Micro credit banking has emerged out to be an effective tool to combat wide spread poverty in the third world countries. Provision of credit to the people at grassroots level and small firms is an excellent strategy to boost economic activities and generating job opportunities especially in Balochistan a country’s largest province, with nearly 44 percent of its surface area and a thinly dispersed population of around 7.5 million. The social indicators are also appalling in the province with illiteracy nearly at 60 percent as of small scattered population in large area, low primary school enrolment ratio and insufficient facilities for healthcare. The incidence of poverty is higher in Balochistan than any other province despite the fact that it is endowed with rich reserves of gas, oil, coal, gold and copper. Over 50 percent of population is subsisting below poverty line in the province. Though poverty in the province is more ‘shared’ poverty, yet income-based inequities in human development need to be addressed. Microfinancing can prove a vital approach to alleviate poverty and combat joblessness in the province, as it would help build human capacity.
The development of microfinance sector can bring about a real change in the lowest strata of society and improve the socio-economic status of the poor segments of the society. Micro credit may be used as an important and effective tool to combat wide spread poverty in the province. Only 20 percent of its people have an access to safe drinking water compared to 86 percent in the rest of Pakistan. Village electrification is only 25 percent against the 75 percent in the rest of the country. Infant mortality rate per 1,000 people is 108 as against national rate of 100. The situation of basic amenities and access to education is also far below the ratio of other provinces.
Khushhali Bank has been promoting micro crediting in the public sector in the province. It has, however, not achieved its key objective of poverty alleviation. In other words, the strategy of Khushhali Bank has not been effective in targeting the abject poverty in the province. The lack of adequate human and institutional capacity, shortage of local expertise and weak coordination among various stakeholders are the main hurdles in expanding micro-finance in Balochistan. These hurdles need to be removed for proper growth of microfinance sector in the province. Khushhali Bank was established by the former government to provide access to sustainable microfinance services for the poor to enhance their income earning capacity.
Balochistan with its challenging security environment needs a comprehensive micro-finance development strategy to alleviate poverty. A strategy should be devised to ensure the access of poor and low-income households to institutional financial services. The micro credit banking in private sector can play a vital role in accelerating economic growth, facilitating finances to the down trodden sections for their socio-economic uplift and eradicating poverty from Balochistan.
The government needs to take all steps to improve law and order for growth of banking sector including micro-financing in the province.
An informal credit supply is not the answer to ameliorate poverty, as the poor frequently turn to the informal credit suppliers that put crippling terms and conditions for micro credit. Efforts should be made to maximize to outreach of the clients for promotion of private banks willing to invest in the micro credit.
A different policy should be formulated for loaning to the people living below poverty line. It is a hard fact that the majority of people in Balochistan live below poverty line, and hence provision of microfinance services to the local people will primarily help in their economic rehabilitation. The province lacks human capital. A bulk of unskilled population lacks the employment opportunities. The promotion of microfinance sector will create more job opportunities for the local people.
The micro credit banks should broaden their branch network and client base amongst the local communities in Balochistan. The private sector should also come forward to set up further micro credit banks.
Aga Khan Foundation has reportedly stepped forward for establishing a micro bank in private sector. The others should follow the example and play a due role looking into the poor segments of the society.
Microfinance can also play a vital role in economic empowerment of women in the province. It can provide them with the opportunities to play their role at all levels and in all types of development activities. According to a UN literacy survey report, females in rural areas with lowest literacy rate, were more inclined to embroidery. They, belonging to the lower class of society, live under poverty, and for them making money on embroidery skills is a real bonus in life. Females from all age are engaged in doing embroidery skills, however, majority of them belong to young age. The learning of embroidery is formal for majority of them, as they don’t undergo any specific training for that; nonetheless, it needs special skills to do it properly.
The handicraft work is common in the rural areas, where females having learnt the handicraft skills are actively engaged in sewing them to raise a livelihood for their families. Financial benefit for handicrafts can play an important role in women’s economic empowerment, especially in rural Balochistan, where it is generally practiced at local family level.
There is dire need for ensuring transparency in microfinance sector. Only the deserving persons fulfilling criteria should have the access to financial services. Secondly, the system of providing microfinance services must be sustainable and on permanent basis. Sustainability can be achieved through diversification of financial services. Thirdly government must encourage the microfinance practitioners and help them develop a formal and sustainable finance system for expanding microfinance supply across the country. An informal credit supply is not the answer to ameliorate poverty, as the poor frequently turn to the informal credit suppliers that put crippling terms and conditions for micro credit. Finally, efforts should be made to maximize to outreach of the clients for promotion of private banks willing to invest in the micro credit.