Microfinance needs technology uplift in Pakistan.
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.