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International

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.


PMIC has contributed to improve financial inclusion in the country by working with the regulators, both the SBP and the SECP, industry associations and practitioners in the development of a favorable ecosystem for the microfinance sector. The PMIC’s efforts, in collaboration with other stakeholders, have greatly helped in growth of the microfinance sector, both in terms of clients as well as loan book. The sector is now gearing to reach 15 million clients by 2025. This would require the sector to almost triple its portfolio size and a huge influx of liquidity for both debt and equity would be needed. PMIC is preparing for this next phase of growth in the sector by expanding its range of services for the sector players.

PMIC aims to explore a number of different avenues to diversify its investment portfolio and bring new players to the industry. In this regard, PMIC is preparing to launch its Challenge Fund to deploy the grant-based microfinance plus initiatives. PMIC is also working to adopt the Securitization and/or Asset Purchase model, where it could purchase some portion of the MFP’s loan portfolio (based on certain geographic area or business sectors) and share a revenue model with the respective MFPs. This would allow the PMIC to fill the funding gap, created as a result of asset purchase/securitization model. As another key initiative, PMIC aims to explore its Institutional Development Fund, where it intends to bring new players to the microfinance industry. In this regard, PMIC is working on a program structure based on which SECP/SBP-registered entities will be provided with financing and technical support to offer microfinance services in their operational areas and business segments.

Digitization is also an important area for PMIC as well as the microfinance sector. However, there is a risk that “digitally excluded would also be financially excluded,” particularly in a country where a large number of individuals do not have access to smartphones and have a very little digital footprint. PMIC believes that digitization should not direct microfinance towards providing nano and consumption loans, rather it should help in attracting more clients. With this aim in view, PMIC is exploring different options for making investments in Fintechs, as Pakistan being an emerging market for such firms.

Through the above-mentioned initiatives, PMIC is going an extra mile to create a financially inclusive society, where women are empowered, rural communities enjoy prosperity and more jobs and income generation opportunities are offered to youth.

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