PML-N has promised in its 2013 manifesto that when in power it would launch the Women Entrepreneurship Financing Scheme to promote women entrepreneurship.
State Bank of Pakistan (SBP) Governor Tariq Bajwa launched in August 2017 a refinance and credit guarantee scheme for women entrepreneurs in underserved areas. He said at the inauguration ceremony “Women are central to this growth paradigm.”
The SBP has launched this scheme in line with the government policy to support and revive economic activities in the country and measures for improving access to finance in underserved areas of the economy, especially for women entrepreneurs.
According to Mr. Bajwa, it was for the first time in the history of Pakistan a scheme with zero per cent refinance rate and 60 per cent risk coverage for small businesses run by women entrepreneurs have been rolled out. Bajwa further added that: “This scheme is an affirmative action by the SBP to encourage the flow of funds to small enterprises run by women in underserved areas. It earmarks at least 20 per cent of funds for Balochistan.”
The SBP will provide the refinance facility to banks at zero per cent, with the maximum financing amount of Rs 1.5 million for five years with a grace period of six months.
Pakistan emerged on the microfinance map in the mid-1990s, but it wasn’t until 2001, when the State Bank of Pakistan (SBP) – the central bank – passed the microfinance ordinance, that the sector became regulated and organizations got officially registered.
Since then, ten microfinance banks and dozens of NGOs have been operating across the country.
An estimated five million people out of a population of almost 200 million borrow 170 billion rupees ($1.6bn) in microloans, according to the latest figures by the NGO Pakistan Microfinance Network.
But the sector’s 25 per cent penetration rate, reported by PMN, pales in comparison to the commercial banking industry’s total loan portfolio of 15 trillion rupees ($142bn).
Microfinance organizations and banks in Pakistan typically follow a self-sustainable model, charging interest rates ranging from 0 to 28 per cent.
The average size of a microloan in the country is 40,000 rupees ($380).
Haroon Akhtar, the adviser to the Prime Minister on Economic Affairs, told Truth Tracker that PML-N had been committed to making women empowered economically and this initiative to provide soft loans to women of underdeveloped areas is a sign of that commitment and belief. He further added that many such schemes are in the pipeline. He, however, added that due to the political uncertainty the government has not been able to focus on many issues of micromanagement level.
Asad Umer, member National Assembly from Pakistan Tahreek-e-Insaaf told Truth Tracker that women’s economic participation rate in Pakistan is 26 per cent. “Microfinance is about giving tangible solutions to women to change their lives,”
Explaining the mechanics of giving microfinance to women in Pakistan, he further added that according to a 2016 UN report, approximately five per cent of Pakistan’s overall microfinance loan portfolio goes to female borrowers, who make up 50 per cent of the clients. And Between 50 to 70 per cent of microloans to women in Pakistan may be used by their male relatives, a 2012 World Bank report found. In some cases, the woman needs a male guarantor or a bank account to be eligible for a loan above an absolute limit.
“It would be of no use to provide microfinance to women unless they are given adequate financing and some preliminary business management courses and financial training.” He said that the PML-N government has just done a whitewash to tell the voters that they have fulfilled their promise; however, he added it was not enough a step towards making women entrepreneurship a reality.
Salman Shah, Pakistan’s former Finance Minister, believes that since the loan size is small, the industry is not making an impact towards alleviating the country of its nearly 40 per cent poverty rate. Similarly, Yasmin Zaidi, director of Center for Gender and Policy Studies said that the average size of the loan to women is 15,000 ($142) to 25,000 ($237) rupees. “Most are in the 5,000 ($47) to 10,000 ($95) category. What is a woman expected to do with that? Can you set up a business?”
PML-N has partially fulfilled its promise. The full benefit of this promise would only become apparent when it would be applied across the country.