According to Pakistan Microfinance Network Rural Finance is inaccessible to over 90 percent of the rural households in Kyber Pakhtunkhwa. The reasons responsible for this extremely low outreach includes low population density; high dependence of the population on agriculture; fewer economic opportunities; and presence of grass root religious movements that oppose interest based lending. This resulted into an increased cost of delivery and credit risk by manifolds for any service provider.
SRSP initiated its microfinance program in June 1991. It initially had its operations restricted to District Charsadda and Kohat, however later on had it expanded to District Peshawar, Nowshera, Hangu, Karak, Abbottabad, Haripur, Mansehra and Battagram. Till June 2006, SRSP had disbursed over 101.50 million rupees benefiting more than 11,000 clients of which 62 percent were women.
Delivering microfinance services under retail lending methodology for almost 15 years (1991-2006), SRSP realized that the traditional microfinance will hardly be successful in the province because of the high cost of delivery and risk associated with the lending program. In July 2006, SRSP pilot tested a Village Banking Model (community-managed financial intermediary) believing in the philosophy that the communities have tremendous self-help capacity, all they need a right kind of technical support and direction. The Village Banking model was tested in 5 districts of the province, and the program than expanded to 2 other districts to village banks established with the support of BKPAP and AUS-Aid. It turned out to be a huge success as the model adequately addressed the issue of lack of ownership among the communities, proximity and cost attached to the delivery of rural financial services in KP.
Through participatory management structure responsibilities were decentralized by giving the community members (particularly women member’s- the most marginalized) autonomy and space to take most of the key decisions themselves pertaining to Village Banking operations. These decisions included electing their own leaders, selecting their own members, recruiting their own staff, creating their own bylaws, doing their own bookkeeping, funds management (disburse and deposits), resolving delinquency problems, and levying their own penalty system on members who either come late, miss meetings, or fall behind in loan payments. The Village Banking model also created greater self-confidence and solidarity among women through the transfer of knowledge, and strengthening their financial management skills at their doors’ step. Today, Village Banks (VBs) are set up in all those areas where there is cluster of COs (representing 100 – 200 households scoring 24 and above on Poverty Score Card) is available. Till June 2018, SRSP had disbursed over 290.47 million rupees benefiting more than 24,800 clients of which 91 percent were women.
According to the Bureau of Statistics, in KP, on average 45 percent of the rural population are living below the poverty line. Such households score 23 or less on the World Bank Poverty Score Card. There is no formal and informal financial services are available for this group of people. In other worlds, they have never been a client to any financial intermediary because of their extreme poverty due to low or no earning source. Therefore, to build the earning capacities of such households, in June 2009 Village Banks were provided with a Community Investment Fund (CIF) through the financial assistance of provincial government. CIF which is comprised of Income Generation Grants and Loans, is available to ultra poor exclusively. These are the households who have no assets and are chronically food insecure. These are often individuals who face extreme circumstances i.e. physical disabilities, too vulnerable to take loan risk (often overly indebted), living in an emergency or post conflict situation. CIF provides to such individuals the opportunity for the purchase of productive assets in order to start-up an Income Generating Activity (IGA) for improved livelihood.
Women’s economic empowerment is a prerequisite for sustainable development and pro-poor growth.
Women are the prime beneficiaries of Community Investment Fund Program. Reason being that women in rural areas are perceived in a more traditional role in the economy (invisible contribution i.e. underpaid and unpaid work of women) and are assumed unable to operate a business outside of their homes. They also face cultural barriers, which often restrict them to the home and making it difficult for them to access financial services. Moreover, they are excluded from mainstream banking primarily for reasons such as poverty, lack of education, and living in remote locations. Since we believe that that access to capital is essential to improve livelihood of a poor household therefore under the CIF program, a woman with a source of income will have a positive effect on her children education and their nutrition intake.
Today there are over 65,000 members (all women) who are member of the SRSP CIF program. Financial assistance ranging from Rs. 5,000 to 25,000 per individual in the form of income generating grants as well as loans have been extended through a network of 329 Village Banks in 10 districts of province. According to a survey that was carried out by DFAT (AusAID) in 56 villages of three Central districts and two Northern districts Out of the 10,326 women that are member of 56 VBs, 5,522 (53%) women were interviewed for immediate benefits of the intervention. 97% women reported an average income increase of PKR 3,780 per month. The Programme will continue to collect data on the remaining women to document the program impact. Furthermore, a survey of over 1,100 CIF beneficiaries reveals that 35 percent of the income derived from CIF interventions are invested in better education and health of their children. Comparing this with the Benazir Income Support Program (BISP) of Government of Pakistan (funded by DFID) that extends a monthly payout of Rs. 1,566 (annually Rs. 18,800) to a similar target group (PSC: 0-18) provide a week’s relief to the family from hunger but their plight in the remaining three weeks of the month is not addressed. Poor people need an independent source of regular income from some job or Income Generating Activity. CIF program, would create a job for the poor as wel as help beneficiary to move out from poverty.
CIF has evidently achieved the said milestones in BKPAP area. According to a third-party evaluation report that was commissioned to Associates in Development (AID) by Government of KP…. “A large percentage of the CIF beneficiary’s households is noted with Financial Stability, High Self-esteem, Economic Independence, Better opportunities and greater Self Confidence as some of the immediate impacts. Furthermore, nearly 94% of the respondents reported a moderate to visible improvement in their household income”.
The CIF is primarily a women program and so far, 234.8 million PKR has been disbursed under different programs including BKPAP, PPAF, Australian Govt benefiting 22,786 HHs with the seed capital and similarly revolved the funds amounting PKR 318 million benefiting 26,101 HHs.
SRSP also delivering microfinance services under retail lending methodology from last 13 years in urban areas of District Peshawar and Nowshera. Responding to the inherent risks, SRSP has been innovative in its approach to make microfinance services accessible to previously inaccessible poors’ in the urban areas. Naway Sahar (Urban Program) is based on the experience that even small working capital (Micro loans) can improve micro-entrepreneurs’ income and productivity. SRSP, Naway Sahar program is a 100% women based program, with the purpose to help them with the opportunity of starting an income generating activity at household level. SRSP role is pivotal in the process because loans are utilized, they offer poor entrepreneurs a flexible productive resource that they can use to improve their economic strategies. With access to small working capital (loans) entrepreneurs can increase productivity and income by 1) lowering costs (buying in bulk or replacing costlier sources of working capital), 2) Increasing production and 3) Diversifying income generating activities. Our experience also confirms that Naway Sahar program stimulates new income sources for poor households by opening options to expand traditional risk diversification strategies. The short loan term and frequent repayments encourages a net shift away from household consumptions to income generating activities by starting household level micro-enterprises, which produce a steadier flow of income for the ultimate beneficiaries. Till June 2018, SRSP had disbursed over 253 million rupees under Naway Sahar program benefiting more than 18,662 clients of which 78 percent were women.
In the financial year 2017-18, cumulative disbursement of 138.8 million has been made to benefit 9,907 households with 100% credit recovery under the microcredit component has been maintained. Value disbursement amounting 75.05 million was made under the village banks and Naway sahar program, providing the financial facility to 5,667 beneficiaries, alongside 63.79 million PKR were revolved to 4,240 beneficiaries under the CIF Program. Similarly, in the first four months (July-October, 2018) of the current FY, new funds amounting 24.9 million were disbursed to 1,690 beneficiaries and 21.36 million were internally revolved to benefit 1,484 households under WEEMD and GEF.
329 village banks serving 48,907 clients having 100% women clients in CIF function of Microfinance
For CIF purpose SRSP has Disbursed 552.8 million PKR, all of it to women clients PSC 0-23, selected after poverty scorecard survey in 10 Districts of Khyber Pukhtunkhwa.
35 number of village banks serving 56,362 clients with 81% women clients in Microcredit function. For Microcredit purpose SRSP have Disbursed 668 million PKR, women proportion is 545.4 million PKR in 8 districts of KP.