Commercialisation of microfinance in Pakistan

This study investigates the growing commercial focus of microfinance institutions in Pakistan. Specifically, the aim of the study is to examine the impact of commercialisation on microfinance institutions and their users or clients – micro borrowers. A selective review of the multidisciplinary literature on microfinance, its commercialisation and its context specifically in Pakistan is used to develop a conceptual framework for the thesis. The study uses mixed methods, where analysis of a series of interviews and focus group meetings is combined with quantitative data analysis to give deeper and more nuanced understanding of the consequences of microfinance’s commercialisation. Moreover, particular attention is given to important themes, including: outreach, profitability, mission, and the prevailing practices of microfinance institutions. The principal findings of the study indicate, firstly, that with increased commercialisation, microfinance institutions in Pakistan tend to confined to a few parts of the country, mostly urban; in particular microfinance tends not to reach rural areas where poverty is more widespread. Secondly, it is found that microfinance institutions and some of the borrowers employ unsavoury practices that exploit cultural norms. Finally, this study argues that commercialisation of microfinance has resulted in a negative impact not only on micro borrowers but also on commercial microfinance institutions themselves, which largely fail to achieve their stated objective of profitability and ‘sustainability’.