Role of Micro Finance in Pakistan

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Half of the world’s population is living below or near poverty line, which is 2 or less then two US dollars. To encourage the development and eliminated poverty UN have announced their goal of millennium to eradicate poverty till 2015. Pakistan is 87th poorest country of the world and 23% of its population is living under poverty line, which is US$ 1 per day. Micro finance is a method to alleviate poverty and empower, and raise the living standard of poor people. Micro finances are provided by the MFIs, who address the financial needs of poor people, neglected by the conventional financial institutions. Micro financial activities are as old as 200 B.C, which were started in India in shape of moneylenders, chit funds and merchant banks.…show more content…
Germany’s microfinance sector consists of Community saving funds (Saving banks), and member-owned cooperative associations (cooperative banks) was one of the largest microfinance sector of the world in late 18th century. Community owned FIs were started during 18th century and were followed by the first community saving funds in 1801. All the financial institutions were brought under the banking law in 1934, which made them universally acceptable banks. In 1997 these two banks had a network of 39,000 branches, 64% of financial intermediation, and 51.4% of all banking assets. Since then these branches are reduced to 29,000 which is still 93% of all bank branches in Germany (Seibel, 2003; Seibel, 2005).

Origin of microfinance in India antedates those of above by three millenniums, Moneylenders (providing loans from their own personal sources) (Moneylenders, n.d), Chit funds (a group of people under the organization of one person pay installments which can be daily, weakly, or monthly for a specific period of time, at the end of that time the pooled amount goes to the person in turn and this cycle continuous till every single contributor gets the full amount he contributed; Usually known as “Comati” in Pakistan)
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