microfinance as a tool for poverty alleviation presentation : dr shabbir hussain

Microfinance as a Tool for Poverty Alleviation Presentation : Dr Shabbir Hussain

DELIVERY MECHANISM

There are multiple models of delivery based upon the integration level of supply chainNGOsSpecialized BanksPromotion of MED, training & helping linkage with banksV/WOsNGOsSpecialized BanksPromotion of MED, training & providing Credit SupportV/WOsSpecialized BanksPromotion of MED, training & providing Credit SupportV/WOsNGOs as SHPIsThree- Pronged ApproachNGOs as Financial Intermediaries

Banks as SHPIs

There are multiple delivery approaches ranging from credit only to a fully integrated portfolio of servicesIntegratedApproach

MinimalistApproach

Credit Only

Financial & Non Financial

CBO based lending promotes independence because of lack of dependency on external donors Donor FundingCommunity Based Funding

The effectiveness of various approaches varies across different levels of povertyAt the Poverty LineBelow the Poverty LineAbject PoorSafety NetLivelihoodGrowthM E DConsumption CreditI G A s

Classification Objective Approaches

Strengths of Government and NGO ProgrammesGovernment Programs

Wide coverage is possible if resources allowInstitutional Mechanism provides clarity of roles and proceduresDirect access and support from Public resourcesLegal Framework of Transparency & AccountabilityLong-term sustainability of systemNGO Programs

Grassroots linkages and commitment of field staff to know and solve problemsNon hierarchical culture in their program. Suggestions welcome from their field staff and decisions taken at field levelMore concentration due to limited activities and area specific approachIndigenous copying mechanism of the community problems with better perceptions

MFIs in PakistanAn Analysis of Current Realities

Only about 5% of the poor in need of micro credit is currently coveredGap between borrowers reached and persons in need

Chart2

51559

196000

6300000

# of Borrowers

Data

Poverty Head-Count During The 1990s By Province & Region

Province92-9393-9496-9798-99

Urban17.71%13.58%12.44%19.13%

Punjab19.13%15.21%12.84%21.71%

Sindh14.35%9.69%8.96%14.03%

NWFP21.65%22.40%23.35%23.85%

Balochistan24.85%13.50%19.46%20.39%

Rural23.91%29.72%25.98%31.95%

Punjab22.69%29.34%23.72%31.41%

Sindh23.54%25.92%16.74%30.45%

NWFP28.80%34.22%37.07%40.56%

Balochistan22.92%32.83%36.27%19.42%

Overall22.15%24.95%21.82%28.19%

Punjab21.71%25.44%20.61%28.62%

Sindh19.47%18.12%12.76%23.33%

NWFP27.92%32.53%35.18%38.10%

Balochistan23.16%30.66%32.75%19.54%

Poverty Under Calorie Based Approach: Head Count Ratio

86-8787-8890-9192-9393-9496-9798-9900-01

National26.90%26.40%23.30%22.20%23.00%21.30%23.20%30.00%

Rural29.40%29.90%26.20%23.90%29.70%26.20%32.00%34.00%

Urban24.30%22.70%13.00%17.70%13.60%12.40%19.10%20.30%

Poverty Head-Count During The 1990s for the Provinces

Punjab92-9393-9496-9798-99

Urban19.13%15.21%12.84%21.71%

Rural22.69%29.34%23.72%31.41%

Overall21.71%25.44%20.61%28.62%

Sindh92-9393-9496-9798-99

Urban14.35%9.69%8.96%14.03%

Rural23.54%25.92%16.74%30.45%

Overall19.47%18.12%12.76%23.33%

Baluchistan92-9393-9496-9798-99

Urban24.85%13.50%19.46%20.39%

Rural22.92%32.83%36.27%19.42%

Overall23.16%30.66%32.75%19.54%

NWFP92-9393-9496-9798-99

Urban21.65%22.40%23.35%23.85%

Rural28.80%34.22%37.07%40.56%

Overall27.92%32.53%35.18%38.10%

Overall Trend in Poverty by Province

92-9393-9496-9798-99

Punjab21.71%25.44%20.61%28.62%

Sindh19.47%18.12%12.76%23.33%

Baluchistan23.16%30.66%32.75%19.54%

NWFP27.92%32.53%35.18%38.10%

Micro-Credit Disbursment

KashfSAFWCOSungiOPPTaraqeeDAMENTRDPSRSPAKRSPTotal

Number of Borrowers50887118537424603238277336112170543366

Number of New Borrowers315854633121192238548217425608193

Total Borrowers824612524867545795476332157852426551559

Micro-Credit Disbursment

KashfSAFWCOSungiOPPTaraqeeDAMENTRDPSRSPAKRSPTotal

Total Borrowers824612524867545795476332157852426551559

Total Borrowers reached by MFG-PEstimated total borrowers reached by all MFI'sEstimated total persons in need of Micro Credit

515591960006300000112000

280000

196000

Provincial Graphs

Provincial Graphs

0.19130.22690.2171

0.15210.29340.2544

0.12840.23720.2061

0.21710.31410.2862

Urban

Rural

Overall

Year

% of Population

Poverty Headcount for PUNJAB

National

0.14350.23540.1947

0.09690.25920.1812

0.08960.16740.1276

0.14030.30450.2333

Urban

Rural

Overall

Year

% of Population

Poverty Headcount for SINDH

# of Borrowers

0.24850.22920.2316

0.1350.32830.3066

0.19460.36270.3275

0.20390.19420.1954

Urban

Rural

Overall

Year

% of Popluation

Poverty Headcount for Baluchistan

0.21650.2880.2792

0.2240.34220.3253

0.23350.37070.3518

0.23850.40560.381

Urban

Rural

Overall

Year

% of Poulation

Poverty Headcount for NWFP

0.21710.19470.23160.2792

0.25440.18120.30660.3253

0.20610.12760.32750.3518

0.28620.23330.19540.381

Punjab

Sindh

Baluchistan

NWFP

Year

% of Poverty

Overall Trend in Poverty by Province

0.2690.2940.243

0.2640.2990.227

0.2330.2620.13

0.2220.2390.177

0.230.2970.136

0.2130.2620.124

0.2320.320.191

0.30.340.203

National

Rural

Urban

Year

% of Population

Poverty Headcount at the National Level

0.2690.2940.243

0.2640.2990.227

0.2330.2620.13

0.2220.2390.177

0.230.2970.136

0.2130.2620.124

0.2320.320.191

0.30.340.203

National

Rural

Urban

Year

% of Population

8246

125

2486

7545

795

476

3321

5785

24265

MFG-P Institutions

# of Borrowers

Number of Borrowers Within The Micro Finance Group Members

51559

196000

6300000

# of Borrowers

Roughly 80% of the current borrowing is from the non-formal sectorHowever, the cost of borrowing from the non-formal sector is 4% higher

Chart3

22

78

Borrowings by sources

Sheet1

Total borrowings by Source (%)

Formal22

Non Formal78

Sheet1


Sheet2

Sopurces of Funds (%)

Interest rate

Formal18.8

Non Formal22.8

Sheet2

Interest rate

Interest Rate

Interest Rates of Formal versus Non Formal

Sheet5

Outreach of major NGOs (June 1999)

BorrowersOuts.AmountAvg.L Size

AKRSP3637243.366899

SRSC100861.861310

PRSP10390102.69877

NRSP42397568.413407

Kashf8032.22740

Safco5881.52520

Sungi6633.55207

OPP141426.818934

SPO5005.511000

Sheet5

Borrowers

Major sources of Microcredit (No. of Borrowers)

Sheet4

Borrowers

Outs.Amount

Avg.L Size

Outreach of Major NGOs

Sheet3

Major Soureces of Microcredit

BorrowersAvg. Loan SizeOutstanding

Banks134194287105614.7

NGOs61400165401015.5

Sheet3

0

0

Borrowers

Sources of Microcredit (No. of Borrowers)

00

00

Banks

NGOs

Sources of Microcredit

Informal Lenders

Commission Agents11.6

Money Lenders35.8

Shopkeepers14.5

Input Dealerds21

Feed Dealers11.3

Others2.4

0

0

0

0

0

0

Informal Lenders

Chart4

18.8

22.8

Interest rate

Interest Rate

Interest Rates (in %) Formal vs. Non Formal

Sheet1


Formal22

Non Formal78

Sheet1


Sheet2


Interest rate

Formal18.8

Non Formal22.8

Sheet2

Interest rate

Interest Rate

Interest Rates (in %) Formal vs. Non Formal

Sheet5



AKRSP3637243.366899

SRSC100861.861310

PRSP10390102.69877

NRSP42397568.413407

Kashf8032.22740

Safco5881.52520

Sungi6633.55207

OPP141426.818934

SPO5005.511000

Sheet5

Borrowers


Sheet4

Borrowers

Outs.Amount

Avg.L Size


Sheet3



Banks134194287105614.7

NGOs61400165401015.5

Sheet3

0

0

Borrowers


00

00

Banks

NGOs


Informal Lenders


Money Lenders35.8

Shopkeepers14.5

Input Dealerds21

Feed Dealers11.3

Others2.4

0

0

0

0

0

0

Informal Lenders

Approximately 60% of the non-institutional lending is through money lenders, Shopkeepers, and agriculture input dealers

Chart1

11.6

35.8

14.5

21

11.3

2.4

c

Informal Lenders

Agra Input Dealerds22%

Shopkeeper15%

Sheet1


Institutional22

Non Institutional78

Sheet1


Sheet2


Interest rate

Institutional18.8

Non Institutional22.8

Sheet2

Interest Rates in percent (Institutional vs non institutional)

Sheet5



AKRSP3637243.366899

SRSC100861.861310

PRSP10390102.69877

NRSP42397568.413407

Kashf8032.22740

Safco5881.52520

Sungi6633.55207

OPP141426.818934

SPO5005.511000

Sheet5

Borrowers


Sheet4

Borrowers

Outs.Amount

Avg.L Size


Sheet3



Banks134194287105614.7

NGOs61400165401015.5

Sheet3

Borrowers


Banks

NGOs


Informal Lenders


Money Lenders35.8

Shopkeepers14.5

Input Dealerds21

Feed Dealers11.3

Others2.4

c

Informal Lenders

Shopkeeper15%

Agra Input Dealerds22%

AKRSP,SRSP and OPP have attained Financial Self-sufficiency Operating efficiency is more in SRSP and TRDPSource : Compiled/synthesised from Microfinance Group (2001) [1] Financial Self Sufficiency ratio indicates the extent to which revenue earned covers operating costs loan losses as well as maintaining the value of net worth in relation to inflation. Unless 100 % financial self sufficiency is reached, the long term provision of cre4dit services is undermined by the impact of inflation and the continued necessity to rely on new donor funds.

Comparison of Existing Micro-Finance ModelsCredit Credit Plus

Sheet1

Comparison of Existing Micro-Finance Models

(Community based economic empowerment)

Criteria/FeaturesMFIs (pure)RSPsCBOsFormal Sector

NCBsLeasing Corp.

(Private)

Major PlayersOPP Damen KashfNRSP PRSP SRSP AKRSPIndigenous organizationsmfi

ModelPass Admin Cost to borrower; market orientedWholistic; menu of servicesA variant of the Wholistic services offeredMandate; subsidized creditMarket orientedncb

Strategic Prioritysustainabilityoutreach and accessAdhoc*None, threat of penalty from SBPoperational focusleasing

A C C E S Scbos

Scope of CoverageUrban; peri-urban (limited locations)RuralRural/Urban (1-5 locations)RuralRural/Urban

Growth RateHighHighLow to noneLow (?)Med (?)

Nature of IGAsAlmost all agroAlmost all agro/ livestockNo Distinction between sectorsAll agroAgro & productive enterprise assets (e.g. - photocopy machine)

Gender SenseHighLowMixed

Lending Methodologysmall groupsvillage basedcommunity basedIndividualIndividual

OutreachMediumLargeLowLargeMed

Clientsworking poorpoorest of the poorpoorest of poorless poorsmall business

D E L I V E R Y

Servicecredit onlyCommunity Physical Infrastructure (CPI), credit, training, National Resource Management (NRM)one or two activitiescredit onlycredit only

Cost of DeliveryLowHighLowLowMedium

F I N A N C I N G

Interest RateHighLowVariessubsidizedVaries

Recovery Rate**Very HighHighMed-LowLowHigh

G O V E R N A N C E

DisclosureHighMedVery LowMedHigh

InspirationGrameenAKRSPNoneMandate of GOPVaries

main + access

Criteria/FeaturesMFIs (pure)CBOsRSPs

Leasing Corp.NCBs

(Private)

Major PlayersDamen KashfOrix LeasingFirst Women's, Bank of KhyberIndigenous organizationsNRSP PRSP SRSP AKRSPmfi

ModelLow subsidy, pass costs to borrowers; market orientedNo subsidy, private equipment, market orientedSubsidized line of credit, mandated disbursementLow subsidy, combination of credit & support servicesSubsidy, credit and holistic support servicesncb

Strategic PrioritySustainabilityOperational focusThreat of penalty from SBPAdhocWidespread accessleasing

A C C E S S

Scope of CoverageUrban; peri-urban (limited locations)RuralRural/UrbanRural/Urban (1-5 locations)Rural

Growth RateHighLow (?)Med (?)Low to noneHigh

Nature of IGAsAlmost all agroAll agroAgro & productive enterprise assets (e.g. - photocopy machine)No Distinction between sectorsAlmost all agro/ livestock

Gender SenseHighMixedLow

Lending Methodologysmall groupsIndividualIndividualcommunity basedvillage based

OutreachMediumLargeMedLowLarge

Clientsworking poorless poorsmall businesspoorest of poorpoorest of the poor

delivery finance governance

Criteria/FeaturesMFIs (pure)RSPsCBOsFormal Sector

NCBsLeasing Corp.

(Private)

Major PlayersOPP Damen KashfNRSP PRSP SRSP AKRSPIndigenous organizationsmfi

ModelPass Admin Cost to borrower; market orientedWholistic; menu of servicesA variant of the Wholistic services offeredMandate; subsidized creditMarket orientedncb

Strategic Prioritysustainabilityoutreach and accessAdhoc*None, threat of penalty from SBPoperational focusleasing

A C C E S S

Scope of CoverageUrban; peri-urban (limited locations)RuralRural/Urban (1-5 locations)RuralRural/Urban

Growth RateHighHighLow to noneLow (?)Med (?)

Nature of IGAsAlmost all agroAlmost all agro/ livestockNo Distinction between sectorsAll agroAgro & productive enterprise assets (e.g. - photocopy machine)

Gender SenseHighLowMixed

Lending Methodologysmall groupsvillage basedcommunity basedIndividualIndividual

OutreachMediumLargeLowLargeMed

Clientsworking poorpoorest of the poorpoorest of poorless poorsmall business

DELIVERY

Servicecredit onlyCommunity Physical Infrastructure (CPI), credit, training, National Resource Management (NRM)one or two activitiescredit onlycredit only

Cost of DeliveryLowHighLowLowMedium

FINANCING

Interest RateHighLowVariessubsidizedVaries

Recovery Rate**Very HighHighMed-LowLowHigh

GOVERNANCE

DisclosureHighMedVery LowMedHigh

InspirationGrameenAKRSPNoneMandate of GOPVaries

Comparison of Existing Micro-Finance ModelsCredit Credit Plus

microfinance as a tool for poverty alleviation presentation : dr shabbir hussain

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