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Microfinance Institutions Performance In Pakistan Essay

2121 words - 9 pages

Introduction

Poverty is the main problem of everywhere. For the last thee decades several developing and developed countries taken several steps to alleviate the poverty. In the world %??(how much %) people are living life below the poverty line their daily or monthly income is less than $ xxx(how much) . One main step is the establishment of Microfinance Institutions which are providing micro credits to the poor people without any collateral. The performance of these institutions is very attractive even some commercial banks also started micro financing on commercial basis.

Actually it is not possible for poor or low income people to gain credit from formal banking sector. ...view middle of the document...

(Japonica Intersectoral 2003). Microfinance banks / institutes providing credits to these people without any collateral/ security. These lending may be in group lending or individual lending. In all cases this is the right way to reduce the poverty. (Hashemi 2003). Microfinance institutions provide a lot of financial services to their clients like micro credits, payment services, deposits services and insurance to the poor and their small business But this practice is possible if these institutions working efficiently for which their financial sustainability is necessary.

Some MFIs especially the NGOs are facing serious problems for sustainability there is lapse in their in organizational design, financial procedures and governance. One reason is that a large number of the MFIs do not provide deposit service to their clients. While majority of the successful MFIs like BancoSol in Bolivia, Grameen Bank in Bangladesh are providing deposit services to their Clients. This deposit service helps MFIs to reach financial self-sufficiency and generating their own internal source of funds which reduce their dependence on external sources of funds (Haley and Morduch, 2002)

Current literature is showing important role of MFIs in improving the lives of the poor people in various countries and poverty reduction. South Asian countries are also pursing policy making and microfinance institutions establishing. These institutions include government sponsored programs and NGOs. Grameen bank is the most famous example and this is the bank which developed new model and introduce new style banking. An interesting point is that Grameen bank leading recovery rate comparable of many commercial banks performance. This approach has helped many micro financial institutions to achieve a reasonable sustainability, and have produced profits without any subsidies (Hulme, 1999).

Microfinance institutions can perform their real role if their financial positions are satisfactory and their financial positions will be satisfactory if their financial performance is satisfactory and these institutions have low or no dependency on other sources of funds.

The condition of poverty in Pakistan is also serious, today about 37% people are poor which was last year 2009 23% Statisticdept.org.pk.. Beside the other reasons our financial institutions are not performing well. In the other countries the performance of microfinance is very impressive. In this study we will analysis the Pakistani microfinance Institutions performance. Especially here we will analysis their financial performance because if their financial performance is not satisfactory in future these institutions cannot sustain their valuable services in real words and the percentage of poor will be increase every year.

The objective of this study is to analysis the Pakistani MFIs financial performance which will help monitoring authorities to monitor and guide them about their strong and weak points to perform...

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