Financial access

May 29, 2019


The writer is a development sector practitioner and a lawyer.
The writer is a development sector practitioner and a lawyer.

OUR country’s social fabric is being frayed by a multitude of socioeconomic ills. While there is no single blanket approach to address every economic complaint, one crucial aspect that urgently needs to be addressed is the vulnerability of Pakistan’s women.

One approach that is gaining currency around the world is microfinance. Both a financial as well as a social intervention, microfinance can be harnessed to uplift the status of disenfranchised populations across a multidimensional sphere. In a country where 84 per cent of the adult population remains unbanked, it is increasingly being seen as a dynamic tool to plug financial gaps and empower the vulnerable.

Women’s lack of financial inclusion impacts all socioeconomic indicators, and it is particularly acute in Pakistan. According to the United Nations, 56pc of Pakistani women fall below the poverty line. Moreover, only 21pc of women have access to finance, of which only 11pc have access to a bank account. A study by Kashf Foundation found that 90pc of women surveyed felt they were disempowered in domestic and financial matters, an issue rampant across all socioeconomic strata.

Women must be empowered to exercise socioeconomic agency.

This lack of economic empowerment has resulted in Pakistani women as a whole, both urban and rural, being deprived of their say in allocation of resources and other decisions within and outside of the home, having reduced financial support structures, and being unable to contribute towards the country’s growth. Thus, the need of the hour is to empower Pakistani women to exercise socioeconomic agency.

The benefits of using microfinance as a gateway to enhance financial access have been enunciated in a plethora of studies. Microfinance provides women with the tools to exercise greater agency over usage and allocation of productive assets, thereby increasing household savings and streamlining domestic consumption. Moreover, it helps women reclaim their reproductive rights, increases school enrolment and literacy rates, decreases nutritional deficiencies and other health risks, and enables employment generation. Rather than women being seen as supplementary caregivers in their homes, financial access enhances their social power both at home and within the community.

In a recent impact evaluation that has been conducted by the Pakistan Microfinance Network and measures household welfare across five dimensions — gender empowerment, household per capita consumption, durable consumption expenditure, schooling children, and employment generation — it was found that giving women access to finance resulted in significant improvements in all dimensions. Women were shown to be more productive savers, invest more altruistically (both within their households and in the market), stimulate entrepreneurial growth, and boost returns on investment within a variety of market sectors. As women tend to spend more on education and healthcare, community welfare was also enhanced.

The market for microfinance in Pakistan currently comprises of only 6.9 million active borrowers of microcredit, in a country where nearly 100m comprise those falling within the vulnerable category according to governmental estimates. Coupled with the fact that the industry is growing at an average rate of 30pc, this highlights the vast untapped potential that lies in covering underserved markets. Market penetration for the microfinance sector currently stands at 32.5pc. While this is impressive growth for Pakistan, it still means that nearly 70pc of the market has not been penetrated.

Moreover, though 53pc of all active borrowers are female due to microfinance institutions such as Kashf Foundation and Damen Support Programme that cater primarily to women, research highlights that the loan ends up being managed by the household’s male members. This shows that women continue to remain underserved because loan products are not being customised primarily to cater to them.

Data pertaining to female entrepreneurship is worrying because recent reports from the World Bank show that only 1pc of the female population is engaging in entrepreneurial activities, compared to 21pc for male. Though the country has embarked on various investment climate refo­rm initiatives, the World Bank highlighted that the lack of access to finance, patriarchal attitudes and discrimination continue to plague women and discourage their labour force partic­ipation. The journey towards achieving socioeconomic empowerment and breaking free from the chains of vulnerability that bind us might be a difficult one, but it is not impossible. Harnessing the power of microfinance as a vehicle to enhance access to finance for women will have a multipronged, systemic impact across all facets of society. It is imperative to provide women with the economic tools needed for them to enhance their participation in the formal economy, gain agency, alleviate poverty, and boost household welfare.

The writer is a development sector practitioner and a lawyer.
Twitter: @Shanzaf

Published in Dawn, May 29th, 2019