ROLE OF MICROFINANCE IN THE DEVELOPMENT OF PAKISTAN'S ECONOMY

Abstract

Microfinance has a potential market of 1.8 billion people in the world and it is a best tool for poverty alleviation and to make financially powerful to people. Poverty is the key challenge facing by the world and eradiating the poverty is depend on the economic growth and development. Pakistan is the principal potential microfmance market in the world which has approximately potential microfmance market of 10 million adults and this estimate is expanding dramatically due to high growth rate of population. 34% of Pakistani population living below poverty line and earn less than US 1$ per day, barely a survival level. Microfmance sector of Pakistan is providing financial services and assistance to very little part of potential market, which is only 3 % of 65 million people. Major part of micro financial services and microcredit loan is provided by NGO's, some of them are specialized and others providing microcredit as one part of large projects. Pakistan is a highly populated country having a lot of skilled and potential labor force. By using the expertise of this labor force more revenues can be generated, which will ultimately increase the Foreign Exchange Reserves of the country. Microfmance plays a vital role to cover the multidimensional impacts of poverty. It improves the basic lifestyle of peoples; provide food security, education and self empowerment. Research shows that the institutions serving in the segment of poor persons and small business holders can be sustain in the market even with high cost of operations. Grameen Bank of Bangladesh is a good example of microfmance institution serving the low income and household segment. There are many areas in the country that are still not covered by microfmance institutions, especially rural areas where potential customers required there services. Grameen bank is very successful in Bangladesh so due to about same culture and economic position microfmance sector can also perform very well and beneficiary in Pakistan. Pakistan's handmade products including (embroidery on fabrics, leather goods, carpets, footballs, surgical items, etc.) are very popular in the whole world. These all products commonly produced in small/ house hold production units and provide a lot of revenue to the country. By promoting and encouraging these small businesses and production units with the help of low markup credit government can increase financial reserves and ultimately alleviate the poverty level in the country. Many famous international brands products and export quality products are produced in small and informal production units situated in poor areas. In current power crises big factories cannot produce their order in time so they outsource these small production units to complete their orders in time. Successful microfmance can also support the highly fluctuated foreign exchange reserves and negative balance of payments of Pakistan. Microfmance is also beneficial to empowering the women because women also play a vital role for economic, political growth and development. They are hardly ever financially sovereign and the most defenseless members in the society. Microfinance is an important tool by which we can empower these women and improves her lives accordingly.