Pakistan is one of the 50 members participating in the celebration of the International Year of Micro Credit-2005 and is committed to use micro finance as a policy to target around 6.5 million poor households.

Presently, only 7.5 per cent of these poor have access to this micro credit service. Khushhali Bank, First Micro Finance Bank, National Rural Support Program along with it UPAP project, Kashaf and all other NGOs and institutions cater to the credit needs of a meagre portion of a huge demand.

Thus, this sector has vast potential to develop and expand throughout the length and the breadth of the country. The network of existing institutions and banks should be broadened and improved.

New entrants should be encouraged and facilitated so that the existing gap between the demand and supply of this service may be filled up. The regulatory policy of the State Bank on this sector should be expansionary and the issues relating to micro finance banks, institutions, NGOs, enter prize development departments, and micro finance unions should be attended to carefully.

Most of the micro finance institutions and banks put exclusive focus on the credit only. It is assumed by micro finance managers/leaders that one and only factor that prevents our poor people from becoming successful entrepreneurs and trade tycoons is the lack of seed capital.

But the picture is totally different. A simple profile of our society shows that they need many other services along with credit to run successful and sustainable businesses.

The borrowers/entrepreneurs need enterprise development trainings (EDTs) to get acquainted with the basic concepts of entrepreneurship like market survey, business feasibility and planning, personal entrepreneurial competencies (PECs), promotional skills, information of market trends and prices, and maintaining of records and preparing income and expenditure statements.

They should be given marketable technical skills through workshops and at the Government Technical Training Centre (TTCs), using facilities of other organizations also.

Micro and small entrepreneurs supplying to the local markets face issues like bargaining on price and credit purchases, particularly in the rural areas and small towns. They need to adjust and link with larger markets in provincial and national capitals and other big markets.

There should be research and coordination wing/ department within each MFI that should not only link the potential entrepreneurs with market but should also be engaged in the collection of information on the cost of production, technology and the processes of production and sharing the same with the entrepreneurs in order to ensure cost effective and good quality products.

Our economy needs a conducive business environment and an entrepreneurial culture for a change to take place. There should be more focus on social mobilization, awareness campaigns and advocacy regarding the importance and role of the micro finance and micro enter prizes.

Currently the relationship between the borrowers and lenders is that of two parties always at the draggers drawn. A one day visit of the field office of an MFI official during the recovery days shows where the present level of the trust between the two stakeholders is.

In many cases there are reports of fights and even FIRs lodged with police against the borrowers. Such types of happenings will cause difficulties for the MFIs in the long run.

During the loan repayment period which is around one year in most cases, the borrowers nurture a feeling that MFIs do not care about their welfare or development but they are merely inhuman profit seekers. There is a need for an environment of trust for lasting mutual cooperation.

Studies by independent research institutions conclude that overall cost of the MFIs is relatively higher mainly due to huge overhead costs. In order to be accessible to all the deserving in the program area, the MFI has to be there in every locality and has to employ a team of the field workers both male and female along with area/field managers. To this expense is added the transport costs.

However, most credit programmes are being supported by organisations which receive either endowment funds or cheap capital. The MFIs should not only depend on these subsidised funds, but also must find creative solutions and methods to target clients efficiently and effectively.

A look into the loan portfolio of MFIs reveals that we are still sticking around the traditional sectors of the economy. A major portion of total loans is invested in agriculture and related sectors.

A big 43 per cent is captured only by the livestock. Another 25 per cent is consumed in agricultural seeds. Remaining portion of loans has gone, almost all, to micro enterprises.

If the objective of MFIs is to provide the poor a sustainable and gainful livelihood, we are not staying on the course as is evident from the present portfolio picture.

All these businesses and enterprises are characterised by higher rates of risks and relatively lower rates of growth. These businesses especially live stocks are highly volatile, fragile and risky income earners.

The borrowers/potential entrepreneurs should be encouraged and guided to invest their capital in the sustainable and growing enterprises with relatively lower rates of risks as they are very vulnerable to fall back into the vicious circle of poverty.

At present, there is no system to logically document the growth achieved by the entrepreneurs. Neither the borrower is trained and motivated to keep the record of the his/her transaction of the business, nor the MFIs have developed a system to keep the track record of the credit beneficiaries.

Consequently, both the entrepreneurs and the MFIs are ill- informed about the future prospectus of that business. The MFIs are ill-equipped to give correct counselling for the new entrants in the business as they do not know about the actual prospectus of the existing enterprises.

More worrisome than this is the difficulty in assessing and evaluation of the micro credit intervention in eradication of the poverty, if we have no proper track record of the borrowers' businesses.