Abstract:
Globally, 1.2 billion people are extremely poor — surviving on less than $1 a day — and three-quarters live in rural areas. Poverty is predominantly a rural phenomenon. Extremely poor people spend more than half of their income to obtain (or produce) staple foods, which account for more than two-thirds of their caloric intake. Most of these people suffer from nutritional deficiencies, and many go hungry at certain times of the year.
Among the major interventions for alleviating poverty has been the direction of credit to the poor. This paper deals with this methodology. It talks about the widely used models of micro-finance, their advantages and concerns. Each model has been analyzed with respect to its impact and efforts have been made to highlight claims through case studies. The paper then devotes itself to a study of Pakistan with specific reference to its Micro-finance industry.
The number of poor, those living below a dollar a day, more than doubled in Pakistan during the 1990s to reach 45 million in 1999. The Government, therefore, prioritized the implementation of a comprehensive poverty reduction strategy that included improvements in social indicators, employment generation, safety nets, and access to microfinance (MF).
The microfinance sector in Pakistan is relatively young and dynamic. Each year new players enter the arena while the existing ones adapt to their changing environment. This trend has been on the rise in recent years, resulting in a sector characterized by a diversity of micro-finance players ranging from large and small conventional development organizations to commercial financial institutions involved either partially or exclusively in reaching the 'un-banked'.
The paper analyzes Pakistan and its various micro-finance players in terms of their performance and suggests ways for Pakistan to improve its Micro-Finance industry with specific focus on agricultural micro-finance since the greatest demand for micro-finance in the country is generated by this sector.
