Summary of the Poverty and Social Impact Assessment: Pakistan Microfinance Policy - Briefing Note

This paper examines the role of microfinance policy on Pakistan's Poverty Reduction Strategy. It highlights findings from a MIX Market report that compares Pakistani microfinance sector with those of neighboring countries, case studies of seven Pakistani MFIs and household surveys.

Findings indicate that Pakistan's microfinance sector, while a late starter, is comparable to that in other South and South-East Asian countries. Surveys indicate that providers and users share similar aspirations of greater access to savings and insurance products, and higher flexibility in microcredit. However, the government needs to step back and let the microfinance industry evolve under its own momentum, and ensure that policies provide an enabling environment for the sector's growth. The paper also highlights the need to build linkages between formal banking structure and informal self-help groups, and broaden policy dialogue for effective poverty alleviation.

Finally, the paper stresses consideration of the following issues:

• Regulation of MFIs;
• Tax structure;
• Use of subsidies;
• Poverty monitoring and evaluation;
• Loan size restriction;
• Borrower eligibility criteria;
• Interest rates.