Islamabad: Pakistan Microfinance Network (PMN) organized a two-day conference, Sustaining resilience: Microfinance in a post-pandemic era in Islamabad on 25 and 26 November 2020 where industry stakeholders came together to share experiences, engaged in dialogue on the latest developments globally and locally and formulated directions for the future of microfinance in Pakistan.

With the current, unprecedented situation, policy makers across the globe have gone into a conundrum; do we wait or see or do we re-invent the processes? The primary objective of this conference was to initiate a dialogue for concerted efforts among all relevant stakeholders, to identify the possible bottlenecks that exist in the industry that can possibly hinder the financial inclusion process and propose ideas to overcome it.

Ghalib Nishtar, Chairman, PMN welcomed the audience and appreciated their willingness for a concerted discussion. “AMC in its fourth year seeks to connect regulators with the practitioners and brings forward meaningful, actionable discussions on the table.” he mentioned.

Dr Hafeez Sheikh, Advisor to the Prime Minister of Pakistan on Finance & Revenue stated that the country needs to make growth a habit. “The microfinance industry does not need to compete with commercial banks rather the MFBs should focus on being more empathetic and serving the underserved.” Dr Hafeez also stressed that where the sector has resources constrained, the practitioners need to come up with effective ways to get finance through the Government led initiatives on which the Government is willing to support the sector in whatever way possible. On the low-housing project scheme, he said that the Government can and will allocate subsidies provided the subsidies are efficiently utilized. He suggested the sector players to come up with a policy to support the Government during the pandemic. For this, he encouraged PMN to set up platform where relevant stakeholders should hold a dialogue and present recommendations to the Government.

Dr. Abdul Hafeez Sheikh

Dr Ishrat Hussain, Advisor to the Prime Minister on Institutional Reforms and Austerity, shared his observation that there has been a consistent rise in the number of borrowers in Pakistan. However, the microfinance providers need to take concrete steps to address sustainability. “There are two functions of the microfinance function; creating awareness around opportunities borrowers have and how their livelihoods will benefit. Unfortunately the vision the MFBs are following is more focused on commercialization and less on the social uplift and impact.” he said. He also said that women inclusion in the financial sphere is still at large in Pakistan; it is not at the pace it should be at. 25% women who are banked is too less a figure. We can address this by increasing women hiring at the workplace to better their financial independence. The figure should go from 25% to 50% in a few years’ time. The highest rate of return on investment is on the female empowerment initiatives across the globe.  Education should improve the earning power of households, lead to empowerment, reduce domestic violence and improve the overall livelihood.

Sima Kamil, Deputy Governor, State Bank of Pakistan observed that more microfinance finance providers need to come into the banking space which will enable them to improve their ability to innovate and reach out to more borrowers. In addition to the MFPs, digitalization needs to be smartly

Farrukh Sabzwari, Commissioner at SECP said that the regulator is focused on being inclusive and especially for including more women in the borrower base. “We are proposing to have PACRA rate microfinance entities for which the blue print is ready. This will help companies to reach the next phase of their growth.”

On the policy level, experts agreed that the pandemic has pushed practitioners into out-of-box thinking and the policy makers too have been challenged to adjust long standing processes.

Digital integration and adaptability was another area that was addressed by experts in developing instruments that would improve operations. However, whilst experts agreed that digital adaptation by the microfinance sector has improved post Covid, Pakistan is still a long way from limiting face to face interaction with the borrowers. ” We need to differentiate between automation and digitization. Financial inclusion cannot be confused with payments only. Physical presence for a microfinance bank is still needed keeping in mind the borrower. Complete digitization also leads to cyber security threats, said Kabeer Naqvi, CEO & President, U Microfinance Bank Limited.

To aid the digitalization, PMN also launched Munsalik an initiative to digitize the microfinance industry, from loan application to disbursement, and recovery. In the first phase, Munsalik will seek to not only digitize internal operations of the MFPs by making them paperless but also provide a middleware to the MFPs to connect with the digital financial services (DFS) players. The aim in the first phase is to digitize the entire loan application process along with providing connectivity with DFS players. In the next phase, Munsalik will provide the MFPs connectivity with NADRA, AML/CFT and Credit Bureau to improve delivery and regulation.

The AMC also saw the launch of a strategic collaboration between Pakistan Microfinance Investment Company (PMIC) and National Investment Trust (NIT), the Social Impact Fund. The Fund is a listed unit scheme under fixed income mutual fund structure. It will be a perpetual and open ended, sector specific fund that will be particularly focused on financing strategic, social initiatives by microfinance banks and generate measureable returns for the investors. “We want a sustainable ecosystem to thrive in Pakistan that drives people out of poverty and aid in the Government’s Financial Inclusion Strategy and targets,’ said Yassar Ashfaq, President, PMIC  who signed the MoU with Adnan Afridi, Managing Director, NIT in the presence of SECP and other stakeholders.

On the disaster risk fund international expert Arup Kumar from the Asian Development Bank said that disaster fund is complimented by the fact that clients will get benefit of increased access to cash. Institutions need to create a reserve and cater to emergency liquidity. “15 years back donors got interested in this area and set up disaster loan funds and this was encouraged when small microfinance institutions got together. We have the advantage of better risk models and also the experience of how MFI’s are restructuring loans. An advice is to have a fund that has layers.” he said.

There was also an overall agreement by experts to encourage new players to enter the market. For this Yassar Ashfaq, CEO & President, Pakistan Microfinance Investment Company (PMIC) mentioned starting a challenge fund which will support new products, focus on areas where the penetration is slow and offer a more geographically inclusive approach.

Over 100 policy makers, microfinance professionals, trainers, practitioners, donors, regulators and other members attended the conference during the course of the two days whilst 200 joined online via webinar. The conference presented a unique opportunity to engage in a dialogue and think of ways to innovate in the current scenario.