Microfinance - a Rigeional Comparison

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Table of Contents

Executive Summary1

Aims and Objectives of The Report1

Structure of the Report1

             Findings of the report ………………………………………………………………………………………………………………….1

Introduction……………………….……………………………….…………………………………………………………………………………2

Pakistan3

Bangladesh8

Srilanka10

India………………………………………………………………………………………………………………………………………………………13

Analysis…………………………………………………………………………………………………………………………………………………17

Conclusion..................................................................................................................................................20

References…………………………………………………………………………………………………………………………………………….21

Table of Figures:

Figure 1Discount Rate Trend Pakistan (Basharat, Arshad and Abbas, 2016)        4

Figure2Breakup of Borrowers by sector (Basharat, Arshad and Abbas, 2016)        5

Figure 3Market share of MFIs in Pakistan (JCR VIS, 2016)        5

Figure 4 market share of MFIs in Bangladesh (Sinha, 2011)        10

Figure 5 Poverty Headcount Index In Srilanka (Census and Statistics Bureau, 2014)        10

Figure 6 Income distribution in Srilanka (Intellecap, 2016)        11

Figure 7 Top 10 MFIs in terms of Branches in India (Sa-Dhan, 2015)        14

Figure 8 Loan per borrower India (Sa-Dhan, 2015)        14

Figure 9 trends in urban rural share of MFI borrowers (Sa-Dhan, 2015)        15

Figure 10 Growth of MFI portfolio post 2010 (Sriram, 2015)        15

Figure 11 Growth of MFIs (Sriram, 2015)        16

Figure 12 Regional Comparison of Microfinance (Sriram, 2015)        17

Figure 13Comparison among MFIs of SAARC countries  (Ahmed et al., 2016)        18

Figure 14 relative microfinance regulations in SouthAsia (WorldBank, 2006)        19

Figure 15Focus on Global Microfinance (Convergences, 2016)        19

EXECUTIVE SUMMARY:

Aims and objectives of the report:

1. The aim of the report is to describe the micro financial activities taking place in the South Asian Region.
2. The report aims to provide information regarding the atmosphere provided in different countries of the region for the growth of the microfinance sector.
3. The objective of the report is to analyze data of the past years and determine which country in the region is performing well and which is performing below the set standard.
4. The report aims to provide possible reasons for the difference observed in the performance of the countries.

Structure of the report:

The report is based on the comparison of “microfinance sector” in the South Asian Region. In the report 4 countries of the region have been observed i.e. Pakistan, India, Bangladesh and Srilanka. Nepal and Afghanistan were not taken due to unavailability of data and China was left because it’s not part of South Asian region. The regulatory environment and the financial activities of these countries are observed separately to better understand the sector of microfinance. The last part of the report is the analysis which provides the possible results or conclusions of the report and include some recommendations for countries that are not performing well.

Findings of the report:

The data observed of different countries, show that the microfinance sector in India has been given the best environment to grow. With Bangladesh being the second best country in which microfinance took its root and still plays an important role in the growth of the economy. Pakistan’s market seems to be doing just fine and is an emerging market for the microfinance sector, this is a positive signal for international investors to invest in this sector. Srilanka’s performance is the worst of the 4 countries due to lower poverty in the region and less focus of the government in this sector.

Introduction:

Microfinance describes a variety of financial services like loans, insurance and savings for poor entrepreneurs who might not get loans from commercial banks. They are usually given in developing countries where majority of population is poor. The goal of microfinance is to enable the poor to support themselves and get rid of poverty.

Muhammad Yunus of Grameen Bank is considered the father of modern microfinance. Microfinance institutions can be both for-profit and not-for-profit.

Per World Bank there are around 7000 microfinance institutions which serve 16 million clients and the outstanding loan portfolio is more than 2.25 billion$ (Microfinance? 2013).

Pakistan:

The microfinance industry in Pakistan has grown over a steady pace during last 4-5 years. The industry is expected to play important role in Pakistan’s growth. Recent macroeconomic stability has provided a boost to the industry. Favorable steps like easing up of monetary policy, creation of PMIC (Pakistan Microfinance Investment Company) and PM interest free loan schemes have been beneficial for the industry (Basharat, Arshad and Abbas, 2016). 

Microfinance sector In Pakistan constitutes of 45 institutions which can be divided into four main types; Microfinance Banks MFBs (regulated by SBP) Microfinance Institutions MFIs (provide specialized services & include NGOs) Rural Support Programs RSP and Microfinance providers MFPs (JCR-VIS Credit Rating Company Limited, 2014).