The Liquidity Challenge for Pakistan’s Microfinance Banks

M-CRIL Advisory Note on the liquidity of microfinance banks in Pakistan

COVID-19 has caused mayhem in the microfinance sector in Asia resulting in low recovery rates of loans and liquidity challenges for inclusive financial service providers.  Both private communications and published statements about Microfinance Banks in Pakistan, however, suggest that the sector has a sanguine approach to the COVID challenge.

The analysis in this note indicates that short-term comfort provided by the stability of deposits may be misleading and that a deeper analysis is needed for microfinance banks to manage their liquidity over the next 12-18 months.

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By Sanjay Sinha