.S. as a terrorist organization, could benefit from the Yunus Social Business model and possibly emerge from a society torn by war.

Through the implementation of micro-finance and the ideology of social business, societies around the world, mired for centuries in poverty could become self-sustainable and thanks, in part to Muhammed Yunus, more could lead rich fulfilling lives.

– Jason Zimmerman

Sources: Kiva, Prothom-Alo, World Bank, Yunus Social Business 1, Yunus Social Business 2
Photo: Huffington Post