Towards a Financially Inclusive Society

PMIC is helping the microfinance sector to help it to cater to the unbanked population.

November 2021

Yasir Ashfaq, CEO, PMIC.

Pakistan is the 5th most populous country of the world. In terms of financial inclusion, however, almost 70% adults and approximately 100 million individuals, do not have a bank account. The commercial banks mostly cater to urban markets. Thus, a lot of effort is required to provide access to financial services for underserved communities living in rural areas of Pakistan. Microfinance industry, currently serving more than 8 million clients, has a lot of responsibility to reach out to these segments of society. The Microfinance Providers (MFPs), particularly the non-bank Microfinance Institutions, struggle to get access to finance from other financial institutions, including commercial banks, due to which their ability to meet financial needs of rural communities is compromised.

Pakistan Microfinance Investment Company (PMIC) was established with a primary aim to meet financial requirements of these Microfinance Providers (MFPs), together with Microfinance Banks and Non-Bank Microfinance Institutions, as a wholesale lender. Registered with the Securities & Exchange Commission of Pakistan (SECP), the PMIC is an investment finance company, which has three shareholders: PPAF (which used to provide wholesale funding before PMIC came into existence), Karandaaz (which was set up by the DFID, now known as FCDO), and KfW ((a German state-owned investment and development bank). PMIC has a mission to empower the underserved by contributing to their financial inclusion and ensuring job creation, income enhancement and improvement in socio-economic conditions of the people that do not have enough opportunities. Over the last 5 years, PMIC has been able to build a portfolio of around PKR 25 billion, provided financing to about 26 MFPs and has impacted the lives of 850,000 people, 86% of whom are women and almost 62% of the portfolio in rural areas.

In addition to funds provided by the shareholders, PMIC has also been able to attract commercial funding of Rs 9 billion for MFPs and has also closed four transactions of subordinate debt and TFCs for microfinance banks. The investment and guidance provided in improving the governance, management and transparency to the MFPs has made them more attractive to commercial banks and international lenders. PMIC now offers a wide range of financial instruments and services, such as senior debt, guarantees, credit enhancement facilities, Tier II debt and advisory services. PMIC also deploys 15% of its income towards impact financing in the areas of agriculture, enterprise development, renewable energy, education and poverty alleviation. These initiatives use a blended finance approach where grants and technical assistance is provided along with financing to stimulate innovation, product development, value addition and risk mitigation, leading to enhanced productivity. More than 100,000 people have been impacted through these initiatives.

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