Institutional Action Plan Raffle Winner: BRAC Pakistan

Congratulations to this week’s winner of the Raffle for Institutional Action Plan Submitters, BRAC Pakistan!

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BRAC Pakistan’s Microfinance Program

Microfinance is a powerful tool that the poor can utilize to inch their way out of poverty by taking advantage of new opportunities and better managing the sufferings they face. The social intermediation embedded in microfinance in the form of group functions can build social capital among the poor which, combined with financial capital has the potential to be powerful mix in the fight against poverty. The formation of social capital through the microfinance process can also be used as an entry point to challenge other structures that perpetuate poverty. It is this holistic vision of the possibilities for poverty alleviation that defines BRAC’s vision of microfinance.

BRAC’s program aims to strengthen the income of the poor by providing easy access to institutional lending to start small and medium income generating activities, as well as mobilize women to contribute to household income.

The overall objectives of BRAC Pakistan’s microfinance program are to significantly contribute to the reduction of poverty, create self-employment opportunities, enhance household income level and reduce the vulnerabilities of the rural poor of Pakistan, especially women.

BRAC started its operation in Pakistan by initiating a small scale microfinance (MF) program in the Khyber Pakhtunkhwa (KPK) province in August 2007. Currently, BRAC Pakistan has 97 branch offices across the country. In the next five years, BRAC plans to set up a total of 240 branch offices across Pakistan to run its pro-poor microfinance program.

Key Features of the Microfinance Program

  • Loan Range: (PKR 10,000 – PKR 50,000).
  • Loan Security Deposit: 10% of the sanctioned amount (refundable after repayment).
  • Service Charge: 20% (Flat) annually.
  • Repayment Mechanism: Payable weekly in 46 equal installments.
  • Repayment period: 1 year for traditional business and 6 months for seasonal business.
  • No collateral is required.
  • After four group-meetings the loan disbursement starts taking place.

Program Impact

  • Promoting gender equity by enabling women to become breadwinners, alongside their male counterparts.
  • Increased participation of women in income generation thus reducing poverty and enhancing social progress.
  • Fostering the development of human potential by empowering women by helping them achieve their potential through vocational training and acquisition of technical knowledge. This has resulted in numerous income generation activities, such as sewing clothes and making handicrafts.
  • Improving people’s living standards. Many of the members of the microfinance program are now leading a prosperous life and their children are receiving educations. The majority of members have expanded their program and recruited more females, contributing to the income of other families.