THE TRUTH OF MICRO FINANCE IN PAKISTAN By; Farhat Abbas Shah Not even in microfinance, every second institution in Pakistan is facing internal and external turmoil of different kinds. Although the Pakistani culture is full of values and morals but unfortunately since Pakistan has taken birth, the sociopolitical environment has wrecked gradually and contaminated every walk of life. After partition of subcontinent there was a gigantic gap of skilled human resource. In order to control and drive the systems properly, improper human resource came into the field and a chain of malpractices started. Particularly leading people did not run the institution according to the rules and regulations but implemented their own personal and subjective principles, and put their focal mind set into the practice. As a result the individual temperament has turned out to be a key tool to operate the systems and procedures of the institutions, and no one seemed ready to change this culture. This practice has become very common phenomena in public sector as well as in private sector. As the private sector depicts its management style, there is a very narrow space to breath for staff. Only a few organizations have modern approach of management and rest of all are only a portrayal of a saith(Sole proprietor and typical money oriented and only personal profit focused business owner) culture. There is merely a vague concept of workers betterment and good deed in these organizations. There has a credible change has occurred in Pakistan particularly after globalization owing to emergence of multinational companies in Pakistan but it is still invisible at country level. Although the World Bank, CGAP and their retinue like PAKISTAN POVERTY ALLEVIATION FUND (PPAF) are providing, facilitating and offering capacity building opportunities as well as resources continuously, but it has come into observations that most of the high managements of the MFIs are driving their organizations with typical Pakistani style called “one man show”. Most of the organizations which have changed their legal status from NGO to a limited company, they themselves have not accepted this
Transcript
THE TRUTH OF MICRO FINANCE IN PAKISTAN By; Farhat Abbas Shah
Not even in microfinance, every second institution in Pakistan is facing internal and external turmoil of different kinds. Although the Pakistani culture is full of values and morals but unfortunately since Pakistan has taken birth, the sociopolitical environment has wrecked gradually and contaminated every walk of life. After partition of subcontinent there was a gigantic gap of skilled human resource. In order to control and drive the systems properly, improper human resource came into the field and a chain of malpractices started. Particularly leading people did not run the institution according to the rules and regulations but implemented their own personal and subjective principles, and put their focal mind set into the practice. As a result the individual temperament has turned out to be a key tool to operate the systems and procedures of the institutions, and no one seemed ready to change this culture. This practice has become very common phenomena in public sector as well as in private sector. As the private sector depicts its management style, there is a very narrow space to breath for staff. Only a few organizations have modern approach of management and rest of all are only a portrayal of a saith(Sole proprietor and typical money oriented and only personal profit focused business owner) culture. There is merely a vague concept of workers betterment and good deed in these organizations.
There has a credible change has occurred in Pakistan particularly after globalization owing to emergence of multinational companies in Pakistan but it is still invisible at country level. Although the World Bank, CGAP and their retinue like PAKISTAN POVERTY ALLEVIATION FUND (PPAF) are providing, facilitating and offering capacity building opportunities as well as resources continuously, but it has come into observations that most of the high managements of the MFIs are driving their organizations with typical Pakistani style called “one man show”. Most of the organizations which have changed their legal status from NGO to a limited company, they themselves have not accepted this change even and still not ready to delegate necessary decision powers at even senior and middle management levels as per company functional policies. On the other hand there are numerous handicaps at staff level too. Because there is a prevailing concept that the well educated human resource prefer to go with commercial Banks rather than Microfinance Institutes, where as the shortage of quality training and educational institutions of management and leadership as compare to population of the country can be make out easily.
The microfinance sector is about thirteen years old a playful financial teenager in Pakistan, while it is rapidly getting maturity in rest of the countries like Bangladesh, Malaysia, Indonesia and India. With reference to Pakistan, sector is facing still the stereo type style of management of Pakistan. The leaders of microfinance have different approaches to run their organizations. Particularly those microfinance institutes witch have become limited companies are still working like NGOs and they argue that only NGOs can work for community with the social responsibility, and the MFIs or the Microfinance Banks can not fulfill the mission of poverty alleviation with the full package of other services. They emphasize that the microfinance can not execute with the view of commercialization, because it is not just a micro credit rather full package of financial services along with social services like consultancy on health and education. At the same time a few leaders of the belief that it can not be done without a clear cut and
transparent commercialization for the reason that there is no harm in it to announce all the practices which are being done by the MFIs i.e service charges rates. They claim that commercial banks and corporate sector is also performing their social responsibilities and they are not irresponsible in that respect. They contend that sector can grow more by lucidity and clearness, even it is necessary to explain the flat rates which are being charged by MFIs. But in the rebuttal of this point of view NGOs inclined leaders articulate that the clients of microfinance never bother about the service charges. Their major concern is to avail financial services for their businesses.
In spite of all these debate no one can refuse the unpleasant way of late recoveries, when the front line staff of MFIs has to play even every possible tactics to pull through there overdue. There is nothing personal in business. Every product have its own life cycle and still there is not any scientific standard to measure the age of any product exactly. With reference to the current situation of a leading MFI of Pakistan “Kashf’ can be coat as an an indicator about the decline of group lending methodology. But it can be refine and can be modified. If we will close our eyes may be it become a major threat and the microfinance world will has to stand with Kashf to save the credibility and durability of ‘GROUP LENDING METHODOLOGY ’because there is nothing infinite in this universe. The day by day tightening clutches of inflation, high food pricing and continuous deterioration of currency against kinds and commodities demand any new sort of methodology and requires some sort of fresh microfinance manner for a long term sustainability.
Since every passing year Pakistan is facing the issue of Currency Exposure Fx Risk and convertibility, because the us dollar went very high and rupee fell down with the ratio of 20% to 25%. Mainly during the last four month and inflation got high as 25% also. Definitely it showed very bad impact within the sector. The current situation is going very bad. The customer stimulated adversely. They have become even violent and most of them have started refuse to pay back.ROSHANEH ZAFAR the president of Kashf Foundation writes in her article “MICROFINANCE THE BUSINESS OF DIGNITY BUILDING”.
Although PAKISTAN MICRO FINANCE NET WORK has declared the code of conduct for customer protection and the all member organizations have signed without any difference of opinion and Though it is a mile stone in the history of Pakistan microfinance sector but even then it is very late, because the whole market has come into an enormous jumble. A chain of delinquency has occurred in Punjab… the biggest province of Pakistan. Thousands of microfinance clients have refused to repay and have started agitation against the largest MFI of Pakistan. More over some of the parliamentarians have issued the letters to these defaulters whose are their voters and supporters also, about not to pay back their debts to the MFIs(as mentioned in above paragraph). This delinquency is spreading like a disease. While one fake and illicit NGO is providing shelter to the delinquent clients and maneuvering their demonstrations on the roads as well as in front of media. This virus is also thinning out within the other MFIs.
It has come into observation that most of the field staff is unaware of even the definition and importance of client satisfaction as well as the real objectives of microfinance. They are also unaware of vision and mission of their organizations. The perception of target clients and loan port folio quality is an other ‘question mark’. Over stressed, de motivated, and the unsatisfied staff or internal client has been found involved in cash fraud and other mal practices. Though there is a demand of sixteen thousand front liners according to PMN but the already working staff has not has been not allowed to rotate from one to another organization professionally, although PPAF (PAKISTAN POVERTY ALLEVIATIN FUND) always encourages and suggests the staff as well as managements but most of managements are reluctant to free or accept the staff with open arms for the betterment of the sector. Pakistan Microfinance Network is required to work on ‘staff protection code of conduct also’. Otherwise a precious human resource may be mislaid and inept. In spite of a few leading MFIs the most of them have become suffocated, hodgepodge and some sort of sandwich between eastern and western cultures. There is a need to customize their working style according to geographical and demographical segmentation. Especially it is needed to disburse only target client conditioned with the use of loan in businesses. Over lapping should be prohibited and blindly outreach must be stopped. Because the race to increase outreach is another cause of loosing internal controls of the organization, while the 90% MFIs are not focusing exactly on the targeted poor client suggested by WORLD BANK.
Still there is a large potential market is available for microfinance in Pakistan principally with integrated approach because the area of “integrated microfinance” is still vacant, but the MFIs and NGOs already working are not so capable of make it viable. It is highly recommended that the new organizations should be encouraged in this field with modern and psychographic approach as well as segmentation. H.I.V+,M.S.N and spatial persons area can be targeted because there is a room for it in Pakistan. Observations reveal that these very sensitive turning points for Microfinance in Pakistan and higher managements have to think upon. They have to resolve these issues seriously and will have to come out of their personal shelves. P.M.N will have to set some criteria for model organizations and should start annual award ceremony for best organizations in different organizational aspects building them high and professional. Excellent clients and best efficient staff should also be considered.
