Social Impact Assessment of Microfinance Programmes - weman

Social Impact Assessment of Microfinance Programmes 

by 

S Akbar Zaidi and 

Haroon Jamal, Sarah Javeed and Sarah Zaka, 

with support from 

Shafi Ahmed, Mansab Ali, Riaz Hussain and Amima Sayeed 

Draft Report 

Study Commissioned by and Submitted to the European 

Union-Pakistan Financial Services Sector Reform Programme, 

Islamabad, April 2007

Executive Summary 

Introduction and Methodology 

• There are numerous assumptions which have been made about what microfinance 

can do and has done. However, there is insufficient empirical evidence to support 

most of the claims. This is the first Study of its kind and scale in Pakistan, which 

attempts to quantify and demonstrate some of the outcomes from microfinance 

interventions. 

• Estimates show that around 300,000 individuals, many of them women, have 

benefited from non-governmental disbursement of microfinance. A number of 

NGOs working in the microfinance sector in Pakistan have gained national and 

international recognition for their work and have formed a forum called the 

Pakistan Microfinance Network, where issues and ideas are discussed and 

exchanged. 

• Despite recent growth, the forms of institutions which provide microfinance in the 

formal sector are limited: there are formal, full service broad spectrum providers, 

MFIs which provide a number of formal sector financial services, and 

microfinance is one such activity; full service microfinance specialists, which take 

on savings and provide microcredit and may be involved in other microfinance 

activities as well; restricted service microfinance broad spectrum, institutions 

which provide some microfinance services along with other services; restricted 

service microfinance specialists, which provide only some microfinance services, 

mainly credit, and not other services such as savings; an, apex institutions which 

lend on to NGOs which may provide microfinance services specifically or along 

with other services. 

• It is important to state, that the term ‘microfinance’ has been used interchangeably 

with ‘microcredit’ in Pakistan, largely because other services and products in the 

sector have been far less developed than credit. Savings and insurance, for 

example, are still in their infancy as far as their provision by microfinance 

institutions is concerned, and even some microfinance banks have been slow to 

evolve their savings instruments and potential. Debate about microfinance in 

Pakistan, continues to be largely about microcredit. 

• Six microfinance institutions have been selected to participate in this study on the 

basis of the following criteria. They have at least three year’s continuous work 

experience in microfinance and a strong business plan for the next three years; 

they have a portfolio of at least 2,000 active borrowers; have audited accounts for 

the last three years; and are willing to participate in this social impact assessment 

study. The group of six institutions cover a range of sizes, ownership patterns, 

source of funding, lending methodology, programme area, organizational 

structure, borrowers, communities etc. 

• The literature on Impact Assessment Methodologies underscores the pitfalls of 

undertaking studies in which an attempt is made to observe, leave alone quantify, 

the ‘impact’ of any intervention in order to address poverty. IA experts caution 

researchers about making grand statements and reaching firm, final, conclusions 

based on the quantification based on many measurables. In the case of softer 

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indicators which are more difficult to measure and quantify – such as 

‘empowerment’ – they are doubly cautious and suggest that one always needs to 

be tentative in suggesting that they can ‘prove conclusively’, that such-and-such 

poverty alleviation or microfinance institution, had a quantifiable impact on 

members or recipients of an intervention. 

• This Study is designed to establish plausible association between changes 

identified and participation in the microfinance programme. However, it is 

important to state that the observation, leave alone the quantification of impact, is 

often difficult to capture and quantify. 

• Studies have shown that impacts on enterprise profits may occur early and then 

taper off within the first year or two of microfinance programme participation. 

Other impacts, for example the accumulation of selected household assets, may 

take as long as three to five years of microfinance programme participation to 

happen. Other studies show that social impacts (such as changes in women’s 

mobility) are likely to take longer to occur than economic impacts (such as 

changes in income). 

• While the huge potential of microfinance is always acknowledged, studies on the 

impact of microfinance conclude that it is unclear whether microfinance 

contributes to a reduction in poverty or is the most efficient method to reduce 

poverty without additional measures in areas such as education, health and 

infrastructure. Moreover, it is recognised that ‘impact’ takes some years to work 

its way through into the lives of beneficiaries, and contradictory or ‘mixed’ results 

are not uncommon. 

• The methodology for this Study is based on the Difference-in-Difference 

approach, which compares the difference between income for participants and 

non-participants in treatment sites/locales, with the same difference in income in 

control sites/locales. This is the best method for undertaking such an exercise and 

better than taking one which focuses on programme participants and new/likely 

participants – the Pipeline Approach – which has an in-built bias as many of the 

new clients are already ‘sold’ on the issue of and efficacy of microfinance. 

• Along with the quantitative questionnaire, the Study also included questions about 

the perceptions of borrowers and non-borrowers in order to understand how they 

see the impact of the intervention. In many cases, perceptions seems to be very 

different from ‘hard data’ and ‘facts’. Since we use Mixed Methodology, we not 

only capture the quantitative side through our questionnaire, but also include 

extensive Focus Group Discussions with clients, borrowers, non-borrowers, those 

who have left the programme – so-called ‘drop-outs’. We also conducted 

substantial Institutional Reviews which are based on interviews and give yet 

another dimension to the Study. 

• The six MFIs chosen for the Study, with their characteristics were: Orangi 

Charitable Trust (OCT), urban, Sindh, not simply concerned with poverty 

alleviation, but also entrepreneurial and economic development, individual 

lending; Sindh Agricultural and Forestry Coordination Organization (SAFWCO), 

rural, Sindh, poverty alleviation and income earning focus; Kashf, Lahore, urban, 

peri-urban, exclusively women, poverty alleviation, gender empowerment, 

economic security; National Rural Support Programme (NRSP), the largest rural 

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support programme in every province of the country, multi-sectoral with 

microfinance being one of its important, though not exclusive, activities – we look 

at the NRSP microfinance programme in the Punjab and Sindh, as well as the 

NRSP’s Urban Poverty Alleviation Project (UPAP); Akhuwat, urban, Punjab, an 

Islamic microfinance provider, based on the zero-interest principle; and Asasah, a 

Lahore-based MFI which is different from the others because its financing 

structure represents fully commercial funding. 

• It is important to state and highlight the fact, that all the six institutions which 

agreed to participate in this Study, did so completely voluntarily. They agreed to 

open up their offices, their records and gave us unprecedented and complete 

access to their staff and clients. Their willingness to be part of this Study and their 

full cooperation with the Team, reflects very highly on the maturity and 

confidence that members of the microfinance sector in Pakistan have about their 

programmes. 

• Each institution has a separate mission statement, style of management, different 

set of priorities, etc., hence, comparison, if made at all, must be made with 

considerable caution. The intention of this Study as specified by the client, was 

not to compare or evaluate the performance of MFPs in Pakistan, and the design 

of the Study does also not provide for such comparison. 

Asasah 

• Asasah was started in 2003 with the objective to enhance micro productivity and 

alleviate poverty. Asasah was established with a 100 percent commercial 

financing structure and was registered in December 2003 as a non-profit 

Company by Guarantee under Section 42 of the Companies Ordinance 1984. 

Initially Asasah had no donor funding available and paid a very high interest on 

its commercial finance, therefore, sustainability became a major focus. Asasah 

now has 27 branches, over 25,000 active members and has disbursed over Rs.457 

million and has a recovery rate of 100 percent. 

• Asasah’s mission is quite broad and comprehensive and states that its objectives 

are to: improve living standards of people below the poverty line through the 

provision of diverse economic, educational and information services; safeguard 

the interest of donors, financial institutions and individuals interested in poverty 

alleviation; improve community well-being, and balance the interests of 

stakeholders by encouraging participation; and, keep employees motivated and 

ensure continuous achievement of objectives through staff capacity building. 

• Asasah uses the Grameen Bank methodology for its group lending of the 

protective and productive loans and monitors each individual client to assure 

portfolio quality and verify loan usage. Asasah asserts that it lends to households 

who have sufficient skills but insufficient resources. Furthermore, Asasah 

believes that female empowerment lies in having a say in important household 

decisions, which are traditionally under a man’s domain in Pakistan. 

Consequently, Asasah works to correct these imbalances by disbursing the loans 

only to women, but making both spouses responsible for fulfilling the terms and 

conditions. 

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• Since Asasah has been in operation just a few years, 86 percent of its clients are 

still only in their first or second loan cycles. Clearly, any ‘impact’ of the 

intervention by microfinance institutions, is highly tenuous, and at best, slight and 

partial. We would expect little to have changed in a matter of two years. 

• Most of Asasah’s clients, all of whom are women, are involved in ‘business/retail 

shops’ or ‘cottage industries’; the perceptions of clients over the loan cycle about 

how well they eat, seem to suggest that the longer they stay with the programme, 

the greater the perceived impact in terms of improvement in quality of life and 

diet, on their lives. On most welfare questions, the longer they have been with the 

programme, the better they think they are doing; with numerous small and large, 

official and donor programmes funding microfinance, there is a huge amount of 

information available about microfinance services and results from Asasah 

confirm this view that a large proportion of Non-Borrowers are aware of credit 

facilities. 

• Asasah’s Active Borrowers have significantly higher Expenditure Per Capita and 

Income Per Capita than do all other categories. This suggests that perhaps Active 

Borrowers benefit from the microfinance intervention. However, in terms of 

Housing variables, this difference is not at all significant, a result which is not 

surprising, given the fact that investment in Housing takes large amounts of 

capital and investment, and we do not envisage that clients of any microfinance 

institutions will be significantly better-off in a couple of years to allow them to 

divert excess capital to Housing. 

• The results do show that women in Asasah’s microfinance programme feel that 

they are significantly more empowered in terms of Economic Empowerment and 

in terms of Empowerment Related to Education and Health. 

Orangi Charitable Trust 

• The Orangi Charitable Trust (OCT) is an off-shoot of the Orangi Pilot Project 

(OPP), a non-governmental development institution created in 1980 in the 

squatter settlement of Orangi Town in Karachi. Respecting the entrepreneurial 

spirit of people as articulated in OPP’s vision, all the programmes focus on 

‘supporting effective existing structures’ instead of creating new structures which 

would likely be unsustainable and counter-productive. 

• OCT started its microcredit servicing from 1987 with an aim to support the 

existing businesses. The rationale being that micro enterprises in Orangi were not 

able to access loans from commercial banks due to loan size, collateral 

requirements and other considerations. The key objectives of OCT are to: provide 

credit for the expansion of the existing micro-enterprises in urban communities; 

provide credit for agro-inputs in rural areas; strengthen the capacity of NGOs and 

CBOs to support micro-enterprises in the area through guidance and training; and, 

provide lines of credit to trained NGOs/CBOs 

• OCT opted for a different paradigm for microcredit instead of seeing microcredit 

as a direct tool for poverty alleviation. Contrary to other institutions, it provides 

credit solely to facilitate the movement of entrepreneurs into better economic and 

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social conditions. Consequently, it has not engaged in identifying the poorest of 

the poor or empowering women, for instance, to bring about gender equity. 

• OCT does not envisage any major expansion in its direct operations, geographical 

reach or client base. It works with a carefully selected and focused client base 

within Orangi, with just a single office located in the building of OPP-RTI. The 

total loan disbursed in Orangi between 1987- August 2006 amounts to Rs. 

157,760,184 to 9,508 units. Out of these, as many as 7,301 units are closed and 

2,207 units are open, which reflects on OCT’s resolve to keep its client base small 

and manageable. 

• This portfolio is balanced by replication of its microcredit programme by 

supporting NGOs/CBOs, where institutionalization becomes the core focus rather 

than operational expansion. OCT is working with 47 NGOs/CBOs where a total 

of Rs. 286,600,604 has been disbursed to 25,606 units till August 2006. Out of 

this 13,926 units are closed while 11,680 are open in 433 areas and villages. 

• OPP-OCT is providing microcredit to existing micro enterprises at bank rate of 

interest without collateral ranging from Rs. 2,000 to 50,000 with simple 

procedures and documentation. There are eight different types of products that are 

offered by OCT to its Orangi and non-Orangi clients. Loans to Schools; Loans to 

Manufactures; Loan to Traders; Loan to Service Providers; Loan to upgrade 

Thallas; Loans to Farmers and Fisher folk; Loan to Clinics; and Loan for 

Livestock. 

• The recovery rates have not always been stable and positive. For instance, in the 

first year 35 percent of clients defaulted causing 20 percent of amount loss. 

Gradually, the trust in borrowers began to pay off and, indeed, clients followed 

the principles of fair business deals. According to OCT’s data, the recovery rate 

has improved tremendously over the years with the current rate at 97 percent. 

• OCT has aimed to reach sustainability since its inception and for this purpose, the 

mark-up rates were kept equivalent to bank rates and operational expenses were 

consciously kept low. 

• OCT is the only MFI in our sample which is a largely male client oriented. It also 

has other characteristics which are dissimilar to other MFIs, particularly that it is 

not in the business of poverty alleviation, as most other MFIs claim. Hence, its 

criteria and standards are different as well. 

• Most of OCT’s clients are in the Business Retail Shop profession, and many of 

the Non-Borrowers move from the category of Technical Service Provider and 

Personal Community Service Provider to those who own Businesses or set-up 

some sort of Cottage Industry. This suggests that credit is a constraint to 

entrepreneurs who, once they receive the loan, may want to set up different sorts 

of economic enterprises since their credit-constraint may have been released. 

• Borrowers’ perceptions about the positive Effect on the Quality of Life are high 

as soon as the first loan is given and continue to rise thereafter. This trend is 

found in most other indicators about perception as well, and most Borrowers 

believe that the rise in Income and the improvement of Quality of Life can be 

sustained over time. We found that OPP clients, who had been borrowing for 3 

year or more, were spending more on food expenditure. 

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Akhuwat 

• Akhuwat was established in 2001 with the objective of providing interest free 

credit to the poor so as to enhance their standard of living. Akhuwat derives its 

name from ‘mua’khat’ or brotherhood, which was first exhibited by the citizens of 

Madina when they shared their wealth with the ‘muhajirin’, the immigrants from 

Makkah. The philosophy is based on the premise that poverty can only be 

eliminated if society is willing to share its resources with the poor and needy. For 

Akhuwat, microcredit is a means to an end and not an end in itself; the end is a 

vibrant, economically strong society, based on sharing resources. 

• At present, Akhuwat has 13 branches in the Punjab and 7,150 active clients, and it 

has disbursed over Rs 150 million over five years. To increase the outreach of 

interest free loans, Akhuwat has partnered with individuals in other cities to start 

similar initiatives. Akhuwat is rapidly gaining legitimacy and in the last one year, 

FY 2005-06, its acceptance has increased immensely as the organization has 

received donations worth Rs. 30 million. 

• Akhuwat’s management has stated, that ‘the Programme is non-political and non– 

sectarian. Muslims from all sects are welcome in the mosques. There is no gender 

discrimination in the mosque. Women also come to mosques to get loans. 

Christians are also welcome in mosques. Akhuwat derives its inspiration from the 

Islamic spirit of mua’khat but its message is for all people of this country. Quite a 

large number of borrowers are Christian who are given loans in mosques. 

Akhuwat also works in a church in collaboration with Christian religious leaders’. 

• Akhuwat started lending with the group methodology in 2001 and introduced 

individual loans in 2003. The current plan is to phase out group loans and 

concentrate on individual lending. As of June 2006, Akhuwat has not formed any 

new groups and is waiting for the end of the loan cycles of those formed earlier. 

The reason for phasing out group loans is that the group leaders were found to 

manipulate their position and extort money from the borrowers for group 

membership. 

• Akhuwat’s Group lending programme only focused on women who were 

organized in Self Help Groups (SHGs) of 10 members each and thus relied on 

social collateral. In each group a president and a manager were elected through 

consensus and the group collectively had to save Rs.3,000 before it could become 

eligible for receiving loans. 

• While the loan has no interest on it, there is a belief that some of the cost of the 

credit has to be transferred to the clients or they would not value the loan and it 

will be like a free meal. So, five percent of the loan is charged as a membership 

fee and this makes the process professional and is not seen as charity since people 

demand better services when they pay the fee. 

• Akhuwat has a large portfolio of individual lending with a total of 14,711 

beneficiaries and it has devised a rigorous appraisal method to ensure maximum 

recovery. In 2005, individual loan disbursements grew by almost 390 percent and 

in 2006 they grew by 135 percent. A prominent feature of individual loans is that 

they are marketed through mosques and the disbursement of the loans also takes 

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place in mosques. Each branch is associated with a particular mosque and is 

located within or just outside the mosque’s premises. 

• When loans are renewed, the main aspects looked at are how the loan was used 

and whether it has benefited the borrower. The loan is renewed only if he was 

regular in returning the instalments, if he used the loan correctly and if it 

benefited him and his household in the final analysis. On average, about 40 

percent of clients are given loans again based on their need and how they used the 

loan and whether it benefited them or not. Like mainstream MFI’s Akhuwat does 

not work on minimizing dropout clients as it wants to reach out to a large number 

of people. 

• Akhuwat also has liberation loans, of which there have been more than 700. 

These people were paying interest at 100 to 200 percent, which translates to Rs 

2000 to 3000 per month. By availing a liberation loan, they have been able to get 

rid of this exploitation. They are also said to feel empowered and socially 

integrated. There are also loans for health, education and a daughter's marriage, 

which are supposed to have had a phenomenal impact. 

• The organization’s performance on profitability and sustainability has been 

steadily improving. However, as Akhuwat does not charge any interest on its 

loans, and only charges a membership fee of 5 percent, it is unable to cover its 

costs which stand at 7 percent. Nonetheless, as Akhuwat increases its outreach it 

will be able to lower the cost and in time will be able to cover its operating 

expenses. 

• Since Akhuwat has been in operation just a few years, almost all of its clients are 

still only in their first or second loan cycles. Clearly, any ‘impact’ of the 

intervention by microfinance institutions, is highly tenuous, and at best, slight and 

partial. We would expect little to have changed in a matter of two years, and so 

find not much significant difference between Active Borrowers, Pipeline 

Borrowers and Non-Borrowers. Most of Akhuwat’s clients, are involved in 

‘business/retail shops’ or are ‘personal community service providers’. The results 

suggest that the Per Capita Income of Active Borrowers is greater than it is of 

other categories. However, on the basis of the Official Poverty Line, only 15 

percent of Akhuwat’s clients fall below this threshold, implying that like almost 

all MFIs in our sample, Akhuwat is concentrating on that category of client who 

is above the Poverty Line. The Health and Education characteristics of all three 

categories, as in the case of most other MFIs in urban areas, are not very different 

from each other. 

• The perceptions of clients over the loan cycle about how well they eat, seem to 

suggest that the longer they stay with the programme, the greater the impact in 

terms of improvement in quality of life and diet, on their lives. This result is 

similar to that of other MFIs. On most welfare questions, the longer they have 

been with the programme, the better they think they are doing. 

Sindh Agricultural and Forestry Workers Coordinating Organization 

• Concerned about the poverty stricken lives and social marginalization of their 

community, a group of five activists came together in 1986 to bring about social 

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and economic change in their surroundings. This group was then known as Samaj 

Sudhar Adabi Idara and undertook small scale social work like arranging for 

medical and health camps and distributing books amongst poor students. 

• Long and intensive reflections led to the establishment of the Sindh Agricultural 

and Forestry Workers Coordinating Organization (SAFWCO) in 1990. Registered 

under the Societies Registration Act XXI of 1860, SAFWCO kept rural 

development as its key priority. As a result, it started addressing cross-cutting 

issues including conditions of peasants and rural women, education, the role of 

feudal lords, the political situation in the area, unemployment, water logging and 

salinity, low wages and housing. 

• Starting from Rs. 5,000 for goat-rearing and home-based poultry, SAFWCO 

initiated its microcredit programme in 1993-94. The expansion of the portfolio 

and credit line has been gradual and firmly grounded in the contextual needs of 

the communities SAFWCO is catering to. SAFWCO’s concept of microcredit is 

the extension of small loans to entrepreneurs too poor to qualify for traditional 

bank loans. It also ensured a more integrated approach towards meeting 

organizational mission and targets. 

• SAFWCO articulates its principles and policies for microcredit as: affordable 

services for low-income groups; greater outreach to the general public; minimal 

risks for new entrepreneurs; loan pay back systems are nurturing towards small 

businesses; increased and easily accessible opportunities for the economically 

disenfranchised groups to support them in gaining economic power. 

• SAFWCO provides both group and individual loans. Loans are made to 

established groups of both men and women, comprised of three to six individuals, 

that have been operating for over a year. For credit and saving activities, villages 

are identified on the basis of their socio-economic situation. For the savings 

programme, monthly meetings are conducted to collect savings, with a minimum 

voluntary contribution of Rs.20. The programme is operated through COs, which 

collect deposits, and manage the savings records and passbooks. Communities are 

also encouraged to utilise their savings through their village development 

organisation as internal lending. 

• The socio-economic status, soundness of business proposal and social collateral 

are the most important criteria for selecting individuals and groups for loans. 

Loan delinquencies of over one month can result in the disqualification of an 

entire village for further loans. This ban is lifted only when all arrears are cleared 

either by the individual or the group of guarantors. According to the management, 

the loan recovery rate averages 95 percent for men and 99 percent for women. An 

operational reason for encouraging women clients is also because they not only 

ensure that instalments are paid on time, but also take responsibility for 

appropriate and effective utilization of the credit. Consequently, SAFWCO has 

brought flexibility in its lending strategy where credit is given to female units 

which can involve other family members in its use. 

• The average retention rate is 60 percent with variations across districts and 

communities. Of the 40 percent that drop-out, SAFWCO’s management reports, 

that these do not qualify as drop-outs because they return after a gap of 12-18 

months. 

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• We find that more than 85 percent of SAFWCO clients belong to the first three 

loan cycles, which will have a bearing on our attempt to capture the extent of 

‘impact’. A large proportion of Borrowers, whether they are older (Active) 

Borrowers or new (Pipeline) Borrowers, have as their professions/business the 

classification ‘Livestock Management’, while most Non-Borrowers are ‘Personal 

Community Service Providers’. This finding related to Livestock Management 

may suggest that in the case of SAFWCO clients, many want to enter the 

Livestock business but are resource/credit constrained. Once they have access to 

credit, a large proportion of them are likely to opt for Livestock Management. 

• One important and interesting finding, is the substantial number of households 

who are part of the SAFWCO microfinance programme, who are below the 

Official Poverty Line. 

• The perceptions of clients and non-clients show a number of features. The longer 

Borrowers stay with the programme, the larger proportion feel that they are 

better-off and that the Quality of their Lives has improved; most say they eat 

better and they feel that this improvement in their Quality of Life can be 

sustained. Most Non-Borrowers are aware of SAFWCO’s microfinance 

programme, and most Non-Borrowers also feel that there is an overall 

improvement of the Quality of Life on account of taking the loan – New 

(Pipeline) Borrowers in particular, have a very positive perception about the 

consequences of the programme, and so do those Non-Borrowers who are located 

in the same area where the programme functions. 

• The results from the estimation show that one area where SAFWCO is having a 

clear impact is women’s empowerment. Old borrowers perform significantly 

better on all indices compared to other respondents. On the overall index old 

borrowers score 10 points higher than other respondents. Old borrowers also 

perform better than pipeline clients in the single difference estimates on 3 indices 

of empowerment. Furthermore, young borrowers also do significantly better on 

the income empowerment index in both single and double difference estimates. 

National Rural Support Programme and the Urban Poverty Alleviation Project 

National Rural Support Programme 

• The National Rural Support Programme (NRSP), is Pakistan’s largest multisectoral 

rural development programme, established in 1991 by the Government of 

Pakistan. At present, it is operational in 35 districts, has 110 field offices and 13 

Regional offices that reach out to 620,330 people directly, and many more 

indirectly. Programme districts are selected according to district poverty ranking 

from data available from national level surveys conducted by government and 

international organizations, and distributed among other Rural Support 

Programmes (RSPs) like the Sarhad and Punjab Rural Support Programmes 

(SRSP and PRSP). The poor in the area are targeted according to the local 

community assumptions with poor households identified by the communities 

themselves in respective localities. NRSP’s main programmes focus on social 

mobilization, infrastructure development and microfinance and enterprise 

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development. NRSP's mandate is to help alleviate poverty by harnessing people's 

potential and undertaking development activities in Pakistan 

• The main objective of NRSP is to create a 

countrywide network of grassroots level 

organizations to enable rural communities to plan, implement and manage 

developmental activities and programmes for the purpose of ensuring productive 

employment, alleviation of poverty and improvement in the quality of life. The 

guiding tenets of NRSP’s philosophy are to organize rural communities develop 

their capital base at the local level through savings and credit schemes, support 

human development endeavours and link the communities with the government 

service delivery departments, donors, NGOs and the private sector. 

• NRSP manages one of Pakistan's biggest microcredit portfolios, with 109,614 

active loans as of July 2005. As part of its holistic approach, NRSP provides 

various financial services to the members of COs in rural areas to help them 

implement their Micro Investment Plans (MIPs). These services include: Micro 

Credit - individuals through groups and Village Banking; Micro Insurance - 

hospitalization and accidental death; Savings - COs keep their savings in 

commercial banks or they invest these in Community Physical Infrastructure. 

• Microcredit is a major component of NRSP focusing on improving livelihoods. It 

is reported to be the largest credit programme in the country after the Agriculture 

Development Bank, having so far disbursed Rs. 7 billion in loans since 1995. 

Loans are provided to both men and women for entrepreneurial business projects 

or for other income generating activities, such as small businesses or investment 

in livestock. 

• The credit process begins with an initial instalment of Rs.10,000, followed by 

further instalments of Rs. 5,000. The interest rate is 10-11 percent over the 12 

months credit cycle. However, after the inclusion of the processing fees, the rate 

rises to 21 percent. The recovery rate is claimed to be almost 100 percent. 

• Each Community Organization is encouraged to collect some amount from its 

members and put these savings in a Bank account. During the year 2004-05, the 

CO members saved a total of Rs. 71.91 million. Of this amount, men’s COs saved 

Rs. 63.81 million and women’s COs saved Rs. 8.10 million. However, there is no 

hard and fast rule regarding the savings mechanism. A few COs also have a 

‘committee’ system, whereby, savings are rotated among the members similar to a 

committee system. 

• NRSP provides credit to the members of the COs and the credit groups through a 

solidarity group approach. Although, NRSP does not have a preconceived 

package, credit is given for any income generating purpose. Other than this 

purpose credit is not targeted for any other use. According to NRSP, this 

encourages the COs to utilize natural resources and human capital. 

• Unlike many other microcredit programmes, the NRSP credit programme gives 

loans to both men and women. The programme feels that the ratio of men and 

women clients actually reflects community demands and behaviour. According to 

the programme figures for 2004-05, Rs. 1,552,335,800 was disbursed, of which 

83 percent was loaned out to men and 17 percent to women. Furthermore, as the 

programme purpose is to focus on improving the household livelihood conditions, 

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the gender of the borrower is not a major determinant. Most of the loans taken by 

women are actually utilized for the male family member’s income generation 

activities. 

• The majority of the NRSP loans are used for agriculture and livestock purposes, 

with 60 percent of the loans for agriculture purposes, 19 percent for livestock and 

21 percent for entrepreneur development. More than 50 percent of the NRSP 

programme area comprises arid zones and rain fed areas of the country taking in 

view the main mandate of the organization to eradicate poverty. 

• The habit of saving is a prerequisite for CO membership, as is regular attendance 

in the fortnightly meetings. Once the members’ savings (which are deposited in a 

bank account in the name of the CO) reach a substantial amount the process of 

internal lending begins with the unanimous will of the CO. The CO then forms a 

credit committee, which appraises the loan requests. The CO extends credit to its 

members from its saving pool on its own terms and conditions. NRSP trains the 

COs in accounting and financial management. 

• From our sample, we observe that about one-fifth of NRSP clients are in the 

fourth and greater loan cycle. A large majority of NRSP Active Borrowers are 

involved in Agriculture in Crop Production, as well as in Livestock Management. 

Active Borrowers have higher average Income Per Capita and Expenditure Per 

Capita than other categories. Both the Expenditure Per Capita and Income Per 

Capita for Active Borrowers is higher than it is for Pipeline and Non-Borrowers 

and this difference is statistically significant. Similarly, the Value of Household 

Assets and the Household Asset Score are both greater for Active Borrowers and 

here again, this difference is statistically significant. Both these sets of data may 

suggest that NRSP Active Borrowers are ‘better-off’ than the new clients and 

non-clients. 

• In most urban MFIs, we observe in the case of Women’s Economic 

Empowerment, that Active Borrowers were far ‘better-off’ than new clients and 

Non-Borrowers. In the case of NRSP, we do not get this result perhaps due to 

greater rigidity in the social structure in rural Punjab where women are less 

physically and socially mobile. 

• Our results show that NRSP is having a positive and significant effect on income 

and total expenditure. Young borrowers have 26 percent higher income than other 

respondents -- overall their household income is 32 percent higher and the per 

capita income is 24 percent higher, however these variables are not significant in 

the single difference estimation. We can see a positive impact on old borrowers 

on all measures of income in both single and double difference estimations. In the 

DID estimations, active borrowers have 90 percent higher income, household 

income is 48 percent higher and per capita income is 40 percent higher. 

• The results on the income variables do show a positive impact on NRSP clients, 

however this impact has not translated into higher spending on education and 

saving. Higher spending on these latter variables is important to develop human 

capital and reduce vulnerability. 

xii

Kashf 

Urban Poverty Alleviation Project 

• UPAP began its operations in June 1996 in the urban and peri-urban areas of 

Rawalpindi and Islamabad. Having successfully established UPAP as a 

microcredit delivery model, NRSP decided to initiate UPAP operations in some of 

Pakistan’s major cities. The first expansions were in Faisalabad and Karachi in 

2002. The programme has since expanded to Multan and Lahore. 

• UPAP establishes low cost settlement offices and disburses credit to women using 

the ‘solidarity group’ method. Three or more women can form a group. The credit 

facility can be used for family enterprises. Men can also use the facility but they 

must be family members whose income comes into the hands of the borrowers. 

This strategy has saved UPAP from major incidents of fraud or default. Alongside 

the solidarity group approach, UPAP also adopted the individual approach on the 

pattern of the Orangi Charitable Trust, to cater to the needs of small-scale 

entrepreneurs and manufacturers who do not live in areas where there is a UPAP 

settlement office. 

• As many as 83 percent of those sampled were in their first three loan cycles, and 

most of these had little or no education. The largest share of Active Borrowers, 

Pipeline Borrowers and Non-Borrowers, all seem to undertake similar sorts of 

business activity, such as having a Retail Shop or then they are Personal 

Community Service Providers. Unlike many of the other MFIs studied where we 

find some sort of shift in business activity on account of the loan, in the case of 

UPAP, we get the sense that most businesses continue after the loan and are 

consolidated, rather than switched. 

• The percentage of Borrowers below the Official Poverty Line, in line with most of 

the other MFIs in the sample, is only 19 percent. The one category in which 

UPAP Active Borrowers have significantly better results, is that of Women’s 

Empowerment. In terms of Economic Empowerment and Income Empowerment, 

the difference is significant. 

• Out results show that UPAP has had some positive impact on educational 

expenditure and assets for old borrowers. The results for empowerment are the 

most significant in the double difference estimation but as the member dummy is 

also positive and significant in some of those regressions we can conclude that 

both active borrowers and pipeline clients are more empowered than their 

neighbours. 

• Kashf Foundation, a non-profit microfinance institution started in Lahore in 1996. 

It was founded after being inspired by the success of the Grameen Bank. Kashf 

started with the mission to ‘provide quality and cost effective microfinance 

services to low income households especially women in order to enhance their 

economic role and decision making capacity’. 

• In September 2006, Kashf celebrated its 10 year anniversary with 

accomplishments such as being one of the first sustainable MFIs in Pakistan, 

providing loans to over 250,000 poor households with plans to reach 850,000 

xiii

clients by 2010. Over the years Kashf has received many awards for its 

performance. 

• Kashf started with micro loans for women; however, with the changing needs of 

the market it has also started offering larger individual loans for micro 

entrepreneurs. In the past year Kashf has rapidly expanded its branch network and 

from 35 branches at the end of 2005, it has increased it to 70 branches at the end 

of 2006, and they are planning to open 50 more branches in 2007. 

• Kashf started its microfinance programme in Lahore, however, now it has 

expanded to Kasur, Gujranwala, Faislabad, Karachi, Khushab and their 

surrounding areas. Most of these branches are for the General Loan category, 

though six have a specialized section for the Individual Loan category. 

• Kashf’s group lending programme is a Grameen Replication, adopting the classic 

Grameen Bank model with some adaptations. Kashf provides one basic loan, 

called the General Loan (GL), for 12 months at a flat interest rate of 20 percent 

per annum. All members are women and each borrower belongs to a group of five 

borrowers, and together five of these groups form one centre. Members repay 

their loans in bi-weekly centre meetings attended by Kashf loan officers. There is 

no collateral, therefore, the centre takes collective responsibility for loan 

repayment. 

• Kashf lends to married, divorced or widowed female clients. Divorced and 

widowed clients are encouraged in the Group lending approach so that they can 

earn for themselves by starting a business or by increasing their current business 

portfolio. 

• From the pool of potential clients, individuals who fall within the Kashf poverty 

criteria of household income between Rs.4-10,000, have a low asset base and high 

dependency ratio, are encouraged to organize themselves into groups and centres. 

• The purpose of the General Loan (GL) is to invest in income generating activities 

and can be used for an existing business or a new one. The loan size begins with 

Rs.10,000 and has a ceiling of Rs.25,000, the loan is repayable over 24 

instalments in the course of 1 year at a service charge of 20 percent. Successive 

loan cycles entitle clients to an accretion in loan amounts of up to Rs.4,000 

depending on their absorptive capacity. 

• The GL comprises about 87 percent of the product wise share. According to 

Kashf this loan is utilized both by women who aspire to establish a small business 

for themselves or others who pass it on to their husbands/sons to diversify 

household income sources. 

• The Emergency Loan (EL) is a service that is available to existing Kashf clients, 

who are already availing a general loan. The Business Sarmaya loan is intended 

for the ‘missing middle’ of the market, i.e., both men and women with running 

businesses who demonstrate a financial need for working capital and/or fixed 

assets. Small entrepreneurs are provided with access to capital in addition to 

advisory support for their respective ongoing businesses that can include trade, 

production and services. 

• Savings is a completely voluntary product. It is a service that the customers can 

decide not to avail at all. Despite the fact that it is a voluntary act and there is no 

interest paid by Kashf on the amount saved, the amount of savings held by 

xiv

clients’ amounts to Rs.5.6 million with an average deposit size of Rs.53. The 

average deposit size has been falling, even though savings would be expected to 

cater for emergencies and investment for lifetime events. 

• It is obligatory upon all Kashf clients to take insurance. Insurance charges are 1.5 

percent of the loan amount (General Loan) and are taken up-front when the loan is 

disbursed. This insurance facility applies in case of accidental or natural death of 

the client. Its benefit includes the writing-off of the outstanding loan amount and 

the family receives Rs.7,500 to cover for funeral expenses. 

• Kashf has brought down its drop out rate considerably. For 2006 it was around 9 

percent. 

• Since Kashf is one of the oldest MFIs in Pakistan, it is one of those which has 

clients in its third cycle and beyond. About a third of Kashf’s sample is in its 

fourth (or longer) loan cycle, which makes Kashf one of the best MFIs to 

undertake an impact assessment analysis. 

• The average Income Per Capita and the Expenditure Per Capita for Active 

Borrowers is much higher for Active Borrowers than for all other borrowers. The 

value of Household Assets of Active Borrowers are also much higher than all 

others. However, as in the case of the targeting of the ‘Official Poor’, i.e., those 

below the Official Poverty Line, very few of Kashf’s clients fall below that Line. 

• Results showing the perceptions of Borrowers on the impact the programme is 

having on them, reveals, as it does in most other MFI cases, that as the number of 

loan cycles increase, in general, so does the positive perception about impact. 

This is not a surprising result, as one would expect that someone will stay on with 

a programme only if their real or perceived quality of life has improved. If they 

felt that their lives were not improving, they should have left the programme. 

• Most important, however, is the hugely significant improvement in Per Capita 

Income, Per Capita Expenditure, Value of Household Assets, etc, which accrues 

to Kashf clients compared to those who are new to the programme or do not 

belong to it 

• Perhaps the most surprising and unexpected results on impact, which relate to not 

Kashf alone but to almost all MFIs, relates to the decrease in women’s 

empowerment in most cases. Although, there is a significant (positive) difference 

at the Women’s Economic Empowerment level between Active Borrowers and 

the other three categories, in the case of other types of Empowerment, such as 

Income, Assets, Health and Education, we find that those women who have not 

joined the programme are ‘better-off’. What this may suggest, is that while 

women begin to take decisions related to Economic issues far more 

independently, perhaps they compromise the additional income earned by 

allowing their spouses/sons to control this income 

• The regression results show that Kashf borrowers, both young and old are doing 

well with regard to income and expenditure as compared to other respondents and 

this has also had a positive impact on assets and schooling of girls. On the other 

hand Kashf borrowers do not score well on the empowerment indices, but in 

general all individuals who self-select themselves into borrowing have high score 

on the indices. 

xv

Conclusions 

• We have looked at six microfinance institutions which are fairly (and in some 

cases, radically) different from each other. Hence, the repeated warning about the 

need to examine each MFI separately based on what it does, rather than to 

compare the results and make statements that such-and-such MFI has the greatest 

impact on its clients. Each microfinance institution has some sort of impact which 

others may not have. 

• All previous studies which have examined ‘impact’ of poverty alleviation 

interventions – microfinance being one such important intervention – warn about 

problems with data and methodology. This is why there have been so few impact 

assessments of microfinance interventions, and the ones that have been 

conducted, have all been criticised for some short-coming or the other. Perhaps 

the main reason why impact assessment studies have been difficult, is that it takes 

many years before impact can be observed and quantified, if at all, convincingly. 

Clearly, on all counts, one has to be fairly cautious about reading impact 

assessment studies, whether they show a positive effect, a negative effect, or no 

effect, despite many years’ of intervention. It may still have to take some years 

when the methodology improves to be able to actually capture impact. 

• Although in some areas and sectors and with regard to some microfinance 

institutions, one finds signs of positive ‘impact’, the single most important finding 

from this Study is that the social and economic impact on the lives of those who 

take credit, for the most part, is limited. 

• We do not say that the impact of microfinance interventions is negative; what we 

do say is that the impact from microfinance is ‘not positive enough’, and that we 

are not in a position to state categorically, that microfinance has a positive impact. 

We do find improvement in the lives of many borrowers, but this improvement is 

not significant enough. This result may also mean that, perhaps, we need some 

additional interventions, along with microfinance, to make a significant impact on 

poverty. 

• The greatest impact that we do find in most indicators, is amongst microfinance 

institutions which have been providing credit for many years. This result, while 

perhaps not unexpected, leads to questions about differences in management style 

and structure being significant factors in suggesting impact, rather than just the 

extended time spent with clients. 

• The second observation from our survey relates to the greater impact observed on 

account of loan size. A larger loan size – or at least a loan size above a minimum 

– has a greater impact than does a small loan amount. 

• Our results suggest that a longer relationship with microfinance and/or higher 

amounts of credit, will have a greater impact, clearly not a very surprising or 

unintuitive result. 

• With the exception of only one MFI, all the MFIs state that they are in the 

business of poverty alleviation. In their Mission and Vision statements, they all 

state that their microfinance (and in the case of one MFI, its development-related 

interventions) are all for the poor and that their clientele is also from the ‘poor’. 

However, if an objective criterion for poverty is used, such as the Government of 

xvi

Pakistan, Official Poverty Line – Rs 1,000 per capita – then, very few clients can 

officially be called ‘poor’. Our results show that only 23 percent of urban 

Borrowers – 65 percent of our sample – are below the Official Poverty Line 

(OPL). On the other hand, 50 percent of the Non-Agricultural Rural Borrowers 

and 61 percent of the Agricultural Borrowers, are below the Official Poverty Line. 

Clearly, by the criterion of the Official Poverty Line, the clients selected by 

urban-based MFIs belong to the ‘non-poor’. 

• The one overall surprising result from the survey has been the finding that the 

microfinance interventions do not seem to have a significant positive impact on 

the different aspects of Women’s Empowerment. We had expected far more 

positive results in this regard, but with very few exceptions, the results show that 

not only has there been little improvement, in some noticeable cases, Women’s 

Empowerment has deteriorated after joining a programme. While we realise that it 

is very difficult to capture and quantify indicators like ‘Empowerment’, this 

result, no matter how tentative, is cause for concern and needs to be addressed by 

MFIs. Changes in Empowerment take much time and social conditions inhibit 

improvement more so than in the case of income enhancement. 

• Recommendations: If staying power matters as the longer the microfinance 

institution stays with its clients and the greater the likelihood of impact being 

observed and measured, an institution should stay the course with its clients and 

develop their clientele over a longer period of time. Linked with the time factor, is 

that of loan size. Perhaps MFIs should raise the loan size for their clients sooner 

and more substantially so that the loan amount makes a difference. Since all MFIs 

state that they are intervening in the market to ‘alleviate poverty’, they need to 

clearly state what those poverty criteria are, whether they are following the 

Official Poverty Line criteria, or whether they are developing their own criteria. 

Whatever they do, they should state where their poor lie in terms of the poverty 

line, who they are, and what determines the definition of the ‘poor’ for them. 

They need to assess their own performance with these sets of criteria. 

• We did not find much impact on education or health, even though there is some 

impact on income for older MFIs. This probably suggests that specific measures 

for these social services need to be taken. The simple view that microfinance will 

sort out everything is too simplistic; if these services are not available or of decent 

enough quality, microfinance will not help very much. Maybe the MFI's could 

link-up with government or other NGO programmes on these social issues and 

improve these services in their own areas and for their clients. Since on the 

Empowerment factor most results have been unimpressive, there is a need for 

each MFI which claims that it also has Empowerment as an objective, to evaluate 

its methodology of intervening on this count. 

xvii

Acknowledgements 

We would like to thank the staff and management of all the six microfinance institutions 

who voluntarily participated in this extensive Study. Without their unconditional support, 

we could not have carried out this Study. They allowed us complete access to their 

clients, staff, offices and documents as and when requested. The fact that the MFIs 

allowed us such access and support, is an indicator that the microfinance sector in 

Pakistan has come of age and gained a great deal in self-confidence, and is willing to 

learn from undertaking such an extensive external assessment. We thank the staff, 

management and the clients of Akhuwat, Asasah, Kashf, the National Rural Support 

Programme (and their Urban Poverty Alleviation Project), Orangi Charitable Trust and 

the Sindh Agricultural and Forestry Workers Coordinating Organization. All the 

organisations are also thanked for providing comments on an earlier draft. 

We also gratefully acknowledge the extended help by Dr Ghazala Mansuri of the 

Development Research Group of the World Bank, Washington, DC, at each stage of the 

Study. She helped all of us envision the design of the Study and was a constant source of 

advice and help in the evaluation phase of the Study. 

Mr Awais Butt, formerly of the European Union-Pakistan Financial Sector Services 

Reform Programme, was the main instigator for this Study and has played an active role 

from the inception to its final phase. We thank him greatly for his advice, suggestions and 

guidance. 

Finally, the Draft Report of this Study underwent a detailed and intensive round of Peer 

Reviewing by experts in the field. We greatly acknowledge the extensive comments 

made by Dr Sajjad Akhtar, Director, Centre for Research on Poverty Reduction and 

Income Distribution (CRPRID) Islamabad, Syed Mohsin Ahmed, General Manager, 

Pakistan Microfinance Network, Islamabad, and Syed Hashim, CGAP, Washington. We 

feel that their comments have helped a great deal in improving the quality of this Final 

Report. 

xviii

Contents 

Executive Summary 

Acknowledgements 

Chapter One: Introduction and Background 

1.1 Introduction 

1.2 The Magic Bullet of Microfinance 

1.3 The Terms of Reference and Aims of the Study 

Chapter Two: Methodology and Sample Selection 

2.1 Impact Assessment Methodologies 

2.2 Methodology for the Study 

2.3 Process of Selection of MFIs for Study 

2.4 Study Sample 

2.5 Estimations 

2.6 Format and Structure of the Report 

Chapter Three: Asasah 

3.1 Institutional Review 

3.1.1 Background and History 

3.1.2 Organizational Structure 

3.1.3 Lending Methodology 

3.1.4 Loan Products 

3.1.5 Operations 

3.1.6 Financial Management 

3.2 Survey Results 

3.3 Regression Analysis 

3.4 Focus Group Discussions 

Appendix Chapter 3 

Chapter Four: Orangi Charitable Trust (OCT) 



4.1.2 Philosophy and Scope of Services 


4.1.4 Programmatic Portfolio 

4.1.5 Lending Methodology and Selection Criteria 

4.1.6 Portfolio Performance and Loan Recovery Ratios 

4.1.7 Institutional Development and Future Expansion 





xix

Chapter Five: Akhuwat 












Chapter Six: Sindh Agricultural and Forestry Workers Coordinating 

Organization (SAFWCO) 



6.1.2 Scope of Services 





6.1.7. Client Loyalty and Drop Outs 






Chapter Seven: National Rural Support Programme (NRSP) 



7.1.2 Mission, Vision and Purpose 

7.1.3 Objective 

7.1.4 Approach 

7.1.5 Social Mobilization: NRSP’s Vision for Rural Development 

7.1.6 Microfinance Enterprise Development Programme 

7.1.7 Application of the new Model 

7.1.8 Appraisal Process 

7.1.9 Principles of Recovery Monitoring and Dropouts 

7.1.10 Characteristics of credit staff 

7.1.11 Village Branches 

7.1.12 Internal Controls 

7.2 Urban Poverty Alleviation Project (UPAP) 

7.3 NRSP Survey Results 

7.4 NRSP Regression Analysis 

xx

7.5 UPAP Survey Results 

7.6 UPAP Regression Analysis 


7.7.1 NRSP 

7.7.2 UPAP 


Chapter Eight: Kashf 





8.1.4 Products 







Chapter Nine: Conclusions 

Bibliography 

Appendix 

Questionnaire 

xxi

Chapter One: Introduction and Background 

1.1 Introduction 

The Government of Pakistan’s microfinance strategy has been formulated to address 

three main goals, viz.: to deal with and reduce the large development deficit that exists in 

the country, and in particular to reduce the high prevalence of poverty, estimated at about 

one-third Pakistan’s population; to promote the empowerment of women by encouraging 

them to undertake income generating projects in order to become self-sufficient and 

financially more independent; and, to support and encourage the small and medium 

enterprise sector. The government’s Poverty Reduction Strategy Paper (PRSP) articulated 

in 2003, and its Medium Term Development Framework 2005-10 (MTDF), both address 

the key problem of poverty in the country and consider microfinance as a critical tool to 

make progress in all three areas mentioned above – for excellent background studies on 

the microfinance sector in Pakistan in recent years, see in particular, Hussein and 

Hussain, (2003); and Oxford Policy Management, (2006) . 

In the 1980s, the non-governmental Aga Khan Rural Support Programme (AKRSP) was 

set-up in the northern region to build community-based organizations and infrastructure, 

and assist in resource mobilization through credit and savings. The success of the AKRSP 

led to the creation of Pakistan’s other (national and provincial) Rural Support 

Programmes, which constituted the main mechanism and approach to microfinance 

during the 1980s and part of the 1990s. Those RSPs made a major contribution to the 

microfinance sector by accessing lines of credit from commercial banks to provide 

microcredit to low-income people living in rural areas; both savings from the community 

and loans to them consisted of the strategy of these RSPs. However, the success of the 

RSP model led to some concern that the microfinance sector in Pakistan had been 

constrained by the design of the developmental organisations which were providing 

microfinance services as an ‘add-on’, rather than as a specialised service. Alternatively, 

the Orangi Pilot Project/Orangi Charitable Trust (OPP/OCT) developed an individual 

lending methodology adapted to urban low-income areas, by targeting entrepreneurs in 

the Karachi region. In the 1990s, learning from international best practices, NGOs 

specialized in microfinance started their operations, such as Kashf Foundation. The 

outreach of microfinance institutions and other rural organizations providing financial 

services has, until recently, been limited due to a narrow institutional base, slow progress 

on sustainability and efficiency benchmarks. 

Since 2000, the microfinance landscape in Pakistan has changed considerably. This 

change can be credited primarily to the government’s growing interest in the 

microfinance sector. The Micro Finance Institutions (MFIs) Ordinance 2001 was 

promulgated by the Government of Pakistan to support the development of the 

microfinance sector by introducing the concept of microfinance banks. Under this 

ordinance, microfinance banks created with the necessary amount of capital, can offer 

microfinance services, including savings deposits, to the general public. In addition, the 

State Bank of Pakistan (SBP) introduced additional prudential regulations related to

microfinance operations. This ordinance and the relevant prudential regulations of the 

SBP, regulate the First MicroFinanceBank (which evolved through the AKRSP) and the 

Khushhali Bank, as well as a number of newly emergent private sector specialised 

microfinance banks, a recent and important initiative in the sector. In the banking sector, 

a public commercial bank specialises in serving women, where the First Womens Bank is 

active in microfinance, while the Bank of Khyber in the North West Frontier Province 

(NWFP) had developed new products and partnerships with NGO and RSPs in order to 

serve lower income groups. While there have been many notable successes in the 

microfinance sector in Pakistan over the decade, there has also been some attrition in the 

sector, where some institutions have given up on their practice of delving in the 

microfinance sector. 

When financial sector reforms were initiated in 1999, the government realised that it 

would have to take a fresh look at Pakistan’s financial sector examining new ways of 

reaching clients, especially the poor and those involved in the dynamic Small and 

Medium Enterprises (SMEs) sector. With the growing privatisation and liberalisation of 

the financial sector, and with the recognition that the private sector too, needs to play a 

role in the poverty reduction strategy, reforms, particularly those pertaining to credit 

liberalisation, were initiated with the help of private sector banks and non-bank 

institutions. A Microfinance Sector Development Programme (MSDP) was initiated in 

which the public and the private sector were expected to play important roles 

independently, as well as in the form of public-private partnerships. 

A major outcome of this initiative was the setting up of the specialised microfinance 

Khushhali Bank in 2000 by the government, under a public-private partnership 

programme which took the lead in retailing microfinance services across Pakistan. In 

addition, the government also encouraged the private sector to set up microfinance banks, 

with the result that six microfinance banks became operational during 2001-07. More 

recent applications for setting up microfinance banks have also been received by the 

government and are under process for licensing. Within four or five years, the outreach of 

the microfinance banks has reached half a million households, although still only onetwelfth 

of the estimated six million households who could access microfinance 

institutions. Government trends and expectations suggest that by 2010, the outreach will 

increase to about half of the target households. 

The Government of Pakistan estimates that small and medium enterprises constitute 30 

percent to the manufacturing sector, as much as 99 percent of the nearly 2.3 million 

enterprises in the country, contribute 7 percent to GDP, and generate 25 percent of 

manufactured exports. It believes that the SME sector has until recently, been neglected 

with low investments in infrastructure, skills and investment, and feels that insufficient 

credit to the sector, has been a cause for this. With sixty percent of the labour force selfemployed, 

the government has felt that there is a need to provide credit to SMEs in the 

guise of microfinance. The Pakistan Poverty Alleviation Fund (PPAF), the National 

Rural Support Programme (NRSP), the Provincial Rural Support Programmes (PRSPs), 

as well as the First MicroFinance Bank, have provided microfinance for micro-level 

entreprises and for the self-employed. 

2

The Pakistan Poverty Alleviation Fund (PPAF) was established in 1997 as a not-forprofit 

private company sponsored by the Government of Pakistan and funded by the 

World Bank, inspired by the success in Bangladesh of PKSF, which has a more narrow 

focus on microfinance. The PPAF was established to help the poor by enabling them to 

gain access to resources for their productive self-employment, to encourage them to 

undertake activities of income generation and poverty alleviation, and for enhancing their 

quality of life. As an Apex fund, PPAF disburses soft loans to a myriad of microfinance 

organisations in Pakistan. It also provides grants on a cost-sharing basis for development 

of small scale community infrastructure, and strengthens development and microfinance 

institutions by supporting their capacity building activities. The resource base of PPAF 

consists of an endowment from the Government of Pakistan of Rs. 500 million, and a 

World Bank credit of US$ 90 million. Half of the World Bank funds must be used for 

microcredit and enterprise development. Total income for 2003 was Rs. 230 million, an 

increase of 59 percent over 2002. Government figures reveal that by the end of December 

2004, PPAF had extended its outreach to 95 districts through 45 partner organisations, of 

which ten were catering exclusively to women. It had disbursed 507,000 loans, of which 

45 percent were to women. PPAF figures show, that it has provided Rs 5.587 billion for 

microcredit and enterprise development and Rs 1.789 billion for infrastructure projects 

benefiting more than 7.7 million individuals. 

While the government has been a recent entrant into the field of microfinance, the private 

and NGO sector has been providing credit to users for many years. NGOs, particularly 

those that are based in urban or peri-urban areas, have been providing microcredit to 

women and other small entrepreneurs. Estimates show that around 300,000 individuals, 

many of them women, have benefited from non-governmental disbursement of 

microfinance. A number of NGOs working in the microfinance sector in Pakistan have 

gained national and international recognition for their work and have formed a forum 

called the Pakistan Microfinance Network, where issues and ideas are discussed and 

exchanged. Both private and nongovernmental groups, as well as the government itself, 

have begun to realise the potential and efficacy of microfinance, and some private sector 

concerns are also considering entering the microfinance sector purely for profit motives, 

having understood that there is a very large demand for credit which needs to be met, and 

where users are willing to pay a high price for the use of financial capital. 

Although large numbers and trends over time have been shown in the paragraphs above, 

it still needs to be stated that the sector in Pakistan is rather small. This means, that the 

forms of institutions which provide microfinance in the formal sector are limited: (i) there 

are formal, full service broad spectrum providers, MFIs which provide a number of 

formal sector financial services, and microfinance is one such activity – the Bank of 

Khyber is such an MFI; (ii) another category is full service microfinance specialists, 

which take on savings and provide microcredit and may be involved in other 

microfinance activities as well – such as the First Microfinance Bank, and Tameer Bank; 

(iii) another category is restricted service microfinance broad spectrum, institutions 

which provide some microfinance services along with other services – the NRSP, 

Thardeep and other RSPs fall in this category; (iv) the fourth category is restricted service 

microfinance specialists, which provide only some microfinance services, mainly credit, 

3

and not other services such as savings – Kashf, is a good example, and; (v) apex 

institutions – like PPAF – which lend on to NGOs which may provide microfinance 

services specifically or along with other services (Oxford Policy Management, 2006). 

1.2 The Magic Bullet of Microfinance 

Since the beginnings of the (still embryonic) microfinance sector have their roots in rural 

development projects funded by donors, this has had, and continues to have, an impact on 

the nature of discussion around the microfinance sector, as well as around rural 

development and poverty alleviation strategy in rural areas in Pakistan, more generally. 

The Aga Khan Rural Support Programme’s development model has been replicated all 

across Pakistan, and since microcredit became a major instrument in dealing with the 

problems of the rural poor, it is assumed by all the actors in the microfinance sector, that 

principally, microcredit should be used to reduce the near 30 percent poverty – much of it 

rural -- in the country. This central belief, albeit largely unsupported by data and 

evidence, informs most of the debate around microfinance in Pakistan. In fact, one can 

argue as well, that research related to microfinance to support or dispel many of the main 

assumptions about microfinance, is woefully lacking, and hence many presumptions 

remain untested, as pointed out clearly by Hussein and Hussain (2003). 

Along with poverty alleviation, microfinance in Pakistan has been seen as an important 

instrument for gender empowerment. The Government of Pakistan and the various rural 

support programmes feel that by providing credit to women which they use for income 

generation and for consumption purposes, the social and economic status of women in the 

household and in the community, can be improved. This is again one of the accepted 

truths that has emerged as conventional wisdom about the microfinance sector in 

Pakistan, although capturing and measuring ‘empowerment’ and emancipation is a 

particularly difficult task. 

It is important to state, that the term ‘microfinance’ has been used interchangeably with 

‘microcredit’ in Pakistan, largely because other services and products in the sector have 

been far less developed than credit. Savings and insurance, for example, are still in their 

infancy as far as their provision by microfinance institutions is concerned, and even some 

microfinance banks have been slow to evolve their savings instruments and potential. 

Debate about microfinance in Pakistan, continues to be largely about microcredit. 

While there are numerous assumptions about what microfinance can do – poverty 

alleviation, women’s empowerment, eradication of unemployment, etc – there is not 

sufficient research which supports all these claims. Some partial research, both in 

Pakistan and abroad might suggest that microfinance works for some people under 

certain conditions, the jury is still out about it really being the Magic Bullet – see the 

summary and evaluation of studies conducted in Hussein and Hussain (2003). Hence the 

need for continuing research, looking at the main assumptions of what microfinance can 

do, becomes essential. 

4

Indeed, Hermes and Lensink (2007) make the important point that, many advocates of 

microcredit ‘argue that microcredit can help to substantially reduce poverty’ on the 

assumption that ‘access to credit can contribute to a long-lasting increase in income by 

means of a rise in investments in income generating activities …; it can contribute to an 

accumulation of assets; it can reduce vulnerability due to illness …’ (p. 463), they also 

make the crucial point that, ‘it is surprising that there are only a few solid empirical 

studies available on the possible poverty reducing effects of microcredit’ (p. 464). 

1.3 The Terms of Reference and Aims of the Study 

The Terms of Reference for this Study were as follows: 

Assessment of the social impact of microfinance programmes (group and 

individual lending) of Microfinance Institutions/NGOs/Microfinance Banks on 

borrowers, communities and on the institutions themselves, and whether these 

MFIs are achieving their social missions. 

Microfinance Institutions (MFIs) have predetermined social missions for their 

microfinance programmes/interventions such as poverty alleviation, empowering 

poor women, provision of financial services to people disqualified from the formal 

financial market, development of micro-enterprises for poverty alleviation and 

strengthening economic development of the poor. The social impact assessment of 

these MFIs will cover the relevance of operations/programmes to their 

goals/missions and use this information to improve the social and financial 

performance of institutions. The contractor will select SIX (6) MFIs for this 

intervention covering at least two (2) provinces and the selection criteria of MFIs 

for this action will be as follows: 

• At least 3 years continuous work experience in microfinance and a strong 

business plan for next 3 years; 

• MFI enjoys a portfolio of at least 2000 active borrowers; 

• Has audited accounts for the last 3 years; 

• Is willing to undergo the social impact assessment of its microfinance operations 

and to use the information for performance improvement. 

The group of six institutions must cover a range of sizes, ownership patterns, 

source of funding, lending methodology, programme area, organizational structure, 

borrowers, communities etc. 

While the Terms of Reference state clearly, that the ‘the contract’s objective is to 

measure the social impact of microfinance programmes (group and individual lending) of 

Microfinance Institutions/NGOs/Microfinance Banks on borrowers, communities and 

institutions themselves and to assess whether these institutions are successful in their 

missions’, we felt that this was a good opportunity to go beyond these goals and make 

extensive use of the space available to do research to address numerous issues which are 

often overlooked. 

Firstly, while looking at the Social Impact of Microfinance Programmes, we will also 

looked at Economic Impacts of these programmes, apart from the Social Impact – see 

5

elow. While we examined the traditional forms of Social Impact – in terms of 

empowerment, improvement and use of social sector facilities on account of 

microfinance, better indicators of health and education, etc – we also examined the 

income effects of microfinance, impacts on employment, impact on economic activity, 

and these factors having an impact on the community (apart from what are considered 

‘Social’ impacts). Much of our analysis is based on estimating the nature, and where 

possible, extent, of the economic impact of microfinance interventions. 

Secondly, we also looked at the need for and possibility of other microfinance services, in 

particular Savings. Most studies show that the poor need Savings support and institutions 

perhaps more than simply credit facilities, but for numerous reasons, MFIs are not able to 

support such endeavours. In order to have a good microcredit programme, often Savings 

facilities become equally important. 

There are numerous assumptions which have been made about what microfinance can do 

and has done. However, there is insufficient empirical evidence to support most of the 

claims. This is the first Study of its kind in Pakistan which attempts to quantify and 

demonstrate some of the outcomes from microfinance interventions. Moreover, it also 

looks at how communities around MFIs and around borrowers, react to an MFI 

intervention – this has not been done in the past. We also examine the institutional form 

of the MFIs who agreed to be part of the programme, examining how they work in the 

community and in the larger environment. 

6

Chapter Two: Methodology and Sample Selection 

2.1 Impact Assessment Methodologies 

The literature on Impact Assessment (IA) Methodologies underscores the pitfalls of 

undertaking studies in which an attempt is made to observe, leave alone quantify, the 

‘impact’ of any intervention in order to address poverty (or any other goal). IA experts 

caution researchers about making grand statements and reaching firm, final, conclusions 

based on the quantification based on many measurables. In the case of softer indicators 

which are more difficult to measure and quantify – such as ‘empowerment’ – they are 

doubly cautious and suggest that one always needs to be tentative in suggesting that they 

can ‘prove conclusively’, that such-and-such poverty alleviation or microfinance 

institution, had a quantifiable impact on members or recipients of an intervention. 

Moreover, experts also present a menu about methodologies and suggest that the choice 

of methodology – whether it is a qualitative or quantitative study, and whether it is a 

large or small one – depend on a number of critical factors which determine the choice of 

methodology most appropriate to the organisation and to the nature of the intervention. 

The first concern which most experts on Impact Assessment Methodologies with regard 

to microfinance interventions have, relate to the size/scale of the study that the 

researcher/s want to undertake (see amongst many: Ravallion, 2006; World Bank, 2005; 

Barnes and Sebstad, 2000; Sebstad, 1998; Mosley, 1998; Hulme, 1997; and, Hulme and 

Mosley, 1996). Size/scale, in most cases, is determined by cost and by the time available 

to undertake the study. IA studies can be very costly and some very large and costly 

studies, running into many hundreds of thousands of dollars (or reportedly, in one case, 

more than one million US dollars – Montgomery, 2005); or, they can be smaller ones, 

which cost less than $ 100,000. The classification of most types of studies, depending on 

their size based on costs, is usually Large (Higher-Cost), Medium or Small (Lower 

Cost).The type of the study – whether it is a large survey based study, or whether it is 

based on Focus Group Discussions, or simply on Rapid Appraisal methodologies – also 

varies, often along with objectives, programme contexts and the availability of finances 

and skilled resources. Hence, despite the fact that there are numerous concerns and issues 

which relate to the impact itself once the study is complete, it is important to know that 

often the design of the study itself can be constrained by a number of conditions. This is a 

major reason why Hermes and Lensink (2007) argue that, ‘it is surprising that there are 

only a few solid empirical studies available on the possible poverty reducing effects of 

microcredit’ (p. 464). 

Most experts recommend Mixed Methods for IA, i.e., when quantitative and qualitative 

methodologies are both used – something that our study also does. Both, a quantitative 

survey, with econometrics analysis in which the direction, nature and extent of impact or 

change are measured is employed, as are Focus Group Discussions – the narratives, 

stories, etc – which give the numbers a more human face. Often the stories contradict the 

‘hard data’ since the methodology for both is different, but both have their own particular 

value and contribution. One needs to consider both when making any sort of analysis. 

7

Ideally, baseline studies and panel data are recommended so that one can capture the 

trend and secular impact of the intervention so that one can compare before-and after 

scenarios. But, unfortunately, most MFIs or researchers do not have the luxury of having 

such data and they have to make do with cross-sectional data captured at one point in 

time. 

The IA should be designed to establish plausible association between changes identified 

and participation in the microfinance programme. Towards this end, quantitative and 

qualitative studies should be based on a longitudinal design, if possible, to obtain more 

reliable measures of change. If a longitudinal design is not possible, the quantitative 

assessment should concentrate on variables for which recall data are easily obtainable and 

generally reliable. It should employ a comparison group, preferably a quasi-experimental 

design control group of micro-entrepreneurs, to provide a basis for associating change 

with participation in the microfinance programme. In onetime studies it is essential that 

information on changes over a designated timeframe be gathered; it is not valid to 

compare the current status of clients with non-clients and claim that the better results 

among clients are due to programme participation. Rather, one assesses trends or changes 

over a period of time between clients and non-clients in order to make a case that the 

differences identified between the two groups are a result of programme participation. A 

quantitative assessment should have a sample size that is large enough to ensure effective 

use of control variables, account for refusals and non-finds, and allow for invalid data 

issues, but small enough to fit the budget. Here is where trade-offs are required between 

the number of variables, margin of error, confidence interval, and budget. (Barnes and 

Sebstad, 2000, p. 8) 

Barnes and Sebstad (2000) make the important point, that ‘in choosing variables, it is 

important to consider the timeframe required for impacts to manifest themselves. 

Previous studies have shown that different variables show change at different times. For 

example, impacts on enterprise profits may occur early and then taper off within the first 

year or two of microfinance program participation. Other impacts, for example the 

accumulation of selected household assets, may take as long as three to five years of 

microfinance program participation to happen. One recent study concluded that social 

impacts (such as changes in women’s mobility) are likely to take longer to occur than 

economic impacts (such as changes in income). Attention to temporal issues in measuring 

variables in impact assessments (either through longitudinal designs or through the use of 

recall data) is important for ensuring valid findings’ (p 37, emphasis added). 

This is a particularly important point from the point of view of our particular study when 

we present our results in the following chapters, since many of the MFIs in Pakistan are 

relatively new – three or four years of operations only – and ‘impact’ will be difficult to 

observe, leave alone, measure and quantify. Moreover, Hermes and Lensink’s (2007) 

critical survey on the impact of microfinance, conclude that ‘its is unclear whether 

microfinance contributes to a reduction in poverty or is the most efficient method to 

reduce poverty without additional measures in areas such as education, health and 

infrastructure’(p. 462). While they acknowledge the huge potential of microfinance, they 

8

too argue that ‘impact’ takes some years to work its way through into the lives of 

beneficiaries. 

In the case of softer measures of impact, such as empowerment or social capital, there are 

far greater words of caution, as not only are such changes difficult to observe and 

quantify, they may take many years to change – (see Holvoet, 2005; Mahmud, 2003; 

Mayoux, 2001). Moreover, Naila Kabeer (2005) has found the rather surprising result in 

her analysis of findings from South Asia with regard to women’s empowerment, where in 

some cases, ‘access to financial services was found to exacerbate domestic violence’ (p. 

4715). With these many words of caution and advice, we present the methodology 

adopted for our study. 

2.2 Methodology for the Study 

The first task was to undertake through an extensive survey, an assessment of the Social 

and Economic Impact of microfinance on borrowers/beneficiaries. This was done in the 

following manner. Once the six MFIs had been selected in consultation with EC- 

PFSSRP, meetings were held with the concerned MFIs separately, and when necessary, 

collectively, to discuss and devise the strategy and questionnaire instruments. A 

representative sample keeping in mind the different types of MFIs and different types of 

borrowers – geographical, urban/rural, gender, etc – was selected based on the 

programme outreach of the partner MFIs. A randomly selected sample of 

borrowers/beneficiaries was selected – see below. 

Given the fact that we will had to use a cross-section (one-point-in-time) data, and given 

the non-random placement of the programme and some self-selection of households in 

the programme, we opted for the Difference-in-Difference approach used by Bret 

Coleman (1999) which compares the difference between income for participants and nonparticipants 

in treatment sites/locales, with the same difference in income in control 

sites/locales. This is the best method for undertaking such an exercise and better than 

taking one which focuses on programme participants and new/likely participants – the 

Pipeline Approach – which has an in-built bias as many of the new clients are already 

‘sold’ on the issue of and efficacy of microfinance (see Khan, 2004). However, as each 

Chapter on each specific MFI shows, we present both the Difference-in-Difference 

results as well as the Single Difference results, and state why there is a difference in each 

set of results. 

Clients/borrowers and non-clients were chosen from the same sites/locales, and nonclients 

of the MFI were also chosen from other sites/locales where the MFI does not 

operate. This is the Difference-in-Difference approach which requires random selection 

of treatment and control sites/locales (communities). The former are sites/locales 

(communities) where the MFI has had its lending operations for some time and in which 

some households have been clients as members of community organizations and others 

are non-clients since they have not joined the community organizations. Control 

sites/locales are those communities in which community organizations have been formed 

(or even may not have been formed) but the MFI has not started its lending operations: 

9

members of these organizations are the future clients and others are non-clients. In the 

urban areas, a related issue is the selection of sample of clients and non-clients since it is 

difficult to differentiate between the treatment and control neighbourhoods or 

communities. However, we were able to do this by trying, to the best of our knowledge 

and of local knowledge, to identify like with like (Khan, 2004). 

The social indicators we wanted to look at can be divided into two categories one, a 

general category looking at education, health, and so on, while the other category pertains 

to empowerment, such as women's role in household economic decision-making, 

purchasing power, financial independence, control on income and savings and control on 

loan. 

Hence, the first strand of the Study is an Economic and Social Impact Assessment on 

borrowers/non-borrowers living in MFI areas and those not living there. The specific 

questionnaire and variables to be captured will be based on existing international best 

practices in measuring the Economic and Social Impact of MFIs, tailored to Pakistani 

conditions. There have been at least three large Economic and Social Impact Assessments 

of MFIs in Pakistan – one of Khushhali Bank and two on Kashf, albeit all with some 

weaknesses (see Zaka, 2006; Montgomery 2005; Zaidi 2003) – and we hope be able to 

match the international best practices in research on the impact, along with the recent 

Pakistani studies. 

Along with the quantitative questionnaire, the study also includes questions about the 

perceptions of borrowers and non-borrowers in order to understand how they see the 

impact of the intervention. In many cases, as we show in the chapters that follow, 

perceptions seems to be very different from ‘hard data’ and ‘facts’. Since we use Mixed 

Methodology, we not only capture the quantitative side through our questionnaire, but 

also include extensive Focus Group Discussions with clients, borrowers, non-borrowers, 

those who have left the programme – so-called ‘drop-outs’. We also have substantial 

Institutional Reviews which are based on interviews and give yet another dimension to 

the study. 

2.3 Process of Selection of MFIs for Study 

Once the Study had been initiated, discussions were held between the Consultant and the 

European Union PFSSRP in order to identify six microfinance providers who represent 

the broad spectrum of microfinance provider in the country and fulfil the requirement 

which shows that there is diversity in our choice. Eleven MFIs/MFPs were identified as 

potential institutions who could participate in the Study. All those MFPs approached 

showed an initial interest to participate, subject to some final conditions, such as the 

finalisation of the methodology, questionnaire, etc. After discussions between the 

Consultant and the EU-PFSSRP, a final list of institutions was prepared and they were 

invited to join in the Study. 

We identified MFIs from two provinces, Punjab and Sindh. The MFIs approached and 

their main characteristics were: Orangi Charitable Trust (OCT), urban, Sindh, not simply 

10

concerned with poverty alleviation, but also entrepreneurial and economic development, 

individual lending; Sindh Agricultural and Forestry Coordination Organization 

(SAFWCO), rural, Sindh, poverty alleviation and income earning focus; Kashf, Lahore, 

urban, peri-urban, exclusively women, poverty alleviation, gender empowerment, 

economic security; National Rural Support Programme (NRSP), the largest rural support 

programme in every province of the country, multi-sectoral with microfinance being one 

of its important, though not exclusive, activities – we look at the NRSP microfinance 

programme in the Punjab and Sindh, as well as the NRSP’s Urban Poverty Alleviation 

Project (UPAP); Akhuwat, urban, Punjab, an Islamic microfinance provider, based on the 

zero-interest principle; finally Asasah was chosen, which is a Lahore-based MFI and is 

different from the others because its financing structure represents fully commercial 

funding. 

Hence, we had in our selection of MFPs, institutions from Sindh and the Punjab; MFPs 

which undertook group lending and those which lent to individuals; those that lent only to 

women and those that did not discriminate on the basis of gender; MFIs which claimed 

that they charged no interest and those which charged a considerable rate of interest; rural 

and urban based MFIs; and, multi-development institutions and specialised microcredit 

providers. What we do not have in our category, is a microfinance bank. Given the 

criteria that were specified in the Terms of Reference for the selection of the MFIs for the 

Study, only two banks were eligible, viz., Khushhali Bank and the First Microfinance 

Bank. We decided not to approach Khushhali Bank since they had recently been subject 

to a huge impact evaluation (Montgomery, 2005) and hence were suffering from 

‘evaluation/assessment fatigue’. We approached the First Microfinance Bank, who turned 

our request down and showed their inability to join the Study. Hence, sadly, we do not 

have a microfinance bank as a partner in this Study. 

It is important to state and highlight the fact, that all the six institutions who agreed to 

participate in this Study, did so completely voluntarily. They agreed to open up their 

offices, their records and gave us unprecedented and complete access to their staff and 

clients. Their willingness to be part of this Study and their full cooperation with the 

Team, reflects very highly on the maturity and confidence that members of the 

microfinance sector in Pakistan have about their programmes. 

2.4 Study Sample 

At the first stage of sampling, the following branches (groups of persons with 

homogenous socio-economic characteristics) from each microfinance institution were 

chosen purposely, depending upon the scale of operation, geographical coverage of 

institution, time constraint and logistics. 

11

Microfinance Branch 

District/City 

Institutions 

OCT Orangi Town Karachi 

SAFWCO 

Shahdadpur – Urban 

Shahdadpur – Rural 

Bhit Shah 

Shahdadpur 

Shahdadpur 

Matiari 

Akhuwat 

Township 

Lahore 

Asasah 

Kashf 

NRSP 

UPAP 

Data Darbar 

Yadgar 

Kot Radhakishan 

Raiwind 

Karim Park 

Kahana 

Chunnian 

Chakwal 

Doltala 

Bhundi 

Hasilpur 

Noorani Basti 

Bazarta Line 

Dhok Ratta 

Muslim Colony 

Lahore 

Lahore 

Lahore 

Raiwind 

Lahore 

Lahore 

Kasoor 

Chakwal 

Gujer Khan 

Rahim Yar Khan 

Bhawalpur 

Karachi 

Karachi 

Rawalpindi 

Islamabad 

At the second stage, regular borrowers were selected randomly from the MFI record of 

open cases. It was decided to include all borrowers who had obtained loans during 

January 2005 and April 2006 and were paying loan instalments. After compilation of data 

obtained from the MFI, randomization software (www.randomizer.org) was used to draw 

the sample of active borrowers. 

A valid control group is the holy grail of any microfinance impact assessment and must 

have participants who possess the same ‘entrepreneurial spirit’ as those in the treatment 

group that receive the loans. One way is to take new entrants in the MFI programme as 

the Control Group, whereas the veteran participants with two or more years experience 

with the MFI are considered to be the Treatment Group. The methodology then attributes 

any difference between these groups to the MFI, since the new entrants have received 

little or no treatment from the MFI, but the veterans have received two or more years of 

loans. This study considers accepted borrowers-to-be (Pipeline Borrowers) as a part of 

the Control Group. Accepted borrowers, who either have not yet received the loan or 

received the loan after April 2006, were compiled from the MFI data and a random 

sample was drawn. To avoid ‘contamination’ and ‘locational’ biases, non-borrowers were 

also chosen both from the project area and from non-project (similar) areas. The randomwalk 

method was adopted to select non-borrowers. Thus, the control group of the study 

12

consists of ‘borrowers-to-be’, non-borrowers from project area and non-borrowers from 

new designated project areas or similar non-project areas. 

Ideally under the best conditions for the purposes of our Study, we wanted to include in 

our sample those new or Pipeline Borrowers who had been accepted as likely and 

potential new clients by the MFI and whose applications had been accepted, but had not 

been granted a loan as yet. However, we found that in the case of all our MFIs, the 

application procedure, approval of the loan and the disbursement of the loan, all took just 

a few days, or a couple of weeks at most, and this did not allow us to capture ‘pure’ new 

Pipeline Borrowers. Hence, we had to opt for those borrowers who had very recently 

been granted a loan. 

The statistically optimal sample size depends on the desired effect size (e.g., a 10 percent 

increase in income), the variance of the outcome, and the tolerance for error in assigning 

statistical significance to the change in outcome. Outcomes in microfinance evaluations 

can be both continuous (e.g., change in income) and binary (e.g., P 1 , the probability of no 

longer being below the poverty line). Using binary outcomes can be easier since the 

variance [(P 1 ) (1-P 1 )] is entirely determined mathematically from the mean. The variance 

is ideally applied in sample size determination by information available from other 

surveys (or pilot surveys) that have been conducted in a similar setting. Unfortunately, it 

is difficult to find out a systematic study in the Pakistani context showing the mean and 

variances of various microfinance impact indictors. Therefore, in the absence of any prior 

value or judgment regarding the variance of any impact indicator, it is best to choose a 

value of 0.5 for P 1 . This is recommended because the variance of indicators that are 

measured as proportions reach their maximum as they approach 0.5. This will ensure an 

adequate sample size irrespective of what the actual value of P 1 is. Nonetheless, this may 

also result in samples that are larger than needed in the event that the actual value of P 1 is 

very different from 0.5. 

Based on standard parameters of a 95 percent level of significance (Z α =1.645) and 80 

percent power (Z β = 0.84) and assuming a variance 0.25 and 10 percent of tolerance error, 

a sample of 154 emerges from the following formula. 

n = (Z α+ Z β )[σ 2 /δ 2 ] 

However, it was decided to enumerate 90 respondents for the Control Group from each 

selected MFI branch (project area). The Control Group includes 30 new borrowers or 

accepted borrowers (Pipeline Borrowers), 30 Non-Borrowers from same (project) area 

and 30 Non-Borrowers from project designated new area or project-similar area. For 

comparison, a sample of 80 borrowers (Treatment Group) was drawn, whom we have 

called ‘Active Borrowers’. Thus a total of 170 respondents were chosen from each MFI 

selected branch – see Table below. 

In order to ensure that the target sample size for the survey was reached, allowances for 

non-response and non-traceability are usually made during the calculation of sample 

sizes. This normally involves increasing the sample size by a non-response insurance 

13

factor. For this survey, the sample was drawn with the allowance of 20 percent. The 

realized sample information is provided in the following table. 

Table – 2.1 

Study Sample 

Respondent Category 

Borrowers Non-Borrowers 

Number of 

Branches Regular New Same New 

Areas Areas 

Overall Sample 20 3393 1597 588 601 607 

Microfinance 

Institutions 

OCT 1 170 81 29 30 30 

SAFWCO 3 505 241 85 89 90 

Akhuwat 2 340 160 60 60 60 

Asasah 3 510 237 92 90 91 

Kashf 3 510 239 91 90 90 

NRSP 4 680 324 108 118 130 

UPAP 4 678 315 123 124 116 

In order to understand the questionnaire, a three day comprehensive training programme 

was given to all enumerators and their Supervisors, first in Karachi, and then later at each 

city/area where the survey was held. Each section of the questionnaire was studied for 

clarification of the questions. After this training session, for better understanding and 

practice, the enumerators were given two blank questionnaires to be filled from two 

borrowers of MFIs in their areas and were asked to return the next day. The filled 

questionnaires were evaluated and marked, and the mistakes/misunderstandings during 

the interviews identified. Once again, with the help of slides, the Trainers went through 

the complete questionnaire and clarified the questions. Once they had complete 

understanding of the questionnaire, each enumerator was asked to interview another 

enumerator. In this way, they had far greater understanding and fluency about the 

questions. The enumerators who performed the best in the training sessions, were then 

selected. Each set of teams conducting the survey, had at least one woman enumerator. 

This process was followed through in Karachi and at all other locations where the survey 

was conducted. 

Once the locations/Branches had been identified and selected, each MFI was requested to 

provide a full client list with loan cycle for that Branch. Following the sampling process 

explained above, we selected the respondents and their ‘neighbour’ for the survey. In 

most cases, each team of surveyors went to the homes of the identified respondents and 

14

conducted the survey there; in some cases, the interviews were conducted at the 

workshop/shop of the client. For the most part, five clients were interviewed by each 

survey team in any day. Often repeated visits were required in order to complete the full 

questionnaire. 

2.5 Estimations 

The impact estimation in this study follows Coleman’s methodology (1999) where he 

compares mature microfinance borrowers in treatment areas with new would be 

borrowers in control areas. This is done to control unobservable factors such as 

entrepreneurial spirit and risk preferences that lead to selection bias. Non borrowers have 

also been included to control for endogenous factors. The logic behind the latter point is 

that MFI’s might view some villages/locales as more entrepreneurial and thus might start 

lending there before other areas as a prudent business step rather than on a random basis 

and lead to programme placement bias. But looking at the neighbours allows us to control 

for the heterogeneity in the two areas. In our model difference in the length of time that 

borrowers have been taking loans has also been taken into account by using loan cycle 

dummies or splitting up the sample into young and old borrowers. With these 

assumptions, impact can be measured by a single impact equation such as: 

Y ij = X ij α + V j β + M ij γ + T ij δ +v ij (1) 

Y ij is an outcome on which we measure impact for household i in village j, X ij is a vector 

of household characteristics, M ij is a membership dummy variable equal to 1 if household 

i self-selects into the credit programme, and 0 otherwise; T ij is a variable to capture the 

treatment effects on households that self selected themselves into the programme and 

already are accessing loans and V j is a vector of village characteristics. M ij can be thought 

of as a proxy for unobservable characteristics that lead households to self-select into an 

MFI program. The coefficient δ on T ij is the main parameter of interest and measures the 

average impact of the programme. A positive and significant δ would indicate that 

microfinance is having a beneficial effect on the borrowers. Coleman asserts that if 

programme placement is random than the above equation should yield efficient and 

unbiased estimates. 

Coleman’s model is based on the Difference-in-Differences (DID) methodology which is 

explicitly designed to overcome the potential ambiguities of the single-difference studies. 

The essence of the difference-in-differences approach is to try to account for the “other” 

forces by also examining the outcomes for a control group that does not receive the 

treatment but that presumably is affected by these other forces. However, DID also has its 

drawbacks like failure to take into account externalities and spill over effects, and the 

differencing nets out the effect of the comparison group, the neighbours in this case. 

An issue that came up during surveying was that it was difficult to find Pipeline 

Borrowers as all MFIs in our sample were disbursing new loans within 15 days. 

Consequently, some of the respondents in the Pipeline category had already received 

15

loans and might have increased consumption due to better liquidity. This aspect would 

lead to a smaller value of δ or the impact reported on the variable of interest. 

Furthermore, the areas in which our selected MFIs were working were predominantly 

urban areas; in fact a large proportion of their work was within the same urban centres of 

Lahore and Karachi. This caused problems in selecting the control groups and localities 

as there are almost 90,000 borrowers in Lahore with 66 MFI offices while in Karachi 

there are over 22,000 borrowers with 46 MFI offices 1 . Therefore, the knowledge and 

accessibility of microfinance in these areas is enormous. This made it impossible to find 

areas which were unexposed to microfinance and therefore precision of δ might be 

compromised. However, effort was made to find control areas where microfinance was 

not pervasive so that we could compute δ with accuracy. 

The final estimation equation is as follows: 

Y ij = X ij α + C ij β + M ij γ + T ij δ +v ij (2) 

Equation (2) is similar to equation (1), except for the dummy C equal to 1 for clients and 

matched neighbours and equal to 0 for the pipeline clients and their matched neighbours. 

This dummy will take into account the heterogeneity between the two groups specified 

above and the localities they live in. In addition to the DID estimates we will also report 

the Single Difference estimates which compare only the active borrowers and the pipeline 

clients as all conditions of the DID model are not strictly met due to problems with data 

collection as mentioned above. 

The equation used for estimation of Single Difference is 

Y ij = X ij α + T ij δ +v ij (3) 

Where δ is the parameter of interest and captures the impact experienced by active 

borrowers on different outcomes as compared to pipeline clients. 

2.6 Format and Structure of the Report 

After the first Chapter on the introduction and background to the study, followed by this 

second Chapter on methodology and sample design, we move on to the results 

component of the Report. Our results are presented for each of the participating 

institutions separately in the next six chapters – Chapter 3-8 – where we show the results 

for each institution. Our interest (and that of the EU-PFSSRP as they state in the Terms 

of Reference) is focused not on a general, broad, social and economic impact analysis on 

microfinance interventions in Pakistan, but on the impact of specific institutional 

interventions. Hence, we do not analyse pooled data for the study, but present our results 

separately in each Chapter. However, the concluding last Chapter, does present some 

1 Pakistan Microfinance Network, “Microwatch: A quarterly update on Microfinance in Pakistan” Issue 01: 

October 2006 

16

general results and observations based on the earlier chapters. Each Chapter on the six 

institutions begins with a detailed Institutional Review/background to the MFI – as per 

required Terms of Reference – before we begin to describe and analyse our results. Each 

Institutional Review is based on interviews and an analysis of published and unpublished 

reports from the organisation. 

In Chapters 3-8, we discuss all relevant results and observations in the main text of each 

chapter and show some key data in tabular form as part of the main text. However, given 

the abundant and rich data that we have collected, we feel that this data should also be 

available in the public domain so that those interested could look at the data in more 

detail. Hence, each of the institution chapters carries an Appendix which contains 

additional data, not all of which is discussed in the text. The questionnaire used for the 

survey is also reproduced as an Appendix to the main Report. 

While it is natural that numerous comparisons are going to be made between 

chapters/institutions on the basis of data provided and results produced, however, a few 

words of caution are necessary before one draws too many comparisons. Each institution 

has a separate mission statement, style of management, different set of priorities, etc., 

hence, comparison, if made at all, must be made with considerable caution. Perhaps the 

most important and marked difference between the MFPs, is that they have been around 

for different periods, most for just a handful of years. With the exception of Kashf and 

the Orangi Charitable Trust – both of which are fundamentally different from each other 

for numerous reasons, anyway – most of the urban MFPs from our sample have been 

around for less than half the time-span of either Kashf or OCT. Clearly, as we emphasise 

in a number of places in this Report, to observe, leave alone measure, impact takes many 

years. Hence, these words of caution. The intention of this Study as specified by the 

client EU-PFSSRP, was not to compare or evaluate the performance of MFPs in 

Pakistan, and the design of the study does also not provide for such comparison. 

Each of the Chapters 3-8, should be read as a ‘stand-alone’. They follow a similar format, 

with an Institutional Review highlighting the background and history of the institution, its 

goals and missions, its form of functioning and loan-disbursement and operation systems, 

followed by the survey results and the quantitative sections, followed by extensive 

accounts and commentary of the Focus Group Discussion. However, while the Chapters 

follow a similar format, they are quite different in content, design and they way they have 

been written. One major reason for this is that, the descriptive and analytical qualitative 

part of the Chapters – Institutional Review, Focus Group Discussion – are written by 

different individuals reflecting differences in style, approach and understanding. While an 

attempt has been made to streamline the format in all the Chapters, we have decided to 

allow for the particular styles of different writers to come through. This reflects their 

particular concerns, and since these writers researched each institution and conducted 

discussions and interviews, we feel that their opinions and observations should be heard 

the way they want to express them. Hence, a further cautionary note on comparing 

Chapters and institutions. 

17

Chapter Three: 

Asasah 



Asasah was started on 1 March 2003 by Tabinda Jaffrey, its Chief Executive Officer 

(CEO), with the objective to enhance micro productivity and alleviate poverty. Asasah 

was established with a 100 percent commercial financing structure and was registered in 

December 2003 as a non-profit Company by Guarantee under Section 42 of the 

Companies Ordinance 1984. The most interesting aspect of Asasah is its business 

approach to microfinance. Initially it had no donor funding available and paid a very high 

interest on its commercial finance, therefore, sustainability became a major focus. In 

addition, Tabinda Jaffrey, the CEO of Asasah had spent seven years working on the 

Executive Committee of Kashf Foundation and felt the approach taken by them to be 

‘very slow and cautious’ and wanted to take a different route. Thus with her business and 

finance background, microfinance experience and the availability of only commercial 

funding, the CEO set up Asasah and treated it as a profit-oriented business with the aim 

of achieving viability and sustainability rapidly. 

The result is that in three and a half years, Asasah has 27 branches, over 25,000 active 

members; it has disbursed over Rs.457 million and has a recovery rate of 100 percent – 

see Appendix. Its Operational and Financial Self Sustainability stands at 78 percent and it 

aims to reach 100 percent sustainability by December 2007. In June 2005, Asasah 

completed its pilot project in which it launched 5 products, streamlined all processes and 

systems and developed an operational manual. 

Asasah’s mission is quite broad and comprehensive and states that its objectives are to: 

‣ Improve living standards of people below the poverty line through the provision 

of diverse economic, educational and information services 

‣ Safeguard the interest of donors, financial institutions and individuals interested 

in poverty alleviation 

‣ Improve community well-being, and balance the interests of stakeholders by 

encouraging participation 

‣ Keep employees motivated and ensure continuous achievement of objectives 

through staff capacity building 

Asasah started operations from commercial funders, who still remain its primary 

investors. The Chief Executive Officer stated that it was a difficult task to convince 

commercial institutions to invest in Asasah and to assure them that their investment will 

yield decent returns. The first investor who became interested after months of persuasion 

was First Elite Capital Modarba. They pledged Rs.7 million for 1,000 clients to Asasah 

and gave them a year to complete the disbursement. Asasah managed to loan out the 

money in three months and its recovery was 100 percent. After this success, other 

1

investors and donors became interested and decided to invest in Asasah. Currently, the 

largest funding comes from the Pakistan Poverty Alleviation Fund, followed by First 

Elite Capital Modarba and Orix Leasing. (See Appendix for funding breakdown) 

Asasah has a range of products designed for the very poor to non-poor micro 

entrepreneurs, who have modest capital requirements, which are not met by commercial 

banks – see Appendix. Asasah’s philosophy is that the first step is to make a household 

economically sustainable and after that, matters such as health and education should be 

tackled. Therefore, Asasah targets the active poor who have skills but lack funds and 

provides them with micro loans. It also focuses on women’s empowerment as it plays a 

pivotal role in the social and economic uplift of a household. 


The main governing body of Asasah is a six member Board of Directors, who come from 

various backgrounds. Their experience ranges from research on enterprise development 

to working in Information Technology. Two members are from Save the Children, which 

is a long term strategic partner of Asasah. The members meet quarterly or more 

frequently, if required. Currently, Asasah is hoping to diversify the Board and increase 

the members so that the vision of the organization can be enhanced. 

Apart from the Board of Directors, Asasah has a Steering Committee comprised of all its 

Department Heads, which is in-charge of decision making and gives a strategic direction 

to the organization – see Appendix. The Steering Committee meets twice a month. An 

Operations Committee is also present and comprises of senior staff involved in 

operations, such as the Area Managers and the CEO. This committee oversees all the 

different operations of Asasah and meets on a regular basis. 

The organization is led by the CEO, who is supported by the Steering and Operations 

committees. There is no operations department at the Head Office and the 

operations/field staff forward queries and problems to the concerned department from 

which they need assistance. The Organizational Structure is attached in the Appendix. 

The department most closely involved with the field operations is the Quality Assurance 

Department, involved in both screening and monitoring. Recently, a marketing 

department has been set up to build marketing capabilities of all the field staff and to 

ensure that all branches implement the marketing strategy. At the branch, the Branch 

Manager (BM) is the Head of Operations and four Loan Officers, called Community 

Development Officers or CDO’s report to him/her. Apart from the operations staff, 

branches also have an Accountant and an Office Boy. Each BM reports to an Area 

Manager (AM), who report to the CEO. 


Asasah uses the Grameen Bank methodology for its group lending of the protective and 

productive loans and monitors each individual client to assure portfolio quality and verify 

loan usage. Asasah asserts that it lends to households who have sufficient skills but 

2

insufficient resources. Furthermore, Asasah believes that female empowerment lies in 

having a say in important household decisions, which are traditionally under a man’s 

domain in Pakistan. Consequently, Asasah works to correct these imbalances by 

disbursing the loans only to women, but making both spouses responsible for fulfilling the 

terms and conditions. The women who are the members can either use the loan 

themselves or can pass it on to their husbands. By keeping this option open, Asasah 

claims that it gives women leverage and allows them to participate in the household 

decision-making. Asasah further believes that the mindset of men has to be changed for 

women to become empowered; hence, husbands have to attend a pre-disbursement 

meeting in which they are informed about the rules and regulations of the organization 

and are asked to sign the loan application. Only after the husbands have agreed with the 

policies, are loans disbursed. Asasah says that the reason for involving men and making 

them jointly responsible for the loan was important so that husbands would not come and 

take their wives forcefully away from the meetings accusing them of neglecting their 

domestic duties. However, by making them jointly responsible, they do not behave in a 

negative manner. It also furthers Asasah’s mission of improving community well-being 

as men-folk also participate and are made aware of the process. 

Asasah uses two tools from the CGAP 1 targeting tools to select clients. One is the 

Housing Index 2 and the other is the Means Test 3 . Asasah Management feels that income 

is not a reliable indicator, and therefore look at the state of the house and 

assets/resources. When a new branch is opened, an area survey is undertaken and after 

earmarking the areas with active poor, the marketing of the loan products is started. This 

involves talking to crowds in marketplaces, meeting socially prominent people like 

doctors who meet a large number of people on a daily basis and hosting community 

meetings. At all these places the CDOs take down contacts of all those people who are 

interested in taking loans. 

If 25-30 applicants live within 2-3 streets of each other and fulfil other guidelines put 

forward by Asasah then a Unit is formed. After the unit formation, the unit committee is 

chosen by the members, which consists of one Unit Manager and five Group Leaders, 

who are in charge of 5-6 members each. The prerequisites of being a member of the unit 

committee require members to exhibit leadership qualities and to be financially better off 

than the other unit members. The group leaders are responsible for getting the recovery 

from their respective group members, however, in cases of default, the whole unit has to 

contribute and in this manner social collateral comes into play. 

If the Unit and the unit committee are approved by the BM then the CDO proceeds to 

form-filling and member-screening. For filling the forms, it is necessary that there is a 

pair of CDOs and the forms of all the applicants are filled in the presence of other unit 

1 Consultative Group to Assist the Poor: a consortium of 33 public and private development agencies. 

2 It is an index using the structure of the house to differentiate between economic levels of households and 

identify those who are poor. 

3 A list of a small number of indicators collected through simplified household poverty surveys that are 

combined to create an index to give a reliable assessment of the poverty level of an individual household. 

3

members to make sure that all the information is correct. In case the loan amount for an 

applicant is more than Rs.19,000 then the CDO has to physically verify the business as 

well. The documents required for the application are papers pertaining to their residence, 

utility bills and NIC (National Identity Card) copies. The CDO has to undertake a 

complete scrutiny of the applicant’s house, work and income, as well as that of other 

household members. If the member was with another MFI earlier, they have to hand in 

their record from the last loan as well. Once this process is complete, the CDO passes the 

applications to the BM, who reappraises them. 

The BM has to look through the papers of all the applicants and physically verify the 

applications of the unit committee and one to two members from each of the groups. 

Therefore, approximately 50 percent of the applicants are personally verified by the BM. 

For the Unit Committee screening the BM and CDO have to ensure that they own a 

house, are physically fit and active, responsible, and are economically better than the 

other members. Once the BM is satisfied with the unit, he calls the Male Unit 

Recognition Meeting, where the male members are explained the whole process and rules 

of the organization and are asked to sign on the application form. After this the BM calls 

the Female Unit Recognition Meeting, where they are tested on the policies and 

procedures of Asasah and sign the application forms. At this meeting, the members also 

have to give in the loan processing fee and the insurance premium. This step is followed 

by disbursement of the loan within the next 5 days. 

Repeat clients also go through a thorough re-screening even though their past record is 

available. Asasah wants to make sure they used the loan correctly and that there are other 

sources of income for the household in case the business fails so that they can recover 

their money. 


Asasah’s product mix targets a range of people around the poverty line as shown in 

Figure 3.1. The protective loan is for the extreme poor, the productive loan for the 

moderate poor, and the other products for those above the poverty line, but nonetheless 

still vulnerable – see Appendix. 

4

Figure 3.1: Asasah’s Target Market 

Asasah’s Target 

Market 

P 

O 

V 

Destitute Extreme Moderate Vulnerable Non-Poor 

Wealthy 

E 

R 

T 

Y 

3.1.4.1 Protective Loan 

This loan was started in the summer of 2006 and is for the extremely poor households 

who are earning less than Rs.2,000 a month. The product is still in its pilot phase and 

given to groups of 25-30 women. The purpose of the loan is to protect households from 

poverty and starvation. The loan size ranges from Rs.3,000 to Rs.8,000 and can be used 

to fulfil basic needs. The duration of the loan is 12 months with an interest of 20 percent 

and the instalments have to be paid fortnightly. According to Asasah, the main objective 

of this loan is to bring the poorest of the poor in the economic mainstream by helping 

them initiate a micro productivity process at the household level and that this bottom 

category of the poor does not feel neglected and deprived. Once a member completes the 

protective loan cycle, she becomes eligible for a productive loan. 

By September 2006, Asasah had given out 1,772 loans and disbursed around Rs.10 

million. The average loan size (ALS) of this category stands at Rs.5,840 and is only 12 

percent of GNP per capita. Therefore, we can see that this loan category is for the bottom 

poor who have restricted absorptive capacity. 

3.1.4.2 Productive Loan 

Asasah started its operations with this product; this loan is available to all members who 

meet the basic criteria of those who are in the moderately-poor to poor category, which is 

in the range of Rs.3-7,000. These members can keep renewing their loans till they reach 

financial sustainability or cross the poverty line. The loan duration is 12 months with 

fortnightly instalments and an interest of 20 percent. The loan size ranges from Rs.10- 

25,000 and is simultaneously disbursed to all group members. The size of the group is 

between 25-30 women. The loan also includes a one-month grace period. The productive 

loan can only be utilized for income generation purposes like starting a new business or 

expanding an old one. 

5

To be eligible for the loan, the individual should not own more than an acre of land, have 

taken a loan from any other institution and should have been living in their present 

accommodation for more than a year if they own it, and three years if they rent it. In the 

first loan cycle the amount given is between Rs.10-15,000, in the second cycle it is 

between Rs.15-20,000; in the third cycle it is Rs.25,000. 

To receive this loan the woman or the person she plans to pass on the loan to, should 

either have a running business or past work experience. There must be other people 

earning in the household so that in case the business fails the loan can still be repaid. The 

CDO has to evaluate that there are good opportunities for the proposed business in the 

area and that a market is nearby. For repeat clients, their repayment record should be 100 

percent and their attendance at meetings must be more than 85 percent. The CDO also 

has to evaluate that the loan was properly used and not spent for consumption purposes. 

All applicants have to pay a loan processing fee of Rs.50 and 1 percent as insurance fee. 

Till September 2006, Asasah had given out 29,719 productive loans and disbursed more 

than Rs.394 million. The average loan size is Rs.13,268 and is 28 percent of GNP per 

capita. 

3.1.4.3 Small Business Finance (SBF) 

This loan caters to micro entrepreneurs with established businesses and old clients who 

have completed their first cycle of productive loan and have a vibrant business with 

potential. Husbands and sons of old clients can also apply for this loan. The loan period 

of SBF is 12 months and the loan size ranges from Rs.26-50,000. The loan includes a 

one-month grace period and is simultaneously disbursed to all group members. The size 

of the groups is small as compared to the productive loan and consists of 5-10 members 

and they can be either men or women. Small business finance loan can be increased by 

Rs.5-10,000 in each successive loan cycle. 

The conditions for this loan include a proper business location either owned by the 

applicant or rented. The Inventory turnover should be twice the amount of the loan and 

the business should have been running since a year. The documents required include 

proof of ownership of the business location, accounts pertaining to the business for the 

last month and an assurance letter from the guarantor. 

The appraisal process includes a preliminary form filled by the CDO which is rechecked 

by the Branch Manager and then forwarded to the Internal Audit Department at the Head 

Office. Staff at the head office evaluate the application and decide on the proper loan 

amount. The applicant has to pay Rs.50 as the loan processing fee. While 1 percent is 

charged as insurance premium if the amount of the loan is less than Rs.30,000 and 2 

percent if it is more than that. 

The SBF is predominantly marketed in urban areas. Recently, Shorebank provided 

training to SBF staff on specific issues about small businesses such as turnover, debt 

capacity and ratio analysis. Due to the different appraisal methodology of SBF, Asasah 

has separated SBF from productive loan branches. They have established three branches 

6

for SBF, two in Lahore and one in Kasur and plan to open another two in the next six 

months. By September 2006, 232 SBF loans had been given out with an ALS of 

Rs.38,444 and total disbursements of almost Rs.9 million. 

3.1.4.4 Livestock Finance (LVF) 

This loan is for clients who already have a livestock business and it is to enable them to 

further invest in livestock and enhance their income by selling dairy products. Individuals 

who apply for this loan must have taken the productive loan first. The appraisal 

procedure and the documents required are the same as that of the SBF. The loan size 

ranges from Rs.30-70,000 with a 20 percent interest rate. The loan is given to either men 

or women in groups of 5-10. The instalments have to be paid fortnightly and each 

member in the group should have a separate guarantor. A loan processing fee of Rs.50 

and 2 percent insurance premium is charged. 

Asasah had given out 34 Livestock loans till September 2006 with an ALS of Rs.40,147. 

Approximately Rs.1.4 million has been disbursed. 

3.1.4.5 Freedom Loan 

This loan is for people who have borrowed from moneylenders and are paying exorbitant 

interest rates and are trapped in a vicious cycle and unable to repay the principle. The 

amount of the loan is decided after scrutinizing the individual and his case and a 

personalized product is created. The interest charged is 20 percent and the loan is 

approved by the Head Office. This is not a mainstream product and is only offered on a 

case-to-case basis. 

3.1.4.6 Micro Leasing 

Asasah introduced a micro leasing facility to its members for leasing equipment, 

machinery or any other operational tool they may need to enhance their income. This 

product was being offered in collaboration with Orix leasing. The loan range was from 

Rs.40-300,000 and for equipment the interest rate charged was 16 percent while for 

vehicles it was 18 percent. A processing fee of 1 percent was also charged and the 

product was offered in groups of 5 to 8 people or individually, and had to be repaid in 2 

to 3 years. The documents required were ownership or rent agreement papers for the 

business/production location, utility bills for the last 3 months and Bank Statements for 

the past 6 months. The applicant had to pay 10 percent of the leased asset in advance and 

had to provide two guarantors. 

Asasah has revamped this product and will offer it independently and not in collaboration 

with Orix Leasing. Offering the product with Orix was leading to complications and 

Asasah has researched the market again and will pilot it soon with new features. 

3.1.4.7 Micro Saving 

Asasah asserts that saving is a basic tool for poverty alleviation and helps in building 

confidence of members and provides ‘the feel good factor’, which is essential for 

developing a positive mindset for risk takers. Furthermore, they say microfinance 

research indicates that saving is an essential measure for meeting emergencies and 

7

managing contingencies, allowing women a viable way of storing assets in their own 

right. 

Therefore, Asasah gives its clients the option of opening a joint savings account with 

their husbands. The account must be opened with a minimum of Rs.50 and any amount 

can be deposited/withdrawn at anytime by both of them. The withdrawals can be of any 

amount at Asasah’s own branch or up to Rs.2,000 at a community meeting. If a family 

falls ill and needs money, the Branch Manager him/herself is supposed to go and give the 

client their savings and the clients can repay their instalments from their savings if they 

wish to do so. 

3.1.4.8 Micro Insurance 

Asasah offers life insurance to members, which provides coverage for them and the main 

breadwinner of the family. It is mandatory for all members to purchase the life insurance 

policy by paying 1 percent of the loan amount if it is less than 30,000 and 2 percent if it is 

more than that. For the protective loan the clients pay only Rs.150. In case of accidental 

death or permanent disability of the member or her spouse, the policy covers the 

outstanding loan and provides Rs.5,000 towards funeral expenses. This service is being 

offered in collaboration with EFU, an insurance firm. 


3.1.5.1 Human Resources 

Asasah has a staff of 370 of which approximately 65 percent are females. Asasah is quite 

determined about investing and building the capacity of its staff. It is one of the core 

points of Asasah’s mission and tries to provide and create various opportunities for its 

staff. It also assists staff in pursuing further education and provides them with financial 

assistance and paid study leave. 

Asasah has set up a training department and every CDO before starting his/her work in 

the field goes through a seven day training course which includes discussions, 

presentations and hands-on training. Such training courses, according to Asasah, improve 

the morale of the workforce and also enhance their analytical and communication skills. 

It increases the understanding of policies and procedures, and helps improve 

standardization across branches. 

Generally, Asasah tries to fill positions through internal promotions, especially for 

operational staff. Operational staff members start as interns after a rigorous selection 

process. CDO salaries include a 40 percent incentive component to bring in two groups 

per month, recover 100 percent of the amount due and keep their documentation up to 

date. They are also given a quarterly reward for their performance. Furthermore, they 

undergo a combination of training, monitoring and incentives which enhances their 

productivity. Asasah believes that a trained staff is very important for portfolio quality. 

Once a CDO has been on the job for a year and a half he is promoted as Assistant Branch 

Manager and later promoted to a BM. Assistant BMs and BM both regularly receive 

training at the training centre. Asasah plans to promote BMs to Area Managers and AMs 

8

to Regional Managers as the organization expands. Due to this, Asasah turnover is only 

2-3 percent and staff seldom leave according to their own will and this attests to their 

mission of keeping employees motivated. 

Staff for new branches are hired by advertisement on cable, college notice boards, 

hospitals and bank notice boards. New staff first start as interns and if their performance 

is adequate, they are made permanent. In case any employee is not performing well they 

are put on probation for 3 months. If their performance does not improve they are given 

long leave. Asasah’s management tries to evaluate the problem thoroughly before 

dismissing any staff. 

The educational requirement for a CDO is Intermediate or Matric with experience. 

Positions of BMs are only filled through internal promotion. Asasah does not hire local 

staff and bring CDOs from other areas as they feel the locals put too much pressure on 

CDOs from their own areas. 

The target for CDOs is to handle 400-450 clients, and for each branch that translates to 

1800 clients. However, currently the caseload per CDO is 232 and the reason is the 

expansion plans due to which new CDOs have been hired who have not reached their 

productivity potential. The borrowers per staff are 67 and this is also much lower than the 

industry average of 147. Again the reason is that Asasah has been expanding staff for the 

expansion plans and in time as outreach increases, the statistics will improve as well. 

Previously, at the branch there used to be 10 CDOs and they could only mobilize four or 

five groups and the BM also had trouble handling the large number of subordinates. With 

the new arrangement of four CDOs, incentives make staff more efficient and also ensure 

that BMs can effectively monitor the portfolio and resolve outstanding staff concerns. 

3.1.5.2 Strategic Initiatives 

Asasah has an aggressive marketing strategy and employs various forms of electronic and 

print media to market its products. Some of the methods used are TV cable 

advertisements, brochures, banners, stickers, staff in uniform, wall-chalking and 

standardized branch appearance. CDOs gather crowds in market areas and hold 

community meetings and advise them to tell their neighbours as well. Furthermore, at 

each branch only two products are offered so that specialized services can be provided. 

Asasah regularly undertakes market research to see what products are being demanded in 

the market. The outcome of this research has been the Livestock loan, Micro Leasing and 

Small Business Finance. Currently two more products are under study, one is a loan for 

education expenses and the other is for health expenses. 

The motivation behind introducing new products has always been demand in the market. 

Asasah regularly holds Focus Group Discussions to gauge client satisfaction. The idea 

behind SBF’s launch was an individual contacting them for a loan. Asasah undertook 

research on the idea and found good prospects for it. Similarly, when poorer people asked 

for loans, those that did not satisfy the conditions for the productive loan, the protective 

9

loan was launched. Micro Leasing was offered when they reviewed the portfolio of 

productive loans and saw that almost 50 percent of the loans were used for purchasing 

assets. The LVF was offered when clients in a Focus Group mentioned that they used the 

productive loan for the down-payment of livestock and then borrowed from other sources 

to pay instalments. From this they realized that a larger-sized loan for livestock was 

needed in the rural areas. 

Asasah has a dedicated department for product development and currently, Asasah wants 

to research an education loan as people have been approaching them for it. Another loan 

that Asasah wants to offer is for health but that will be in the future sometime. Asasah’s 

plan is to offer these specific products rather than offer an emergency loan. Asasah’s 

management says that health and education are the two main reasons for which clients 

take out their savings and they will offer specific products rather than an allencompassing 

emergency loan. They keep analyzing how loan and savings are utilized so 

that they know what the needs of their clients are. 

Asasah also monitors the social performance of its clients as it has sections on education, 

household status and resources in their application forms. With each successive cycle, 

Asasah knows how improvements in these indicators have taken place. This process is 

known as ‘Internal Monitoring’ in the microfinance literature and is different from impact 

assessments (Hulme, 1999). 

Asasah has established a productivity/training centre to enhance the productivity of 

employees at all levels. Asasah believes in the continuous capacity building of its 

employees and invites consultants and academicians to train staff. They also offer the 

training facility to other social organizations. Asasah wants to set up a research 

department and a Social Performance System so that it can be used to improve products 

and services. Other than capacity building, the measures taken to retain staff and keep 

them motivated are internal promotions, financial assistance for education and an open 

door policy practiced by the management. 

The challenge faced by Asasah is to reduce costs and decentralize operations, as many 

loans are still being approved from the Head Office. However, to do this Asasah will 

have to formulate robust monitoring. They also need technical assistance to improve the 

rural operations and an automated system to track and manage portfolio 

3.1.5.3 Geographical Coverage 

Asasah works primarily in urban and semi-urban areas of the Punjab. In 2005, it initiated 

expansion in heavily populated rural markets as well, and plans to expand further in the 

rural areas. When Asasah started, they asked a statistician to work out the areas where 

there was need for microfinance based on census data. Based on the need document, 

Asasah sends out research teams to do a full fledged investigation. 

Asasah has a comprehensive strategy for identifying new areas and opening new 

branches. A team comprising of 8-10 staff members is put together who travel to a 

research area chosen by the operations committee and approved by the CEO. They 

10

undertake thorough research which entails filling 16 forms on different aspects of the 

area such as the number of bank accounts, phone connections, and health centres and so 

on. The research team also talks to different prominent people in the area like the Nazim, 

maulvis and midwives who have knowledge about the local area and population. 

Once the area has been thoroughly researched a report is put together by the team and 

sent for approval. If the branch is approved by the CEO and the funding partners, a 

building near a main road is rented so that a bank and local transport are close. After that 

a process of hiring staff is undertaken. The target market in the area is identified by 

interviewing locals. This is important as it determines the products that will be marketed 

in the area. 

Till 2008 Asasah plans to keep focusing on expanding in the Punjab and plans to open a 

total of 69 branches and then move on to other provinces. It has also identified potential 

areas within the Punjab where new branches will be opened during 2007. Asasah plans to 

open branches first at the district level, next at the tehsil level and finally at the sub-tehsil 

level. Expansion in other provinces will be based on the market potential and the risk and 

funding status. Asasah plans to reach 100,000 clients by the end of 2007 and 500,000 by 

2011. For Asasah, growth is important as that is the only way it can achieve 

sustainability. 

3.1.5.4 Competition and Expansion strategy 

Asasah started with an ambitious plan and has grown rapidly over the years. In the first 

year it disbursed loans to almost 4,500 individuals which is higher than the average loans 

given by other MFIs in their first year 4 . The main challenge for Asasah has always been, 

and still is, funds, and in the initial years only commercial sources of funding were 

available which were very expensive. For Asasah, donor funds would be the cheapest 

option but relying on them will hamper expansion plans, therefore, commercial funds 

from financial institutions have been borrowed. To ease the funding constraints, Asasah 

should work to develop more relationships with donors like Deutsche Bank who have a 

Microcredit Development Fund, which can give guarantee to commercial banks on their 

behalf. 

The initiatives Asasah plans to take for growth are to continue with its aggressive 

marketing strategy through electronic and print media so that it can target a large number 

of potential clients. Asasah has established 32 branches (list in Appendix) and this 

network will be helpful in scaling up operations. Moreover, as clients successfully finish 

the productive loan cycle they become eligible for specialized products, so operations 

have been streamlined to ensure that before the loan cycle ends, applications for 

specialized products are initiated to avoid customer attrition. Furthermore, Asasah plans 

to train operational staff to be customer-oriented and ingrain a culture of customer 

relationship management in them. It also plans to provide training on competitors so that 

they can better attract customers. 

4 Pakistan Microfinance Network, “Customized Performance Report: Asasah 2004” 

11

Other growth initiatives include working with Shorebank International to offer a package 

of services to clients, including Business Development Services and Microfinance Plus, 

which includes social services. It is planning to start a pre- and post-natal care centre with 

the help of Save the Children, however it is a priority to offer the services in a sustainable 

manner perhaps using a fee-based mechanism. 

For urban growth, Asasah plans to focus on SBF and micro leasing so that it is not in 

direct competition with other MFI’s. However, it feels that the majority of the growth 

will be from rural areas as there is a great demand potential and not too much 

competition, but will focus on non-farm business as agriculture is risky. Asasah realizes 

that due to the huge market potential, other MFI’s do not pose a serious threat and their 

presence is beneficial as it saves time in educating clients as they have already been 

exposed to microfinance. Asasah sees competition as an opportunity to learn and improve 

from and to keep them motivated. 

However, the CEO says that government schemes and mushroom organizations which 

have funding for a couple of years spoil the market because they are not interested in 

sustainability and spoil the attitude of customers by not recovering loans. 

3.1.5.5 Policy Environment 

The Chief Executive Officer, Tabinda Jaffery feels that the policy environment is much 

more conducive now for MFIs than earlier as the State Bank and Pakistan Microfinance 

Network are taking active measures. Seminars and conferences regularly take place and 

commercial banks are much more accommodating. However the main problem is that 

they cannot lend on the clients’ savings deposit with them as they are not a bank. While 

setting up an MFI Bank is very expensive and requires a minimum equity of Rs 500 

million and the transformation is very tedious as well. The CEO feels that local donors 

should set up a dialogue and provide technical assistance and give guarantees to 

commercial banks on behalf of MFIs that are doing well so that they are not constrained 

for funds. Asasah has great difficulty in securing funds as it is only 80 percent sustainable 

even though its PAR at 30 is zero percent. 

3.1.5.6 Dropouts 

Asasah is very particular about client satisfaction and therefore has a drop out rate of 8 

percent, which is low compared with the industry average. If the drop out rate is broken 

down by urban and rural areas, then it is around 20 percent in urban areas due to 

competition and less than 5 percent in rural areas. The concept of client satisfaction is 

incorporated in staff trainings and special modules on Customer Relationship 

Management and Positive Mental Attitude are covered. The management constantly 

stresses on both staff and client retention so that the organization can grow soundly. 

Asasah does its best to minimize drop-outs by a customer oriented approach. They try 

their best to keep their good clients and if their need for a small loan ends, they move 

them up to a more specialized product. If they require even larger loans, they refer them 

to one of their funding partners such as First Elite Capital. 

12

According to Asasah the only time a client exits is when he dies or his record is so 

horrific that they are not willing to entertain him/her. Generally if a client’s record is not 

good, they put their subsequent loan approval on hold for 6 months or so. After that if 

group members are ready to give a guarantee on their behalf, then they will offer them a 

loan, otherwise they will not. To motivate clients to stay with them they also provide 

them training, like the signature training before loan disbursement. They are also 

planning to focus on Microfinance Plus, which is an initiative to bundle social services 

with microfinance. The strategy is to offer a whole package of services with various 

kinds of loans so that they do not have to go to other MFIs. 

3.1.5.7 Operational Systems 

Asasah does not have a computerized MIS system and all the operations are recorded 

manually. However, it is planning to design a system and the organization realizes that an 

automated portfolio tracking system is becoming critical as it is expanding. Therefore, an 

independent consultant has been hired to identify Asasah’s need for developing an 

appropriate MIS. In 2003 due to funding constraint, Asasah did not start with a 

computerized MIS, now FFSP has supported them and is helping them set up the system. 

The accounting and operational data on disbursement and outreach is sent to the Head 

Office weekly for consolidation. However, the recovery status is reported to the head 

office daily by the branches. 

3.1.5.8 Audit System and Financial Planning 

Asasah has a very thorough screening system for its clients. They believe that 80 percent 

chances of delinquency can be reduced by proper screening before giving the loan. 

Therefore, they have a long list of instructions for the appraisal process and CDOs 

undertake 100 percent physical verification of clients, the BM reappraises 50 percent of 

the clients while the AM repeats appraisal of 30 percent of the unit members. Other than 

the above procedure, the QAD checks all of the first 10 units formed of each new branch. 

The QAD is the main arm of the organization overseeing operations and has two sections, 

one is monitoring and the other is disbursement. The disbursement section is in-charge of 

tracking quality of service delivery, formation process of groups and adherence to 

lending procedures at Asasah’s branches. The monitoring section is responsible for 

tracking portfolio quality, they stay in the field through-out the year and at the end of 

each month submit a report to the CEO. 

The AM spends one day out of the week in a different branch under his management, 

where he/she oversees all functions and sends a report to the QAD. The disbursement 

section at the head office receives all the documents when a new unit is formed. They 

recheck the documents and insure that the quality of the unit is according to Asasah 

standards. The disbursement section can also visit any unit in the field at anytime and 

cancel any member if they are not up to mark. 

Apart from all these checks, there is also an internal audit department that has to audit all 

branches every 6 month to ensure the quality of financial statements, branch income and 

13

expenditure and to see that conditions for different products are being met. An external 

auditor also audits the branches annually. 

3.1.5.9 Portfolio Performance 

Asasah has excellent credit performance with a repayment rate of 100 percent and a PAR 

at 30 days of zero percent. This puts them head and shoulders above the industry average 

of 3.2 percent. The loans are written off in the accounts at 90 days, however, they are not 

taken off from the individual branch’s accounts. Asasah has a strict policy of zero 

tolerance on delinquency. The head office receives daily reports from branches about any 

repayment issues, which are immediately followed up by the head office and concerned 

branch staff. 

The portfolio geographical diversification is increasing as Asasah is expanding and 

presently they are working in 9 districts. Portfolio diversification in terms of the different 

businesses Asasah lends for is given in Figure 3.2 and is fairly diversified. 

Figure 3.2 

Distribution of Loans by Sector 

5% 6% 

1% 13% 

45% 

30% 

Agriculture Manufacturing Services 

Trade and Commerce Handicrafts Dairy 


3.1.6.1 Funding Mobilization: 

For its operations, Asasah has obtained loan funds from a combination of eight 

commercial and donor organizations. Funding details are attached in the Appendix. At 

the end of each year, Asasah sends its business plan for the next year to all of their 

funding partners. The donors then pledge the amount of money they are willing to invest 

for the coming year. The commercial investors provide funds at an interest of 10-13 

percent and the donors at 8-10 percent. The current breakdown of funding is given in 

Figure 3.3. 

14

Figure 3.3 

Funding Sources 

NGO 

5% 

Donors 

36% 

Financial 

Institutions 

59% 

In 2002 when the State Bank of Pakistan decreased the interest rate, it was then that First 

Capital became interested in Asasah. It took 6 months more to convince the next investor, 

Orix Leasing. However, overtime as Asasah performed well other investors showed 

interest. In October 2005, Save the Children chose Asasah as a long term strategic partner 

as they believed Asasah to be one of the leading MFIs in Pakistan. Asasah looks to gain 

international recognition and exposure to best practices and access to additional funding 

for rapid expansion from the partnership. While, Save the Children will further its 

Economic Opportunities programme which focuses on creating sustainable incomes for 

mothers and their children by supporting MFIs. 

Over the years due to Asasah’s noteworthy performance the attitude of commercial 

investors has improved. At the beginning, First Elite Capital provided finance at an 

interest of 15 percent with a financing limit of Rs 7 million. However, by March 2006, 

they decreased the interest to 12 percent and raised the finance limit to 20 million. 

Similarly, Orix Leasing decreased interest from 12 to 10 percent over the years and 

increased the finance limit to Rs 20 million. 

The latest Bank that has pledged funds to Asasah is Zarai Taraqeeati Bank Limited 

(ZTBL) and the amount they will be extending is Rs.300 million. However, as Asasah 

cannot provide security for the funds, the clients will be a part of ZTBL’s portfolio. 

3.1.6.2 Asset, liability and equity composition 

Asasah’s asset utilization in its loan portfolio is around 50 percent while the average for 

the industry is 42.5 percent and cash in hand and in the bank is 36 percent. The capital 

asset ratio for 2006 was 2.35 percent and shows the inadequacy of capital faced by 

Asasah. On the liability and equity side, Asasah is in a dire situation. It has made a loss of 

Rs.15 million since 2003, as it is not sustainable as yet. The main liability for Asasah 

which constitutes 97 percent of the total liabilities is the funds it borrows to finance the 

loan portfolio as its equity was only Rs.7 million as of September 2006. The major chunk 

of income for Asasah is from the loans disbursed and in FY2006 it was Rs.24 million. 

Asasah has to pay a large amount for the mark up on money it borrows to lend out and 

for FY2006 it was Rs.12 million. However, the major expense for the organization was 

on personnel and amounted to Rs.36 million. 

15

3.1.6.3 Profitability and Sustainability 

As Asasah started operations on the basis of commercial funding and received the funds 

at a high interest, it focuses firmly on returns and sustainability. Asasah’s goal is to 

achieve 100 percent sustainability by the end of December 2007. In four years, Asasah’s 

operational self sufficiency is at 76 percent, while financial self sufficiency is at 75 

percent while that for the industry in Pakistan is 61 percent. The trend chart for 

sustainability over the years is as shown in Figure 3.4. 

Figure 3.4 

Percentage 

80 

78 

76 

74 

72 

70 

68 

66 

Sustainability 

Jun-04 Jun-05 Jun-06 Sep-06 

Operational Self Sustainability 

Financial Self Sustainability 

In terms of profitability, Asasah has a negative adjusted Return on Assets of –8 percent, 

though it has improved by 5 percent during the course of the year. This is similar to the 

industry average of -7.2 percent. Cost per unit of money is Rs.0.46 and Asasah can work 

to bring this down. Asasah’s main problem is that its costs are huge due to the high 

interest they pay on the funds they borrow. If they could secure guarantees which would 

lower the mark up on the loans they could reach sustainability sooner. 


In this section we present the results from our survey for Asasah. The results are based on 

the data collected on the basis of the questionnaire – see Appendix of the Report. A select 

few of the results are presented here in table form, in the main text of this Chapter, while 

the substantial majority of tables are presented in the Appendix to the Chapter. The 

Appendix to this Chapter contains the largely ‘descriptive’ tables and results, while the 

tables which are part of the text in this Chapter, are the more ‘analytical’ tables. In the 

Appendix to this Chapter, there are far more tables than those on which we offer 

comments in the text. Many of these tables are simply informative and so we do not 

discuss them in the Chapter. They are being provided for the reader’s own interest and 

perusal. Only the more interesting, striking or pertinent results and tables from the 

Appendix are discussed in the text. 

As we show in Chapter 2, the survey was conducted across four types of populations for 

the purposes of the Study. Two of the categories are ‘clients’ or ‘borrowers’, while the 

other two are ‘non-clients’. In the borrower/client category, there are two types of clients, 

the ‘Active Borrowers’ and the ‘Pipeline Borrowers’. The former category that of ‘Active 

16

Borrower’, is that client who has been in the programme of the MFI for longer than ten 

months; s/he may have been a client for some years in their nth loan cycle or may have 

even been a client in their first year. ‘Pipeline Borrowers’ are classified as those new 

clients who had joined the programme of the MFI a few months – usually between 1-4 

months – of the start of our survey. There are also two categories of ‘Non-Borrowers’, 

one which are selected from the neighbourhood of the old Active Borrowers, and the 

other from the neighbourhood of Pipeline Borrowers. Ideally, and in the best case 

possible, the Active Borrower and the Pipeline Borrower (and their neighbours) should 

have been chosen from ‘old/established’ areas where the MFI has been working for some 

years, and ‘new’ areas where they are about to enter and identify and enlist clients. 

However, in many cases this was not possible since most MFIs did not have exclusively 

‘new’ areas identified, and we were forced to take Active Borrowers and Pipeline 

Borrowers, and both sets of their neighbours, from the same locality/area. Nevertheless, 

this does not undermine our results which are presented in this Section. In some cases we 

present results where we compare the Active Borrower with Pipeline Borrowers, and in 

some cases we compare both Active Borrowers and Pipeline Borrowers with the two 

combined categories of neighbours, that of Non-Borrowers. 

In the case of Asasah, we were lucky enough to be able to distinguish between old and 

new areas, and the Active Borrowers were interviewed in their branches of Yadgar, 

Raiwind and Kot Radhakrishan. The ‘new’ areas where Asasah has only recently started 

work where our survey was conducted, were Gujranwala and Kamoke. The neighbours 

from both ‘old’ and ‘new’ areas constitute our ‘Non-Borrower’ category. 

We first discuss results based on tables presented in the Appendix to this Chapter. 

Since Asasah has been in operation just a few years, 86 percent of its clients are still only 

in their first or second loan cycles. Clearly, any ‘impact’ of the intervention by 

microfinance institutions, is highly tenuous, and at best, slight and partial. We would 

expect little to have changed in a matter of two years, and to find not much significant 

difference between Active Borrowers, Pipeline Borrowers and Non-Borrowers. Most of 

the tables in the Appendix suggest so as well. 

Most of Asasah’s clients, all of whom are women, are involved in ‘business/retail shops’ 

or ‘cottage industries’ – Table A.3.2.4 – although what is interesting, is that there are 

fewer Non-Borrowers who are involved in the former category, suggesting that perhaps 

once women acquire a loan, they move on to setting up or expanding a ‘business/retail 

shop’. Amongst the numerous similarities between all three categories, one which Table 

A.3.2.9 shows, is that around 70 percent of girls and 85 percent of boys, irrespective of 

them being a member or not, attend school, and that vaccination levels are also similarly 

high. Table A.3.2.12 shows that almost all women, irrespective of their relationship to 

Asasah, have an additional source of household income, other than what they themselves 

earn. 

The perceptions of clients and non-clients about various aspects of their lives, make 

interesting reading. Table A.3.2.26 on the perceptions of clients over the loan cycle about 

17

how well they eat, seem to suggest that the longer they stay with the programme, the 

greater the perceived impact in terms of improvement in quality of life and diet, on their 

lives. On most welfare questions, the longer they have been with the programme, the 

better they think they are doing. However, even more interesting is Table A.3.2.29, where 

the perceptions of Non-Borrowers are tabulated. What is particularly noteworthy in this 

table is, that those Non-Borrowers who are in the ‘new’ area where Asasah has just 

entered, have a far better perception of the impact of the microfinance programme, than 

did Non-Borrowers who were in the same locality as those who were ‘Active Borrowers’. 

As we show in Chapter 2 in the Methodology Section, in the first-best state, a key 

requirement of impact studies is that clients-to-be or new clients, not be ‘contaminated’ 

with news and information of microfinance activities. However, as we argue, in urban 

Pakistan today, this is not possible, since with numerous small and large, official and 

donor programmes funding microfinance, there is a huge amount of information available 

about microfinance services. Table A.3.2.27 confirms this view that a large proportion of 

Non-Borrowers are aware of credit facilities. 

Since Asasah has been giving credit for just a few years and is one of the more recent 

MFIs, the data we present below cannot be based on a distinction of loan cycle, as it can 

in the case of older MFIs. Hence, for the purposes of the newer MFIs like Asasah, we can 

club all Non-Borrowers along with the new clients (‘Pipeline Borrowers’) and make 

some comparisons with Active Borrowers. 

Table 3.1 shows that Active Borrowers have significantly higher Expenditure Per Capita 

and Income Per Capita than do all other categories. This suggests that perhaps Active 

Borrowers benefit from the microfinance intervention. While Table 3.2 shows that the 

difference between Asasah’s Active Borrowers and all others in terms of Housing 

variables, is not at all significant, a result which is not surprising, given the fact that 

investment in Housing takes large amounts of capital and investment, and we do not 

envisage that clients of any microfinance institutions will be significantly better-off in a 

couple of years to allow them to divert excess capital to Housing. 

Table – 3.1 

ASASAH – Economic Status 

Variables Category Mean Standard 

Deviation 

t-value 

Significance 

Level 

Expenditure Per Capita Active Borrowers 1402 572.0 3.225 .001 

New and Non-Borrowers 1247 518.7 

Per Capita Food Expenditure Active Borrowers 697 285.0 1.417 .157 


Income Per Capita Active Borrowers 1601 771.1 2.656 .008 


Household Asset Score Active Borrowers 7.54 2.0 2.465 .014 

New and Non-Borrowers 7.06 2.3 

Value of household assets Active Borrowers 256158 384073.3 -.717 .473 


18

Note: There are 237 and 273 respondents in each category respectively. t-value greater than 1.6 indicates 

the mean difference between two categories is statistically significant. The negative t indicates that 

average value of category 2 is greater than the average value of category 1. 

Table – 3.2 

ASASAH – Housing 


Deviation 

t-value 

Significance 

Level 

House owners Active Borrowers 89.45 .30783 .160 .873 

New and Non-Borrowers 89.01 .31333 

Person per room Active Borrowers 3.5265 1.72231 .867 .387 


Houses with baked bricks Active Borrowers 92.41 .26548 -.782 .435 


Houses with RCC Roof Active Borrowers 34.60 .47670 -.220 .826 


Houses with Cemented Floor Active Borrowers 40.93 .49274 -1.765 .078 





With most children going to school in all categories, as we show above, the impact of 

microfinance on is negligible. However, what is surprising from Table 3.3 is that the 

Monthly Expenditure of those in the programme is significantly lower than those who are 

new or not part of the programme. Also, it is quite curious that the difference in the 

proportion of children going to Private Schools is significantly lower for Active 

Borrowers than it is for new or Non-Borrowers. 

Table – 3.3 

ASASAH – – Children’s Education 


Deviation 

t-value 

Significance 

Level 

School Going Children % Active Borrowers 85 23.2 .187 .852 


School Going Children - Boys % Active Borrowers 82 33.2 -.145 .885 


School Going Children - Girls % Active Borrowers 70 42.2 -.406 .685 


Children going to Private School % Active Borrowers 39 46.6 -2.168 .031 


Monthly Expenditure on Education Active Borrowers 227 263.2 -2.100 .037 





19

In terms of Household Assets, the only significant difference seems to be that Active 

Borrowers have Refrigerators, and that far fewer of them have sewing machines than all 

other categories – Table 3.4. Table 3.5 on the other hand shows that the Monthly Sales of 

Active Borrowers are significantly higher than all others. 

Table – 3.4 

ASASAH – Household Assets Ownership 


Deviation 

t-value 

Significance 

Level 

Own House Active Borrowers 88.61 .31839 .116 .908 


Refrigerator Active Borrowers 42.19 .49491 3.815 .000 


Colour TV Active Borrowers 76.37 .42570 1.355 .176 


Motor Cycle Active Borrowers 11.39 .31839 .831 .406 


Washing Machine Active Borrowers 73.84 .44044 1.414 .158 


Sewing Machine Active Borrowers 84.81 .35968 -2.541 .011 


Bed with Foam Active Borrowers 26.16 .44044 -.425 .671 


Gold Active Borrowers 19.41 .39634 .530 .596 


Mobile phone Active Borrowers 46.41 .49977 1.561 .119 



the mean difference between two categories is statistically significant at least at 90 percent level of 

significant. The negative t indicates that average value of category 2 is greater than the average 

value of category 1. 

Table – 3.5 

ASASAH – – Business Assets 


Deviation 

t-value 

Significance 

Level 

Monthly Sale [Rs.] Active Borrowers 15149 8230.3 3.016 .003 


Value of Assets - Shop/Workshop Active Borrowers 8836 36281.6 2.128 .034 


Machinery Active Borrowers 4131 15361.7 -1.211 .226 


Instruments Active Borrowers 1085 3622.2 .721 .471 


Other Active Borrowers 7156 44166.9 2.595 .010 


20




Perhaps the most positive and encouraging results relate to issues about Women’s 

Empowerment as they do for most MFIs – Table 3.6. However, before we begin to 

celebrate this outcome, we need to temper our enthusiasm by reminding ourselves, that 

these sets of questions have non-quantitative answers and are opinions of the 

respondents. Nevertheless, the results do show that women in a microfinance programme 

feel that they are significantly more empowered in terms of Economic Empowerment and 

in terms of Empowerment Related to Education and Health. 

Table – 3.6 

ASASAH – Women’s Empowerment 


Deviation 

t-value 

Significance 

Level 

Economic Empowerment 

Score out of 14 Active Borrowers 8.1059 3.29174 8.012 .000 


Income Empowerment 

Score out of 5 Active Borrowers 2.1525 1.51378 -1.919 .056 


Assets Empowerment 

Score out of 8 Active Borrowers 1.5424 1.79192 .350 .727 


Empowerment Related with 

Education and Health 

Active Borrowers 5.8178 2.81725 2.835 .005 

Score out of 10 

New and Non-Borrowers 5.1494 2.31177 2.829 .005 

Social Empowerment 







There are weaknesses in using bivariate analysis, as we do above, since it does not allow 

us to examine the nature of the impact, and hence, we use multivariate regression 

analysis, which allows us to look at impact controlling for other related variables. These 

two sets of analysis also explain why we often get contradictory findings. 

The impact model estimated for Asasah is 

Y ij = X ij α + C ij β + M ij γ + T ij δ +v ij 

21

Where Y ij is an outcome on which we measure impact for household i in locality j, X ij is 

a vector of household characteristics, 5 C ij is a dummy equal to 1 for active borrowers and 

their matched neighbours and 0 otherwise, M ij is a membership dummy variable equal to 

1 if household i self-selects into the credit programme, and 0 otherwise; and T ij is a 

variable to capture the treatment effects on households that self selected themselves into 

the programme and are already accessing loans. T is also a dummy variable equal to 1 for 

active borrowers and 0 otherwise. As 86 percent of Asasah clients in our sample are 

either in their first loan cycle or second, we do not control for number of loans taken as 

there are not significant differences between the clients in the two different loan cycles. 

The coefficient δ on T ij is the main parameter of interest and measures the average impact 

of the programme. A positive and significant δ would indicate that microfinance is 

having a beneficial effect on the borrowers. 

A Single Difference equation is also estimated to assess impact between active borrowers 

and the pipeline clients. The form of the equation is as follows and the variables are 

defined as stated above. 

Y ij = X ij α + T ij δ +v ij 

The results from the estimation for δ are given in Table 3.7. The majority of the results in 

our regressions were insignificant. One significant result in our DID estimation was that 

active borrowers save less than other categories of respondents (-265; p=0.06). This 

might be due to the fact that they have to give in the loan instalment on top of their other 

expenditures and this leaves them with little money to save every month. The other 

results from DID estimation that are significant all relate with empowerment. We find 

that on average active borrowers score 5 points more on the Overall Empowerment Index 

compared with other respondents (4.7; p=0.004). Active borrowers also perform better on 

three other empowerment indices as listed in the results table (Economic Empowerment 

1.3, p=0.02; Asset Empowerment 0.46, p=0.08; Empowerment related to health and 

education 2.38, p=0.00). 

However, in the single difference estimates the empowerment results are not significant 

except for social empowerment and on that index active borrowers perform worse than 

pipeline clients (0.89; p=0.00). The difference between single difference and DID 

estimates implies that both active and pipeline borrowers as a group are more empowered 

than the non-borrowers. This is validated by the significance of the member dummy (M) 

in the DD estimates on empowerment indices as it captures the impact of unobservable 

variables (e.g. preferences) that are common to those respondents that self-select 

themselves into a microfinance programme. 

The other estimates that are significant in Single Difference estimation pertain to 

educational expenditure and school enrolment. The treatment dummy on educational 

expenditure is -97.28 which is significant at the 5% level and implies that active 

5 For Asasah seven household characteristics were included in the regression out of 15 tested through 

ANOVA. 

22

orrowers spend less on education by almost Rs.100 compared to pipeline clients. 

Furthermore, the percentage of children enrolled in schools especially girls of active 

borrowers are on average less than that of pipeline clients (-11,3; p=0.035, Girls’ 

Enrolment -11.95; p=0.038). These are comparable to the survey results discussed in the 

last section. 

Table 3.7: Regression Results for Asasah 

Single Difference Double Difference 

Dependent Variable 

Coefficient t-value 1 Coefficient t-value 

Log(Respondent Income) 0.07 1.16 0.15 1.41 

Log(Household Income) -0.012 -0.31 0.047 0.77 

Log(Per Capita Income) 0.018 0.36 0.063 0.81 

Log(Total Household Expenditure) 0.002 0.95 0.021 0.37 

Log(Food Expenditure) 0.033 0.66 0.019 0.25 

Educational Expenditure -97.28 -2.23 ** 75.72 1.12 

Health Expenditure 47.22 1.90 * 2.7 0.05 

Savings -161 -1.61 -268 -1.88 * 

Cumulative Asset Value -24830 -0.69 -25852 -0.66 

Children Enrolled in School(%) -11.3 -2.11 ** 1.08 0.13 

Boys Enrolled in School(%) -7.98 -1.52 6.86 0.87 

Girls Enrolled in School(%) -11.95 -2.09 ** -6.5 -0.73 

Women's Empowerment (Overall Index) 2 -0.46 -0.51 4.7 2.92 *** 

Economic Empowerment 0.34 0.92 1.31 2.27 ** 

Income Empowerment 0.12 0.66 0.22 0.71 

Asset Empowerment -0.17 -0.90 0.46 1.75 * 

Empowerment related with Education and 

Health 0.15 0.53 2.38 4.82 *** 

Social Empowerment -0.89 -4.51 *** 0.35 0.96 

1 Significant at 10%(*), Significant at 5%(**), Significant at 1% (***) 

2 Score based on 47 questions, the other idices listed below are a breakdown of this index. Refer to 

questionnaire for detail. 

Health Expenditure is also significant in the Single Difference estimation and shows that 

microfinance has had a positive impact for active borrowers (47.22, p=0.10). On further 

analysis of the data we find that pipeline clients are spending the least amount on health 

when compared to other respondents. 

In the DID regression, the member dummy was significant for all measures of income 

and for total expenditure, implying that the unobservable factors such as entrepreneurship 

has a positive impact on the above mentioned outcomes over and above that of access to 

microfinance. One of the variables controlled for in the regressions was the number of 

earners in the household and that was significant in 8 out of the 18 DID regressions. It 

was positively associated with household income, per capita income, total expenditure, 

food, asset value, and some of the empowerment indices. Another variable controlled was 

the gender of the household head with a dummy, which took a value of one for female 

headed households. This was significant and negatively associated with the income and 

expenditure measures implying that female headed households are poorer; however, it 

was significant and positively associated with most of the empowerment indices meaning 

that they were more liberal as it would be expected. 

23


This section discusses the client feedback of microfinance institutions and the various 

coping mechanisms at the local level in terms of financial transactions. Information has 

been gathered primarily through Focus Group Discussions with beneficiary groups in 

randomly selected programme localities. Some additional information has also been 

gathered through discussions with the respective programmes’ field and programme staff. 

Three focus group discussions were held in the Asasah localities, one each in urban areas 

of Lahore, Kasur and Raiwind. Each group had 6 to 8 participants. 

Client Profile 

Most of Asasah clients had small enterprises working within their homes. Out of 22 

participants in the three focus groups, five women were housewives while the remaining 

were doing some kind of business. The housewives had taken loans for contribution in 

their husband’s businesses. Borrowers were 1 st to 3 rd cycle categories, but there were very 

few variations in their responses in context of their credit cycles. 

A significant impact was reported in the income levels after receiving the credit, and 

women narrated astute business sense in expansion of their enterprise after the Asasah 

loan and its utilization in scaling up their business. 

Prior to Asasah interventions, the women of these localities had no relationship with any 

other financial or microcredit institution. Women felt that the banking systems were too 

tedious and they lacked the time and the knowledge in dealing with such procedures. 

‘The Bank procedures are too lengthy and tedious. Firstly, we don’t know much about 

how a bank credit system works. Then their procedures and screening process is very 

lengthy and the recovery process is also very long resulting in additional debt on the 

client. So Asasah suits our needs as not only is it accessible, but also because the loan 

can be repaid within a year.’ 

(FGD Participant, Chowk Yaadgar, Lahore) 

Savings are an integral part of the Asasah programme and women can save whatever 

amount possible for them with their group leader. Other than that, women in all the areas 

saved petty amounts for urgent needs and also depended on Asasah savings for 

emergency purposes or even planned requirements. Informal borrowing from relatives 

and friends was also a common trend in case of an emergency. 

In Kasur and Lahore, many participants said that they participated in the committee 

system in addition to Asasah savings. As a result many had bought televisions, 

refrigerators, DVD players, etc, from their savings. 

‘I plan to buy a motorbike for my son next eid from my savings.’ 

(Participant, Shahbaz road, Kasur) 

24

Jewellery and livestock were generally perceived as assets, which could be sold with 

immediate remuneration during a crisis. 

Clients in Lahore said that Kashf also worked in their community, but they preferred 

Asasah as they have had a good relationship with the organization and found no reason to 

shift from their programme to another one. They also felt that the Kashf programme was 

more difficult and less flexible in its approach. 

Clients’ Feedback 

The most frequent and prominent point mentioned in all three areas was the attitude of 

the Asasah staff. Women said the staff attitude was very positive and understanding, 

which was one of the main reasons for their continued relationship with the organization. 

‘Asasah staff go door to door to explain their entire programme to the people. They are 

polite, give respect to everyone and try to cooperate in which ever way possible.’ 

(Participant, Chowk Yadgaar, Lahore) 

The flexible programme approach was anther major incentive. Clients did not feel under 

pressure to pay back at designated dates and could avail easier provisions according to 

their personal situations. If a borrower felt that the twice-a-month instalment was too 

burdensome, she could pay once a month, while many clients also expressed that they 

preferred the twice-a-month instalment, as it reduced the amount of the recovery. 

‘Once- a- month recovery is easier for those people who depend on monthly salaries as 

they can pay after receiving their pay checks. In case of twice-a-month it gets quite 

difficult as in the middle of the month there is not sufficient amount to pay for the 

instalments from the household budget.’ 


A noticeable number of clients also mentioned that the group size was not a major 

determinant and the number of members could range between 20 to 25 women. 

‘In fact, Asasah even agrees to less than 20 members in case there are not adequate 

number of women in the group. That is good, because otherwise, it would be difficult for 

many women to access this service.’ 

(Participant, Raiwind) 

Many women were of the view that the loan amount should be larger for mature clients as 

more investment is required as business expands. The small business finance loan of the 

programme required a collateral in the form of house ownership registration or some 

other asset deed, which many clients did not have. The clients felt that such regulations 

should be done away with considering the economic situation of the borrowers in their 

areas. 

25

‘Next time I want a Rs. 100,000 loan, but I live in a rented house and do not have any 

other asset which can be handed over as a collateral. I think they should trust their 

mature clients and give more flexibility for bigger credit amounts as well like they do 

with smaller amounts.’ 


‘We can feel the difference in our economic status after the Asasah loan. If we get a 

larger loan amount, the situation will further improve, therefore, we feel that the loan 

amount should be increased so that we can put in more into our businesses.’ 

(Participant, Raiwind, Lahore) 

There were a few voices among the participants, who mentioned that a lower interest rate 

and a longer loan recovery period of 18 months would provide them with a cushion to 

further improve their income levels. 

26


A 3.1.1 Institutional Snapshot 

Indicators 2006 

Age 4 

Members outstanding 31,763 

Active borrowers 25,081 

Branches 27 

Districts covered 9 

Total disbursements (Rs) 

457 million 

Average loan disbursed (Rs) 13,078 

Account officers (loan officers) 200 

Total employees 345 

Employee turnover (%) 2 

Borrowers per account officer 232 

Total income(Rs) 

37 million 

Operational self-sufficiency (%) 76 

Financial Self-sufficiency (%) 75 

Adjusted Return on assets (%) -8 

Portfolio yield (%) 37.9 

Cost of borrowings 11 

Operational Efficiency 0.54 

Portfolio at risk (>30 days) (%) 0 

Cost per unit of money disbursed 0.46 

A3.1.2 Products Profile 

Loan Product 

Protective 

Loan 

Productive Loan Small Business 

Finance 

Livestock 

Finance 

Purpose 

Fulfil basic 

needs 

Income 

Generation 

Small Business 

Development 

Dairy Sector 

Investment 

Term/Duration 12 months 12 months 12 months 12 months 

Loan size 

Rs.3,000 to 

Rs.8,000 

Rs.10,000 to 

Rs.25,000 

Rs.26,000 to 

Rs.50,000 

Rs.30,000 to 

Rs.70,000 

Interest rate 

20 20 20 20 

(percent) 

Repayment term Fortnightly Fortnightly Fortnightly Fortnightly 

Processing Fee Rs.50 Rs.50 Rs.50 Rs.50 

Savings Voluntary Voluntary - - 

Insurance 1% of loan 1% of loan 1-2% of loan 2% of loan 

27

A3.1.3 Funding Sources 

Funds 


Loans 

Cumulative Principle 

Disbursed 

Mark-up 

Rate 

Commercial Funding 

Crescent Leasing Ltd. 741 9,547,000 12% 

Deutsche Bank 46 1,730,000 2% 

First Elite Capital Modarba 8,698 112,89,130 12-13% 

Orix Leasing Pakistan Limited 5,527 74,412,000 10-12% 

Pak Oman Investment 473 5,356,000 12% 

Sub – Total 16,624 219,320,130 

Donor Funds 

Grameen Trust Bangladesh 100 1,165,700 4% 

Orangi Charitable Trust -OCT/OPP 1,581 19,762,000 16.4% 

Pakistan Poverty Alleviation Fund 13,304 175,080,000 6-8% 

Swiss Agency for Cooperation and 36 1,351,000 -- 

Development 

Save the Children ,USA 1,257 14416000 -- 

Sub Total 15,139 196,088,700 

Total 31,763 415,408,830 

28

A3.1.4 Organizational Structure 

Board of Directors 

Operations Committee CEO S 

C 

Area 

Research 

Finance 

Marketing 

Internal Audit 

Quality 

Manager 

D t t 

Department 

Department 

Assurance 

D 

Branch 

Finance 

Accounts 

Monitoring 

Disbursemen 

Manager 

Assistant 

Branch Manager 

Branch 

Accountant 

Community 

Development Officer 

29

A3.2 Survey Results – Tables 

Table – A.3.2.1 

Sample Information 

[ASASAH] 

Respondents % 

Respondent 

Category 

510 100.0 

Active Borrowers 237 46.5 

New Borrowers 92 18.0 

Non-Borrowers (Same Area) 90 17.6 

Non-Borrowers (New Area) 91 17.8 

Table – A.3.2.2 


[ASASAH] 

Borrowers % 

Loan 

Taken 

329 100.0 

One 173 52.6 

Two 111 33.7 

Three 31 9.4 

Four 14 4.3 

Table – A.3.2.3 

Respondent Characteristics - Education 

[ASASAH] 

Respondents 

Formal Education 

Technical Training 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

237 92 181 510 

46.5 18.0 35.5 100.0 

No Education 76.4 79.3 68.0 73.9 

Primary 11.4 12.0 12.7 12.0 

Middle 8.9 1.1 9.9 7.8 

Metric 2.5 5.4 7.2 4.7 

Inter .4 1.1 1.7 1.0 

Graduate and above .4 1.1 .6 .6 

No Training 99.6 98.9 98.9 99.2 

Have Training .4 1.1 1.1 .8 

Total 

30

Table – A.3.2.4 

Respondent Characteristics - Nature of Business 

[ASASAH] 


Total 

Active Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 237 92 181 510 

46.5 18.0 35.5 100.0 

Business (Retail Shops with fixed outlet) 29.5 30.4 18.2 25.7 

Business (Vendor without fixed outlet) 8.9 7.6 14.4 10.6 

Goods Supplier 4.2 6.5 1.1 3.5 

Personal Community Service Providers 19.4 16.3 35.9 24.7 

Technical Service Provider 6.8 6.5 2.2 5.1 

Cottage Industry 20.3 21.7 23.8 21.8 

Transport Service Provider 11.0 10.9 4.4 8.6 

Table – A.3.2.5 

Household Demography 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 

237 92 181 510 

46.5 18.0 35.5 100.0 

Family Size 1-3 Person 6.8 6.5 10.5 8.0 

4-6 Person 48.9 34.8 43.1 44.3 

7-9 Person 36.3 52.2 37.6 39.6 

More than 9 8.0 6.5 8.8 8.0 

Average Family Size 6 7 6 6 

Dependency Ratio 101.53 94.38 91.30 96.60 

Total 

31

Table - A.3.2.6 

Housing Characteristics - Quality 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 

237 92 181 510 

46.5 18.0 35.5 100.0 

House owners 89.5 94.6 86.2 89.2 

Person per room 3.53 3.55 3.31 3.45 

Houses with baked bricks 92.4 97.8 92.3 93.3 

Houses with RCC Roof 34.6 39.1 33.7 35.1 

Houses with Cemented Floor 40.9 63.0 41.4 45.1 

Total 

Table - A.3.2.7 

Housing Characteristics - Services 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 

237 92 181 510 

46.5 18.0 35.5 100.0 

Houses with telephone 3.4 2.2 4.4 3.5 

Houses with electricity 99.2 98.9 97.2 98.4 

Houses using gas for cooking 51.5 84.8 62.4 61.4 

Houses using flush system 92.8 98.9 95.0 94.7 

Total 

Table - A.3.2.8 

Household Economic Status 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 

237 92 181 510 

46.5 18.0 35.5 100.0 

Income Per Capita 1601 1539 1376 1510 

Expenditure Per Capita 1403 1336 1202 1320 

Per Capita Food Expenditure 698 648 668 678 

Poor Households (% below Official Poverty Line) 18 18 35 24 

Household Asset Score 8 8 7 7 

Value of household assets 256159 309257 263237 267913 

Average Indebtedness 5000 0 12692 11333 

The Official Poverty Line is taken as Rs 1,000 per capita per month – see Montgomery (2006). 

Total 

32

Table - A.3.2.9 

Child Education 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 

School Going Children % 85 84 85 85 

School Going Children - Boys % 82 81 84 82 

School Going Children - Girls % 70 73 72 71 

Children going to Private School % 39 50 50 45 

Monthly School Fee per Child 65 74 90 76 

Tuition Fee per Child 40 54 58 49 

Transport Fee per Child 0 0 5 2 

Monthly Expenditure on Education 227 322 299 272 

Figures are Averages 

Table - A.3.2.10 

Child Immunization 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 

Complete Course 79.1 84.3 74.5 78.4 

Incomplete Course 20.9 13.7 24.5 20.9 

No Vaccination 2.0 1.0 .7 

Only for household having children less than 5 years 

Table - A.3.2.11 

Health Expenditure 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 

Members reported illness (Last 30 days) 2 2 2 2 

Monthly Expenditure on Health 199 180 488 301 

Figures are averages 

Table - A.3.2.12 

Sources of Household Income 

[ASASAH] 


Overall 

Active 

Borrower 

s 

Pipeline 

Borrowers 

Non- 

Borrowers 

33


(%) Income from Main occupation 77 68 60 69 


Secondary occupation 0 0 0 0 

Other Earners 22 32 39 30 

Pension 0 1 1 0 

Inland Remittances 0 0 0 0 

Overseas Remittances 0 0 0 0 

Rental Income 0 0 0 0 

Table - A.3.2.13 

Household Consumption Pattern 

[ASASAH] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 



(%) Expenditure on FOOD 50 49 56 52 

Education 3 4 3 3 

Health 3 2 3 3 

Electricity 7 6 8 7 

Gas 2 3 3 2 

Telephone 1 1 1 1 

Rent 2 1 3 2 

Travelling 3 2 4 3 

Repayment of Loan 22 17 0 14 

Saving 0 2 1 1 

Consumption Last 30 days - Meat (days) 4 4 2 3 

- Fruits (days) 4 3 2 3 

- Eggs (days) 4 5 3 4 


34

Table - A.3.2.14 

Household Assets Ownership 

[ASASAH] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Own House 88.6 93.5 85.6 88.4 

Refrigerator 42.2 27.2 26.0 33.7 

Colour TV 76.4 83.7 64.6 73.5 

Motor Cycle 11.4 13.0 7.2 10.2 

Prize Bond 1.3 .6 

Washing Machine 73.8 79.3 62.4 70.8 

Sewing Machine 84.8 93.5 91.2 88.6 

Bed with Foam 26.2 39.1 22.1 27.1 

Urban Property 

Gold 19.4 22.8 14.9 18.4 

Mobile phone 46.4 50.0 34.3 42.7 

Figures are average percentage 

Table - A.3.2.15 

Business Characteristics 

[ASASAH] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Family Workers (engaged in business) 1 1 1 1 

Permanent on Monthly Salary 2 1 2 

Permanent on Daily Wages/Piece Rate 2 6 1 3 

Seasonal/Occasional 2 3 3 3 

Monthly Sale [Rs.] 15150 17327 10352 13840 

Value of Assets - Shop/Workshop 8837 2391 4384 6094 

Machinery 4131 19690 2256 6272 

Instruments 1085 1395 593 966 


35

Table - A.3.2.16 

Women’s Empowerment 

[ASASAH] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Number of Respondents 236 92 149 477 

Economic Empowerment - Score out of 14 8.1 7.7 4.6 6.9 

Income Empowerment - Score out of 5 2.2 2.1 2.6 2.3 

Assets Empowerment - Score out of 8 1.5 1.7 1.4 1.5 

Empowerment Related with Education and Health - Score out of 10 

5.8 5.5 4.9 5.5 

Social Empowerment - Score out of 10 4.1 5.0 3.8 4.2 

Figures Average Score except number of respondents 

36

Table - A.3.2.17 

Women’s Empowerment - Economic Aspects 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Do you take decisions on the aspects of 

purchase, modification or repair of house 39 25 20 30 

Do your husband discuss with you when 

decision on modification/repair of house is 

made 

60 85 67 67 

Do you take decisions on the purchase or 

sale of livestock 20 22 12 18 

Did your husband discuss with you before 

sale or purchase of livestock 39 26 18 30 

Do you purchase your dresses for the 

family 79 87 70 78 

Do you purchase the utensils for your 

family 79 87 75 79 

Do you purchase gold and jewellery for 

your family 37 33 13 29 

Do you take decisions on borrowing 

money 57 46 26 45 

Do your husband discuss with you on the 

issues of borrowing money 66 66 51 61 

Do you spend money you have borrowed 47 29 10 32 

Do you repay the money you have 

borrowed 63 55 11 45 

Do you take decisions on transactions 

involving household Equipments 60 46 26 47 

Do you have any debt in your name 87 84 6 61 

Do your husband discuss with you when he 

has made the debt 79 79 51 70 

Figures are percentages except number of respondents 

37

Table - A.3.2.18 

Women’s Empowerment - Income 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Do you have your own income 30 24 66 40 

Do you spend it for the family yourselves 35 27 62 42 

Do you need the permission of your husband 

to spend your income 25 34 28 27 

Do you get any part of your family income 

or husbands income to your hands 

regularly 

49 43 42 46 


spends income for the family requirements 77 79 64 73 


Table - A.3.2.19 

Women’s Empowerment - Assets 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Do you possess any household asset 15 11 14 14 

Do you have cash savings in your own 

name 22 29 28 25 

Do you operate Bank account in your 

name 1 1 1 1 

Do you pledge, Sell, or exchange any 

of the above said assets yourself 15 8 15 14 

Do your need permission from your 

husband to sell, pledge, exchange any 

of the assets 

22 35 21 24 

Do you have purchased land in your 

own name 12 1 1 6 

Is the house you stay registered in 

your name 14 15 13 14 


your and husband name 55 67 44 54 


38

Table - A.3.2.20 

Women’s Empowerment - Health and Education 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Do you take decisions on the issues of your 

children education 47 34 26 38 

Do your husband consult with you when he 

takes decision on the education of children 72 80 61 70 

Do you think you can decide on how many 

children you can have 41 42 24 36 

Do you think you can decide on the spacing 

between children 53 42 38 46 

Do you think that you can decide on the 

treatment of your and your family member 

illness 

46 40 38 42 

Do you think you can decide on the method 

of treatment for your family members 55 50 50 52 

Do you think you can decide on the type of 

contraceptive to be used 31 21 21 26 


issues of health aspects of children 78 78 77 78 

Do you have any choice of food prepared 

and served in your home 79 80 78 79 

Are you able to take care of the nutritional 

requirements of your self, family and 

children 

80 84 80 81 


39

Table - A.3.2.21 

Women’s Empowerment - SOCIAL Aspects 

[ASASAH] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Are you free to go out and visit your 

friends and relatives with out permission 68 85 77 74 

Do you have the choice of the dresses you 

wear 81 99 94 89 

Do your husband impose his religious 

beliefs on you and make you accept them 5 8 2 4 

Do you have any association with political 

parties 3 3 1 3 

Do you participate in voting and other 

democratic procedure 46 57 59 52 

Do your husband impose her political 

ideas on you and make you accept them 3 5 5 4 

Do you participate in the meetings of NGO 

programmes or in other social events 59 74 35 54 

Do your husband prevent you from 

participating in such programmes 14 12 6 11 

Do you take decisions on the marriage of 

your son-daughter 53 70 43 53 


issues of the marriage of children and 

close relatives 

75 87 61 73 


40

Table - A.3.2.22 

Borrowers - Loan Amount Used by: 

[ASASAH] 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

Borrowers 

237 92 329 

72.0 28.0 100.0 

Loan was Self 34.2 16.3 29.2 

used by: Spouse with your suggestion 58.6 62.0 59.6 

Spouse without your suggestion 2.2 .6 

Other Members 7.2 19.6 10.6 

Figures are column percentages except number of borrowers 

Table - A.3.2.23 

Borrowers - Loan Amount Used For: 

[ASASAH] 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

Borrowers 

237 92 329 

72.0 28.0 100.0 

Loan was Business Activity 95.8 96.7 96.0 

used for: Repayment of debts .8 .6 

Consumption 2.5 3.3 2.7 

Marriage of Daughter/Son .8 .6 

Figures are row percentages except number of borrowers 

Table - A.3.2.24 

Borrowers’ Perceptions - Getting Loan 

[ASASAH] 

Number of Borrowers 237 

Loan utilized for same purpose (%) 100 

Loan sufficient (%) 100 

Time Obtaining Loan (Months) 36 

Expenditure incurred (Rs.) 136 

Problems in Obtaining Loan (%) No Problem 93.7 

Collateral 3.0 

Delay in Payment 2.1 

Too many Meetings 2.1 

Too many visits .8 


41

Table - A.3.2.25 

Borrowers’ Perceptions - Coping Strategy 

[ASASAH] 

Loan Taken 

One Two Three Four 

Overall 

Number of Borrowers 81 111 31 14 237 

Sale of asset/Sale of Animals 3.7 .9 1.7 

Borrow loan from relative/friends 77.8 91.0 71.0 42.9 81.0 

Borrow loan from Microfinance 38.3 19.8 45.2 85.7 33.3 

Borrow loan from Commercial 

Banks 

1.2 .9 .8 

Borrow 

from 

Moneylender/Commission agent 1.2 .4 

Reduce Consumption Expenditure 1.2 2.7 1.7 

Search for extra work 1.2 3.6 6.5 3.0 

Extra hours in existing occupation 4.9 6.3 3.2 5.1 

Have Enough Saving 3.2 .4 

Figures are column percentages except number of respondents 

* Multiple Response Questions May Exceed 100% 

Table - A.3.2.26 

Borrowers’ Perceptions - Impact 

[ASASAH] 

Loan Taken 


Overall 


Effect on quality of Improved 92.6 95.5 93.5 100.0 94.5 

life 

No Change 

7.4 4.5 6.5 5.5 

Family eat your fill As much as wanted (all types) 46.9 38.7 58.1 92.9 47.3 

As much as wanted (not all types) 50.6 60.4 38.7 7.1 51.1 

Sometimes felt hunger 2.5 .9 3.2 1.7 

Have more to eat now Have more to eat now 76.5 91.0 100.0 100.0 87.8 

Have more to eat in earlier times 2.5 .9 1.3 

Equal 21.0 8.1 11.0 

Family health Health is better now 70.4 79.3 80.6 85.7 76.8 

Health was better earlier 1.2 3.6 7.1 2.5 

Equal 28.4 17.1 19.4 7.1 20.7 

Sustainable increase Yes 96.3 99.1 100.0 100.0 98.3 

in income No 3.7 .9 1.7 


42

Table - A.3.2.27 

Non-Borrowers’ Perceptions - Getting Loan 

[ASASAH] 


Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 

Overall 

Number of Non-Borrowers 

90 91 181 

100.0 100.0 100.0 

Aware about credit facility Yes 67.8 63.7 65.7 

No 31.1 36.3 33.7 

Do not need 16.7 31.9 24.3 

Amount of Instalment is high 6.7 11.0 8.8 

Interest is high 5.6 6.6 6.1 

Regular payment is difficult 28.9 12.1 20.4 

Do not know office address 2.2 2.2 2.2 

Do not like to borrow 2.2 1.1 

Applied for 2.2 1.1 

Religious Reason 2.2 1.1 


Table - A.3.2.28 

Non-Borrowers’ Perceptions - Coping Strategy 

[ASASAH] 

New 

Borrowers 


Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 

Overall 

Number of Non-Borrowers 92 90 91 273 

Sale of asset/Sale of Animals 1.1 2.2 1.1 

Borrow loan from relative/friends 88.0 98.9 83.5 90.1 

Borrow loan from Microfinance 33.7 11.0 15.0 


Search for extra work 1.1 .4 

Extra hours in existing occupation 4.3 1.1 1.8 




43

Table - A.3.2.29 

Non-Borrowers’ Perceptions - Change 

[ASASAH] 

New 

Borrowers 


Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 

Overall 


Effect on overall quality of Improved 97.8 35.6 63.7 65.9 

life 

Deteriorated 8.9 12.1 7.0 

No Change 2.2 54.4 24.2 26.7 

Family eat your fill As much as wanted (all types) 62.0 11.1 48.4 40.7 

As much as wanted (not all types) 38.0 80.0 39.6 52.4 

Sometimes felt hunger 6.7 12.1 6.2 

Often felt hunger 1.1 .4 

Have more to eat r Have more to eat now 91.3 31.1 61.5 61.5 

Have more to eat in earlier times 1.1 10.0 12.1 7.7 

Equal 7.6 57.8 26.4 30.4 

Family health 

Health is better now 76.1 31.1 49.5 52.4 


Equal 22.8 57.8 39.6 39.9 


44

Chapter Four: Orangi Charitable Trust (OCT) 



The Orangi Charitable Trust (OCT) is an off-shoot of the Orangi Pilot Project (OPP), a 

non-governmental development institution created in 1980 in the squatter settlement of 

Orangi Town in Karachi. The OPP was formed by the legendary social scientist, Dr. 

Akhtar Hameed Khan, who worked in Comilla Academy in Bangladesh. With Dr. Khan’s 

vision, OPP’s work fostered a culture of reflection and self-help amongst the enterprising 

poor. Respecting the entrepreneurial spirit of people as articulated in OPP’s vision, all the 

programmes focus on ‘supporting effective existing structures’ instead of creating new 

structures which would likely be unsustainable and counter-productive. Moreover, on the 

basis of thorough reflections, action research and analysis, the Project encouraged local 

people to generate solutions, develop programmes, run, manage and fund them. While 

building technical and strategic capacities for this to happen was realized upfront, Dr. 

Khan was also clear that OPP’s success was largely dependent upon the strengthening of 

neighbourhoods and communities as well. 

Although OPP designed innovative programmes and facilitated their implementation with 

considerable success, for e.g. development of sanitation and sewerage infrastructure, 

processes were considered fragmented and tactical, more than strategic. When years of 

research insights and lessons were synthesised, OPP identified four main issues of Katchi 

Abadis. These included (a) sanitation and housing quality (b) employment (c) health (d) 

education. While people were organizing themselves and responding to issues, clearly it 

was not enough. It was realized that without technical and managerial guidance, and 

stable credit support, the solutions will always be sporadic and random. In 1987, the OPP 

upgraded itself into four autonomous institutions to improve the quality and scope of 

planning and implementation. These were: 

• The OPP-RTI (Orangi Pilot Project – Research and Training Institute) dealing 

with sanitation, housing , education, research and training; 

• The Orangi Charitable Trust (OCT) for microcredit servicing; 

• Karachi Health and Social Development Association (KHASDA) looking at 

health; and 

• The OPP Society which channelizes funds to the above three institutions. 

4.1.2 Philosophy and Scope of Services 

OCT started its microcredit servicing from 1987 with an aim to support the existing 

businesses. The rationale being that micro enterprises in Orangi were not able to access 

loans from commercial banks due to loan size, collateral requirements and other 

considerations. The key objectives of OCT are to:

• Provide credit for the expansion of the existing micro-enterprises in urban 

communities 

• Provide credit for agro-inputs in rural areas 

• Strengthen the capacity of NGOs and CBOs to support micro-enterprises in the 

area through guidance and training 

• Provide lines of credit to trained NGOs/CBOs 

OCT opted for a different paradigm for microcredit instead of seeing microcredit as a 

direct tool for poverty alleviation. Contrary to other institutions, it solely provides credit 

to facilitate movement of entrepreneurs poor into better economic and social conditions. 

Consequently, it has not engaged in identifying the poorest of the poor or empowering 

women for instance, to bring about gender equity. OCT specifically focuses on equity 

and how relevant opportunities can be made available to those who put efforts. 

This approach is in line with OPP’s self-help doctrine where individuals and communities 

are encouraged to take charge of their own lives. OCT management explains that the 

approach is responsive to the dynamics of ‘market economy’ because ‘credit is not a 

welfare activity.’ Therefore, OCT focuses on facilitating its clients and partners in better 

functioning in the market economy by making them self-reliant, competent and 

strategically savvy. 

From 1987-1991, OCT solely provided credit services to people based in Orangi with 

functional enterprises. In 1990, M. A. Imtiazi, Secretary General of BCCI (now INFAQ 

Foundation), urged OCT to extend help to micro-entrepreneurs living in areas outside 

Orangi. Simultaneously, the World Bank selected OCT as one of its major microfinance 

projects. Since then, INFAQ Foundation has donated Rs. 27.85 million and World Bank 

Rs. 8.95 million as revolving fund. These donations made it possible to issue loans to 

small entrepreneurs living in Karachi, to small farmers, herders and traders of Karachi 

villages and to NGOs in districts of Sindh, Punjab and NWFP. 

OCT does not envisage any major expansion in its direct operations, geographical reach 

or client base. It works with a carefully selected and focused client base within Orangi, 

with just a single office located in the building of OPP-RTI. The total loan disbursed in 

Orangi between 1987- August 2006 amounts to Rs. 157,760,184 to 9,508 units. Out of 

35000 

34943 

30000 

25606 

25000 

21757 

20000 

Served Units 

15000 

10000 

9337 

8073 

13684 

11922 

13186 

Closed Units 

Open Units 

5000 

0 

1264 

Orangi Outside Orangi Total 

2

these, as many as 7,301 units are closed and 2,207 units are open, which reflects on 

OCT’s resolve to keep its client base small and manageable. This portfolio is balanced by 

replication of its microcredit programme by supporting NGOs/CBOs, where 

institutionalization becomes the core focus rather than operational expansion. OCT is 

working with 47 NGOs/CBOs where a total of Rs. 286,600,604 has been disbursed to 

25,606 units till August 2006. Out of this 13,926 units are closed while 11,680 are open 

in 433 areas and villages. 

Figure 4.1: Total Units Served by OCT 

Table 4.1: NGOs supported by OCT 

Sindh Punjab NWFP Balochistan Total 

Number of NGO/CBOS 31 14 1 1 47 

Number of Areas covered 255 153 3 12 421 


The project area of Orangi with a population of one million is divided into four zones. A 

supervisor is responsible for each zone whereas five account officers manage the 

accounting, and monthly printouts of account sheets help supervisors to check defaults. 

OCT management was reorganized in April 1996 where the post of Joint Director was 

abolished. The sections were: loans, accounts, recovery and training. The Vice-Chairman 

of OCT became the coordinator. The trustees are the Chairman and Vice-Chairman. The 

organizational culture is very informal which allows the clients to identify with OCT staff 

and strengthen their relationship. 


OPP-OCT is providing microcredit to existing micro enterprises at bank rate of interest 

without collateral ranging from Rs. 2,000 to 50,000 with simple procedures and 

documentation. There are eight different types of products that are offered by OCT to its 

Orangi and non-Orangi clients. The details are as follows: 

• Loans to Schools: There are over 750 schools in Orangi, two-thirds of which are 

unsustainable with 50-500 students charging very low fees. The quality of 

education as well as the infrastructural conditions of such schools is dilapidated. 

Therefore, two types of credit have been introduced: loans with service charge for 

physical upgradation, and teacher’s training to mid and higher level schools. 

There are 665 schools which have received loans amounting to Rs. 19,352,981. 

Loans without service charges are provided to 57 small schools totalling Rs. 

1,054,710 for physical up-gradation. Six units are open and the recovered amount 

is Rs. 1,001,610. 

3

• Loans to Manufactures: Orangi Town is bubbling with entrepreneurial spirit with 

family units and individuals involved in various small-scale manufacturing. For 

supporting these businesses so that they can expand and be sustaining, loans to 

manufacture products are given. Commonly, loans are given to Banarsi Cloth 

weavers, garment factories and leather work producers, stitching centres, 

automobile and auto spare parts workshops, furniture makers and many others. 

Till August 2006, a total of Rs. 78,164,872 loans has been disbursed. 

• Loan to Traders: Retailers and traders are also extensively supported by OCT. 

Almost one-third of clients served constitute traders running general stores, 

medical stores, electrical shops, confectioners, butchers, etc. The total amount 

disbursed is Rs. 154,158,305. 

• Loan to Service Providers: A total amount of Rs 49,935,027 is disbursed as 

loans to service providers like beauticians, hoteliers, transporters, etc. 

• Loan to upgrade Thallas: 93 percent of Orangi’s houses have been built with 

financial and technical assistance from local building component manufacturing 

yards operated by entrepreneurs. These yards exist in all the neighbourhoods and 

are known as thallas, their owners take on house-building contracts or supply 

masons as needed by other contractors. Although the emergence of thallawalas 

has contributed to improving the construction and housing quality in Pakistan, 

however, due to limited perspective, their technical designs and services were 

considered to be generally very archaic or outdated. Therefore, OPP-RTI offered 

carpentry and masonry skill training and technical advice. Loans were provided 

for improving the technology used by thallawalas such as mechanizing the blockmaking 

process, developing prefabricated roofs and floor slabs, etc. This technical 

advice and credit has helped at least 60 thallawalas who now employ over 300 

persons with the upgradation and expansion of their services. A total loan of Rs. 

2,385,100 is provided to 135 thallawalas. 

• Loans to Farmers and Fisher folk: This is another major product of OCT with 

10,758 units served (roughly one-third of total) with loans of Rs. 121,381,603 

across Sindh. These loans are given mainly through farmers’ collectives and 

NGOs for the purchase of seeds, fertilizers, pesticides, tractor hiring, etc, thus 

supporting them from crop sowing to cutting and selling. The size of loan is 

determined by the type of crop and area of crop. Loans have also been given for 

paving water channels, installing electrical pumps for water-logged farms and fish 

farming. 

• Loan to Clinics: OCT provides loans to upgrade physical spaces and technical 

equipment of health facilities in and outside Orangi. Almost 198 clinics have been 

supported through loans of Rs 3,928,400. 

4

• Loan for Livestock: OCT also supports livestock farming and diary business 

especially through its partner NGOs. A total loan of Rs. 14,381,603 has been 

disbursed to 1,709 units. 

Loan Types as % of Total Portfolio 

Thalla, 0.53 

Clinic, 0.88 

Services , 11 

livestock, 3.2 

School, 4.8 

Manufacturing , 

17.5 

Trading, 34.7 

Farming & 

Fisherfolk, 27.4 

Manufacturing Farming & Fisherfolk Trading Services School livestock Clinic Thalla 

Figure 4.2 


As mentioned in previous sections, OCT only provides loan to individuals primarily 

because of the culture of Orangi town and also because group repayments have higher 

rates of defaulting. Reaching this procedure and clarity, however, was no mean feat. It 

took almost 16 years of experience and lessons-learnt by implementing its microcredit 

programme, that OCT finally settled on its current strategy. In the beginning, loans were 

given to individual entrepreneurs selected and supervised by OCT managers. This was 

effective only till the number of borrowers were limited. Supervision and tracking 

became a logistic and financial nightmare as OCT’s clients grew in number and spread 

geographically. A simplistic solution was applied and numbers of supervisors were 

increased. This however posed a challenge of judicious use of discretionary powers. 

During 1991-94, OCT was faced with a difficult scenario where its managers were giving 

out loans in great numbers across Karachi city. In 1996, the system nearly collapsed with 

sky-rocketing defaulters and umpteen cases of misuse of discretion. For saving the 

programme, the number of borrowers and staff was curtailed extensively. The evolution 

of loan management system went through four distinct faces that are outlined below: 

4.1.5.1 Phase 1: Loans through Social Organizers/Supervisors 

Supervisors recommended loan application upon a quick visit to the borrower’ enterprise 

whereas the final decision was made by the Director and Joint Director when two to three 

applications were received. In reality, loans were approved solely on supervisor’s 

recommendation. Account keeping was also manual. 

5

Several flaws surfaced when the system was implemented in Orangi only. The 

programme started in all areas of Orangi with a population of over 1 million. It was 

humanly impossible for the supervisors to make informed decisions about all borrowers. 

Therefore, a rise in bad clients, difficulties in loan recovery and weak supervision, were 

the obvious outcomes of this system. Manual accounting made it impossible to check 

status especially when roles and responsibilities of teams were also not defined or 

distributed. 

4.1.5.2 Phase 2: Loans through Extension (1993-95) 

Addressing the flaws, the second phase had properly distributed sections and hence, roles 

of supervisors. Four sections were formed separately dealing with loans, accounts, 

recovery, and training and extension. 

In this phase, maximum loan size was also defined along with the recovery period while 

credit was only distributed in Orangi. Agents were selected amongst good clients who 

helped in selecting new borrowers and credit recovery. Disbursement through checks was 

introduced along with a computerized accounting system. These changes helped OCT in 

improving the recovery rates, client selection, operational efficiency and information 

based decisions. Moreover, a clear division of work strengthened the team’s collegiality 

and job satisfaction. 

In 1995, the programme was reviewed again and it was found that some of the extension 

activities were not based on credible information. Also agents having active businesses 

were not able to respond to all the loan requests directed to them. Moreover, the time for 

payments and number of instalments were not feasible for clients or the organization. 

4.1.5.3 Phase 3: Loans through Good Clients (1996-99) 

To respond to the pressing logistical and HR constraints, the lending methodology was 

reviewed again. This time, OCT approached all good clients with an opportunity for them 

to identify two borrowers from their vicinity. The nature and frequency of meetings with 

borrowers were changed extensively. Initially, monthly meetings didn’t get a positive 

response; however, in 8-9 months, borrowers were more forthcoming. Loan decisions 

were institutionalized by forming a loan committee which approved loans through 

consensus. Most importantly, the number of instalments was reduced to ten for efficient 

recovery while reduction in service charges was also offered with early repayments. 

These changes made the process more streamlined and transparent. Also the circle of 

trusted clients became stronger and more effective. However, in 2000 multiple 

complaints were received that the number of instalments are too few and difficult to pay 

for. 

4.1.5.4 Phase 4: Re-verification of Loans (2000 onwards) 

The loan recovery period was extended to fifteen months. Also, to meet the increased 

demands for credit in local markets, it was decided that loans could be processed if 

6

guarantees of two local entrepreneurs are given. The other steps of loan application are 

elaborated above. 

The loaning process constitutes simple steps summarized below: 

• The loan application form issued by the office on request, is checked. 

• Assessment of the loan application is carried out by the field supervisor 

• The loan application is verified by the field supervisor. 

• The loan committee then reviews the loan application and approves or 

disapproves through consensus. 

• After approval, an agreement is signed by the client. Two working witnesses are a 

requirement of the agreement. These are usually the loaners from OCT with good 

credit history. 

• The loan is disbursed through cheque. The approved application is fed into the 

computer. 

• A ledger account is created and the balance regularly updated and reviewed. 

• Instalments are paid at the office where an entry is immediately made in the 

computers and a receipt issued. 


The recovery rates have not always been so stable and positive. Even before coming into 

existence, OCT recognized the threats any credit programme in Pakistan was subjected 

to: the corruption of financial institutions and the corruption of the borrower. The first 

threat was internal which was managed by meticulous monitoring and relentless selfappraisals 

and minute documentations. This in-depth scrutinizing of loans and recoveries 

safe-guarded internal integrity of the microcredit programme, and there were no issues 

created by staff performance. 

However, more complex issue were to limit the cases of dishonesty, corruption and 

blackmailing. The risk increased owing to the political influences and law and order 

situation in Karachi, and Orangi in particular. Again, OPP’s founding principles 

generated a firm belief amongst the staff that if they were honest and fair in their business 

dealings, this will eventually be matched by the borrowers. OCT approached the issue 

with an understanding that any delinquent loans reflects on organizational weakness and 

not that of the borrowers. Therefore, it was hoped that OCT staff would learn to pick and 

maintain a growing circle of honest clients. While this was seen as a rigorous route to 

staff capacity building, the first two years were indeed patience testing. For instance, in 

the first year 35 percent of clients defaulted causing 20 percent of amount loss. 

Gradually, the trust in borrowers began to pay off and indeed, clients followed the 

principles of fair business deals. 

For microcredit given within Orangi, the total recovery is Rs. 170,994,150 where 

recoveries in principal are 144,029,280 and recoveries as service charges are Rs. 26,964, 

870. For loans issued outside Orangi through NGOs, total recovery made is equivalent to 

7

Rs. 228,234,500 while recoveries in principal are 198,826,128 and service charges are 

Rs. 29,408,372. While OCT’s PAR>30days for this year is not available, in 2005 it stood 

at 6.3 percent. However, the write-off ratio has lowered almost by half from 6.4 percent 

to 3.74 percent (source: PMN MIX Analysis). According to OCT’s data, the recovery 

rates have improved tremendously over the years with the current rate at 97 percent. 

Loan Recovery (1987-2006) 

450000000 

444205788 

400000000 

350000000 

342855408 

300000000 

286600604 

250000000 

200000000 

150000000 

157605184 

198826128 

144029280 

100000000 

50000000 

87774476 101315769 56373242 

13541293 

29408372 

26964870 

0 

Total Loan Repaid Principal Balance Service Charges 

Repaid 

Orangi 

Outside Orangi 

Figure 4.3 


4.1.7.1 Diversification of Funding Sources 

Honing the spirit of self-reliance, OCT started with a decision that it will not operate on 

donor funding. Consequently, the funds were borrowed from national banks without any 

concessions and then lent to family units without any delays or collateral. Since it worked 

on a non-profit basis, OCT was able to take greater risks and bear losses of defaults and 

bad debts. It was neither safeguarding the depositors as it didn’t accept any deposits nor 

had to report profits because it didn’t have any shareholders either, and thus gave no 

dividends. 

However, a change in approach was necessitated by the growing demand for credit. 

While the lending mechanisms were kept simple and free of red-tapism, OCT started 

borrowing from various national and international banks and also accepted grants and 

donations. An initial grant of Rs. 1.97 million from its parent body OPP was received of 

which Rs. 1 million were pledged to National Bank for an overdraft facility. Amongst the 

first few donors were the Federal Bank of Cooperatives, Swiss NGO Programme office 

and NORAD. 

8

CEBEMO, a Dutch funding agency, has been giving Rs. 80,000 for women entrepreneurs 

while World Bank has generously supported OCT in creating a revolving funds. In 1995, 

the Bank sanctioned an annual grant of Rs. 353,000 for appointing thirty loan-agents and 

supervisors for loan groups, and the same amount for training other NGOs for replication 

of the microcredit programme. 

4.1.7.2 Financial and Operational Sustainability 

OCT aimed to reach sustainability since its inception and for this purpose, the mark-up 

rates were kept equivalent to bank rates and operational expenses were consciously kept 

low. Within 3 years, the ratio of operational overheads to disbursed loan fell to 8.73 

percent and then to 4.86 percent. The ratio of mark up to overheads increased to 128 

percent in 1990 and then to 355 percent in 1994-95. For the year 2006-07, as its overhead 

expense, OCT draws 3.7 percent of the loans and 45 percent from the service charges. 

Operational Self Sufficiency (OSS) rates have grown consistently almost to double i.e. 

from 83.30 percent in 2003 to 168.03 percent in 2005. Return on Assets and Equity rates 

have also grown significantly from -3.19 percent ROA and -3.87 percent ROE in 2004 to 

8.01 percent and 11.28 percent respectively. 

The operational costs are low because of a very simple, lack-lustre approach to 

microcredit with a strong support network. For instance, the core staff of OCT only has 

16 members which is responsible for processing amounts of Rs. 20 million and over 

1,000 accounts. The frugality of operations is enhanced by the computerized accounts 

system where updated records help in monthly monitoring. Moreover, the World Bank 

grant supported in hiring of loan agents who help in client selection and recovery. 

Channelizing loans through 47 NGO/CBOs also reduces direct costs while the office 

premises are free of cost, provided by OPP-RTI. 

This has helped OCT become a self-sustained institution with a reserve fund of Rs. 

35,500,000 made up from the mark-up received and savings from the grants received by 

INFAQ Foundation. While few liabilities still exist, OCT has cleared its bank loans. 

4.1.7.3 Management Information Systems and Research Functions 

OCT presents a unique case as far as its MIS and its utilization are concerned. While all 

accounts are computerized, they do not measure up to the standards of a full-fledged 

functional MIS, despite the fact that the information utilization is extremely prudent and 

across the board. The accounts section efficiently processes and records all information 

pertaining to loan disbursement, operational expenses, prepares reports on annual budget 

projections along with those on receipts and payments. Recovery officers also contribute 

in record updation and later on, monthly and weekly status reports are circulated amongst 

staff. All decisions are based on the trends analysis thus generated. 

Partly because of the rich heritage of Dr. Khan and then through the institutionalization 

of OPP-RTI, OCT is one of the few MFIs that have grounded their programme and 

strategic direction in action research. OCT involves its staff and also encourages 

9

independent research studies to be carried out on its project’s efficiency and 

effectiveness. There have been several research based publications on the OCT 

programmatic directions and its impact. The thorough documentation of portfolio and 

strategy changes as well as lessons learned and the regular progress reports, provide 

tangible evidence of the prevalent research culture. 


In this section we present the results from our survey for OCT. The results are based on 

the data collected on the basis of the questionnaire – see Appendix of the Report. A select 

few of the results are presented here in table form, in the main text of this Chapter, while 

the substantial majority of tables are presented in the Appendix to the Chapter. The 





























OCT is the only MFI in our sample which is largely male client oriented. It also has other 

characteristics which are dissimilar to other MFIs, as the Institutional Review above 

suggests, particularly that it is not in the business of poverty alleviation, as most other 

10

MFIs claim. Hence, its criteria and standards are different as well. Table A.4.2.4 in the 

Appendix suggests that most of OCT’s clients are in the Business Retail Shop profession, 

and many of the Non-Borrowers move from the category of Technical Service Provider 

and Personal Community Service Provider to those who own Businesses or set-up some 

sort of Cottage Industry. This suggests that credit is a constraint to entrepreneurs who, 

once they receive the loan, may want to set up different sorts of economic enterprises 

since their credit-constraint may have been released. 

There does not seem to be much significant difference in the Housing characteristics of 

Borrowers and Non-Borrowers, except that the proportion of Borrowers owning their 

own houses is much larger and significant than the other the categories – Table 4.1 and 

A.4.12.6-7. Table 4.2, moreover, also suggests that the increased Income Per Capita of 

Borrowers is significant as is Household Asset Score. The difference in Children’s 

Education, not surprisingly, is not significant – Table 4.3. 

Table – 4.1 

OCT – Housing 


Deviation 

t-value 

Significance 

Level 

House owners Active Borrowers 87.6543 33.10104 1.906 .058 


Person per room Active Borrowers 2.5257 1.14251 -1.989 .048 


Houses with baked bricks Active Borrowers 98.7654 11.11111 -1.049 .296 


Houses with RCC Roof Active Borrowers 37.0370 48.59127 -.156 .876 


Houses with Cemented Floor Active Borrowers 93.8272 24.21611 -.486 .628 





Table – 4.2 

OCT – Economic Status 


Deviation 

t-value 

Significance 

Level 

Expenditure Per Capita Active Borrowers 1556.1118 642.14860 -.099 .921 


Per Capita Food Expenditure Active Borrowers 865.3527 405.04234 .389 .698 


Income Per Capita Active Borrowers 3342.9662 5298.92256 1.669 .097 




11

Value of household assets Active Borrowers 764140.1375 705735.90136 1.174 .242 





Table – 4.3 

OCT – Children’s Education 


Deviation 

t-value 

Significance 

Level 

School Going Children % Active Borrowers 92.3000 16.89936 -.514 .609 


School Going Children - Boys % Active Borrowers 89.0351 29.58073 -.472 .638 


School Going Children - Girls % Active Borrowers 84.5417 27.61144 .150 .881 


Children going to Private School % Active Borrowers 74.6863 39.81352 .355 .724 


Monthly Expenditure on Education Active Borrowers 1042.5397 2094.26249 .768 .444 





Where there is a significant difference between Borrowers and the New and Non- 

Borrowers, is in the type of Household Assets Owned. A greater proportion of Borrowers 

have far greater assets than do New and Non-Borrowers – Table 4.4 and A.4.2.14. 

Similarly, one finds a significant difference in the value of sales of Borrowers compared 

to the other two categories – Table 4.5. 

12

Table – 4.4 

OCT – Household Assets Ownership 


Deviation 

t-value 

Significance 

Level 

Own House Active Borrowers 90.1235 30.02057 2.401 .017 


Refrigerator Active Borrowers 70.3704 45.94683 2.072 .040 


Colour TV Active Borrowers 82.7160 38.04643 1.678 .095 


Motor Cycle Active Borrowers 45.6790 50.12330 2.575 .011 


Prize Bonds Active Borrowers 3.7037 19.00292 -.880 .380 


Washing Machine Active Borrowers 75.3086 43.39028 1.899 .059 


Sewing Machine Active Borrowers 76.5432 42.63685 -.152 .880 


Bed with Foam Active Borrowers 48.1481 50.27701 1.007 .316 


Urban Property Active Borrowers 14.8148 35.74602 1.713 .088 


Gold Active Borrowers 55.5556 50.00000 .357 .722 


Mobile phone Active Borrowers 74.0741 44.09586 1.714 .088 






Table – 4.5 

OCT – Business Characteristics 


Deviation 

t-value 

Significance 

Level 

Monthly Sale [Rs.] Active Borrowers 72512.35 113642.201 3.230 .001 


Value of Assets - Shop/Workshop Active Borrowers 98950.62 261506.114 -.925 .356 


Machinery Active Borrowers 46222.22 173470.963 -.048 .962 


Instruments Active Borrowers 5167.22 19804.367 -.348 .728 


Other Active Borrowers 5143.21 27743.828 -.925 .356 





13

Borrowers perceptions about the positive Effect on the Quality of Life are already high as 

soon as the first loan is given and continue to rise thereafter – Table A.4.2.20. This trend 

is found in most other indicators about perception as well, and most Borrowers believe 

that the rise in Income and the improvement of Quality of Life can be sustained over 

time. 






The Difference in Differences (DID) impact model estimated for OCT is 



a vector of household characteristics * , C ij is a dummy equal to 1 for active borrowers and 





active borrowers and 0 otherwise. The coefficient δ on T ij is the main parameter of 

interest and measures the average impact of the programme. A positive and significant δ 

would indicate that microfinance is having a beneficial effect on the borrowers. 

To account for individuals who have been taking loans since a few years, we add a 

dummy to our regression. This dummy is for individuals who have taken more than 2 

loans, and takes a value of 1 if they are in their third, fourth or fifth cycle and 0 

otherwise. There were only 30 individuals in the sample who had taken more than 2 

loans. 





Unfortunately, we find no significant coefficients for δ in our regressions as reported in 

Table 1. The only significant variable was the dummy for loan cycle on food expenditure. 

In both single and double difference regressions we found that OPP clients, who had been 

borrowing for 3 year or more, were spending more on food expenditure. In the double 

* For OPP two household characteristics were included in the regression out of 15 tested through ANOVA. 

14

difference, we found that active borrowers were spending 22 percent higher on food than 

all other respondents (p=0.075), while for single difference the value was 23% (p=0.071). 

Table 1: Regression Results 


Dependent Variable Coefficient t-value 1 Coefficient t-value 

Log(Respondent Income) 0.11 0.72 -0.20 -0.88 

Log(Household Income) 0.15 1.05 -0.04 -0.18 

Log(Per Capita Income) 0.11 0.76 -0.08 -0.38 

Log(Total Household Expenditure) -0.07 -0.92 0.02 0.14 

Log(Food Expenditure) 0.12 -1.33 0.14 0.66 

Educational Expenditure 45.00 0.27 -526.00 -1.19 

Health Expenditure -55.00 -0.38 -265.00 -1.25 

Savings 335.00 0.71 -269.00 -0.36 

Asset Score 0.64 0.95 -0.66 -0.63 

Children Enrolled in School(%) -4.88 -0.50 -15.00 -0.95 

Boys Enrolled in School(%) -14.18 -1.24 -25.85 -1.49 

Girls Enrolled in School(%) -0.10 -0.01 -12.30 -0.77 








Group Composition: 

• Focus group discussions were arranged with OCTs clients and non-clients in Orangi. 

• A total of 20 males were interviewed. It was difficult for all the people to assemble at 

any one place, therefore, small groups of 2-4 people were approached for comments 

in different areas of Orangi. Direct discussion with female clients could not be 

arranged due to a variety of reasons including festival celebrations. OCT provided 

recent data on female clients and non-clients which was collected by its own team for 

other research activities. 

• Representation of non-clients was ensured. Out of 20 men, 5 were non-borrowers. 

• Education level varied from matriculate to masters degree holders. 

• The group had a mix of clients ranging from those in their eighth or ninth loan cycle 

and those who were just one month old clients. 

Involvement in microcredit programme – reasons and factors 

• An overwhelming majority of clients mentioned expansion of business and 

diversifying income generation as the key reason for which they sought loans. The 

15

entrepreneurial culture in Orangi, endless demand, and OCT’s selection of the target 

group, qualify this reason. 

• A few persons stated that they wanted to come out of low-paying jobs and start their 

own business which is why they opted for these credit services. For instance, a video 

shop keeper stated that he started working on a video shop at Rainbow centre at the 

age of 18. After 5 years of work, he realized that he had the experience and ability to 

start his own work rather than receive Rs. 100 per day. He did a quick market analysis 

and found that there were no audio shops in Orangi. He rented a place from his 

savings and started the business. The first loan he applied for was of Rs. 3000 to buy 

more cassettes back in 1998. In another two years, with the advent of mobiles, cds, 

and phone cards, he applied for a bigger loan to ensure that his shop served varying 

needs of the customers. This experimentation was hugely successful, he was able to 

pay off the loan rapidly and applied for an even bigger amount. In this way he 

expanded the business and has now received Rs 40,000, which he plans to use for 

buying the shop. 

• Data on women clients reveals support to the family as the main reason for taking a 

loan. While the male family members were engaged in small-scale businesses or jobs, 

they decided to use up their skills for providing for their families. Meeting 

educational expenses of children was another reason commonly cited. 

• Paradoxically, the deteriorating law and order situation, especially during 1992-99, 

and political clashes, became a strong factor due to which people opted for loans. 

While the business activities plunged, the rate of lootings and forceful commissions 

soared tremendously. As a result, people were unable to get their items sold on time 

and had to take loans to get fresh stocks of clothes, food, general goods, etc. 

Repayments of loans were difficult especially when they had to be returned in 10 

months, and many family units suffered. 

Loan Repayments and Social Collateral 

• Participants were satisfied with the processing of loans and termed it as ‘efficient and 

quick’. The new clients expressed their satisfaction with OCT’s policy of two 

guarantors also. However, the clients who have received their 3 rd or 5 th loan 

mentioned that OCT should not ask for two guarantors for every round especially 

when the credit relationship is a long and positive one. Such clients also expressed a 

desire for the loan amount to be increased beyond Rs. 50,000 along with an increase 

in the number of instalments. 

• A sense of collective responsibility could be seen amongst all clients when they were 

asked about repayments. They said that OCT and its staff work selflessly for the 

improvement of the entire area, and it is therefore mandatory for them to reciprocate 

those efforts in some way. Timely payment is one such way. Clients between the ages 

of 50-60 admired the sea-change OPP has brought in the area. 

Impact on Quality of Life & Social Consciousness 

• Clients attributed a peaceful and comparatively tension free lifestyle with the 

economic stability brought about by OCT loans. They felt that they are better able to 

take care of their families, spend time with their kids and have a social network 

16

mainly because they don’t have to worry about the next day’s income. One 

participant said, ‘many of our ambitions were fulfilled and the frustration level with 

the government systems and injustices has reduced considerably because we know we 

can do a lot better with little support.’ Women clients have also identified family 

unity and harmony as a direct outcome of the OCT programme. 

• Orangi already has one of the highest literacy rates in Karachi. Therefore, the clients 

were quite conscious of the importance of education, health, and political rights. 

However, responses of clients revealed that hopes of improvement are not pinned 

with the institutions or dominant system per se. Clients mentioned that they are 

sending their children to English medium schools only for their own development and 

enlightenment. They are very sure that they will not secure good jobs because of the 

poor system and public services. It is for this reason children are engaged in family 

enterprise and businesses. The culture of resilience, self-reliance and creative 

enterprise emanates from the hardships faced during migration. 

Non-Borrower’s Perspective 

• A very strong reason for not taking any loans is the parallel, indigenous, system of 

savings in Orangi town known as bisi or the committee system. Non-clients 

mentioned that through committees they save up to triple the amount which is given 

out by OCT. Interest free availability of money is another reason why committee 

system is preferred over taking loans. 

17


A.4.1.1 Institutional Snapshot 

Indicators December 2006 

Active borrowers (direct) 1264 

Active Borrowers (through NGOs) 11, 922 

Branches 1 

Affiliate/Partner Organizations 47 

Area covered (Direct) 

Orangi, Karachi 

Area/Districts Covered through Partners 421 across Pakistan 

Total disbursements(Rs.) 436,084,838 


Total employees 

16 core, 30 Loan 

agents 

Employee turnover (%) 

n/a 

Borrowers per staff 218 

Borrowers per Loan officer 

n/a 

Total income(Rs.) 225, 064, 811 

Total Assets (Rs.) 111,795,442.2 

Capital/Asset ratio 67.47% 

Operational self-sufficiency (%) 168.03 

Financial Self-sufficiency (%) 35 † 

Return on Assets (%) 8.01 

Return on Equity (%) 11.28 

Portfolio yield (%) 22.40 

Average Loan Balance per Borrower Rs. 14000 

Operating expense/Loan Portfolio 3.7% 

Portfolio at risk (>30 days) (%) 0.00% 

Cost per borrower 23.5% 

A.4.1.2 Product Profile 

Loan 

Product 

Purpos 

e 

Manufactur 

ing Loans 

Income 

Generation 

Trading 

Loans 

Income 

Generation 

Services 

Loans 

Income 

generation 

School 

loans 

Physical 

Infrastruct 

ure 

developm 

ent and 

training 

Farming 

and Fisher 

folk loans 

Income 

generation 

Loans for 

Thallawal 

as 

Income 

generation 

Skills 

building 

and 

infrastructu 

re 

Loan for 

Clinics 

Up 

gradation 

of 

physical 

and 

technologi 

Livestock 

loans 

Income 

generation 

† Source: PMN 2003 Performance Indicators. Recent estimates not available. 

18

Term/D 

uration 

Loan 

size 

improveme cal 

nt facilities 

15 months 15 months 15months 15months 15 months 

Rs.2000 - 

Rs.50,000 

Rs.2000 - 

50000 

Rs 2000- 

.50,000 

Rs.2000 - 

50000 

Rs.2000 

- 50,000 

Rs.2000 – 

Rs 50000 

Rs.2000- 

50,000 

Rs.2000 - 

50000 

Interest 

rate 

Repay 

ment 

term 

18% 18% 18% 18% 

Smaller 

loans have 

no service 

charges 

18% 18% 18% 18% 

Monthly Monthly Monthly Monthly Monthly Monthly Monthly 

Savings - - - - - 

Insuran 1% of loan 1% of loan 1% of 

1% of loan 

ce 

loan 

A.4.1.3 

Structure of Microcredit Programme 

CEO 

Loan Section Accounts Section 

Recovery officer Training Officer 

Loan Officer (01) 

Loan Manager (04) 

Assistant 

Agents 

Accounts Officer 

Accountant 

Computer Consultant 

Computer Officer 

Assistant 

Trainers 

19

Table - A. 4.2.1 


[OCT] 

Respondents % 

Respondent 

Category 

170 100.0 





Table - A. 4.2.2 


[OCT] 

Borrowers % 

Loan 

Taken 

110 100.0 

One 45 40.9 

Two 35 31.8 

Three 22 20.0 

Four 5 4.5 

Five 2 1.8 

Six 1 .9 

Table - A. 4.2.3 


[OCT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.6 17.1 35.3 100.0 

Proportion of Female 1.2 .6 

Formal Education No Education 19.8 13.8 18.3 18.2 

Primary 11.1 20.7 16.7 14.7 

Middle 28.4 20.7 18.3 23.5 

Metric 22.2 24.1 31.7 25.9 

Inter 13.6 17.2 13.3 14.1 

Graduate and above 4.9 3.4 1.7 3.5 

Technical Training No Training 76.5 75.9 78.3 77.1 

Have Training 23.5 24.1 21.7 22.9 

20

Table - A. 4.2.4 


[OCT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.6 17.1 35.3 100.0 



Goods Supplier 2.5 3.4 1.8 




Transport Service Provider 3.3 1.2 

Table - A. 4.2.5 


[OCT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.6 17.1 35.3 100.0 


4-6 Person 44.4 51.7 38.3 43.5 

7-9 Person 23.5 27.6 36.7 28.8 

More than 9 24.7 17.2 23.3 22.9 



21

Table - A. 4.2.6 


[OCT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.6 17.1 35.3 100.0 

House owners 87.7 89.7 70.0 81.8 





Table - A. 4.2.7 


[OCT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.6 17.1 35.3 100.0 





Table - A. 4.2.8 


[OCT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.6 17.1 35.3 100.0 




Poor Households (% below Official 

Poverty Line) 

16 14 22 18 



22


The Official Poverty Line figure is Rs 1,000 per capita per month – see Montgomery (2006) 

Table - A. 4.2.9 


[OCT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 










Table - A. 4.2.10 


[OCT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 



No Vaccination 5.7 4.4 4.5 


Table - A. 4.2.11 


[OCT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 




23

Table - A. 4.2.12 


[OCT] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 










Table - A. 4.2.13 


[OCT] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 







Gas 2 2 2 2 


Rent 2 1 6 3 






- Fruits (days) 10 8 10 10 

- Eggs (days) 10 9 9 10 

24

Table - A. 4.2.14 


[OCT] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Own House 90.1 89.7 70.0 82.9 

Refrigerator 70.4 55.2 55.0 62.4 

Colour TV 82.7 69.0 73.3 77.1 

Motor Cycle 45.7 34.5 23.3 35.9 

Prize Bond 3.7 3.4 8.3 5.3 



Bed with Foam 48.1 34.5 43.3 44.1 

Urban Property 14.8 17.2 1.7 10.6 

Gold 55.6 58.6 50.0 54.1 

Mobile phone 74.1 82.8 51.7 67.6 


Table - A. 4.2.15 


[OCT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Permanent on Monthly Salary 3 3 2 3 


Seasonal/Occasional 4 2 4 




Machinery 46222 17207 62142 46891 

Instruments 5167 8172 5260 5713 

25

Table - A. 4.2.16 


[OCT] 

Borrowers 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

81 29 110 

73.6 26.4 100.0 

Loan was used by: Self 100.0 100.0 100.0 


Table - A. 4.2.17 


[OCT] 

Borrowers 

Loan was 

used for: 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

81 29 110 

73.6 26.4 100.0 

Business Activity 92.6 93.1 92.7 

Repayment of debts 1.2 .9 

Consumption 

6.2 6.9 6.4 


Table - A. 4.2.18 


[OCT] 








Picture Requirement 1.2 


Requirement of Utility Bill 1.2 

Complicated Procedures 2.5 

Staff Bad Behaviour 2.5 


Too many Documentations 3.7 

Too many visits 1.2 


26

Table - A. 4.2.19 


[OCT] 

Loan Taken 

One Two Three Four Five Six 

Overall 

Number of Borrowers 25 31 18 4 2 1 81 

Sale of asset/Sale of Animals 16.0 6.5 11.1 9.9 

Borrow loan from relative/friends 68.0 74.2 44.4 100.0 100.0 66.7 

Borrow loan from Microfinance 12.9 11.1 7.4 


Banks 

28.0 9.7 12.3 

Borrow from 

Moneylender/Commission agent 3.2 1.2 


Search for extra work 3.2 5.6 2.5 

Extra hours in existing occupation 4.0 1.2 

Have Enough Saving 12.0 16.1 27.8 100.0 17.3 



Table - A. 4.2.20 


[OCT] 

Loan Taken 


Overall 


Effect on quality of 

life 

Improved 

Deteriorated 

No Change 

56.0 64.5 66.7 100.0 61.7 

8.0 9.7 6.2 

36.0 25.8 33.3 100.0 100.0 32.1 

Family eat your fill As much as wanted (all types) 68.0 87.1 83.3 100.0 100.0 100.0 81.5 


Sometimes felt hunger 4.0 1.2 

Have more to eat now Have more to eat now 24.0 32.3 50.0 75.0 100.0 35.8 


Equal 64.0 61.3 44.4 25.0 100.0 56.8 

Family health Health is better now 20.0 32.3 38.9 75.0 30.9 

Sustainable increase 

in income 

Health was better earlier 8.0 11.1 4.9 

Equal 72.0 67.7 50.0 25.0 100.0 100.0 64.2 

Yes 

68.0 83.9 66.7 100.0 100.0 100.0 76.5 

No 32.0 16.1 33.3 23.5 


27

Table - A. 4.2.21 


[OCT] 


Overall 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 

Number of Non-Borrowers 30 30 60 

100.0 100.0 100.0 


No 40.0 70.0 55.0 

Do not need 46.7 6.7 26.7 



Do not know office address 6.7 3.3 

Application Rejected 3.3 1.7 

Religious Reason 3.3 1.7 


Table - A. 4.2.22 


[OCT] 

New 

Borrowers 


Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 

Overall 




Borrow loan from Microfinance 6.9 3.3 10.0 6.7 


Banks 

13.3 4.5 

Reduce Consumption Expenditure 6.9 6.7 3.3 5.6 

Search for extra work 3.3 1.1 


Have Enough Saving 13.8 30.0 14.6 



28

Table - A. 4.2.23 


[OCT] 

New 

Borrowers 


Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 

Overall 


Effect on overall quality of 

life 

Family eat your fill 

Have more to eat r 



Improved 72.4 20.0 26.7 39.3 

Deteriorated 3.4 33.3 20.0 19.1 

No Change 24.1 46.7 53.3 41.6 

As much as wanted (all types) 75.9 56.7 43.3 58.4 


Sometimes felt hunger 3.3 1.1 

Have more to eat now 51.7 6.7 33.3 30.3 


Equal 41.4 70.0 50.0 53.9 



Equal 55.2 33.3 60.0 49.4 

29

Chapter Five: Akhuwat 



Akhuwat was established in 2001 by Dr. Amjad Saqib and his friends with the objective 

of providing interest free credit to the poor so as to enhance their standard of living. At 

the time Dr. Saqib was working at the Punjab Rural Support Programme (PRSP) and 

found the 20 percent interest charged on the loans, disturbing. One reason was the fact, he 

felt, that it was in direct conflict with the teachings of Islam, and the other was that in the 

formal banking sector the interest was much lower, which was available to ‘creditworthy’ 

affluent individuals. Therefore, he wanted to start a microfinance programme where the 

loans were in the form of Qarz-e-Hasna 1 . With an initial donation of Rs.10,000, Akhuwat 

was formed and the first loan was given out to a woman. 

Akhuwat derives its name from ‘mua-khaat’ or brotherhood, which was first exhibited by 

the citizens of Madina when they shared their wealth with the ‘muhajirin’, the immigrants 

from Makkah. The philosophy is based on the premise that poverty can only be 

eliminated if society is willing to share its resources with the poor and needy. For 

Akhuwat, microcredit is a means to an end and not an end in itself; the end is a vibrant, 

economically strong society, based on sharing resources. 

For the initial few years Akhuwat was simply a philanthropic venture to see how interest 

free microfinance would do, but by 2003, the donations had increased to Rs. 1.5 million 

and the loan recovery rate was 100 percent. Consequently, it was decided to formalize the 

organization and Akhuwat was registered under the Societies Registration Act of 1860. 

At present, Akhuwat has 13 branches in the Punjab and 7,150 active clients, and it has 

disbursed over Rs 150 million over five years. Over the years, Akhuwat has stayed true to 

its mission of helping the underprivileged with interest free loans and provides various 

loan products to meet the needs of its clients. To increase the outreach of interest free 

loans, Akhuwat has partnered with individuals in other cities to start similar initiatives. 

Akhuwat is rapidly gaining legitimacy and in the last one year FY 2005-06 its acceptance 

has increased immensely as the organization received donations worth Rs. 30 million for 

its noble cause. 

Till 2003 Akhuwat worked on a small scale out of the PRSP office with Dr. Saqib and 

one more employee handling the operations; but once the donations increased, the 

organization was formalized and the first branch in Township, Lahore, was established, 

1 Helping someone in need with interest-free loans; these are preferred over charity.

which also became the head office. The loan product offered was the enterprise/family 

loan which was for business purposes. 

The main growth thrust for Akhuwat came in 2003 when the Governor of Punjab, Lt. 

General (Retd) Khalid Maqbool, found out about their work and wanted to observe it in 

practice. He visited Akhuwat and met with clients, which generated ample publicity. The 

donations increased and so did the applications for the loans, and now approximately 

1,000 new loans are given out every month in Lahore. Figure 5.1 shows the increase in 

the number of loans over the years and from 2004 to 2005 the loans have increased by 

almost 300 percent. 

Figure 5.1 

Number of Loans 

5000 

4000 

3000 

3135 

4398 

2000 

1000 

0 

836 

192 283 

2002 2003 2004 2005 2006 

Year 

Akhuwat’s management has stated, that ‘the Programme is non-political and non– 

sectarian. Muslims from all sects are welcome in the mosques. There is no gender 

discrimination in the mosque. Women also come to mosques to get loans. Christians are 

also welcome in mosques. Akhuwat derives its inspiration from the Islamic spirit of 

mua’khat but its message is for all people of this country. Quite a large number of 

borrowers are Christian who are given loans in mosques. Akhuwat also works in a church 

in collaboration with Christian religious leaders’. 


Akhuwat is governed by a Board of ten members, consisting of philanthropists, civil 

servants and businessmen. The main responsibility of the internal governance rests with 

the Board. Their role has been well defined in the Articles of Association and they 

formulate and approve policies, and provide guidance and direction on different matters. 

The Board meets quarterly to review operations and take policy decisions. Another 

salient responsibility of the board is to provide marketing services for Akhuwat and 

mobilize funds for loans. A Board review takes place every three years where a change in 

board members might take place depending on the availability of the existing members 

and the needs of the organization. 

2

Akhuwat is run by Dr. Amjad Saqib who is the Executive Director, as well as the 

Chairman of the Board. The organizational structure of Akhuwat (see Appendix) mainly 

consists of the Operations department, and matters pertaining to the Human Resources, 

IT and other issues are handled by the Programme Manager. This system works for 

Akhuwat as it is still a small organization with a 52 person team. Apart from the 

Programme Manager, the Executive Director is supported by a Finance Manager and an 

Internal Auditor. Two advisors, for Finance and Credit, work on a voluntary basis and 

meet with the Branch Managers on a monthly basis or more frequently if an issue comes 

up. Dr Saqib and all the Board members have also worked on an honorary basis since the 

beginning, as they felt drawing their salary out of donations would be inappropriate and 

that it undermined their cause. Subsequently, the top management has no financial 

interest and work purely out of benevolence. There are many other volunteers working 

for Akhuwat who help in retrieval of payments and other matters. According to Dr. 

Saqib, Akhuwat is a blend of volunteerism and necessary compensation. 

As loans are interest free, it is imperative for Akhuwat to keep the costs low. Apart from 

the fact that the senior management gets no remuneration, the organizational setup has 

been kept very simple. The organization does not own any vehicle and the staff are 

expected to go about on local transport or their motor-cycles, for which they are 

reimbursed. The offices are small and simple, with very little furniture and ‘farshi’ 2 

seating arrangements. 

The Head Office also acts as one of the branches and is responsible for managing 

individual loans. The Programme Manager leads a team of two Area Managers, each 

responsible for four branches. Each branch is run by a Branch Manager, who leads a team 

of 4-6 Unit Managers, who are responsible for the field operations of Akhuwat. Some 

branches have a steering committee, comprised of 5-7 prominent individuals living in 

that area and two from Akhuwat, generally the Area and the Branch Managers. The job 

of the committee is to oversee all the functions of the branch and also to mobilize funds 

in their respective areas. 


5.1.3.1 Group Loans 

Akhuwat started lending with the group methodology in 2001 and introduced individual 

loans in 2003. The current plan is to phase out group loans and concentrate on individual 

lending. As of June 2006, Akhuwat has not formed any new groups and is waiting for the 

end of the loan cycles of those formed earlier. The reason for phasing out group loans is 

that the group leaders were found to manipulate their position and extort money from the 

borrowers for group membership. Most group members were selected on the basis of 

their popularity in the locality and not on their genuine need for credit. The LO was also 

sidelined by the President of the group and told that they themselves would take 

responsibility of recovery and that the LO did not have to worry about it. Another 

2 Seating arrangement on the floor with cushions and low tables. 

3

problem of group lending is that meetings are weekly and if the recovery is not 100 

percent then the whole group has to wait till the recovery is completed. 

Akhuwat’s Group lending programme only focused on women who were organized in 

Self Help Groups (SHGs) of 10 members each and thus relied on social collateral. In each 

group a president and a manager were elected through consensus and the group 

collectively had to save Rs.3,000 before it could become eligible for receiving loans. 

After that, group members would receive loans by turn and as the responsibility of the 

repayment fell on the whole group, it was prompt. The loan has no interest on it, but Dr. 

Saqib feels that some of the cost of the credit has to be transferred to the clients or they 

would not value the loan and it will be like a free meal. So, five percent of the loan is 

charged as a membership fee and this makes the process professional and not charity as 

people demand better services when they pay the fee. 

In group lending, meetings are fortnightly, which allows for frequent interaction between 

group members and Akhuwat staff. At the meetings, routine collection of loan 

instalments and savings takes place as well as discussion of grievances and problems of 

group members. The outcome of these latter discussions have been very constructive as 

Akhuwat arranged for a tutor to coach community children during one summer and has 

set up several health camps. 

Figure 5.2 

Disbursements 

Millions 

35 

30 

25 

20 

15 

10 

5 

0 

30.2 

12.8 

7.8 

5.1 

0.8 1.2 0.2 

2.4 2.6 

2002 2003 2004 2005 2006 

Year 

Group Loans 

Individual Loans 

5.1.3.2 Individual Loans 

Akhuwat has a large portfolio of individual lending with a total of 14,711 beneficiaries 

and it has devised a rigorous appraisal method to ensure maximum recovery. In 2005, 

individual loan disbursements grew by almost 390 percent and in 2006 they grew by 135 

percent as can be seen in Figure 5.2. A prominent feature of individual loans is that they 

are marketed through mosques and the disbursement of the loans also takes place in 

mosques. Each branch is associated with a particular mosque and is located within or just 

outside the mosque’s premises. An introduction to the programme is given after prayers 

when people have congregated there. According to Dr. Saqib, the decision was deliberate 

as he states, ‘for far too long, we limited the use of mosques to just prayers. In between, 

they are desolate. With our offices in mosques, we have saved tremendously on 

4

operational costs. We don't pay rent or utility bills’. 3 Furthermore, it increases the 

participation of people. It also attaches a religious sanctity to returning the loan on time 

as the concept of accountability is intensified as it is a place of worship and also gives the 

whole process a feel of ‘barkat’. 4 The management of Akhuwat believe, that ‘in a 

Muslim society, mosque has always been a centre of community interaction. We also 

want to utilize this institution for the betterment of people living around it. We also like 

to work in churches as one of our branch was established in a famous church of Lahore’. 

The loan process involves interested individuals submitting their application, which is 

simply a letter requesting for a loan with their business idea, at the mosque or the branch. 

After that the Unit Manager undertakes an economic and social appraisal of the applicant 

which includes visiting and interviewing people at his residence, neighbourhood and 

place of work. The applicant and the guarantors are interviewed at the mosque. 

In the appraisal process the Unit Manager has to evaluate whether the applicant is 

deserving and the rule used is that the household’s per capita income has to be less than 

Rs.1,000. The business idea is evaluated to see if it is viable and whether it can generate 

income beyond the household expenses of the individual so that he/she can easily repay 

the loan. The applicant’s family is interviewed to make sure they know about the loan 

and support the business idea and the applicant’s spouse has to sign the loan application. 

Akhuwat believes that the support and involvement of the family is very important for 

credit recovery and therefore, closely involves them in the loan disbursement process. 

They view the family as a cohesive unit and involve everyone in the process. Akhuwat 

believes that all household members work collectively to maximize the benefits for the 

whole family. Therefore, recently the name of the individual loan for productive purpose 

has been changed to ‘Family Loan’. 

Once the Unit Manager completes the appraisal, he passes on the application to the 

Branch Manager who undertakes his own appraisal of the applicant. Once that is 

complete, the application is discussed at the meeting of the credit committee which 

comprises of all the Unit Managers of the branch, the Branch Manager and the Area 

Manager. In summary, the main aspects looked at before loan approval are the skill and 

reputation of the applicant, whether he is below the poverty line and that he is not a 

criminal nor a drug addict. If the credit committee approves the application, the loan is 

disbursed to the applicant at the mosque. The appraisal process has to be completed by 

the branch within 30 days. 

Disbursement in mosques takes place twice a month and the borrower has to be 

accompanied by one of his guarantors at the time. The other people present at the 

disbursement include community members, and Akhuwat staff from the branch and head 

office. However, before receiving the loan the applicant has to become a member of the 

organization and that requires paying a membership fee equivalent to 5 percent of the 

loan amount. In addition, the applicant also has to pay 1 percent of the loan amount to 

3 Zofeen Ebrahim, “The microcredit success story”; Dawn, 5 th February 2006 

4 Blessing 

5

uy insurance, which covers the risk of death or becoming handicapped. In case of death 

the loan is written off and the family is provided Rs.5,000 for funeral expenses. If the 

client was the only earning member of the household then the family is provided with 

Rs.1,000 a month for three months to meet basic expenditures. If the client becomes 

handicapped then again the loan is written off and he is provided a wheelchair. 

Akhuwat’s management contemplated partnering with State Life Insurance Company for 

insuring its clients but the Board rejected the proposition as the company did not invest 

its money in accordance to the Shariah 5 . Therefore, they simply kept the insurance 

money in a current account though now they have moved it to MCB and Bank Alfalah 

Islamic Banking. 

Once the loan has been disbursed, the Unit Manager has to monitor the client with regular 

visits to his residence and place of work. The loan repayment has to be submitted at the 

branch by the 7 th of each month. If a payment is not in by the 10 th , the Unit Manager 

visits the client a few times to remind him and if he still does not pay then the guarantors 

are contacted and asked to make the payment. In case the client has a genuine reason for 

not handing in the repayment he is given some leeway and a new date is set by which he 

(or his guarantor) has to give in the loan instalment. The borrower, however, has to make 

all payments by 30 th of the same month as the Unit Manager has to closely monitor each 

individual client, they are responsible for only 250 to 300 people. This is much lower 

than what Loan officers handle in group lending methodology because in that they 

manage groups as opposed to individuals. 

When loans are renewed, the main aspects looked at are how the loan was used and 

whether it has benefited the borrower. The loan is renewed only if he was regular in 

returning the instalments, if he used the loan correctly and if it benefited him and his 

household in the final analysis. On average, about 40 percent of clients are given loans 

again based on their need and how they used the loan and whether it benefited them or 

not. Like mainstream MFI’s Akhuwat does not work on minimizing dropout clients as it 

wants to reach out to a large number of people. 

Akhuwat also has liberation loans, of which there have been more than 700. These people 

were paying interest at 100 to 200 percent, which translates to Rs 2000 to 3000 per 

month. By availing a liberation loan, they have been able to get rid of this exploitation. 

They are also said to feel empowered and socially integrated. There are also loans for 

health, education and a daughter's marriage, which are supposed to have had a 

phenomenal impact. 


5.1.4.1 Family Loan 

The most common loan type is the one for setting up or expanding a business, called the 

Family Loan as explained in the last section and this comprises of 91 percent of the 

5 Islamic Law 

6

individual lending portfolio. The loan amount can range from as little as a few thousand 

rupees to Rs. 25,000; the exact amount is decided by the credit committee based on the 

need and business plan given by the applicant. The most common amount for the first 

loan is Rs.10,000 and the instalments are Rs.1,000 every month. Usually an effort is 

made that the instalment structure is such that the monthly payment comes out to be 

Rs.1,000 a month so that it is easy to remember for the client. In subsequent loan cycles, 

the amount of the loan is raised by Rs.2-3,000. 

5.1.4.2 Liberation Loan 

This loan is for people who have borrowed from moneylenders and are paying exorbitant 

interest rates on the loan. Akhuwat pays off the principle amount in one go for the client 

and then the client repays it to Akhuwat in instalments. It comprises 5 percent of the 

Akhuwat loan portfolio as given in Table 5.1. Liberation loans are approved from the 

head office and if they are unusually large, more than Rs.25,000; the Executive Director 

approves it. 

5.1.4.3 Housing Loan 

A housing loan has also been offered since the last year and is in the range of Rs.40- 

50,000 and has to be repaid in two years. This loan product has been offered in 

collaboration with Al-Noor Umar Welfare Trust, another voluntary organization. 

5.1.4.4 Other Products 

The other products offered are Health, Marriage and Education loans. Although these are 

non-productive loans, but important events can cause a major stress on the poor, therefore 

they are being offered by Akhuwat. The maximum amount loaned is Rs.15,000 but 

generally the amount is Rs.10,000. The loan for wedding expenses is specifically for 

daughters or sisters of the poorest of the poor. These loans have to be repaid within the 

year. 

Table 5.1: Loan Portfolio Distribution 

Loan Product Number of Loans Portfolio % 

Enterprise 13,351 91 

Liberation 762 5 

Housing 147 1 

Education 132 1 

Marriage 218 1 

Health 101 1 

Total 14,711 100% 

Akhuwat staff also provide technical training to its clients. They make the latest 

knowledge and market information available to the clients so that they become more 

efficient. Clients who lack expertise are taught and trained in the vocations of their 

interest. They may do ‘internships’ with borrowers who are already running some 

specific enterprises and are desirous of imparting skills to others. Akhuwat coordinates 

7

activities with other NGOs and Social Welfare Organizations so that social services can 

reach their own clients. Akhuwat focuses especially on education and health because 

these are basic necessities and the right of every individual and have benefits beyond the 

individual himself (externalities). Legal aid has also been provided to the needy by a 

team of volunteer law students through one of the Board member who is a lawyer and 

Principal at a local Law College. 


5.1.5.1 Human Resources 

Akhuwat has a low staff turnover rate which since December 2004 has been 

approximately 3 percent. This reflects the high commitment and motivation of the staff. 

Most of the staff has received thorough training in microfinance and related aspects. 

Akhuwat has a well defined recruitment policy and vacant positions are filled with 

suitable candidates having requisite qualifications. New hires start as interns and go 

through an intensive three month training regimen before they are made staff members. 

The educational level required for Unit Managers is Matric or F.A., while that for Branch 

Managers is F.A. or B.Com., therefore it is relatively easy to find and retain staff. 

Applicants for new jobs are generally found by word of mouth and by placing notices 

outside branches. 

Unit Managers get a bonus for 100 percent recovery in their monthly pay and if they have 

disbursed more than 150 loans and are meeting their monthly target of disbursing 25 

loans a month, they are eligible for an interest free loan to purchase a motorcycle. 

Akhuwat also provides its staff with some medical facilities and educational allowance 

for their children. Furthermore, staff members get an extra month’s salary every Eid. 

Akhuwat maintains a well documented Manual covering operations, administration and 

human resource issues. The management keeps adding new information to the Manual as 

it becomes policy; Akhuwat started with a 15 to 20 page Manual and now have increased 

it to approximately 60 pages. In the Manual, the job descriptions of all personnel are 

clearly laid down as are branch administration guidelines. For Akhuwat, the Manual is 

also a tool to pass on to other people/organizations interested in starting similar projects. 

Table 5.2 shows the number of employees and borrowers per staff over the years. The 

growth in employees started from the third year on and by March 2006, the number of 

employees had risen to 45. The borrowers per staff are around 98, this is below the 

industry average of 147, however, Akhuwat’s major portfolio is invested in individual 

lending and that requires extra monitoring. 

8

Table 5.2: Number of Employees and Borrowers per staff 

Year No. of Employees Borrowers per staff 

2002 3 64.0 

2003 3 94.3 

2004 12 69.7 

2005 32 98.0 

2006 45 97.7 

5.1.5.2 Competition and Expansion Strategy 

Akhuwat has shown rapid growth since 2003. In the last year alone it has opened five 

new branches and expanded its client base by 4,000 clients. The organization has been 

able to mobilize higher donations as people have learnt about its programme and 

appreciate the nobility with which it is being run. It is based on Islamic values and 

appeals to the religious minded. 

The Board is responsible for reviewing the performance of the organization and in 

deciding how to expand the outreach. However, growth is linked with the credit pool and 

the amount of donations received is unpredictable. The growth plan for the current year 

FY 2006-07 was to disburse 10,000 individual loans and open branches in eight new 

cities. While the growth plan for the next year is to double the numbers achieved in this 

year. 

For expansion into other cities, Akhuwat is looking for partner organizations. The 

partnership can vary from just providing funds to Akhuwat to run the operations, to 

Akhuwat training the staff and setting up the branch and leaving the operations to the 

partner organization. Ideally, Dr. Saqib envisages the future as one where Akhuwat 

would play the role of an apex organization using its credit pool as equity to assist partner 

organizations and help them run operations in cities outside Lahore. In this scenario, 

Akhuwat can provide financial and technical support to its partners. For Dr. Saqib, 

success is not confined to sustainability figures it also entails how widely the model is 

replicated, and how effectively and efficiently the poor are served. ‘Numbers overwhelm 

but saving the life of one person is akin to save entire mankind. While doing so, one must 

also observe the limits set by Allah Almighty’. This is what Dr. Saqib and other Board 

Members firmly believe. Currently, Akhuwat is in discussion with organizations in 

Peshawar, Multan, Gujrat and Jhelum. 

However, Dr. Saqib feels that their primary responsibility is to work in the areas of 

Lahore, where he and other board members live. People of other areas should work in 

their own locales. They do not feel pressure to grow as they are dependent on resources 

donated by civil society. For Akhuwat, this work is a long term ongoing process. 

Akhuwat management feels that they are not in competition with other MFIs because 

they have a different model and they do not charge interest, nor do they take funds from 

the same sources as other MFIs. Furthermore, the market is still quite open, so Akhuwat 

does not feel threatened by competition from commercial players. 

9


As Akhuwat is registered as a society, it does not have to comply with the State Bank of 

Pakistan’s regulations for MFIs. The rules for societies are not as stringent and Akhuwat 

easily fulfils them. Recently, Akhuwat got a tax exemption certificate from the Pakistan 

Centre of Philanthropy. It was awarded after a complete scrutiny of internal governance, 

financial management and programme delivery of Akhuwat. Akhuwat is also registered 

with the Pakistan Microfinance Network and has to share information with them on 

certain indicators which promotes transparency of their operations. The only constraint 

Akhuwat finds in the regulatory environment is that it cannot use the savings it collects 

from its members for onward lending. 


Akhuwat has a computerized accounting and management system both at the Branches 

and the Head Office. The system was borrowed from PRSP at inception and is still being 

used. The software can generate 40 different kinds of reports for tracking operational and 

financial performance on a regular basis along with efficient tracking of the overdue 

portfolio. However, new software has been designed by the help of FFSP customized to 

Akhuwat’s needs and is currently in the testing phase. The software is more 

comprehensive and will be better suited to the microfinance operations of Akhuwat. 

In terms of reporting, information from all the branches is sent to the Head Office for 

consolidation. The branches send liquidity status and cash flow reports to the Head Office 

on a weekly basis to enable it to monitor compliance with the cash reserve regulations. 

The financial statements (balance sheets, profit and loss accounts), summary of loan 

releases, list of current accounts and list of overdue and past-due accounts, are sent to the 

Head Office on a monthly basis for monitoring and consolidation. 

5.1.5.4 Audit System and Financial Planning 

The organizational structure is well defined and the hierarchies provide various internal 

checks. The Area Manager spends one day a week in branches under his control, while 

the Programme Manager visits branches every 15 days. The Finance Manager visits the 

branches monthly; the Internal Auditor audits the branches quarterly, while an external 

auditor appraises the branches annually. The Executive Director makes surprise audits, 

while the Steering Committee also has to oversee all the functions like credit quality, 

recovery and so on. The finance and credit advisors also review the performance and 

policies with all the branch managers on a monthly basis. Therefore, there is constant 

inspection going on and the status of recoveries and targets is being checked. This also 

prevents accounting errors and helps in identifying any misappropriation, leakage or 

pilferage. 

The finance department prepares the overall budget for the organization. All financial 

transactions are properly maintained such as a cash book, salary ledger and so on. A 

professional Chartered Accountant reviews the accounts annually. Budgets and financial 

targets are set several times during the year based on available funding. As soon as funds 

are available, Akhuwat tries to increase its target disbursement so that they are loaned 

10

out. Targets are also set at the branch level, where Area and Branch Managers together 

decide on the targets. 

Budgets for all kinds of branch expenses, like telephone, stationary, and so on, are also 

set and if these are exceeded, the branch staff has to pay them out of their own pockets. 

Four of the branches are decentralized and they have to give out a minimum of 125 loans 

to meet their expenses and to contribute (10) percent of their membership fees towards 

the Head Office expenses. If they have left-over funds, then these are transmitted to the 

Head Office every few months. The decentralized branches make their own cheque for 

disbursement, can approve loans up to Rs.25,000 and take care of their own expenses. 

The other branches send the approved applications to the Head Office, from where the 

loan cheques are issued, as are their own salaries and other expenses. Gradually all 

branches will be decentralized. 


The membership fees are the main funds from which operational expenses are met. They 

help cover 76 percent of the expenses. Akhuwat, generally, does not use the grants it 

receives to cover the operational costs, they are only used for onward lending. Therefore, 

the 24 percent shortfall is covered by the Board of Directors. Akhuwat‘s percentage 

recovery since it was established has been 99.7 percent and the PAR>30 is 0.1 percent. 

This PAR>30 is a lot healthier than the industry average of 3.2 percent. Akhuwat’s Yield 

on Portfolio is only 5 percent and lower than the industry average of 18 percent, but this 

is understandable considering Akhuwat provides interest free loans. Akhuwat writes off 

loans in its accounts after two years, however not in its operational records as they feel it 

is their responsibility to get the money back. 

The portfolio is geographically concentrated in the area of Lahore; however, Akhuwat 

has opened some branches in other areas recently. In terms of the activities the loans are 

given out for, the portfolio is reasonably diversified with loans given for rickshaws, fruit 

and vegetable carts, grocery stores, establishment of PCOs, stitching, sewing, plumbing, 

working as black smith, electrician, cobbler, barber, opening beauty parlours, preparing 

leather goods, book binding, kite making, and so on. 


5.1.6.1 Funding Mobilization 

One of the key functions of the Board is to mobilize funds for Akhuwat. The Steering 

Committee of each branch also has to undertake initiatives to mobilize funds. Every year 

before Ramzan, the organization hosts a function for fund-raising and invites 500-1000 

people. Akhuwat has been widely written about in the press and that has helped raise 

funds as well. Akhuwat has a website with details on how to donate, so people who hear 

and are interested in donating, can visit the website. 

Akhuwat has an awareness campaign in which it sends letters requesting donations to 

members of different associations such as the Chambers of Commerce. Some volunteers 

11

are also working on a marketing plan for funds mobilization. The Board also tries to 

identify partner organizations which can help with bringing in funds. 

5.1.6.2 Asset, Liability and Equity Composition 

Akhuwat’s asset utilization (percentage of assets comprising loan portfolio) is around 78 

percent and this is better than the industry average of 42.5 percent. This high rate of asset 

utilization will allow Akhuwat to increase its profitability rather than leaving the assets 

idle as cash. Akhuwat has very few liabilities as it does not borrow to finance its 

microfinance operations. Its operations are exclusively financed by grants and donations, 

and over the years, Akhuwat has received more than Rs.60 million as grants. Last year 

Akhuwat received almost Rs.30 million (Figure 5.3) in grants and this was an increase of 

158 percent on the previous year. 

Figure 5.3 

Millions 

30 

25 

20 

15 

10 

5 

0 

Grants received 

28.35 

10.99 

7.15 

0.97 1.82 

2002 2003 2004 2005 2006 

Year 


The organization’s performance on profitability and sustainability has been steadily 

improving. However, as Akhuwat does not charge any interest on its loans, and only 

charges a membership fee of 5 percent, it is unable to cover its costs which stand at 7 

percent. Nonetheless, as Akhuwat increases its outreach it will be able to lower the cost 

and in time will be able to cover its operating expenses. Similarly, OSS and FSS were 77 

percent for 2006 and show that Akhuwat is not sustainable at the present as it cannot 

cover its operational and financial expenses. But, Akhuwat’s operational efficiency is 

very high at 7.13 percent, while the industry average is 22.4 percent. In this regard, 

12

Akhuwat is performing much better than its peers and due to this indicator, Akhuwat will 

be able to achieve sustainability in time. 

Akhuwat has an impressive lending model built on local traditions and it would be more 

than 100 percent sustainable if it were charging interest on its loans as its recovery is 

almost 100 percent, and operating expenses are very low. But the premise on which the 

organization has been established, prohibits it to charge any interest; consequently, as 

outreach increases over time and costs per borrower fall due to economies of scale, 

sustainability will also increase. 


In this section we present the results from our survey for Akhuwat. The results are based 

on the data collected on the basis of the questionnaire – see the Appendix of the Report. 

A select few of the results are presented here in table form, in the main text of this 

Chapter, while the substantial majority of tables are presented in the Appendix of the 

Chapter. The Appendix to this Chapter contains the largely ‘descriptive’ tables and 

results, while the tables which are part of the text in this Chapter, are the more 

‘analytical’ tables. In the Appendix to this Chapter, there are far more tables than those 

on which we offer comments in the text. Many of these tables are simply informative and 

so we do not discuss them in the Chapter. They are being provided for the reader’s own 

interest and perusal. Only the more interesting, striking or pertinent results and tables 

from the Appendix are discussed in the text. 














years, and ‘new’ areas where they are about to enter an identify and enlist clients. 








13


Since Akhuwat has been in operation just a few years, almost all of its clients are still 

only in their first or second loan cycles. Clearly, any ‘impact’ of the intervention by 

microfinance institutions, is highly tenuous, and at best, slight and partial. We would 

expect little to have changed in a matter of two years, and to find not much significant 

difference between Active Borrowers, Pipeline Borrowers and Non-Borrowers. Most of 

the tables in the Appendix suggest so as well. 

Most of Akhuwat’s clients, are involved in ‘business/retail shops’ or are ‘personal 

community service providers’ – Table A.5.2. In terms of Housing Quality – Table 

A.5.2.6, there is very little difference between the three categories, nor is there in the 

access to Services. This is not a surprising result since we expect most people to have 

similar sort of residential facilities if they live in the same, or similar, neighbourhood. 

Table A.5.2.4 shows the Economic Status of Akhuwat clients compared to their 

neighbour Non-Borrowers, and the results suggest that the Per Capita Income of Active 

Borrowers is greater than it is of other categories. However, on the basis of the Official 

Poverty Line, only 15 percent of Akhuwat’s clients fall below this threshold, implying 

that like almost all MFIs in our sample, Akhuwat is concentrating on that category of 

client who is above the Poverty Line. The Health and Education characteristics of all 

three categories, as in the case of most other MFIs in urban areas, are not very different 

from each other. 

The perceptions of clients and non-clients about various aspects of their lives, make 

interesting reading. Table A.5.2.26 on the perceptions of clients over the loan cycle about 

how well they eat, seem to suggest that the longer they stay with the programme, the 

greater the impact in terms of improvement in quality of life and diet, on their lives. This 

result is similar to that of other MFIs. On most welfare questions, the longer they have 

been with the programme, the better they think they are doing. However, even more 

interesting is Table A.5.2.29, where the perceptions of New (Pipeline) Borrowers are 

tabulated. What is particularly noteworthy in this table is, that Pipeline Borrowers who 

have just started in the programme a few months ago, have a very positive perception of 

the impact of the microfinance programme. 

As we show in Chapter 2 in the Methodology Section, in the first-best state, a key 

requirement of impact studies is that clients-to-be or new clients, not be ‘contaminated’ 

with news and information of microfinance activities. However, as we argue, in urban 

Pakistan today, this is not possible, since with numerous small and large, official and 

donor programmes funding microfinance, there is a huge amount of information available 

about microfinance services. Table A.5.2.27 confirms this view that a large proportion of 

Non-Borrowers are aware of credit facilities. 

Tables 5.2 to 5.7 in this Chapter confirm earlier argument that it is improbable that one 

will see any impact between Active Borrowers and new entrants in the programme or 

amongst Non-Borrowers. All three tables suggest that any difference between the two 

14

categories, if any, is not significant. In fact, in no category do we find any significant 

difference between those who have been in the programme for two years – Active 

Borrowers – and those who are not in the programme. 

As in the case of many MFIs, these results do not reflect upon the workings of Akhuwat 

and nor does it show that microfinance does not work. Rather, as we argue in Chapter 2, 

the time required for impact to be noticeably observed and quantified, is considerably 

greater than the period most of our MFIs have been in business for. 

Table – 5.2 

AKHUWAT – Housing 


Deviation 

t-value 

Significance 

Level 

House owners Active Borrowers 78.1250 41.46966 .320 .749 




Houses with baked bricks Active Borrowers 98.1250 13.60667 .224 .823 


Houses with RCC Roof Active Borrowers 84.3750 36.42322 1.174 .241 


Houses with Cemented Floor Active Borrowers 72.5000 44.79162 1.807 .072 





Table – 5.3 

AKHUWAT – Economic Status 


Deviation 

t-value 

Significance 

Level 

Expenditure Per Capita Active Borrowers 1422.3281 577.00095 1.542 .124 

New and Non- 

Borrowers 

1328.6200 542.99927 

Per Capita Food Expenditure Active Borrowers 693.7873 347.77198 1.764 .079 

New and Non- 

Borrowers 

628.9586 329.48707 


New and Non- 

Borrowers 

1411.6488 624.06628 

Household Asset Score Active Borrowers 7.17 2.458 .154 .878 

New and Non- 

Borrowers 

7.13 2.436 

Value of household assets Active Borrowers 490050.2239 590787.49174 -.234 .815 

15

New and Non- 

Borrowers 

506072.7273 586851.50630 




Table – 5.4 

AKHUWAT – Children Education 


Deviation 

t-value 

Significance 

Level 



School Going Children - Boys % Active Borrowers 80.3571 36.59394 -1.096 .275 


School Going Children - Girls % Active Borrowers 72.2222 39.95302 .186 .852 


Children going to Private School % Active Borrowers 51.3514 46.17955 -.475 .635 


Monthly Expenditure on Education Active Borrowers 648.1802 910.66177 -.327 .744 


Note: There are160 and 180 respondents in each category respectively. t-value greater than 1.6 indicates 



Table – 5.5 

AKHUWAT – Household Assets Ownership 


Deviation 

t-value 

Significance 

Level 

Own House Active Borrowers 81.8750 38.64347 .919 .359 


Refrigerator Active Borrowers 58.7500 49.38299 .593 .554 


Colour TV Active Borrowers 73.7500 45.54009 -.029 .977 


Motor Cycle Active Borrowers 20.0000 40.12559 -.252 .801 


Prize Bonds Active Borrowers 1.8750 13.60667 .583 .561 


Washing Machine Active Borrowers 77.5000 41.88934 1.002 .317 


Sewing Machine Active Borrowers 88.7500 31.69727 1.829 .068 


Bed with Foam Active Borrowers 26.8750 44.47015 -1.509 .132 


Urban Property Active Borrowers 2.5000 15.66151 -.159 .874 


Gold Active Borrowers 16.8750 37.57069 -.085 .933 


Mobile phone Active Borrowers 53.1250 50.05893 .268 .789 


16





Table – 5.6 

AKHUWAT – Business Assets 


Deviation 

t-value 

Significance 

Level 

Monthly Sale [Rs.] Active Borrowers 16425.63 24327.233 -.521 .603 


Value of Assets - Shop/Workshop Active Borrowers 33876.88 139085.496 -.436 .663 


Machinery Active Borrowers 4346.25 13594.093 -.872 .384 


Instruments Active Borrowers 3260.31 23963.757 1.260 .208 


Other Active Borrowers 2250.00 10711.922 -.092 .926 





Table – 5.7 

AKHUWAT – Women’s Empowerment 


Deviation 

t-value 

Significance 

Level 








Score out of 8 Active Borrowers 1.4839 1.58623 -.043 .965 






6.8710 3.20084 -.555 .580 





17









The impact model estimated for Akhuwat is 



a vector of household characteristics 6 , C ij is a dummy equal to 1 for active borrowers and 





active borrowers and 0 otherwise. Apart from this a loan cycle dummy has also been 

added for those respondents who are in their second loan cycle to see the marginal impact 

of microfinance after the first year of borrowing. The coefficient δ on T ij is the main 

parameter of interest and measures the average impact of the programme. A positive and 

significant δ would indicate that microfinance is having a beneficial effect on the 

borrowers. 





The results from the estimation of δ are given in Table 5.8. The majority of the results in 

our regressions were insignificant. One of the variables in DID estimation on which we 

find a significant positive effect is household income for active borrowers (17%, p=0.07). 

This result is also validated by single difference estimation (13%, p=0.047) and implies 

that active borrowers have higher household income as compared to other respondents. 

Another result that is significant in DID estimation is for food expenditure, active 

borrowers spend 16% more on food than other categories of respondents (p=0.06). 

6 For Akhuwat seven household characteristics were included in the regression out of 15 tested through 

ANOVA. 

18

The other results that are significant are for empowerment. In the double difference 

estimation, economic empowerment is significant (3.85 pts; p=0.02) while in single 

difference, social empowerment is significant (1.38 pts.; p=0.09). In the regressions on 

overall, economic and income empowerment, the loan cycle dummy was significant 

implying that clients who have borrowed twice are more empowered than first time 

borrowers. Even though the percentage of female respondents in the active borrower 

category was 47 percent, and in the other categories collectively it was 13 percent, we 

still do not find a significant impact on most empowerment indices. In the pipeline 

respondent category, the percentage of females was 17 percent as Akhuwat is phasing out 

its group lending, which only caters to women, and is moving towards individual lending. 

The other variable that came out significant in the regressions was the member dummy 

for asset score (-0.99, p=0.029), implying that the individuals who self-select themselves 

own fewer assets than their neighbours. This is understandable as building assets takes 

time and to begin with maybe these individuals are poorer and that is why they have been 

accepted by Akhuwat as clients. However, the loan cycle dummy for asset score is 

positive and significant (0.88, p=0.03) implying that over time, the borrowers do end up 

building assets, which are important to reduce vulnerability. 

Table 5.8: Regression Results 


Dependent Variable Coefficient t-value 1 Coefficient t-value 

Log(Respondent Income) 0.12 1.35 0.1 0.98 

Log(Household Income) 0.13 2.00 ** 0.17 1.80 * 

Log(Per Capita Income) 0.12 1.73 * 0.16 1.56 

Log(Total Household Expenditure) 0.05 0.95 0.03 0.42 

Log(Food Expenditure) 0.06 0.95 0.16 1.75 * 

Educational Expenditure 133 0.98 330 1.54 

Health Expenditure -17.5 -0.28 135 1.23 

Savings 7.8 0.05 -236 -0.85 

Asset Score 0.49 1.23 0.44 0.73 

Children Enrolled in School(%) -0.62 -0.08 10.4 0.90 

Boys Enrolled in School(%) -0.72 -0.09 20.8 1.47 

Girls Enrolled in School(%) 3.2 0.43 9.2 0.84 

Women's Empowerment (Overall Ind 2.86 0.78 4.07 0.81 

Economic Empowerment 1.13 0.9 3.85 2.36 ** 

Income Empowerment -0.32 -0.68 -1.27 -1.61 

Asset Empowerment -0.55 -0.69 -1.55 -1.59 

Empowerment related with 

Education and Health 1.22 1.06 1.66 0.84 

Social Empowerment 1.38 1.72 * 1.37 0.89 


2 Score based on 47 questions, the other idices listed below are a breakdown of this index. Refer to 

questionnaire for detail. 

19

From these results we can judge that outcomes like income and food expenditure have 

benefited from microfinance in the short term; however outcomes like asset accumulation 

that take time, experience impact later. 




been gathered primarily through focus group discussions with beneficiary groups in 


gathered through discussions with respective programmes’ field and programme staff. 

Two focus group discussions were conducted in the Akhuwat programme localities in 

Lahore in the Township area and Shah Jamal. The participants were a combination of 

male and female clients. 


Akhuwat clients belong mostly to the low-income groups engaged in various small 

enterprises and businesses. However, despite their low incomes of less than Rs. 5,000, the 

majority of the participants said that they saved through the committee system. Very few 

were actually putting money into the Akhuwat savings schemes, which indicates that 

savings is not a significant part of the programme and is definitely not obligatory. 

There was no formal relationship with any banking system prevailing among the people 

in the two localities and people managed their financial requirements through relatives 

and neighbours during times of need. The amounts saved through the committees were 

either invested in enterprise development or other planned needs like buying motor 

rickshaws or for marriages. A majority of the people did own a few assets that could be 

sold or used as a backup for emergency purposes. 

All clients reiterated that the Akhuwat credit programme has had a clearly positive 

impact on their lives and their income levels had improved since taking up the credit. 


Akhuwat, according to its programme philosophy, believes in a humanitarian vision and 

mission as indicated by their clients, and is reflected in the attitude and behaviour of their 

team members. People said that the staff were compassionate and polite in their approach 

and tried to provide all possible support to them. 

Although, borrowers were appreciative of the fact that this was an interest free 

programme, they felt that some of the procedural requirements should be less tedious. 

Many clients mentioned that the application process was too lengthy, while the policy of 

presenting two witnesses twice in the credit amount disbursement process, was also 

irksome. 

‘People in our area are working class and need to be at their workplaces most part of the 

day. Akhuwat wants two witnesses, who have to spend quite a few hours on behalf of the 

20

client during the verification and disbursement process. When Akhuwat finally hands 

over the credit amount, it is done in the mosque in the presence of the witnesses, which 

makes the witnesses quite nervous at times. They should review this entire witness 

process.’ 

(Male Participant, Township, Lahore) 

According to some clients, it was also difficult to find people who are prepared to act as 

guarantors on behalf of the borrower. Many times people were hesitant to verify and act 

as witnesses for credit applications as they were scared that in case the borrower is unable 

to pay back, Akhuwat would hold them responsible. 

‘We have to beg people to come with us as a witness. Once I had to pay a witness Rs. 

200, because he was a daily wager and could not go to work because of me.’ 

(Male Participant, Shah Jamal, Lahore) 

One client mentioned that the membership rate was too high and should be brought down 

(around 6.2 percent of the total loan cost); however, the other group members quickly 

justified this rate on the basis that other than this there was no interest on the loan, which 

was a major relief. 

There are other MFIs also operational in the area. XX and YY ‘also provide credit but 

their interest rates are much higher, and also the procedures are comparatively more 

complicated. The Akhuwat methodology is more appropriate for people like us.’ 

(Male Participant, Shah Jamal, Lahore) 

Presently, the productive loan category is the loan type most frequently provided by 

Akhuwat. As a result, borrowers had a low awareness level about any other loan. Clients 

said that they only knew that Akhuwat gave loans for productive purposes and not for 

any other use. 

21


A 5..11 Institutional Snapshot 




Branches 13 


Total disbursements(Rs.) 

156 million 

Average loan disbursed(Rs.) 10,643 



Employee turnover (percent) 2 


Total income(Rs.) 

4.6 million 

Operational self-sufficiency (percent) 77 

Financial Self-sufficiency (percent) 77 

Adjusted Return on assets (percent) -6.8 

Portfolio yield (percent) 15 

Cost of borrowings 0 

Operating expense ratio 0.71 

Portfolio at risk (>30 days) (percent) 0.1 

Cost per unit of loan disbursed 0.07 


Loan Product Family/ 

Liberation Wedding/Education Housing Loan 

Enterprise Loan Loan 

Loan 

Purpose Income Generation Pay off To meet general Construction 

Moneylender needs 

Term/Duration

A.5.1.3 Branches 

‣ Lahore (8 Branches) 

‣ Faisalabad 

‣ Rawalpindi 

‣ Dijikot 

‣ Lodhran 

‣ Jahanian 

Total: 13 Branches 

A.5.1.4 Organizational Structure 

Board of Directors 

Executive Director 

Internal Auditor Program Manager Finance Manager 

Area Manager (2) 

Accounts Officer 


(1) 

Unit Manager (4-5) 

23

Table - 5.4.2.1 


[AKHUWAT] 

Respondents % 

Respondent 

Category 

340 100.0 





Table - A. 5.2.2 


[AKHUWAT] 

Borrowers % 

Loan 

Taken 

220 100.0 

One 145 65.9 

Two 61 27.7 

Three 11 5.0 

Four 3 1.4 

Table - A. 5.2.3 


[AKHUWAT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.1 17.6 35.3 100.0 

Proportion of Female 45.0 18.3 15.8 30.0 


Primary 18.1 25.0 13.3 17.6 

Middle 30.0 31.7 20.0 26.8 

Metric 15.6 10.0 23.3 17.4 

Inter 5.0 6.7 5.0 5.3 



Have Training 5.0 9.2 5.6 

24

Table - A. 5.2.4 


[AKHUWAT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.1 17.6 35.3 100.0 



Goods Supplier .6 2.5 1.2 




Transport Service Provider 3.8 1.7 2.1 

Table - A. 5.2.5 


[AKHUWAT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.1 17.6 35.3 100.0 


4-6 Person 52.5 55.0 39.2 48.2 

7-9 Person 34.4 33.3 39.2 35.9 

More than 9 6.3 8.3 16.7 10.3 



25

Table - A. 5.2.6 


[AKHUWAT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.1 17.6 35.3 100.0 

House owners 78.1 85.0 72.5 77.4 





Table - A. 5.2.7 


[AKHUWAT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.1 17.6 35.3 100.0 





Table - A. 5.2.8 


[AKHUWAT] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.1 17.6 35.3 100.0 





Poverty Line) 

15 15 28 20 



Average Indebtedness 15900 33760 26616 

The Official Poverty Line is at Rs 1,000 per capita per month – see Montgomery (2006) 

26

Table - A. 5.2.9 


[AKHUWAT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 










Table - A. 5.2.10 


[AKHUWAT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 



No Vaccination 1.2 7.4 4.4 3.5 


Table - A. 5.2.11 


[AKHUWAT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 




27

Table - A. 5.2.12 


[AKHUWAT] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 










Table - A. 5.2.13 


[AKHUWAT] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 







Gas 4 3 4 4 


Rent 4 3 5 4 






- Eggs (days) 5 5 7 6 


28

Table - A. 5.2.14 


[AKHUWAT] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Own House 81.9 86.7 71.7 79.1 

Refrigerator 58.8 43.3 61.7 57.1 

Colour TV 72.5 65.0 78.3 73.2 

Motor Cycle 20.0 25.0 19.2 20.6 

Prize Bond 1.9 1.7 1.5 



Bed with Foam 26.9 20.0 41.7 30.9 


Gold 16.9 10.0 20.8 17.1 

Mobile phone 53.1 50.0 52.5 52.4 


Table - A. 5.2.15 


[AKHUWAT] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 




Seasonal/Occasional 2 2 



Machinery 4346 4492 8887 5974 

Instruments 3260 913 1024 2057 


29

Table - A. 5.2.16 


[AKHUWAT] 


Overall 


Pipeline 

Borrowers 

Non- 

Borrowers 





Empowerment Related with Education and Health 

- Score out of 10 6.9 5.6 8.1 7.0 



30

Table - A. 5.2.17 


[AKHUWAT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 






made 

69 44 68 67 


sale of livestock 26 37 26 




family 84 89 89 86 


family 89 67 89 87 




money 50 67 42 50 





borrowed 40 67 26 40 







31

Table - A. 5.2.18 


[AKHUWAT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 








regularly 

47 78 47 50 




Table - A. 5.2.19 


[AKHUWAT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Do you possess any household asset 8 22 8 


name 15 22 11 14 


name 3 11 5 4 






45 22 58 46 


own name 5 22 6 


your name 8 33 5 10 




32

Table - A. 5.2.20 


[AKHUWAT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 












illness 

60 67 58 60 











children 

85 67 95 86 


33

Table - A. 5.2.21 


[AKHUWAT] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 





wear 89 44 95 86 


beliefs on you and make you accept them 6 22 7 


parties 8 11 7 






programs or in other social events 53 22 42 48 


participating in such programs 31 11 53 33 






74 33 95 74 


Table - A. 5.2.22 


[AKHUWAT] 

Borrowers 

Loan was 

used by: 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

160 60 220 

72.7 27.3 100.0 

Self 75.0 91.7 79.5 

Spouse with your suggestion 21.3 1.7 15.9 

Other Members 

3.8 6.7 4.5 


34

Table - A. 5.2.23 


[AKHUWAT] 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

Borrowers 

160 60 220 

72.7 27.3 100.0 

Loan was Business Activity 95.0 88.3 93.2 

used for: Repayment of debts 1.3 5.0 2.3 


Marriage of Daughter/Son .6 3.3 1.4 

The use of other household members .6 .5 

Death/Illness of household members .6 .5 

Other .6 .5 


Table - A. 5.2.24 


[AKHUWAT] 








Picture Requirement 1.3 



35

Table - A. 5.2.25 


[AKHUWAT] 

Loan Taken 


Overall 



Borrow loan from relative/friends 72.6 82.4 81.8 100.0 76.9 



Search for extra work 2.1 1.3 

Extra hours in existing occupation 1.1 .6 

Have Enough Saving 2.0 9.1 1.3 

12 1.1 .6 



Table - A. 5.2.26 


[AKHUWAT] 

Loan Taken 


Overall 


Effect on quality of 

Improved 84.2 92.2 90.9 100.0 87.5 

life 

Deteriorated 

6.3 3.8 

No Change 

9.5 7.8 9.1 8.8 

Family eat your fill As much as wanted (all types) 55.8 51.0 72.7 66.7 55.6 

As much as wanted (not all types) 44.2 49.0 27.3 33.3 44.4 

Have more to eat now 

Have more to eat now 78.9 84.3 100.0 100.0 82.5 

Have more to eat in earlier times 2.1 1.3 

Equal 18.9 15.7 16.3 

Family health 

Health is better now 66.3 51.0 90.9 33.3 62.5 


Equal 26.3 49.0 66.7 32.5 

Sustainable increase 

Yes 91.6 92.2 100.0 66.7 91.9 

in income No 8.4 7.8 33.3 8.1 


36

Table - A. 5.2.27 


[AKHUWAT] 


Overall 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 


100.0 100.0 100.0 


No 45.0 36.7 40.8 

Do not need 35.0 30.0 32.5 





Do not like to borrow 5.0 2.5 

Do not know procedure 3.3 1.7 

Amount of loan is very low 3.3 1.7 


Table - A. 5.2.28 


[AKHUWAT] 

New 

Borrowers 


Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 

Overall 






Pull out children from school 1.7 .6 

Search for extra work 3.3 3.3 2.2 

Extra hours in existing occupation 1.7 .6 

Have Enough Saving 8.3 2.8 



37

Table - A. 5.2.29 

Non-Borrower’s Perceptions - Change 

[AKHUWAT] 

New 

Borrowers 


Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 

Overall 


Effect on overall quality of Improved 78.3 48.3 33.3 53.3 

life 

Deteriorated 6.7 20.0 15.0 13.9 

No Change 15.0 31.7 51.7 32.8 



Sometimes felt hunger 1.7 16.7 5.0 7.8 



Equal 25.0 35.0 45.0 35.0 




Equal 35.0 38.3 51.7 41.7 


38

Chapter Six: Sindh Agricultural and Forestry Workers 

Coordinating Organization (SAFWCO) 



Concerned about the poverty stricken lives and social marginalization of their 

community, a group of five activists came together in 1986 to bring about social and 

economic change in their surroundings. This group led by Suleiman Abroo was then 

known as Samaj Sudhar Adabi Idara and undertook small scale social work like 

arranging for medical and health camps and distributing books amongst poor students. 

However, the major gap between the scope of problems and scale of this initiative pushed 

the group to join the Sindh Graduate Association which helped them in carrying out 

social work on a larger scale. It was in 1990, during a medicine distribution campaign, 

that a villager made the group members realize that the absence of basic facilities like 

education, health, housing, sanitation form the core of issues resulting in increasing 

poverty and social deprivation. Consequently, Suleiman and his friends started 

contemplating on the need and outcomes of an integrated approach to rural improvement 

which responds to all aspects of life. 

The long and intensive reflections led to the establishment of the Sindh Agricultural and 

Forestry Workers Coordinating Organization (SAFWCO) in 1990. Registered under the 

Societies Registration Act XXI of 1860, SAFWCO kept rural development as its key 

priority. As a result, it started addressing cross-cutting issues including conditions of 

peasants and rural women, education, role of feudal lords, political situation in the area, 

unemployment, water logging and salinity, low wages and housing. In the first two years, 

SAFWCO launched projects on women’s health and education improvement with social 

mobilization for collective action, as its main strategy. The scope further expanded when 

torrential rains and floods of 1992 resulted in massive destruction of numerous villages in 

District Sanghar. SAFWCO members surveyed the damaged area, captured the extent of 

destruction through videos, and approached national and international donors for funds. 

The International Development and Refugee Foundation (IDRF) on the recommendation 

of South Asia Partnership Pakistan (SAP-Pk) provided financial support through which 

SAFWCO constructed 250 houses in 15 villages. This not only earned a credible 

reputation for SAFWCO amongst civil society organizations, local and provincial 

governments, but also generated clarity and confidence internally amongst the team 

members. 

While securing the ownership of newly-constructed houses in the name of villagers under 

the government’s Goth Abad Scheme, SAFWCO also realized that bringing villages back 

to functional state will also entail some economic help. Starting from Rs. 5,000 for goat 

rearing and home-based poultry, SAFWCO initiated its microcredit programme in 1993- 

94. The expansion of the portfolio and credit line has been gradual and firmly grounded

in the contextual needs of the communities SAFWCO is catering to. SAFWCO’s concept 

of microcredit is the extension of small loans to entrepreneurs too poor to qualify for 

traditional bank loans. It also ensured a more integrated approach towards meeting 

organizational mission and targets. 

SAFWCO works for the vulnerable and poverty-trodden communities of rural Sindh. In 

order to bring these communities out of the abyss of poverty, it is necessary that they 

should be given access to financial services for establishing their own businesses or 

strengthening the already existent ones. In this context, the programme of microcredit has 

proved successful in combating with the epidemic of poverty. 

6.1.2 Scope of Services 

SAFWCO was formed with a vision of building a sustainable, equitable and just society. 

It envisions creating ‘sustainable communities achieving equitable economic, social, 

political and cultural development through grass roots development institutions.’ In order 

to meet its mission, the scope of SAFWCO’s programme is multi-sectoral. The following 

is the brief synopsis of each portfolio: 

• Social Development Sector focuses on institutional building at the grassroots 

level to support in bringing about a social change. It has social mobilization as a 

core activity and entry point, followed by different development interventions 

including social and physical service delivery projects, and coordinating and 

networking, along with emphasis on gender balance and good governance 

• Education Development Programme aims at expanding and improving the 

standard of primary education and promoting literacy, especially amongst 

females, in rural Sindh. Working towards this aim, SAFWCO establishes formal 

and non-formal educational institutions, particularly in less developed areas with 

especial focus on girls' education. Moreover, for improving education quality, it 

undertakes training and research activities with various stakeholders. 

• Health Sector Programme works with a mission to highlight and address issues 

related to children's and women's health, environment, and health care that play a 

significant role in affecting people's socio-economic life. It engages in health 

education for the community, primary health care services in areas having no 

health facility, and also prepares village volunteers as paramedical force 

• Community Physical Infrastructure Development (CPID) Programme support 

rural communities in addressing their prioritized physical infrastructure needs. 

The communities themselves implement these schemes following the preparation 

of technical and social feasibilities as well as cost estimates by the program staff. 

SAFWCO has an engineering and technical wing which ensures the feasibility 

and quality of construction processes. 

• Credit and Enterprise Development Programme comprises 21-30 percent of 

SAFWCO’s operations. SAFWCO’s concept of microcredit is the extension of 

small loans to entrepreneurs too poor to qualify for traditional bank loans. The 

goal is to enhance the socio-economic status of the vulnerable groups and 

2

communities through sustainable economic development activities. Details of this 

portfolio are presented below. 


Under the leadership of the Chief Executive Director, each portfolio is headed by 

Programme Managers who are responsible for the design, conceptualization and 

coordination of their respective programmes. Implementation responsibilities are mainly 

given to the field office teams which include the Programme Officer and Assistant 

programme officers for each area. The client dealing and recovery process is managed by 

the branch offices while the Head Office focuses on tracking the overall status of 

operations. The operations of 3 Branch Offices are overseen by a Senior Manager who is 

responsible for day-to-day guidance/decision making to all portfolios as well as the 

administrative functioning of the office. 

The management and leadership receives strong governance support from a General 

Body of 29 members and more directly by the Board of Governors (see Appendix 1). At 

present, SAFWCO operates with a workforce of approximately 350 persons across its 22 

offices. It has dedicated a team of 63 members for its Credit and Enterprise Development 

programme working in urban and rural areas. 


To meet the overall goals, the Credit and Enterprise Development programme constitute 

of Microcredit, Savings and Resource Mobilization, Capacity Building for Enterprise 

Development and Microcredit Initiatives for NGOs/CBOs. Currently, microcredit 

initiatives for individuals and capacity building on key areas are completely active. The 

savings programme is carried out only at a small-scale where clients are convinced to 

make savings from their day to day domestic expenses and develop as many tangible and 

intangible assets as possible. 

SAFWCO articulates its principles and policies for microcredit as: 

• Affordable services for low-income groups 

• Greater outreach to the general public 

• Minimal risks for new entrepreneurs 

• Loan pay back systems are nurturing towards small businesses 

• Increased and easily accessible opportunities for the economically disenfranchised 

groups to support them in gaining economic power. 

In view of these stated principles, SAFWCO has designed the following mechanisms and 

strategies for microcredit. Details on each aspect follow. 

3

6.1.4.1 Products and Services Offered 

There are five main products offered by SAFWCO. A unique feature of all the products 

is, that they are designed according to the contextual and economic realities and needs of 

its clients. 

• Handicraft Loan: As indicative from its name, a handicraft loan is offered to 

support traditional craftsmanship and the retailing of Sindhi products, such as 

embroidery, rilli-making, ajrak dyeing, mirror work, cap making, etc. The amount 

offered ranges between Rs. 2-4000. These loans are commonly availed by women 

in Mitiari and Hyderabad, and with highest payment rates. These small loans 

support them in buying raw material like threads, mirrors, etc. 

• Livestock Loans: With a 60 percent share, this is the most popular product of 

SAFWCO especially in the vicinities of Bhit Shah and Shahdadpur since these 

areas provide daily dairy supplies all over Hyderabad, Sanghar and Mitiari 

districts. The amount of loans range from Rs. 4-10,000. In the subsequent rounds, 

the credit amount can be stretched up to Rs 25,000 depending on the performance 

of units. Under this product, SAFWCO provides loans for agricultural activities 

also. 

• Trade and Retail Loans: This product is more common in urban areas where 

small entrepreneurs are supported to expand their existing business and enterprise. 

If the application is strong in terms of social collateral, credit is given to start up 

new businesses also. The amount of loans range from Rs. 5-30,000; however, a 

loan of more than Rs. 10,000 is not processed in the first round. 

• Enterprise Development Fund: This is the latest product of SAFWCO directly 

responding to the needs individuals or groups having a long and positive credit 

history with the organization. After paying off several rounds of small loans, 

many clients felt constrained by the small amounts of loan offered by SAFWCO 

which was helpful in running or sustaining the business; however, they could not 

plan massive expansion with a maximum of Rs. 25-30,000 only. Launched at a 

very small scale, SAFWCO introduced Enterprise Development Fund under 

which Rs. 30-100,000 can be borrowed. With this, SAFWCO is also venturing 

into institutionalized savings and insurance schemes. 

• Festival Loans: This product also falls under the small loans category with a 

maximum range of Rs. 10,000. The loan is offered purely for familial and cultural 

festivities like marriages, births, crop cutting, religious festivals, etc. Again, this 

product is hugely popular in families barely above the poverty line as it helps 

them in meeting their social needs and standing. 

4


SAFWCO provides both group and individual loans. Loans are made to established 

groups of both men and women, comprised of three to six individuals, that have been 

operating for over a year. For credit and saving activities, villages are identified on the 

basis of their socio-economic situation. The CED Programme Officer and Assistant 

Programme Officers then hold meetings with the Community Organizations (CO) on 

credit and saving policies and form a credit committee to identify the poor for loans and 

for monitoring the credit programme. Credit Committees (CC) in rural villages act as 

intermediaries between SAFWCO and individuals or group of loaners. Strategically, 

SAFWCO ensures that the CC comprises notables and influential people in the village or 

lead social activists of the community. CC initially scrutinize the applications and 

recommends the applications to the CED for credit disbursement. Members of the credit 

committee, guaranteeing proper use and recovery, give the final approval for credit. The 

targeting, processing, disbursement, utilization and recovery procedures for credit, are 

based on community participation, involving all members of the CO. 

For the savings programme, monthly meetings are conducted to collect savings, with a 

minimum voluntary contribution of Rs.20. The programme is operated through COs, 

which collect deposits, and manage the savings records and passbooks. Communities are 

also encouraged to utilise their savings through their village development organisation as 

internal lending. 

In urban areas, the mechanism is more focused on individual loans and door-to-door 

mobilization since the concept of community is very different from that of rural areas. 

Another important channel for application generation is the referrals from existing 

guarantors and word of mouth. Despite the fact there are other MFIs and Banks operating 

in the same districts, SAFWCO is preferred by small and local entrepreneurs mainly due 

to its products and service mechanisms. 

The socio-economic status, soundness of business proposal and social collateral are the 

most important criteria for selecting individuals and groups for loans. Loan delinquencies 

of over one month can result in the disqualification of an entire village for further loans. 

This ban is lifted only when all arrears are cleared either by the individual or the group of 

guarantors. Formation of community organizations and this form of social collateral has 

proved effective for SAFWCO. According to the management, the loan recovery rate 

averages 95 percent for men and 99 percent for women. An operational reason for 

encouraging women clients is also because they not only ensure that instalments are paid 

on time, but also take responsibility for appropriate and effective utilization of the credit. 

Consequently, SAFWCO has brought flexibility in its lending strategy where credit is 

given to female units which can involve other family members in its use. However, care 

is taken that too many loans are not given to one family unit. 

5

Other filters related to the specific product also apply. For instance, if an application is 

made for purchasing raw material for handicrafts, it will fall under the Handicraft loan 

which has a maximum ceiling of Rs. 4,000. Similarly, in the first round of application, 

the maximum amount given is Rs. 10,000. The selection of applicants for consequent 

rounds depends on the credit repayment history of the individual as well as the credibility 

of group or credit guarantors for social collateral. Also, those applications are not 

considered where units or groups have already taken credit from some other MFIs or 

banks. A vigilant and thorough screening process is thus put in place. Annual planning 

and organizational directions of SAFWCO also play an important role in deciding the 

client numbers and types of loans to be processed. SAFWCO’s management feels that a 

ceiling quota for each district should be calculated in relation to overall operations and 

programmes for each district. Such targets also help the organization in estimating cost 

recovery for branch office operations. 


SAFWCO charges an 18 percent service charge on a flat basis, which is its main source 

for meeting its operational expenses. Keeping true to its principles, SAFWCO has made 

several efforts to facilitate its clients in payment. For instance, the services charges are 

reduced up to 4.5 percent if the loan is paid off in 3 months. In addition, a nominal fee of 

Rs. 100 is charged for initial documentation. Many a times, this includes facilitation for 

computerized NIC formation for almost 80 percent of women clients, especially in rural 

areas. 

SAFWCO has a PAR>30 days of 3.1 percent and annual write-off ratio of 1.5 percent, 

which indicates a need for SAFWCO to address this issue. While the PAR>30 days has 

been reduced from 4.33 percent in 2004, it is still critical for SAFWCO to improve its 

credit risk profile either through improvement in its loan tracking system or by improving 

the appraisal system. According to SAFWCO, it averages 95 percent for men and 99 

percent for women, whereas rural area recovery is 100 percent while that for urban areas 

ranges between 70-80 percent. 

They have recently designed an elaborate MIS which is planned to become functional by 

February 2007 and will greatly assist in the tracking and recovery processes. Moreover, 

with is five-year strategic planning conducted in December 2006, it is expected that 

performance and financial sustainability will be improved while reducing the operational 

costs. Although the Yield of Portfolio is fairly strong with 24 percent average, SAFWCO 

spends a large amount in its social mobilization strategy in rural areas. 

6.1.7 Client Loyalty and Drop Outs 

The average retention rate is 60 percent with variations across districts and communities. 

It is maintained that clients give preference to SAFWCO’s Credit and Enterprise services 

over other MFIs and banks in the area, namely NRSP and Khushhali Bank. Partly, this is 

the outcome of the integrated and grass-roots accessibility approach that is promoted by 

6

SAFWCO. An equally important factor is the policy and social collateral demands of the 

other organizations. Moreover, SAFWCO’s service charges are 2 percent lower than 

other institutions. 

Of the 40 percent that drop out, SAFWCO’s management reports, that these do not 

qualify as drop-outs because they return after a gap of 12-18months. It is felt that the 

cultural mindset also drives the clients attitude towards utilization of services. The 

majority of people become content with a little improvement in their economic situation 

and return only when they feel sustainability or operation of their business is at stake. 

The ratio for males and females is roughly 40:60, and the portfolio of clients has changed 

significantly over the years. From very desperate and uneducated people, it has become a 

mix with people from stable backgrounds also applying. While female clients are 

increasing, those women who are from fairly stable economic families, maintain that their 

husbands or families are adequately providing for them and hence they do not want to 

avail microcredit services. 


6.1.8.1 Human Resources Profile and Development 

As mentioned above, SAFWCO has a team of 63 people looking after the CED 

programme with 51 loan officers. The personnel portfolio has significantly increased 

from 22 staff for CED with 11 loan officers over the years. The senior and mid-level 

managers responsible for overall design, conceptualization and implementation have 

qualifications in the social sciences and have extensive experience of working with 

communities. While only a few people have specific experience of microcredit 

programmes, SAFWCO adopts an apprenticeship model to ensure that they develop indepth 

understanding of the programmes and processes. 

SAFWCO has institutionalized its capacity building and HR development processes 

through its Human and Institutional Development Programme. In addition to the external 

organizations and development professionals, it carries out regular training and refresher 

courses for its staff. It has developed training modules on enterprise development, 

business development, analytical tools and software, community mobilization, and other 

relevant issues. SAFWCO plans to carry out extensive staff development initiatives on 

the basis of HR assessment undertaken as part of its strategic planning. 

6.1.8.2 Management Information Systems and Utilization 

SAFWCO is steadily moving towards systemic planning and implementation. This is 

indicative from the gradual integration of ICT in its work and connectivity of various 

branch offices. It has designed a thorough Management Information System through 

which data and analysis will be generated on all key financial and operational indicators. 

Since the MIS is not completely operationalized, it is difficult to assess the quality of 

information generated, or its utilization. However, discussions with SAFWCO 

7

management reveal the significance of this instrument in their analysis for planning and 

expansion. 

The general culture of SAFWCO is to meet with clients to understand their issues and 

respond to them by making changes in programme strategies. It has a strong internal 

Monitoring and Evaluation team which generates regular reports on programme targets 

and efficiency for General Managers and governance; these also form the basis for future 

planning. This indicates that there will be a conscious use of analytical reports when the 

MIS will be operationalized. Moreover, it is also seen as a tool for strengthening the loan 

tracking and screening mechanism. 

6.1.8.3 Financial and Operational Sustainability 

As indicated above, service charges on credits become the key source for meeting 

operational expenses. SAFWCO also receives a line of credit from the Pakistan Poverty 

Alleviation Fund (PPAF) worth Rs.13 million under which operation costs and staff 

salaries are covered for three years. While it is very likely that PPAF would extend this 

contract, however, SAFWCO has developed its endowment fund. There exists a 

revolving fund which is in the form of direct contribution from founding members and is 

used for new initiatives and asset development. 

Despite these initiatives, the indicators for financial and operational sustainability need to 

improve tremendously. Although the expense ratio has decreased over the past two years, 

it is comparatively high with 32.9 percent when compared with other FSS MFIs 22 

percent and for all MFIs in Asia 23.2 percent. Similarly, the operating expense ratio is 

also high at SAFWCO – 32.2 percent – as opposed to 15.5 percent of all FSS and all 

Asian – 12.6 percent. The current profitability ratios for SAFWCO are low with FSS 

standing at 57.9 percent and Operational Self sufficiency is rated as 59.32 percent. 

SAFWCO has -16.45 percent Return on Assets and -60.98 percent Return on Equity. 

6.1.8.4 Research and Development 

SAFWCO follows its legacy of grass roots participation and reflection and thus maintains 

research at the core of programme development. It regularly conducts research studies in 

the programme areas of the organization or at a wider provincial level as needed. 

Research is seen as a better means of learning from past experiences, improving upon 

service delivery, planning and allocation of resources, and demonstrating results as a part 

of accountability to key stakeholders. While a combination of tools, including 

Participatory Rural Appraisal techniques, statistical and quantitative analysis and case 

studies are employed, the foci of research are multi-disciplinary and look into poverty 

alleviation, socio-economic development and institutional reforms. 

Evaluative research also takes an important place in SAFWCO’s overall strategy. It has 

identified three levels of evaluation ranging from outcome mapping and assessment to 

impact analysis. Research is also featured in the core responsibilities of all programme 

employees who are encouraged to keep field journals and accounts to capture their 

8

eflections. External evaluations and research studies are also commissioned; however, 

the frequency and scope needs to expand significantly. 

6.1.8.5 Systemic Planning and Future Directions 

SAFWCO has a long range of plans for its operational, institutional and programmatic 

expansion. While more specific plans will emanate from the five year strategic planning 

that has recently been initiated, broad directions have been shared. With respect to assets 

and operational sustainability, SAFWCO has acquired its three branch offices, hence has 

reduced the expenses for rents. It has also procured a land parcel of 16 acres for its 

DHARTI project i.e. Development of Human Action Research and Training Institute. 

The recently established Human and Institutional Development Centre is also procured 

from SAFWCO’s own savings of Rs. 3.2 million which is now generating its own 

operational costs through consultancies and outsourcing services. 

Geographically, SAFWCO has expanded its operation to Achroo Thar district which is a 

very marginalized and highly ignored area with extinct facilities or infrastructure. 

Similarly, it plans to start its operation in very disadvantaged communities of Jamshoro 

and Kohistan areas of Sindh. 


In this section we present the results from our survey for SAFWCO. The results are based 

on the data collected on the basis of the questionnaire – see Appendix at the end of the 

Report. A select few of the results are presented here in table form, in the main text of 

this Chapter, while the substantial majority of tables are presented in the Appendix to the 




















9










From tables in the Appendix to this Chapter, we find that more than 85 percent of 

SAFWCO clients belong to the earlier, their first three, loan cycles which will have a 

bearing on our attempt to capture the extent of ‘impact’. Table A.6.2.3 shows, as we 

would expect, that there is not too much difference in the educational levels of clients and 

non-clients. Table A.6.2.4 has an important finding in it which shows that a large 

proportion of Borrowers, whether they are older (Active) Borrowers or new (Pipeline) 

Borrowers, have as their professions/business the classification ‘Livestock Management’, 

while most Non-Borrowers are ‘Personal Community Service Providers’. This important 

finding related to Livestock Management may suggest that in the case of SAFWCO 

clients, many want to enter the Livestock business but are resource/credit constrained. 

Once they have access to credit, a large proportion of them are likely to opt for Livestock 

Management; interestingly, the proportion of those who have a Retail Shop, is fairly 

similar across the three categories, suggesting that perhaps this is not a category for 

which most would-be borrowers desire credit. 

The tables in the Appendix on Housing Characteristics, and Table 6.1 below show us that 

there is very little, in fact insignificant, difference in Housing characteristics of SAFWCO 

Borrowers and Non-Borrowers, with all living in similar sorts of houses with similar sorts 

of services. Table A6.2.8 and Table 6.2 show that while the difference in the Income Per 

Capita of Borrowers and New and Non-Borrowers is not very significant, the difference 

of Expenditure Per Capita between these two categories, is significant. In most other 

categories, the difference between Borrowers and New and Non-Borrowers, is not 

significant. However, one of the most important and interesting findings from Table 

A.6.2.8, is the substantial number of households who are part of the SAFWCO 

microfinance programme, who are below the official poverty line. 

Table – 6.1 

SAFWCO – Housing 


Deviation 

t-value 

Significance 

Level 



Person per room Active Borrowers 4.3941 2.34141 -.544 .587 

10




Houses with RCC Roof Active Borrowers 3.3195 17.95183 .715 .475 


Houses with Cemented Floor Active Borrowers 39.0041 48.87744 .347 .729 





Table – 6.2 

SAFWCO – Economic Status 


Deviation 

t-value 

Significance 

Level 



Per Capita Food Expenditure Active Borrowers 422.9781 227.56572 .163 .870 




Household Asset Score Active Borrowers 6.41 2.579 .565 .572 




Note: There are 241 and 265respondents in each category respectively. t-value greater than 1.6 indicates 



One of the unexpected and surprising results that we have found – Table 6.3 and A.6.2.9 

– is that the proportion of School Going Children for Active Borrowers is lower than that 

for New and Non-Borrowers and that this difference between the two categories is 

significant. From Table 6.2.9, this difference seems to be more marked for Boys than for 

Girls, and if this is the case, one possible explanation could be that Boys are now being 

used as family labour, particularly in Livestock Management, an activity which is new 

for most clients. 

Table – 6.3 

SAFWCO – Children’s Education 


Deviation 

t-value 

Significance 

Level 

School Going Children % Active Borrowers 78.5690 27.12173 -2.019 .044 


11

School Going Children - Boys % Active Borrowers 83.0051 29.75190 -.688 .492 


School Going Children - Girls % Active Borrowers 55.8051 45.01595 -.013 .990 


Children going to Private School % Active Borrowers 15.7280 34.27120 .573 .567 


Monthly Expenditure on Education Active Borrowers 97.4425 238.51888 .050 .961 





There is not much substantial difference between our two categories owning Household 

Assets, with the only significant difference – Table 6.4 – being that Borrowers own more 

Gold (and have Beds with Foam mattresses). 

Table – 6.4 

SAFWCO – Household Assets Ownership 


Deviation 

t-value 

Significance 

Level 

Own House Active Borrowers 96.2656 18.99989 -.743 .458 


Refrigerator Active Borrowers 17.8423 38.36654 -.099 .921 


Colour TV Active Borrowers 48.5477 50.08292 -.401 .689 


Motor Cycle Active Borrowers 14.1079 34.88273 .277 .782 


Washing Machine Active Borrowers 37.7593 48.57940 .318 .750 


Sewing Machine Active Borrowers 54.7718 49.87536 -.864 .388 




Urban Property Active Borrowers 5.8091 25.15512 1.460 .145 


Gold Active Borrowers 49.7925 50.10363 2.647 .008 








12

One of the most significant findings from our survey for SAFWCO, relates to the 

substantial positive difference in different types and categories of Women’s 

Empowerment. Table 6.5 shows that in every category, the difference between Borrowers 

and the other categories, is significant. None of the other MFIs in our sample had such a 

result. 

Table – 6.5 

SAFWCO – Women Empowerment 


Deviation 

t-value 

Significance 

Level 





Score out of 5 Active Borrowers 4.2093 .81336 3.066 .003 









7.0814 2.09882 4.485 .000 








In terms of the perceptions of clients and non-clients, Tables A. 6.2. 24-29, show a 

number of features. The longer Borrowers stay with the programme, the larger proportion 

feel that they are better-off and that the Quality of their Lives has improved; most say 

they eat better and they feel that this improvement in their Quality of Life can be 

sustained. Most Non-Borrowers are aware of SAFWCO’s microfinance programme, and 

most Non-Borrowers also feel that there is an overall improvement of the Quality of Life 

on account of taking the loan – Table 6.2.29. New (Pipeline) Borrowers in particular, 

have a very positive perception about the consequences of the programme, and so do 

those Non-Borrowers who are located in the same area where the programme functions. 






13

The Difference in Differences (DID) impact model estimated for SAFWCO is 



a vector of household characteristics * , C ij is a dummy equal to 1 for active borrowers and 








SAFWCO has been providing microcredit for sometime and in our sample we have 

clients in loan cycles ranging from one to five. Therefore we do two separate sets of 

regression on young and old borrowers. In our sample the mean number of loan cycles is 

2.1, therefore we define young borrowers as those who have borrowed 2 times or less and 

old borrowers who have borrowed more than 2 times. 


and the pipeline clients. This exercise was done for both young and old borrowers. The 

form of the equation is as follows and the variables are defined as stated above. 


The results from the estimation of δ are given in Table 1. One area where SAFWCO is 

having a clear impact is women’s empowerment. Old borrowers perform significantly 

better on all indices compared to other respondents. On the overall index old borrowers 

score 10 points higher (p=0.018) than other respondents. Old borrowers also perform 

better than pipeline clients in the single difference estimates on 3 indices of 

empowerment. Furthermore, young borrowers also do significantly better on the income 

empowerment index in both single and double difference estimates (DID: 1.5 pts; 

p=0.019). In these regressions the member dummy is not significant and therefore we can 

say that the higher score on empowerment is due to borrowing from SAFWCO, as the 

insignificant member dummy implies that to begin with individuals who self-select into 

the borrowing programme are not more empowered. The other result that is positive and 

significant is savings for old borrowers compared to pipeline clients. On average, old 

borrowers are saving Rs.300 more than pipeline clients (p=0.063). 

The only other result that is significant is educational expenditure; however it is negative 

implying that old borrowers are spending less than pipeline clients (-138; p=0.008). The 

other variables that were generally significant in the regressions were rural and 

* For SAFWCO four household characteristics were included in the regression out of 16 tested through 

ANOVA. 

14

espondent’s education level. The rural dummy had a negative effect on all outcomes, 

while respondent’s education had a positive effect on all variables. 

15

Table 1: Regression results 

Young Borrowers 

Old Borrow 

Single Difference Double Difference Single Difference Do 


Coefficient t-value 1 Coefficient t-value Coefficient t-value Co 

Log(Respondent Income) 0.001 0.01 0.15 0.84 -0.27 -1.66 

Log(Household Income) -0.10 -1.04 -0.03 -0.26 0.002 0.02 

Log(Per Capita Income) -0.20 -0.19 0.03 0.21 0.13 1.25 

Log(Total Household Expenditure) -0.06 -0.95 -0.02 -0.24 -0.03 -0.55 

Log(Food Expenditure) -0.08 -1.15 -0.04 -0.38 -0.02 -0.32 

Educational Expenditure -40.43 -0.65 50.20 0.62 -137.60 -2.66 *** 

Health Expenditure 2.14 0.05 25.10 0.34 -65.50 -1.34 

Savings 108.20 0.73 63.77 0.34 297.20 1.87 ** 

Asset Score -0.29 -0.81 0.48 0.89 0.03 0.08 

Children Enrolled in School(%) -5.49 -0.93 1.52 0.17 -9.90 -1.53 

Boys Enrolled in School(%) -5.60 -0.86 -5.78 -0.60 -7.10 -0.98 

Girls Enrolled in School(%) -1.55 -0.26 11.76 1.39 -6.30 -1.02 

Women's Empowerment (Overall Index) 2 2.09 0.60 6.13 1.43 6.10 1.79 * 

Economic Empowerment 0.76 0.58 1.47 0.89 1.95 1.51 

Income Empowerment 0.79 1.71 * 1.50 2.38 ** 1.45 3.32 *** 

Asset Empowerment 0.12 0.26 0.96 1.66 0.36 0.85 


Health 0.61 0.73 1.69 1.62 1.61 2.00 ** 

Social Empowerment -0.19 -0.27 0.53 0.62 0.77 1.07 


2 Score based on 47 questions, the other idices listed below are a breakdown of this index. Refer to questionnaire for detail. 

Note: Young Borrowers are clients who have taken two loans or less and Old borrowers are those who have taken between 3 to 5 loans. 







6.4.1 Focus Group Discussions – Bhit Shah Urban 


• Focus group discussions were arranged with SAFWCO’s clients and non-clients from 

Bhit Shah Urban. 

• A total of 15 people participated in the discussion out of which 9 were women. 

Discussions were conducted in small groups separately for men and women to ensure 

open and candid responses. 

• Interviews with only female non clients could not be arranged.

• Education levels varied significantly – male participants were at least matriculate or 

intermediate pass. 5 females were also middle or matric pass while 4 of them were 

primary drop-outs. 

• The group had a mix of clients ranging from those in their fourth or fifth loan cycle 


Involvement in Microcredit Programme – reasons and factors 

• Income generation or enhancement was identified as the key reason for which all 

participants engaged in SAFWCO’s Credit and Enterprise Development Programme 

(CED) across urban and rural areas or gender. 

• Most female clients took loans for livestock and small loans for embroidery and 

handicrafts. Male clients applied for loans to set up their shops or retail business of 

milk. Demand for dairy products is higher in that area because of the shrine and 

people flock there to pay their homage. 

• In case of urban clients, both males and females, another strong reason for applying 

for loans is the raising inflation rates which continue to shrink their income and bring 

business to a static position. 


• Almost all clients mentioned that instalments and their process were very reasonable 

and they could easily pay them off. They stated that loans were basically utilized to 

purchase more raw material or livestock which gives immediate boost to the income 

level. Therefore, they didn’t face any problems at all. 

• Female clients elaborated that from the increased income, they not only pay off the 

debts but also save considerable amounts. So for the next round of investment, they 

add up their saving in the amount received on credit and thus, can take more 

ambitious business moves. One participant stated that she was able to buy 3 buffalos 

and 5 goats by utilizing the loan and savings strategically. She currently saves up 

almost Rs. 120 on selling 5 litres of milk at an average. 

• Clients, both men and women, receiving loans for handicraft didn’t seem to be 

equally strategic. SAFWCO staff explained that cultural diversity comes into play. 

The ethnic groups or castes running the handicrafts business as well as the old 

settlers, do not have a business approach. And thus, they feel content with their basic 

living needs being met. 

Impact on Quality of Life and Social Consciousness 

• A direct correlation between taking microcredit and quality of life and enhanced 

awareness, cannot be drawn. Partly, the overall community development initiatives, 

accessible media and proximity to city centre by SAFWCO and other organizations, 

play a role, as does proximity to Hyderabad centre. Also, the clients did not associate 

any change in social status, quality of life, or greater consciousness of their rights and 

responsibilities towards their family or society at large. Education, health and family 

planning were things which they were significantly aware about; however, the 

practices were more culturally driven than knowledge based. 

17

• Participants were also not very clear about their future plans and aspirations. The 

responses could easily be categorized as being very standard, highlighting a stable 

economic set up, education and jobs for their children. 

• In case of women clients, the decision-making and family issues did not change much 

with their economic reliance. Key decisions, like arranging for and approving suitable 

candidates for children’s marriages, attending family events and tokens to be given, 

property, crops, main budgets, were taken by the head of the family. Their 

participation level has also not changed. In some cases, husbands always sought their 

views, and that continued to happen even after their economic contribution increased. 

All clients and non-client were very articulate about their own rights as citizens of 

Pakistan and elaborated on how different regime changes have only usurped those 

rights. 

Non Clients 

The only two female non-clients FGD participants maintained that they do not feel 

adequate in taking up any risk like accepting loans. While they know their small-scale 

business can grow with the microcredit facility, they do not feel courageous enough to 

take the plunge. So they use their own savings from their household budget to buy more 

raw materials for handicrafts and their embroidery work. 

6.4.2 Focus Group Discussions – Shahdadpur Urban and Rural 


• Focus Group Discussions were arranged with SAFWCO’s clients and non-clients 

from Shahdadpur Urban and Rural areas. 

• A total of 35 people participated in the discussion out of which 19 were women. 

Discussions were conducted in small groups separately for men and women to ensure 

open and candid responses. 

• Representation of non-clients was ensured. Out of 16 men, only 5 were nonborrowers 

while 6 non-clients were present in the women’s group. 

• Education levels varied significantly – male participants were at least matriculate or 

intermediate pass. While all female members never pursued education beyond 

primary. Only one female member had completed her matriculation and was teaching 

in a local school. 

• The group had a mix of clients ranging from those in their fourth or fifth loan cycle 


Involvement in Microcredit Programme – reasons and factors 

• Income generation or enhancement was identified as the key reasons for which all 

participants engaged in SAFWCO’s Credit and Enterprise Development Programme 

(CED), across urban and rural areas, or gender. 

• The immensity of needs, however, varied greatly amongst participants. For instance, 

a female client from the urban area stated that she already has a business of candle 

making which was supported by her husband and son as well. When she approached 

SAFWCO for loans, her husband was taken ill and their productivity was reduced 

18

since she was distributing her time for his care as well. The first loan of Rs. 3,000 was 

sought to buy candle-making machines so that she could produce more candles in less 

time. The experiment was successful and now in her fifth round of loans, she has 11 

machines, and distribution has increased tremendously covering Shahdadpur and 

Sanghar both. 

• Another participant stated that his family was in an extremely desperate condition as 

their crops were destroyed during the torrential rains. They were only left with one 

buffalo which was the only source of income for the family of 11 people. He found 

out about SAFWCO’s programme through the community organization and was 

encouraged to apply for a loan. He used it for buying a goat which brought some 

stability in the family. Loans were paid off through savings and another application 

was filed for buying seeds so they could prepare for the next crop. After a gap of two 

years, he applied for a bigger loan to buy another buffalo so the income from selling 

milk could be increased further. 

• In case of urban clients, both males and females, another strong reason for applying 

for a loan is the raising inflation rate which continues to shrink their income and bring 

business to a static position. Many participants stated that their home budgets keep 

increasing because of family needs, health and educational expenses, and they do not 

have much left to invest in the business. Therefore, the loan money is directly 

invested in business so it could lead to greater profit margins. 


• Participants unanimously agreed on the need to make payments on time as their 

probability to get bigger loans approved, increases. The strategies used for paying 

instalments varied again from individual to individual. Some people did not invest all 

amounts together, saving enough to pay off the first three instalments. That freed 

them from the worry at least in the initial payments. Once the business picks up, 

instalments were seen as utility bills and so were included in budgeting. Others 

mentioned that they put aside some money from their daily income so paying Rs.500 

or 1000 doesn’t emerge as an issue at the end of the month. 

• Many women clients stated that ‘any delays or defaults in loan repayments is 

unthinkable’ because they would not want to deceive someone who has done them a 

huge favour. They felt that when they were in absolute need of help and support, 

SAFWCO took them out of the crises, so it was unethical of them not to repay. 

• Clients showed their satisfaction with SAFWCO’s policies for social collateral and 

the loan process. Since a group of 3-6 members are needed for each loan application, 

there were clients who are part of more than one group. When asked how they would 

pay up if the main client defaulted, almost 75 percent of the participants asserted that 

such a situation will not arise. The strong belief emanates from the close-knit nature 

of business community as well as of rural life. They mentioned that it is basically a 

web of trust and interdependence which every member respects. Moreover, there is 

the belief that the social and economic gains are much higher if one follows the core 

principles rather than violates them. 

19

Impact on Quality of Life & Social Consciousness 

• Barring a few cases, clients did not associate any change in social status, quality of 

life, or greater consciousness of their rights and responsibilities towards their family 

or society at large. For instance, the majority were sending their children to school 

even when faced with extreme economic pressures. Similarly, cognizance levels of 

health care and hygiene were not impacted significantly. Some clients mentioned that 

they still opt for self-medication and help from the local dispenser until the ailment 

persists for prolonged periods. Changes in lifestyle and preferences were also not 

reported or observed - for instance, family planning was not practiced with many 

clients having large families of 6-7 children. 

• Around 7 participants said that their nutritional intake is far more varied and balanced 

now that their business was functional. They mentioned that earlier on they couldn’t 

afford to eat mutton or chicken even in 2 months and had staple food only. However, 

now twice or three times in a week, they have mutton/meat as their food. The change 

was mainly attributed to economic stability. 

• Participants were also not very clear about their future plans and aspirations. The 

responses could easily be categorized as ‘standard’, highlighting a stable economic 

set up, education and jobs for their children. 

• In case of women clients, the decision-making and family issues did not change much 

with their economic reliance. Only one participant cited concrete examples as to how 

her role has changed – she said that she has decided to build a house from her savings 

and despite fierce resistance from her in-laws and husband, she continued with the 

construction. When asked about her husband’s reaction to her assertiveness, she said 

her two sons were supporting her decision who also support her in business dealings, 

hence, the husband was quietened in front of his two sons. 

• As far as social justice and political rights are concerned, again no decipherable 

difference in the status could be seen. For example, the dowry demands and 

extravagant expenses of weddings were accepted and articulated as social norms 

which they could not question. 

• They were very articulate about their own rights as a citizens of Pakistan and 

elaborated on how different regime changes have only usurped those rights. A female 

client said that she is ready to beat up any nazim or political agent that comes asking 

for votes because there is never any service provided to them. And they have given up 

hope on any improvement in the political or social scene in Pakistan. 

Non-Borrowers’ Perspective 

• The reasons for not using the facility of loans and microcredit were also explored by 

talking to non-borrowers faced with similar economic and social issues. Out of 11 

male and female respondents, 5 did not opt for loans purely because of religious 

reasons. They cited various quranic verses and hadith to assert why they will never 

engage in any interest and mark up paying activity. Of the remaining, two male 

participants said that they have a joint family system so money could be borrowed 

from within the family. Two female respondents (urban) stated that their involvement 

in economic activities in not supported by their families (both parents and in-laws) 

nor are they faced with a desperate situation. While 2 females from the rural areas 

20

were still considering the possibility of taking loans, they feared that repayments will 

be an issue because they were not very confident about their entrepreneurial 

capabilities. 

21


A.6.1.1 Institutional Snapshot 


Members outstanding 27000 

Active borrowers 12572 

Branches 22 


Total disbursements(Rs.) 16,113,754 

Average loan disbursed(Rs.) 1 1,433,035 



Employee turnover (%) 

n/a 

Borrowers per staff 142 

Borrowers per Loan officer 245 

Total income(Rs.) 9483793 † 

Total Assets (Rs.) 63227934 

Average Loan Portfolio 43356900 ‡ 

Capital/Asset ratio 24.94% 

Operational self-sufficiency (%) 59.32% 

Financial Self-sufficiency (%) 57.99% 

Return on Assets (%) -16.45% 

Return on Equity (%) -60.98% 

Portfolio yield (%) 

24.8% Nominal 

20.2% Real 

Average Loan Balance per 

11.68% 

Borrower 

Operating expense/Loan Portfolio 45.58% 

Portfolio at risk (>30 days) (%) 4.33% 

Cost per unit of loan disbursed 36.6 

† Data for fiscal year 2003-04 

‡ As of December 2005. Source: PMN 

22


Loan Product Livestock 

Loans 

Crafts Loan Retail and Trade 

Loans 

Enterprise 

Development 

Festival 

Loan 

Purpose 

Income 

Generation 

Income 

Generation 

Setting up or 

expansion of new 

businesses 

Business 

expansion, 

support in 

savings 

Support for 

Celebrations, 

wedding, crop 

cutting 

Term/Duration 12-18months 12 months 12-15months 12-24months 12 months 

Loan size Rs.4000 - 

Rs.10,000, 

Amount 

increases in 

Subsequent 

rounds 

Rs.2000-4000 Up to Rs.25,000 

depending on 

loan cycles 

Rs. 30,000-Rs. 

100, 000 

Up to 

Rs.10,000 

Interest rate 18% 

Reduced by 

1/4 th if loan is 

paid back in 4 

months 

18% 

Reduced by 



months 

18% 

Reduced by 1/4 th 

if loan is paid 

back in 4 months 

18% 18% 

Reduced by 



months 

Repayment term Monthly Monthly Monthly Monthly 

Fee 

Rs. 100 for 

documentation 

Rs. 100 for 

documentation 

Rs. 100 for 

documentation 

Rs. 100 for 

documentation 

Rs. 100 for 

documentation 

Savings - - - to be introduced - 

Insurance 1% of loan 1% of loan 1% of loan 1% of loan 

23


[SAFWCO] 

Table - A. 6.2.1 

Respondents % 

Respondent 

Category 

505 100.0 





Table - A. 6.2.2 


[SAFWCO] 

Borrowers % 

Loan 

Taken 

326 100.0 

One 133 40.8 

Two 89 27.3 

Three 60 18.4 

Four 35 10.7 

Five 9 2.8 

Table - A. 6.2.3 


[SAFWCO] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.7 16.8 35.4 100.0 



Primary 19.9 17.6 16.2 18.2 

Middle 5.4 9.4 9.5 7.5 

Metric 12.9 12.9 8.4 11.3 

Inter 6.6 7.1 14.0 9.3 



Have Training 1.7 .6 

24

Table - A. 6.2.4 


[SAFWCO] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.7 16.8 35.4 100.0 



Technical Service Provider .4 1.2 2.8 1.4 

Transport Service Provider 2.5 8.2 .6 2.8 

Agriculture – Crop Production 12.0 3.5 16.2 12.1 

Livestock Management 34.0 30.6 10.6 25.1 

Table - A. 6.2.5 


[SAFWCO] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.7 16.8 35.4 100.0 


4-6 Person 32.8 22.4 27.4 29.1 

7-9 Person 30.3 41.2 34.1 33.5 

More than 9 29.0 30.6 32.4 30.5 



Table - A. 6.2.6 


[SAFWCO] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.7 16.8 35.4 100.0 

House owners 97.1 96.5 97.2 97.0 



Houses with RCC Roof 3.3 3.4 2.8 


25

Table - A. 6.2.7 


[SAFWCO] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.7 16.8 35.4 100.0 





Table - A. 6.2.8 


[SAFWCO] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


47.7 16.8 35.4 100.0 





Poverty Line) 

62 68 74 67 




The Official Poverty Line figure is Rs 1,000 per capita per month – see Montgomery (2006) 

Table - A. 6.2.9 


[SAFWCO] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 








26



Table - A. 6.2.10 


[SAFWCO] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 





Table - A. 6.2.11 


[SAFWCO] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 




27

Table - A. 6.2.12 


[SAFWCO] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 










Table - A. 6.2.13 


[SAFWCO] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 







Gas 1 1 1 1 


Rent 1 0 1 1 






- Eggs (days) 10 11 9 10 


28

Table - A. 6.2.14 


[SAFWCO] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Own House 96.3 94.1 95.5 95.6 

Refrigerator 17.8 18.8 17.9 18.0 

Colour TV 48.5 51.8 48.0 48.9 

Motor Cycle 14.1 10.6 14.5 13.7 

Prize Bond .8 .4 



Bed with Foam 10.0 5.9 3.4 6.9 


Gold 49.8 32.9 38.5 43.0 

Mobile phone 25.3 21.2 19.6 22.6 


Table - A. 6.2.15 


[SAFWCO] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 







Machinery 8541 10886 5662 7913 

Instruments 7164 5192 5505 6174 


29

Table - A. 6.2.16 


[SAFWCO] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 





Empowerment Related with Education and 

Health - Score out of 10 7.1 5.8 5.4 6.3 



30

Table - A. 6.2.17 


[SAFWCO] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 






made 

74 55 62 67 






family 79 73 83 80 


family 77 77 81 79 




money 77 73 51 67 





borrowed 78 73 52 68 







31

Table - A. 6.2.18 


[SAFWCO] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 








regularly 

78 59 71 74 




Table - A. 6.2.19 


[SAFWCO] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 




name 68 59 40 56 


name 7 4 5 






44 55 56 50 


own name 2 5 3 2 






32

Table - A. 6.2.20 


[SAFWCO] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 












illness 

70 59 43 58 











children 

80 73 77 78 


33

Table - A. 6.2.21 


[SAFWCO] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 





wear 81 73 83 81 




parties 23 36 19 23 














81 73 81 80 


Table - A. 6.2.22 


[SAFWCO] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Borrowers 241 85 326 

73.9 26.1 100.0 

Loan was Self 

used by: 

92.9 97.6 94.2 


Other Members .8 .6 


34

Table - A. 6.2.23 


[SAFWCO] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 


73.9 26.1 100.0 

Loan was Business Activity 

used for: 

99.2 98.8 99.1 

Consumption .4 1.2 .6 

Death/Illness of household members 

.4 .3 


Table - A. 6.2.24 


[SAFWCO] 









Too many Documentations 2.9 


Group Making 

5.0 


35

Table - A. 6.2.25 


[SAFWCO] 

Loan Taken 

One Two Three Four Five 

Overall 

Number of Borrowers 48 89 60 35 9 241 

Sale of asset/Sale of Animals 60.4 55.1 48.3 45.7 66.7 53.5 

Borrow loan from relative/friends 95.8 89.9 85.0 80.0 100.0 88.8 



Banks 

10.4 10.1 10.0 2.9 8.7 

Borrow from 

Moneylender/Commission agent 2.1 7.9 3.3 2.9 11.1 5.0 

Reduce Consumption Expenditure 10.4 11.2 13.3 11.4 11.1 11.6 

Search for extra work 6.3 11.2 13.3 5.7 9.5 

Extra hours in existing occupation 14.6 12.4 8.3 25.7 11.1 13.7 

Have Enough Saving 12.5 23.6 26.7 31.4 11.1 22.8 



Table - A. 6.2.26 


[SAFWCO] 

Loan Taken 

One Two Three Four Five 

Overall 

Number of Borrowers 48 89 60 35 9 241 

Effect on quality of Improved 

life 

54.2 65.2 75.0 82.9 77.8 68.5 

Deteriorated 

2.1 4.5 1.7 2.5 

No Change 

43.8 30.3 23.3 17.1 22.2 29.0 

Family eat your fill As much as wanted (all types) 37.5 52.8 55.0 77.1 66.7 54.4 

As much as wanted (not all types) 60.4 44.9 45.0 22.9 33.3 44.4 

Sometimes felt hunger 2.1 2.2 1.2 

Have more to eat now Have more to eat now 41.7 48.3 65.0 65.7 44.4 53.5 


Equal 56.3 50.6 35.0 28.6 55.6 44.8 

Family health Health is better now 22.9 38.2 43.3 60.0 44.4 39.8 


Equal 75.0 58.4 56.7 40.0 55.6 58.5 

Sustainable increase Yes 

in income 

75.0 83.1 81.7 85.7 100.0 82.2 

No 25.0 16.9 18.3 14.3 17.8 


36

Table - A. 6.2.27 


[SAFWCO] 


Overall 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 


100.0 100.0 100.0 


No 27.0 4.4 15.6 

Do not need 10.1 8.9 9.5 






Table - A. 6.2.28 


[SAFWCO] 


Overall 

New 

Borrowers 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 






Banks 

4.7 9.0 11.1 8.3 

Borrow from 

Moneylender/Commission agent 4.7 6.7 3.8 




Have Enough Saving 2.4 4.5 8.9 5.3 



37

Table - A. 6.2.29 


[SAFWCO] 


Overall 

New 

Borrowers 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 


Effect on overall quality of Improved 

life 

65.9 44.9 34.4 48.1 

Deteriorated 1.2 6.7 12.2 6.8 

No Change 32.9 48.3 53.3 45.1 






Equal 55.3 50.6 54.4 53.4 

Family health Health is better now 44.7 39.3 33.3 39.0 


Equal 50.6 51.7 52.2 51.5 


38

Chapter Seven: National Rural Support Programme 

(NRSP) 



The National Rural Support Programme (NRSP), is Pakistan’s largest multi-sectoral rural 

development programme, established in 1991 by the Government of Pakistan. It is a notfor-profit 

organization registered under Section 42 of Companies Ordinance 1984. 

NRSP is also the largest Rural Support Programme in the country in terms of outreach, 

staff and development activities. Its goal is to reach out to 38 million poor people all over 

Pakistan through its network and other Rural Support Programmes (RSPs). At present, it 

is operational in 35 districts, has 110 field offices and 13 Regional offices that reach out 

to 62,330 people directly and many more indirectly. Programme districts are selected 

according to district poverty ranking from data available from national level surveys 

conducted by government and international organizations, and distributed among other 

Rural Support Programmes (RSPs) like the Sarhad and Punjab Rural Support 

Programmes (SRSP and PRSP). The poor in the area are targeted according to the local 

community assumptions with poor households identified by the communities themselves 

in respective localities. NRSP’s main programmes focus on social mobilization, 

infrastructure development and microfinance and enterprise development. 

Salient features of NRSP are: 

• It is a home grown organization, registered as a Company Limited as Guarantee 

under Section 42 of Companies Ordinance (1984); 

• Government of Pakistan provided seed money to establish NRSP in 1992; 

• NRSP’s core operations are managed from the income of an endowment fund as 

well as from donor funding; 

• NRSP is an Not for Profit Organization; 

• NRSP is autonomous and independent; 

• NRSP has no preconceived package for delivery of services or supplies; 

• NRSP is a Gender Sensitive Organization; 

• NRSP has no political agenda. 

7.1.2 Mission, Vision and Purpose 

NRSP's mandate is to alleviate poverty by harnessing people's potential and undertaking 

development activities in Pakistan. It has a presence in 35 Districts in all the four 

Provinces including Azad Jammu and Kashmir through Regional Offices and Field 

Offices. NRSP is currently working with more than half a million poor households 

organized into a network of more than 29,000 Community Organizations. With sustained

incremental growth, it is emerging as Pakistan's leading engine for poverty reduction and 

rural development. (NRSP website) 

NRSP works to release the potential abilities, skills and knowledge of rural men and 

women, to enable them to articulate their aspirations and to effectively marshal the 

resources they need to meet their identified needs. The purpose is poverty alleviation - 

enabling people to break the cycle of poverty, which begins with lack of opportunity, 

extends to the well-known miseries of economic and nutritional poverty and leads new 

generations to endure the same conditions. The process is social mobilization - bringing 

people together on new terms for a common purpose. The conceptual tools are 'social 

guidance' (recruiting local men and women who will take on a leadership role), advocacy, 

capacity building and awareness raising. The programmatic tools are training, support to 

institutions, microcredit, infrastructure development, natural resource management and 

'productive 

linkages'. 

The organizational purpose is to advocate for the poor and to bring the concerns of 

economically marginalized men and women to public consciousness and to affect policy 

so that the poor are brought into the mainstream of the economy. 

NRSP's vision is manifested in expanded opportunities for income-generation; 

community schools which provide quality primary education, community owned and 

managed infrastructure schemes, improved agricultural productivity, higher returns for 

labour and so on. From the widest perspective the vision is manifested as the first stages 

of a transformation of civil society. 

7.1.3 Objective 

The main objective of NRSP is to create a countrywide network of 

grassroots level organizations to enable rural communities to plan, implement and 

manage developmental activities and programmes for the purpose of ensuring productive 

employment, alleviation of poverty and improvement in the quality of life. The 

organization is designed in such a way that it specializes as a support organization, which 

provide social guidance to the communities. The guiding tenets of NRSP’s philosophy 

are to organize rural communities develop their capital base at the local level through 

savings and credit schemes, support human development endeavours and link the 

communities with the government service delivery departments, donors, NGOs and the 

private sector. While interacting with so many stakeholders, NRSP carefully outlines its 

role as that of a facilitator. This leads the communities and other partners to maintain 

their relationship independent of NRSP. 

The generic principles of NRSP’s philosophy prevent it from following a preconceived 

package approach. The whole quest is to identify and support whatever activities 

communities intend to do on their own according to their prioritized needs. 

7.1.4 Approach 

2

To mobilize people's willingness through the provision of social guidance, NRSP takes 

the following steps: 

Relying on local perceptions, a poverty profile is prepared to assess the intensity of 

poverty prevailing in the community that seeks social guidance. 

The willing community is introduced to the philosophy of NRSP, based on which the 

community organizes itself into a socially viable group called the community 

organization (CO). In view of the information provided by the poverty profile, an 

attempt is made to encourage the poor to join the CO. 

During initial interactions with the community, genuine activists, who have an ambition 

to support their communities in their quest to overcome poverty, are identified. The role 

of these activists in harnessing the willingness of the communities is of paramount 

significance. 

Following the identification of an activist, a micro plan for each member is developed 

to see what he or she is willing to do on his/her own. Along with catering to the 

individual needs, group level and village level needs are also identified. A thorough 

analysis of each is conducted in view of available resources and 

constraints to assign priorities to the identified needs. 

The next step after the cost-benefit analysis is the arrangement of the desired resources 

to address the priority needs. These resources are pooled by the community, provided 

by the support organization or managed through other stakeholders like private and 

public sector service delivery departments, NGOs and donors. 

(Source: NRSP Annual Report 2004-05) 

7.1.5 Social Mobilization: NRSP’s Vision for Rural Development 

NRSP works to release the potential abilities, skills and knowledge of rural men and 

women, to enable them to articulate their aspirations and to effectively marshal the 

resources they need to meet their identified needs. The purpose is poverty alleviation – 

enabling people to break the cycle of poverty, which begins with lack of opportunity, 

extends to the well-known miseries of economic and nutritional poverty and leads new 

generations to endure the same conditions. The process is social mobilization - bringing 

people together on new terms for a common purpose. 

The conceptual tools are ‘social guidance’ (recruiting local men and women who will 

take on a leadership role), advocacy, capacity building and awareness raising. The 

programmatic tools are training, support to institutions, micro-credit, infrastructure 

development, natural resource management and ‘productive linkages’. 

7.1.5.1 Social Mobilization, the core of NRSP’s philosophy 

Social mobilization is based on acknowledging that the community is the centre of all 

development activities. It is only informed and engaged community members who can 

plan and undertake sustainable grass roots development. NRSP utilizes the following 

steps in mobilizing rural men and women: 

7.1.5.1.1 Programme introduction: The process of social mobilization in a new 

Union Council begins with a series of dialogues with community members, explaining 

3

the purpose of the organization and the mutual obligations which CO formation entails. 

These dialogues: 

• Help to establish rapport and build trust between the NRSP Social Organizers and the 

villagers; 

• Enable potential CO members to identify the socio-economic and infrastructural 

opportunities available in their communities. Every effort is made to include both men's 

and women's perspectives as the dialogues proceed. 

• Help identify potential areas of effective intervention, as defined by the men and 

women of the community. Once identified, the opportunities are grouped into sectorspecific 

categories. 

7.1.5.1.2. Situation analysis: As part of the entry process, the Social Organizer 

completes a 'Situation Analysis', which covers demographic trends, economic data 

(household income, agricultural and other earnings), employment data, the institutions 

(schools, hospitals etc.) found in the area, the amount and condition of land, health and 

education facilities and physical infrastructure and the state of the agricultural economy. 

The situation analysis utilizes primary and secondary sources (interviews, Census data, 

etc.) and is valuable as a benchmark, as a tool for entry level planning and for eventual 

programme expansion. 

7.1.5.1.3. CO Formation: The NRSP staff asks people to form Community 

Organizations (COs), which will function as a platform for development. Each CO then 

elects a President and a Manager. The NRSP staff and the CO members identify an 

Activist from amongst the CO members. 

7.1.5.1.4. Poverty Profile: It is the process in which villagers are identified 

according to their own definitions of economic wellbeing. This gives NRSP a good idea 

of the scale of poverty in the area and enables NRSP to match its intended interventions 

with local needs. The categories are: 

Khushal: Well to do Guzara accha ho jata hai: Better off 

Guzara bhot mushkil se hota hai: Very poor Guzara mushkil se hota hai: Poor 

Dusroon ke sahare zinda rehte hain: Destitute. 

7.1.5.1.5. Micro investment plans: Once a CO has been formed, the Social Organizers 

help the members to draw up micro-investment plans (MIPs). Established at three levels, 

household, group and the village, these help the CO members to identify their economic 

needs in concrete terms and to plan ways to improve their economic standing. 

7.1.6 Microfinance Enterprise Development Programme 

7.1.6.1 

NRSP manages one of Pakistan's biggest microcredit portfolios, with 109,614 active 

loans as of July 2005. As part of its holistic approach, NRSP provides various financial 

services to the members of COs in rural areas to help them implement their Micro 

Investment Plans (MIPs). Major programme donors are PPAF, IFAD and a substantive 

4

part of the credit programme is also through NRSP endowment fund provided by the 

Government of Pakistan. 

These services include: 

Micro Credit - individuals through groups and Village Banking 

Micro Insurance - hospitalization and accidental death 

Savings - COs keep their savings in commercial banks or they invest these in 

Community Physical Infrastructure. 

Micro-credit is a major component of NRSP focusing on improving livelihoods. It is 

reported to be the largest credit programme in the country after the Agriculture 

Development Bank, having so far disbursed Rs. 7 billion in loans since 1995. Loans are 

provided to both men and women for entrepreneurial business projects or for other 

income generating activities, such as small businesses or investment in livestock. 

The credit process begins with an initial instalment of Rs.10,000, followed by further 

instalments of Rs. 5,000. The interest rate is 10-11 percent over the 12 months credit 

cycle. However, after the inclusion of the processing fees, the rate rises to 21 percent. 

The recovery rate is claimed to be almost 100 percent. 

7.1.6.2 Savings 

Each Community Organization is encouraged to collect some amount from its members 

and put these savings in a Bank account. During the year 2004-05, the CO members 

saved a total of Rs. 71.91 million. Of this amount, men’s COs saved Rs. 63.81 million 

and women’s COs saved Rs. 8.10 million. However, there is no hard and fast rule 

regarding the savings mechanism. Some COs keep their savings with the CO leader, who 

disburses them according to the need of the group. A few COs also have a ‘committee’ 

system, whereby, savings are rotated among the members similar to a committee system. 

7.1.6.3 Loan Disbursement Methodology 

NRSP provides credits to the members of the COs and the credit groups through a 

solidarity group approach. Although, NRSP does not have a preconceived package, credit 

is given for any income generating purpose. Other than this purpose the credit is not 

targeted for any other utilization. According to NRSP, this encourages the COs to utilize 

natural resources and human capital. 

Unlike many other microcredit programmes, the NRSP credit programme gives loans to 

both men and women. The programme feels that the ratio of men and women clients 

actually reflects community demands and behaviours. According to the programme 

figures for 2004-05, Rs. 1,552,335,800 was disbursed, of which 83 percent was loaned 

out to men and 17 percent to women. Furthermore, as the programme purpose is to focus 

on improving the household livelihood conditions, the gender of the borrower is not a 

major determinant. Most of the loans taken by the women are actually utilized for male 

family member’s income generation activities. 

5

Group loans are meant specifically for female clients for which followings rules are 

applied: 

A group should have minimum three members; Mother, daughter and sisters 

cannot be members of the same group, however, other female relatives can be 

members of the same group if they live in different households; Group members 

should be familiar with one another in order to take responsibility for each other; 

Group members should be prepared to repay on behalf of a defaulter in the group; 

Group members should live within close vicinity of each others’ homes; First time 

loan amount will not exceed Rs. 10,000 and will be repaid on monthly 

instalments; In addition, group members have the facility to utilize trainings and 

skill enhancement through NRSP. 

NRSP offers a successive lending product in which the credit amount increases with 

successive loans. During the reporting period, the first loan client was Rs. 10,000 while 

for a repeating client the maximum ceiling is Rs. 30,000. 

The majority of the NRSP loans are used for agriculture and livestock purposes, with 60 

percent of the loans for agriculture purposes, 19 percent for livestock and 21 percent for 

entrepreneur development. More than 50 percent of the NRSP programme area comprises 

arid zones and rain fed areas of the country taking in view the main mandate of the 

organization to eradicate poverty. 

The Micro-finance and Enterprise Development Programme (MEDP), with a portfolio of 

100,276 active loans worth Rs. 1,064, 696, 693 since July 2005, has disbursed a total of 

Rs. 6,706,957,499 since NRSP’s inception in 1993. The figures for 2004-05 show an 

increase over 2003-04 in loan size and a 3 percent increase in credit disbursement to 

women. There was a significant increase in credit disbursement size for enterprise 

development and a decrease in disbursement for agriculture loans. The total credit 

disbursed in 2004-05 was 79.12 percent for men and 20.88 percent to women. 

As the COs are primarily responsible for assessing the character of the intended 

borrowers, it is the CO which assesses the credit worthiness of CO members applying for 

a loan. The CO submits the loan application to NRSP in the form of a Resolution signed 

by at least 75 percent of the CO members. The CO undertakes the responsibility of 

verifying the proper utilization of the loan and its repayment. The NRSP Social 

Organizers and loan officers also conduct social and technical appraisals before the 

approval of the loan. 

In order to improve the quality of COs and the loan portfolio, it was decided in 2003 to 

make structural changes in the microcredit assessment, delivery and recovery model. A 

new social mobilization and credit delivery scheme has been introduced. The principles 

of the new model have been derived from the Urban Poverty Alleviation Programme 

(UPAP) – see below. 

6

7.1.7 Application of the new Model 

Currently, the new model is operating in the Hyderabad, Badin, Mardan, Malakand and 

Rawalpindi Regions. Present reports show the following outcomes: 

• The entire staff has become more focussed on doing the assigned work in a 

planned manner; 

• The credit staff is implementing all credit activities systematically; 

• The social organization process has accelerated; 

• The SOs do not feel overworked despite forming a larger number of COs; 

• Disbursements have increased considerably; 

• Repayments have improved significantly and all new loans are showing 100% 

recovery. 

It is important to note that the changes are in the management structure only: the 

principles and the structure of the credit programme remain the same. For example, the 

service charge, repayment schedules and credit ceilings are the same. Credit only goes to 

individuals, as is the case in the existing programme. The CO still initiates the request for 

credit and its members benefit from it. The concept of social pressure through group 

formation still prevails, because the credit is given on the recommendation of the CO, 

which also undertakes the responsibility for repayment. 

7.1.8 Appraisal Process 

The appraisal process focuses on assessing the character and trustworthiness of the 

intended clients. Previously, NRSP’s appraisal process focused primarily on the financial 

feasibility of the proposed activity plus the COs guarantee. However, the Organization 

has learned from experience that the character of the client pays a greater role in his or 

her repayment performance than his or her ability to generate a profit from the business 

or activity for which the loan is taken. The character assessment or social appraisal 

includes whether the client is ‘honest’ and ‘responsible’ as well as confirmation of his or 

her whereabouts for which copies of National Identity Cards and client photographs are 

obtained and a complete record is maintained at the village and district offices. 

Two independent appraisals are conducted. The field Worker collects the CO Resolution 

for rural credit in the CO meeting and then carries out an appraisal at the home of the 

intended client. This is called the Social Appraisal because it confirms the whereabouts of 

the client and on his or her character. While the second appraisal, referred to as a 

Technical Appraisal, is done by the Credit Officer confirming the accuracy of all the 

information collected by the Field Worker during the Social Appraisal. The Credit 

Officer also checks the financial viability of the proposed activity, with assistance from 

the Engineer or other specialists such as the enterprise development staff if required. This 

double appraisal at the household level helps the NRSP staff to know the borrower and 

also involve the family members in the process. The Field Worker is not authorized to 

reject a credit application on his/her own. The decision lies with the Senior Credit 

7

Officer. If the Field Worker and Credit Officer disagree, the Senior Credit Officer makes 

the decision, after hearing both opinions. 

Disbursement of amount is done within 7 to 8 days of approval, for which the individual 

borrower visits the local Habib Bank Branch for direct collection of cash through a check 

issued on her or his name. 

Collateral 

NRSP extends micro credit to economically marginal men and women who have no 

material collateral. The COs, however, exert social pressure in case of loan default. 

Because each loan request is signed by at least 75% of the CO members, each member 

acts as a guarantor for all other members. To facilitate the COs and their members in the 

repayment of their loans in difficult times, NRSP encourages the COs to practice regular 

savings before requesting a loan. However, to ensure that this does not discourage the 

poorest CO members, the ceilings for mandatory savings are flexible. 

Saving and Internal Lending 

The habit of saving is a prerequisite for CO membership, as is regular attendance in the 

fortnightly meetings. Once the members’ savings (which are deposited in a bank account 

in the name of the CO) reach a substantial amount the process of internal lending begins 

with the unanimous will of the CO. The CO then forms a credit committee, which 

appraises the loan requests. The CO extends credit to its members from its saving pool on 

its own terms and conditions. NRSP trains the COs in accounting and financial 

management. 

Enterprise Development 

NRSP facilitates the COs in developing new enterprises and improving existing ones 

through its Vocational Training Programme (VTP) and Natural Resource Management 

Programme. As part of the VTP, the CO members are trained in business development 

and financial management. 

7.1.9 Principles of Recovery Monitoring and Dropouts 

Recovery monitoring is given a lot of importance in the new system. It requires daily 

recovery planning with preparation of daily recovery targets based on the due date of 

each instalment. In the new model, the Senior Credit Officer’s primary duty is to develop 

daily monitoring reports and to ensure that a client who does not pay his or her 

instalments on time is reminded of the obligation to repay. It is the responsibility of the 

Senior Credit Officer to focus on finding ways and means of ensuring timely recovery. 

According to the NRSP micro-finance programme team, NRSP does not have a very 

stringent approach towards recovery and depend more on the social collateral through the 

COs and loan groups (3 individuals per group). To-date, the programme has not 

encountered any major defaulters. 

In addition, the loan officers at the village level have certain district targets which if 

achieved are a major source of incentives in form of bonuses added into their salaries. 

8

Therefore, staff members try their utmost to meet their loan and recovery targets. 

However, this approach does have an affect on NRSP’s mandate of focusing on the 

poorer community segments, as many borrowers are not actually the poor in their 

respective communities. Some of the team members further added that the poorest strata 

were not prepared to take the risk of attaining loans as they did not have the assets to 

recoup in case of an emergency or other losses during business. 1 

In the recent programme history, there have been very few dropouts in the Credit 

Programme process. Except for a few randomly reported cases in the beginning of the 

programme, COs members are mostly familiar with each other and do not identify those 

borrowers who have probability of leaving in the middle of the loan cycle due to the 

social collateral approach. Similar feedback was received during the clients assessment 

discussions during this research. 

7.1.10 Characteristics of credit staff 

The model recognizes the importance of on-the-job training and monitoring to build staff 

capacity. The Field Workers are the front line workers responsible for maintaining close 

contact with the COs and their members. This requires a large number of honest and 

responsible Field Workers who can meet all the COs and their members. The Field 

Worker must be a local, trustworthy person. The Credit Officer must guide the Field 

Workers. The SCO must be able to train and monitor a large cadre of Field Workers and 

Credit Officers. In the new model, once a Social Organizer helps people to form a CO, 

and a credit request is initiated, the credit process from that point on is in the hands of the 

Credit Officer and the CO and its members. This means that the Social Organizer is free 

to concentrate on other activities, including health and education, training and natural 

resource management, as the CO requires. 

7.1.11 Village Branches (VB) 

In order to establish frequent contact with community members, one to two room village 

branches have been formed at accessible locations, typically at the centre of one or more 

Union Councils. The location and number of Village Branches in a Union Council is 

determined by the size and proximity of the potential clientele. The VB is the smallest 

administrative unit responsible for coordinating with the COs and their members on a 

daily basis. It is also a recovery collection hub. The Field Worker and the Credit Officer 

keep the VB open during office hours according to a fixed schedule, posted in the office. 

According to the schedule, the Field Worker allocates time for CO meetings, recovery 

follow-up, and appraisals and recovery collection. The Credit Officer monitors the 

performance of the Field Worker through surprise visits and checking of all the records 

etc. The SCO arranges periodic ‘surprise visits’ to ensure proper office procedures and 

compliance with the agreed schedule. 

1 Study consultant’s Interviews with General Manager Micro-Finance and Entrepreneur Development 

Programme and Credit team District Attock 

9

The worker’s degree of mobility depends on the type of terrain and the settlement pattern. 

In areas with high population density, the FW visits COs and clients on foot, and in areas 

where the population is scattered the FW is provided with a motorcycle. Women FWs 

work only in areas that have a high population density. For areas with smaller 

populations, the Social Organizers will continue providing credit services. Women credit 

officers will have vehicles at their disposal to ensure they reach far flung areas, except in 

densely populated areas, where they will travel on foot. 

7.1.12 Internal Controls 

NRSP has a comprehensive MIS with a database for all its programmes. In the new set 

up, the credit MIS is not accessible to Credit Officers or Field Workers. The accounting 

staff at the district level reports directly to the Regional General Manager and to Finance 

and Accounts at the head office. However, in order to ensure the correct postings of data 

in the MIS, the Credit Officers are authorized to check the daily postings from the 

receipts. In addition, the other principles are: 

The CO formation and credit delivery are two distinct processes which must take place 

independently of each other: 

Only those COs should have access to the rural credit programme, which are 

recognized by the Rural Credit Section as viable institutions. For this purpose, the 

Rural Credit section will register the COs with NRSP, rather than the person who 

formed it; 

The credit should always reach the intended client, who must acknowledge the 

receipt of the credit from NRSP; 

The staff responsible for credit should be able to focus exclusively on credit 

operations and should be able to implement a strategy that leads to 100% on time 

recovery; 

The organizational structure, such as location of offices and staffing patterns, 

should make it possible to pursue clients effectively; 

The entire process should be transparent; 

All credit disbursement and recovery activities should be implemented in a 

planned manner; 

The system should allow performance evaluation of staff on the basis of 

predefined criteria. For example, the Social Organizers will be evaluated on the 

quality and performance of the COs they form, and credit staff on the credit 

outreach and the quality of the loan portfolio. 

7.2 Urban Poverty Alleviation Project (UPAP) 

UPAP began its operations in June 1996 in the urban and peri-urban areas of Rawalpindi 

and Islamabad. Since then it has been testing various strategies and adopting the best 

ones to cope with the field realities. Having successfully established UPAP as a 

microcredit delivery model, NRSP decided to initiate UPAP operations in some of 

Pakistan’s major cities. The first expansions were in Faisalabad and Karachi in 2002. The 

10

programme has since expanded to Multan and Lahore. It should be mentioned here that 

although NRSP through UPAP is running a separate urban credit programme, the NRSP 

MEDP continues to operate in certain peri-urban areas in its programme regions. 

UPAP establishes low cost settlement offices and disburses credit to women using the 

‘solidarity group’ method. Three or more women can form a group. The credit facility 

can be used for family enterprises. Men can also use the facility but they must be family 

members whose income comes into the hands of the borrowers. This strategy has saved 

UPAP from major incidents of fraud or default. Alongside the solidarity group approach, 

UPAP also adopted the individual approach on the pattern of the Orangi Charitable Trust, 

to cater to the needs of small-scale entrepreneurs and manufacturers who do not live in 

areas where there is a UPAP settlement office. 

For expansion purposes UPAP has found the solidarity group approach more successful. 

The experience of UPAP teams is quite diverse in terms of its borrowers. They learned 

that borrowers could be either trustworthy or untrustworthy according to circumstances 

and not as a rule. Thus, UPAP believes any credit disbursement strategy is likely to 

succeed which ensures effective supervision and pursuance of borrowers. This can be 

done through regular monitoring and by developing a relationship of respect with the 

community. The recovery rate of UPAP reflects the effectiveness of this approach. 

Objectives 

• To improve the quality of life of disadvantaged and low income people; 

• To develop an indigenous model of poverty alleviation in the urban areas of 

Pakistan; 

• To provide the urban poor, focusing on women but not excluding men, with 

access to credit; 

• To alleviate poverty of low-income households by organizing women, 

encouraging them to save; 

• Increasing their access to resources through credit; 

• To create income generating self-employment opportunities for women; 

• To explore the possibility of establishing a specialized bank based on the 

experience of the pilot project. 

Credit Disbursement Approaches 

Solidarity Group: 

Three or more like-minded women with comparable social and economic conditions form 

a group. Once a group is formed it meets weekly. During the meeting, each group 

member saves some amount, through cutting her expenditures equivalent to the weekly 

recovery instalment of the credit amount that she intends to borrow. After five weeks, the 

weekly saving amount is given to one of the members through a draw. Thereafter this 

process continues again. Four weeks after group formation, credit is disbursed to one of 

the women. After the group has ensured that this woman has utilized the credit properly 

11

credit is disbursed to another woman. Usually, in each weekly meeting the credit is 

disbursed to the next member. 

Individual: 

Any micro level manufacturer living only where UPAP’s settlement office does not exist, 

can take credit on the personal guarantee of an honest and competent client of UPAP. 

UPAP Programme Monitoring 

UPAP has developed an efficient monitoring system. Its MIS developed in Oracle 

generates a number of reports revealing both disbursement and recovery positions on a 

daily and monthly basis. Monthly staff meetings and daily diaries are a regular feature of 

UPAP’s monitoring system. These practices help bring the staff on the same wavelength 

regarding programme issues. 

7.3 NRSP Survey Results 

In this section we present the results from our survey for NRSP. The results are based on 

the data collected on the basis of the questionnaire – see Appendix at the end of the 

Report. A select few of the results are presented here in table form, in the main text of 

this Chapter, while the substantial majority of tables are presented in the Appendix to the 


























12




The tables in the Appendix of this Chapter describe some of the key findings from our 

survey. Unlike all our partner MFIs, NRSP is the only purely rural MFI in our sample, 

and hence one needs to keep this factor in mind when evaluating its results. This fact also 

makes comparison with the other MFIs in our sample difficult. Moreover, NRSP is a 

development organisation involved in poverty alleviation and microcredit is one of its 

main activities. Hence, it is also possible that the results from the microfinance 

intervention could be affected by other inputs from NRSP, such as the social organisation 

skills the organisation relies on. This broad package of development interventions also 

makes NRSP unique in our sample, thus making comparisons with specialised MFIs 

somewhat problematic. 

From our sample, we observe that about one-fifth of NRSP clients are in the fourth and 

greater loan cycle. Table A.7.2.3 shows that the educational characteristics of those who 

are Active Borrowers as well as those who are not part of the programme, are fairly 

similar, an unsurprising result. A large majority of NRSP Active Borrowers are involved 

in Agriculture in Crop Production, as well as in Livestock Management. The proportion 

of NRSP clients in these two categories seems to be higher than both that of Non- 

Borrowers and new (Pipeline Clients), suggesting perhaps that NRSP loans are used for 

agricultural purposes and perhaps non-clients, over time, shift from Business/Retail Shop 

type activities to Agriculture and Livestock. 

The Housing Quality data seem to be fairly similar across the sample – Table A.7.2.6 – 

with perhaps more NRSP Active Borrowers having Cemented Floors than the other three 

categories of clients. Table 7.1 in the text below, confirms this observation showing that 

the difference are not statistically significant, except in the Cemented Floors category. 

What is surprising, however, is that the so few Active Borrowers have Houses with RCC 

Roofs compared to the new clients and Non-Borrowers, a difference which is statistically 

significant. 

Table – 7.1 

NRSP – Housing 


Deviation 

t-value 

Significance 

Level 


New and Non- 

Borrowers 

97.7528 14.84210 


New and Non- 

Borrowers 

2.9093 1.51554 


New and Non- 67.6966 46.82936 

13

Borrowers 

Houses with RCC Roof Active Borrowers 5.2469 22.33160 -3.262 .001 

New and Non- 

Borrowers 

12.3596 32.95827 


New and Non- 

Borrowers 

30.8989 46.27269 

Note: There are 324 and 356 respondents in each category respectively. t-value greater than 1.6 

indicates the mean difference between two categories is statistically significant. The negative t 

indicates that average value of category 2 is greater than the average value of category 1. 

Table A.7.2.8 shows the average Income, Expenditure and Value of Household Assets of 

Active Borrowers, Pipeline Borrowers and Non-Borrowers, where Active Borrowers 

have higher average Income Per Capita and Expenditure Per Capita than both categories. 

Table 7.2 shows that both the Expenditure Per Capita and Income Per Capita for Active 

Borrowers is higher than it is for Pipeline and Non-Borrowers and this difference is 

statistically significant. Similarly, the Value of Household Assets and the Household 

Asset Score are both greater for Active Borrowers and here again, this difference is 

statistically significant. Both these sets of data may suggest that NRSP Active Borrowers 

are ‘better-off’ than the new clients and non-clients. 

Table – 7.2 

NRSP – Economic Status 


Deviation 

t-value 

Significance 

Level 


New and Non- 

Borrowers 

971.8186 405.06757 


New and Non- 

Borrowers 

1303.4008 835.43774 


New and Non- 

Borrowers 

7.99 2.868 

Value of household Active Borrowers 

assets 

1189218.7307 1572360.69310 3.742 .000 

New and Non- 

Borrowers 

772059.8596 1331138.08740 




One does not find much difference in the indicators for Children’s Education – Table 

A.7.2.9 – although there is a difference in the Monthly Expenditure incurred on 

Education, where Active Borrowers spent far more than New and Non-Borrowers – 

Table 7.3 – and this difference was statistically significant. In most of our other (urban) 

14

MFIs, we did not find a similar result, where there was no such marked difference. In the 

urban areas, the Education levels were higher than they are for rural areas, and perhaps 

Education in rural areas has a somewhat lower priority than it does in cities and towns. 

Hence, it is possible, that only after some years of improved income do rural parents 

spend extra on the Education. Perhaps, as Incomes rise in rural areas, the additional 

Income allows parents to send more children to school or then send their children to 

better schools. 

Table – 7.3 

NRSP – Children’s Education 


Deviation 

t-value 

Significance 

Level 

School Going Children % Active Borrowers 91.3612 18.76740 1.089 .277 

New and Non- 

Borrowers 

89.3238 20.63974 

School Going Children - Boys Active Borrowers 

% 

90.1341 26.42924 .459 .647 

New and Non- 

Borrowers 

88.8194 26.55939 

School Going Children - Girls Active Borrowers 

% 

73.2108 41.67856 .600 .549 

New and Non- 

Borrowers 

70.4734 42.75401 

Children going to Private Active Borrowers 

School % 

27.2728 41.28501 1.069 .286 

New and Non- 

Borrowers 

23.2768 40.34627 

Monthly Expenditure on Active Borrowers 

Education 

393.9461 868.26460 2.976 .003 

New and Non- 

Borrowers 

207.6695 417.82755 


indicates the mean difference between two categories is statistically significant. The negative t 

indicates that average value of category 2 is greater than the average value of category 1. 

One of our unexpected and surprising results is that there does not seem to be much 

difference on Household Asset Ownership amongst the three categories of respondents – 

Table A.7.2.14 and Table 7.4. One would have expected Active Borrowers, as their 

income rise, to perhaps invest in additional Household Assets. 

Table – 7.4 

NRSP – Household Assets Ownership 


Deviation 

t-value 

Significance 

Level 

15

Own House Active Borrowers 98.4568 16.62074 -.111 .911 


Refrigerator Active Borrowers 26.5432 44.22460 -1.173 .241 




Motor Cycle Active Borrowers 21.6049 41.21849 .351 .726 


Prize Bonds Active Borrowers .9259 9.59267 -.255 .799 


Washing Active Borrowers 

Machine 

43.2099 49.61342 -.454 .650 

Sewing 

Machine 



68.2099 46.63811 -.250 .803 


Bed with Foam Active Borrowers 17.5926 38.13461 -1.321 .187 


Urban Property Active Borrowers 1.5432 12.34544 .150 .881 




Mobile phone Active Borrowers 38.2716 48.68017 .019 .985 



indicates the mean difference between two categories is statistically significant at least at 90 

percent level of significant. The negative t indicates that average value of category 2 is greater 

than the average value of category 1. 

Another unexpected result relates to Women’s Empowerment, where, as in the case of 

many MFIs, we find that there is little difference between Active Borrowers and others – 

Table A.7.2.17-21 and Table 7. 6. While we found similar results for urban MFIs as well, 

we did find that in the case of Economic Empowerment, Active Borrowers were far 

‘better-off’ than new clients and Non-Borrowers. In the case of NRSP, we do not get this 

result perhaps due to greater rigidity in the social structure in rural Punjab where women 

are less physically and socially mobile. 

Table – 7.5 

NRSP – Women Empowerment 


Deviation 

t-value 

Significance 

Level 



New and Non- 

Borrowers 

9.6486 3.29978 




New and Non- 

Borrowers 

3.2568 1.37553 

16


New and Non- 

Borrowers 

1.9324 1.05117 




Active Borrowers 6.0000 1.61955 -.205 .838 

New and Non- 

Borrowers 

6.0541 1.45142 



New and Non- 

Borrowers 

4.2297 1.19985 




7.4 NRSP Regression Analysis 





The Difference in Differences (DID) impact model estimated for NRSP is 











As NRSP has been providing microcredit for a long time we have clients in our sample 

who are even in their sixth and seventh loan cycle. Therefore we do two separate sets of 

regression on young and old borrowers. In our sample the mean number of loan cycles is 

2.25, therefore we define young borrowers as those who have borrowed 2 times or less 

and old borrowers who have borrowed more than 2 times. 

2 For NRSP six household characteristics were included in the regression out of 15 tested through ANOVA. 

17





The results from the estimation of δ are given in Table 7.6. From the results we can 

conclude that NRSP is having a positive and significant effect on income and total 

expenditure. Young borrowers have 26 percent higher income than other respondents 

(p=0.094), overall their household income is 32 percent higher (p=0.005) and the per 

capita income is 24% higher (p=0.045), however these variables are not significant in the 

single difference estimation. On total household expenditure, young borrowers do 

significantly better on both single and double difference estimations (7%, p=0.079; 

DID:11 percent, p=0.042). Similarly we can see a positive impact on old borrowers on all 

measures of income in both single and double difference estimations. In the DID 

estimations, active borrowers have 90% higher income (p=0.00), household income is 48 

percent higher (p=0.00) and per capita income is 40 percent higher (p=0.00). In 

estimations where old active borrowers are compared to pipeline clients (Single 

Difference), respondent’s own income is 70 percent higher (p=0.00), household income is 

24 percent higher (p=0.02) and per capita income is 22 percent higher (p=0.04). 

Other than this impact we find that old borrowers spend Rs.208 more on health 

expenditure as compared to all other categories of respondents (p=0.09). Compared to 

pipeline clients, old borrowers are saving significantly less (Rs.154; p=0.04) and they 

also score lower on the asset empowerment index (1.43; p=0.00). 

About 14 percent more girls from young borrowers households are enrolled in school 

(p=0.09) compared to all other respondents and they score higher on the asset index when 

compared to pipeline clients (0.97; p=0.00). However, on empowerment indices young 

borrowers are scoring significantly less than pipeline clients as given in Table 7.6. 

A dummy variable was added in the regressions to control for rural and urban differences 

between clients. The rural dummy was generally negative and significant for expenditure 

and enrolment figures. Respondent’s education was positively related with all variables 

and it was significant in about 85 percent of the regressions. The only exception to this 

was health expenditure, which was at times negatively related to respondent education, 

though it was never significant. 

The dummy member was negative and significant for respondent’s own income, 

implying that those who self-select themselves for borrowing start with a lower income 

compared to other individuals. In some empowerment regressions, member was positive 

and significant and the dummy old was negative and significant, but there was no clear 

trend. 

The results on the income variables do show a positive impact on NRSP clients, however 

this impact has not translated into higher spending on education and saving. Higher 

18

spending on these latter variables is important to develop human capital and reduce 

vulnerability. 

19

Table 7.6: Regression results 


Old Borrowers 

Single Difference Double Difference Single Difference Double Difference 


Coefficient t-value 1 Coefficient t-value Coefficient t-value Coefficient t-value 

Log(Respondent Income) 0.05 0.39 0.26 1.68 ** 0.70 5.73 *** 0.89 5.63 *** 

Log(Household Income) 0.11 1.30 0.32 2.82 *** 0.24 2.45 ** 0.48 3.83 *** 

Log(Per Capita Income) 0.11 1.31 0.24 2.01 ** 0.22 2.06 ** 0.40 2.94 *** 

Log(Total Household Expenditure) 0.07 1.76 * 0.11 2.04 ** -0.002 -0.03 0.02 0.29 

Log(Food Expenditure) 0.02 0.38 0.03 0.48 -0.05 -0.93 -0.06 -0.94 

Educational Expenditure 38.20 0.48 42.00 0.44 47.40 0.61 23.50 0.25 

Health Expenditure -100.00 -0.98 28.80 0.27 47.00 0.41 208.00 1.70 * 

Savings -23.19 -0.29 75.00 0.81 -153.00 -2.09 ** -60.50 -0.68 

Asset Score 0.97 2.97 *** 0.36 0.78 -0.25 -0.72 -0.75 -1.55 

Children Enrolled in School(%) 6.81 1.17 9.13 1.16 8.10 1.32 8.50 1.05 

Boys Enrolled in School(%) 2.82 0.50 3.27 0.46 3.64 0.64 3.70 0.51 

Girls Enrolled in School(%) 2.61 0.43 14.12 1.72 * 1.45 0.25 8.86 1.06 

Women's Empowerment (Overall Index) 2 -3.42 -1.93 * 0.82 0.24 0.45 0.07 0.68 0.10 

Economic Empowerment -2.10 -2.43 ** -0.79 -0.51 0.06 0.01 -0.04 -0.01 

Income Empowerment -0.98 -3.05 *** 0.31 0.55 -1.07 -0.95 -0.21 -0.22 

Asset Empowerment -0.05 -0.91 0.51 1.23 -1.43 -1.75 * -0.84 -1.08 


Health -0.59 -1.18 -0.03 -0.04 1.78 1.36 0.90 0.55 

Social Empowerment 0.30 0.81 0.83 1.25 1.12 1.24 0.86 0.73 



Note: Young Borrowers are clients who have taken two loans or less and Old borrowers are those who have taken between 3 to 7 loans.

7.5 UPAP Survey Results 

As many as 83 percent of those sampled were in their first three loan cycles, and most of 

these had little or no education. The largest share of Active Borrowers, Pipeline 

Borrowers and Non-Borrowers, all seem to undertake similar sorts of business activity, 

such as having a Retail Shop or then they are Personal Community Service Providers. 

Unlike many of the other MFIs studied where we find some sort of shift in business 

activity on account of the loan, in the case of UPAP, we get the sense that most 

businesses continue after the loan and are consolidated, rather than switched. 

There is no significant difference in the Housing characteristics of Active Borrowers or 

New and Non-Active Borrowers – Table 7.6 – perhaps suggesting that insufficient capital 

has been accumulated in this short span of time to invest in improvements in the house. 

Table 7.7, on the other hand, has the rather surprising result that in most cases, the 

Expenditure Per Capita and the Per Capita Food Expenditure, are significantly lower for 

Active Borrowers than for Pipeline or Non-Borrowers. The percentage of Borrowers 

below the Official Poverty Line, in line with most of the other MFIs in the sample, is 

only 19 percent. From Table A.7.4.13, it seems that both Active Borrowers and Pipeline 

(New) Borrowers are spending a large amount of their income on the repayment of their 

loan, and in comparison to those who are Non-Borrowers, are spending less on Food 

Expenditure. 

Table – 7.7 

UPAP – Housing 


Deviation 

t-value 

Significance 

Level 


New and Non- 

Borrowers 

71.0744 45.40429 

Person per room Active Borrowers 3.2650 1.48790 1.968 .049 

New and Non- 

Borrowers 

3.0226 1.68968 

Houses with baked bricks Active Borrowers 92.3810 26.57248 -1.600 .110 

New and Non- 

Borrowers 

95.3168 21.15704 


New and Non- 

Borrowers 

39.3939 48.92961 

Houses with Cemented Active Borrowers 

Floor 

75.5556 43.04411 1.391 .165 

New and Non- 

Borrowers 

70.7989 45.53149 

Note: There are 315 and 363 respondents in each category respectively. t-value greater than 

1.6 indicates the mean difference between two categories is statistically significant. The 

negative t indicates that average value of category 2 is greater than the average value of 

category 1.

Table – 7.8 

UPAP – Economic Status 


Deviation 

t-value 

Significance 

Level 

Expenditure Per Capita Active Borrowers 1325.1840 643.54615 -2.253 .025 

New and Non- 

Borrowers 

1442.4875 703.02808 

Per Capita Food Active Borrowers 

Expenditure 

567.7574 234.59407 -4.638 .000 

New and Non- 

Borrowers 

664.6475 299.48792 

Income Per Capita Active Borrowers 1456.5825 1104.67028 -.587 .557 

New and Non- 

Borrowers 

1498.6593 748.03354 


New and Non- 

Borrowers 

7.06 2.592 

Value of household Active Borrowers 

assets 

333866.8203 345371.43949 1.667 .096 

New and Non- 

Borrowers 

291473.5914 306132.64951 




category 1. 

While there is not much significant difference in the characteristics of Active Borrowers 

and the other two categories with regard to Education characteristics, there is one 

surprising result in which the proportion of school-going Girls as a proportion, is lower 

for Active Borrowers – Table 7.9. Why this is so is difficult to explain; one possible 

explanation could be that girls are being asked to work in the family business rather than 

go to school, but there could be other reasons as well. 

23

Table – 7.9 

UPAP – Children’s Education 


Deviation 

t- 

value 

Significance 

Level 


New and Non- 

Borrowers 

91.7132 17.43449 


% 

82.8616 31.74271 .068 .946 

New and Non- 

Borrowers 

82.6027 34.52412 


% 

76.4683 38.97037 -2.027 .043 

New and Non- 

Borrowers 

84.7039 33.07633 


School % 

43.2434 45.20299 1.249 .212 

New and Non- 

Borrowers 

37.8462 45.66167 


Education 

506.0400 617.97444 1.442 .150 

New and Non- 

Borrowers 

427.2304 525.06299 




category 1. 

In t case of Household Assets Ownership, we find no significant difference between 

Active Borrowers and the other two categories, except that more Active Borrowers have 

savings in Gold – Table 7.10. The differences between the two categories in terms of 

Business Assets is also not significant, except that we again find the surprising result that 

Active Borrowers have lower Business Assets than do New and Non-Borrowers, and that 

the value of the Machinery Assets of Active Borrowers are significantly lower – Table 

7.11. 

24

Table – 7.10 

UPAP – Household Assets Ownership 


Deviation 

t- 

value 

Significance 

Level 



Refrigerator Active Borrowers 36.8254 48.96461 -1.896 .058 


Colour TV Active Borrowers 76.5079 46.74632 .599 .549 





Machine 

67.6190 46.86728 .181 .856 

Sewing 

Machine 



72.3810 46.86728 -1.873 .061 









1.6 indicates the mean difference between two categories is statistically significant at 

least at 90 percent level of significant. The negative t indicates that average value of 

category 2 is greater than the average value of category 1. 

Table – 7.11 

UPAP – Business Assets 


Deviation 

t- 

value 

Significance 

Level 

Monthly Sale [Rs.] Active Borrowers 16159.68 18017.626 -.885 .376 

New and Non- 

Borrowers 

17661.71 25004.080 

Value of Assets - Active Borrowers 

Shop/Workshop 

11156.19 44093.032 -1.723 .085 

New and Non- 

Borrowers 

28298.90 171750.279 

Machinery Active Borrowers 2132.06 7891.055 -2.385 .017 

New and Non- 

Borrowers 

4519.28 16168.329 

Instruments Active Borrowers 1608.89 6266.196 -.911 .362 

New and Non- 

Borrowers 

2366.94 13556.640 

Other Active Borrowers 4188.89 22578.879 2.134 .033 

New and Non- 

Borrowers 

1487.60 7888.063 

25




The one category in which UPAP Active Borrowers have significantly better results, is 

that of Women’s Empowerment – Table 7.12, Tables A.7.4.16-21. In terms of Economic 

Empowerment and Income Empowerment, the difference is significant. 

Table – 7.12 

UPAP – Women’s Empowerment 


Deviation 

t-value 

Significance 

Level 












Active Borrowers 6.7733 2.11744 .427 .670 









category 1. 

The perceptions of Active Borrowers on the improvement in their Quality of Life based 

on the proportion of Active Borrowers who think their lives have improved on account of 

the loans – Tables A.7.4.26 – seem to be lower than for other MFIs. Even from those who 

are in their fourth loan cycle or beyond, only about 80 percent feel that their Quality of 

Life has improved, while the proportion of those who feel that they are eating 

better/more, is also on the lower side. 

7.6 UPAP Regression Analysis 





The Difference in Differences (DID) impact model estimated for UPAP is 

26











UPAP was established in 1996 and in our sample we find clients who are even in their 

sixth loan cycle. Therefore we do two separate sets of regression on young and old 

borrowers. In our sample the mean number of loan cycles is 2.25, therefore we define 

young borrowers as those who have borrowed 2 times or less and old borrowers who 

have borrowed more than 2 times but less than 7. 





The results from the estimation of δ are given in Table 7.13. Impact results for 

empowerment are the most significant. In the DID regressions, UPAP clients perform 

significantly better than other respondents. The coefficients for young and old borrowers 

are comparable and on the overall index, young borrowers score almost 9 (p=0.00) point 

higher than other respondents and old borrowers score 11 (p=0.00) points higher. Old 

borrowers also perform better than pipeline clients in single difference estimates for the 

overall empowerment index (1.99; p=0.05) and the economic empowerment index (0.83; 

p=0.06). The other variable in the regressions was the Member dummy for the overall 

empowerment index, economic empowerment and income empowerment. The 

significance of the member dummy implies that people who choose to borrow are more 

empowered to begin with especially on economic and income empowerment in this case. 

Young borrowers have a 15 percent higher per capita income than other respondents 

(p=0.057), while old borrowers have a higher educational expenditure and asset score 

than pipeline clients. Old borrowers are spending an extra Rs.150 on education (p=0.04) 

and also score 0.63 points higher on the asset index (p=0.034). However, old borrowers 

are saving less than all other respondents (-212; p=0.099). 

3 For UPAP seven household characteristics were included in the regression out of 15 tested through 

ANOVA. 

27

For young borrowers the number of earners in the household was positive and significant 

for income, expenditure and empowerment variables in both single and double difference 

estimation. The same was true for old borrowers in both estimations. Surprisingly, in 

majority of the regressions, female headed households scored significantly less on 

empowerment indices for both young and old borrowers. 

In double difference regressions for both young and old borrowers the education of the 

respondent had a positive and significant effect on income and expenditure measures. 

From out results we can see that UPAP has had some positive impact on educational 

expenditure and assets for old borrowers. The results for empowerment are the most 

significant in the double difference estimation but as the member dummy is also positive 

and significant in some of those regressions we can conclude that both active borrowers 

and pipeline clients are more empowered than their neighbours. 

28

Table 1: Regression results 


Old Borrowers 

Single Difference Double Difference Single Difference Doubl 

Dependent Variable Coefficient t-value 1 Coefficient t-value Coefficient t-value Coeffi 

Log(Respondent Income) -0.04 -0.47 0.13 1.13 -0.10 1.26 

Log(Household Income) 0.06 1.49 0.11 1.64 0.01 0.19 

Log(Per Capita Income) 0.08 1.62 0.15 1.91 ** -0.05 -1.01 

Log(Total Household Expenditure) 0.04 1.12 0.08 1.36 -0.02 -0.51 

Log(Food Expenditure) -0.01 -0.20 0.02 0.33 0.00 0.11 

Educational Expenditure 40.80 0.76 0.25 0.00 149.50 2.06 ** 9 

Health Expenditure 3.70 0.08 59.00 0.93 -28.50 -0.75 2 

Savings 102.00 1.00 -32.00 -0.23 -105.00 -1.37 -21 

Asset Score 0.31 0.99 -0.18 -0.39 0.63 2.13 ** 

Children Enrolled in School(%) 0.78 0.15 4.70 0.58 7.23 1.35 

Boys Enrolled in School(%) 4.35 0.90 3.50 0.48 2.23 0.49 

Girls Enrolled in School(%) 1.40 0.24 3.80 0.45 3.59 0.63 

Women's Empowerment (Overall Ind -0.47 -0.45 2.72 1.44 1.97 2.06 ** 

Economic Empowerment -0.21 -0.45 1.14 1.48 0.82 1.93 * 

Income Empowerment -0.03 -0.14 -0.01 -0.02 0.25 1.21 

Asset Empowerment 0.13 0.81 0.22 0.77 0.22 1.54 

Empowerment related with 

Education and Health 0.16 0.51 1.01 1.80 * 0.42 1.46 

Social Empowerment -0.54 -2.07 ** 0.36 0.84 0.26 1.12 



Note: Young Borrowers are clients who have taken less than 2 loans and Old borrowers are those who have taken between 3 to 6 loans. 

29




been gathered primarily through focus group discussions with beneficiary groups in 



7.7.1 NRSP 

Four focus group discussions were held in NRSP programme areas with two male and 

two female groups of borrowers. These groups were conducted in Talagung and Attock 

districts, which are both part of the Barani area of the Punjab province. In each district, 

one male and one female FGD was conducted in two different villages. Groups of rural 

clients were selected, as NRSP’s majority borrowers are rural based, with a separate 

urban credit programme under the UPAP – see below. 

Table 2 gives details of the FGDs localities. 

District Attock 

Females 

Males 

District Talagang 

Females 

Males 

Name of Village 

Akhori 

Boota 

Chingee 

Bhilomar 

Districts Attock and Talagang have more or less similar socio-economic and 

geographical characteristics. In the rural areas, the majority of the people have small to 

medium sized landholdings along with multiple sources of supplementary incomes, like 

small businesses, employment in the service and defence sectors, and out-migration to 

other larger urban centres in the country, and internationally. A significant proportion of 

males in the area have either gone to the Gulf and European countries for livelihood 

purposes and send remittances back home, which account for the relatively better 

economic conditions in the area. 


Although the main mission of NRSP is poverty alleviation with a focus on the poorer 

segments of society, however, the profile of their average rural clients does not reflect 

this. The majority of the participants of the focus groups had multiple sources of income 

and the average monthly income was approximately Rs. 10-12,000. Some of the 

participants reported monthly incomes as high as Rs. 25,000 also. 

Most of the borrowers had taken credit through their Community Organizations rather 

than through Group Loans, which was still a relatively new concept in the programme 

approach. NRSP has a flexible approach towards selection of its borrowers and is willing 

30

to consider young unmarried clients as well as older ones who are in good health. 

However, most of the borrowers seem to be between the ages of 35 to 55 years, who are 

members of Village Community Organizations and familiar with the working of NRSP. 

The majority of the participants in all four groups were second or third time borrowers. 

According to the group participants, the very poor in their communities were unable to 

borrow even under such schemes as NRSP as they could not afford to pay back the loan 

instalments and did not possess any assets, which could be used in case of an emergency. 

The communities conceded, which was also endorsed by some of the programme staff, 

that the poorer households were generally not included as CO members, specifically in 

the credit schemes due to the social collateral approach, as other members were not 

ready to take the risk in case of a drop-out or defaulter client. Similar feedback was 

given in the context of Group Loans for the poor. 

NRSP conducts participatory poverty assessments in each community they work in, but 

ironically, this inability of actually providing services to the real poor seems to be the 

most prominent weakness of the NRSP credit programme. 

A rapid comparison of average household incomes of the group participants suggests that 

there has been a positive impact of the loan. Borrowers, males or females, usually used 

the borrowed amount to strengthen an existing income source. For example, Ghulam 

Mohammad was earning Rs. 1,500 to 2,000 per month through his donkey. After he 

joined the NRSP CO, the CO president told him to start saving so that he becomes 

eligible for a loan through the CO. Once he got the credit of Rs. 10,000, he started a 

vegetable cart and now earns Rs. 3,000 to 4,000 per month. 

A worthwhile point in case of NRSP clients is that being an integrated rural development 

programme, NRSP is not only focused towards credit, but its CO members are also 

involved in other community development activities This results in a stronger sense of 

cohesiveness and ownership amongst the members, who feel that although the credit 

scheme is a major incentive but it is not the only benefit of being a part of NRSP. 

Formal financial transactions are quite rare among the rural communities in Pakistan. 

NRSP programme areas are no exception. People mostly depended on informal means for 

fulfilling their financial requirements and in case of emergencies borrow from relatives 

and neighbours. 

Female participants were aware of local moneylenders, but had never utilized any such 

services. While male groups members were more familiar with the concept, they did not 

approve of it and termed it as a highly exploitative means of extracting money from those 

in need. According to the men, the money borrowed from a local moneylender could 

seldom be repaid due to the high interest rates and for years people kept paying the 

interest rates rather than the actual amount borrowed. Therefore, people only went to a 

moneylender in case of a very urgent need. 

31

Everyone knew about bank loans due to the aggressive marketing of many banks for 

agricultural and other credits. But again, the local population especially the women, did 

not find the process client-friendly and felt that the process of acquiring a loan was too 

tedious. Furthermore, many participants including females said that the bank interest 

rates were too high. People also felt intimidated by the general environment in the banks 

and were more comfortable with community-based schemes like NRSP. The regular 

interaction with the loan officers and programme field workers added to the comfort level 

of the communities in addition to accessibility through the NRSP village branches in each 

programme union council. 

‘The Bank loan’s mark-up is very high. You take a small amount from the bank as a loan 

and have to repay almost double. While the process of return is also very lengthy and 

tedious.’ 

(Male FGD participant, Talagang District, Punjab) 

The local concept of savings was mostly through the committee system. The women felt 

that the only way they could manage any significant savings was by becoming a part of 

community committee groups, otherwise people were unable to save anything. Savings, if 

possible, were always kept at home as the amount seldom exceeded the level that 

required any banking services or safekeeping. 

‘The rich do not need to save, while the poor don’t have enough to save. We started to 

save only after getting introduced to NRSP.’ 

(Male FGD Participant, Talagang District, Punjab) 

The main assets for people in the area were livestock followed by gold jewellery. It was 

mentioned that people kept livestock for emergency purposes as it could be easily sold 

off in the market with immediate cash returns. For females, jewellery was not only a 

personal desire, but also perceived as a financial security, which could be disposed of at 

the time of need. Property of course was understood as a major asset, but only the well 

off could afford it. 


There was a general sense of satisfaction amongst all the group participants regarding the 

credit services of NRSP. People were of the view that this scheme provided them support 

to improve their socio-economic conditions in a manageable way. Males and females 

alike had a comprehensive understanding of the entire appraisal and loan process and 

approved of the social and technical appraisal approach. The pre-group formation or 

approval of a loan resolution through the CO authenticated the concept of social 

collateral. As a result, borrowers were clear about the repayment procedures and interest 

rates prior to applying for a loan. 

‘It is very easy to acquire a loan from NRSP and it is equally easy to repay it. There are 

small chances that someone will not pay back, because the CO members are community 

32

influentials and people understand the implications. Besides a complete record of all 

loans is kept by the CO president and the NRSP staff.’ 

(Male FGD, Attock District, Punjab) 

The majority of the participants, including women, did not have any issues with the 

NRSP rate of interest or the entire recovery process. Borrowers were aware that the 

NRSP mark-up was comparatively much lower than the other credit schemes available to 

them, therefore, this was the best available option for them. The recovery process was 

termed as quite flexible and borrowers did not feel under pressure to repay on an exact 

time and date. The group dynamics permitted some breathing space in case of an inability 

to pay on the designated day. However, there were no defaulters reported by the group 

participants within their COs or loan groups. People paid on time and in many cases a 

few days before the designated day for recoveries. No dropout cases were mentioned in 

any of the groups. The NRSP credit staff also endorsed this. 

Prior to NRSP, in case of need we would have to borrow from relatives or friends which 

becomes cumbersome as one feels a bit under pressure, but now with this facility we deal 

with an organization, which does make a difference we deal not with an individual but an 

institution. 

(Female FGD Participant, Attock District, Punjab) 

Usually, we manage to collect our instalments a few days prior to the exact date as we 

know that we will have to pay a fine in case of late submission. We manage even if we 

need to borrow for the instalment. 

(Female FGD Participant, Talagang District, Punjab) 

A noticeable number of participants were quite honest in admitting that many times the 

loan from NRSP was utilized for some other purpose other than the real reason for the 

credit. But it did not make a difference to them as long as they were able to pay back on 

time. The Organization also seemed to ignore such issues. There are two probable 

reasons for this deviation both on part of the borrower and the programme. Firstly, the 

loan amounts are not that large and the borrower can make up through other means; 

secondly, most of the borrowers repeat the credit process and can gradually compensate 

for the proposed credit activity. 

There were several participants who reported taking two to three loans, which had a 

positive impact on their household incomes. First time borrowers mentioned little 

financial impact because the amount for first time borrowers was usually between Rs. 

5,000 to 10,000 only. Most of the loans in the region had been taken for livestock and 

agriculture purposes. Women, especially, found livestock loans very effective and were 

able to make a profit of Rs. 8,000 to 10,000 per month through a buffalo or a cow. 

The group savings in the COs and loan groups was a relatively new concept for the local 

communities. Savings are introduced in the initial CO formation process and is 

mandatory later according to the financial situation of the individual members, but CO 

members mostly continue to put in some savings every month as people take it as an 

33

amount put away for emergency purposes. In some of the NRSP COs, members have 

formed revolving committee groups, which make savings mandatory for all willing 

members. 

We have a committee in our CO. It is a real good system as everyone has a substantive 

saving amount at the end of the cycle, which can be used for some productive purpose. 

(Female FGD Participant, Attock District, Punjab) 

The NRSP credit programme provided a sense of security to the CO members who 

perceived it as a means to support their income generation and for emergency purposes. 

Members generally planned to continue taking repeated loans as per requirement due to 

easy accessibility procedures and manageable instalments. The group activities in the CO 

also provided the members with an opportunity to sit together and plan collective 

community activities, with an added recreational value to the process, especially for the 

women, who got a chance to get away from their daily routines and sit with other women 

from the neighbourhood. 

Although, quite satisfied with the present structure of the NRSP credit programme, 

people felt that they would feel even more relief if the interest rate was further reduced 

and the loan amount was increased. Both men and women felt that a higher credit amount 

would naturally mean more business investment, and thus, greater profitability. 

7.7.2 UPAP 

UPAP is an offshoot of the NRSP credit programme, which is concentrated in the rural 

areas, with little focus on the urban poor. Therefore, UPAP was initiated in 1996 

specifically focusing on the urban poor who did not have access to formal financial 

institutions. Until 2002, UPAP was only operational in a few selected poor localities of 

Islamabad and Rawalpindi. In 2002-03, it also began its operations in Faisalabad and 

Karachi. Present UPAP operations are in six major cities. It is small in scale with a total 

of 38,923 members and 66,205 credit cases as of July 2005. 4 The loan size begins from 

Rs. 8,000 with a ceiling of Rs. 17,000. 

As UPAP began its programme from Islamabad/Rawalpindi, this region continues to 

have the largest cohort of borrowers (15,829 active cases to-date). Therefore, the locality 

selected for the UPAP Focus Group Discussion was a low-income area located in the 

heart of Islamabad city. More than 1,000 Christian families inhabit France Colony, with a 

significant number employed in the Capital Development Authority (CDA) as sanitary 

workers. Many women also work in the nearby houses as domestic workers. This locality 

is overseen by the UPAP Bari Imam office, which at present is managing 982 active 

borrowers of which 64 are from France Colony. Loans are given in groups of three 

members selected by the people themselves. Borrowers are both men and women. The 

programme recovery rate is 100 percent. 

4 UPAP Disbursement and Recovery Data as of July 2005 

34


Most of the women in the area were engaged in some type of income generating activity. 

Seven women participated in the discussion. Five were contributing in the family income. 

Two were hired as domestic help, one was a home-based seamstress, one had a corner 

shop, and one assisted in the family scrap business. Four women were illiterate and three 

had attended primary school. 

People lived in joint families with multiple incomes, whereby two or more family 

members contributed. Household incomes ranged from Rs. 4,000 to 10,000 a month. 

All group members had taken successive loans from UPAP at least 4 times. Women in 

the group discussion said that their initial loan amount was Rs. 8,000 and then two 

successive amounts of Rs. 13,000 each. Now some of them had received Rs. 17,000 in 

their fourth cycle. Credit was given only for productive activities and the UPAP team 

closely monitored the utilization of the credit amount. 

People in the area, especially women, had no dealings with the banks or any other formal 

financial institutions/programmes. Financial matters were dealt with directly and through 

informal means. Personal loans was the most common method for meeting urgent needs. 

In case of emergencies or life cycle events people borrowed from close relatives or 

friends. Moneylenders were seldom approached due to their exorbitant interest rates. 

Women in the group said that they had never visited a bank and had no idea about how 

they worked. But they had heard that bank loans were very difficult to get and their 

interest rates were also high. Easy accessibility to UPAP services was a major incentive 

for its clients. 

Group participants mentioned that in 2006 another microcredit programme had also 

approached them, but they did not have any other details regarding it. 

There was a common trend of savings even prior to the UPAP interventions. Women kept 

small amounts aside safely with them, which according to them, helped them out in times 

of need. Committees were another common way of saving and people planned certain 

activities around the time of their Committee turn. 


UPAP clients were appreciative of the programme and generally approved of the 

programme procedures. People, specifically, women found community based services 

much more accessible and said that the only time they had to go outside their localities 

was once when they had to cash their checks at the Habib Bank, Murree Road in 

Rawalpindi and then for monthly recovery amounts, deposited at the UPAP Bari Imam 

office. The monthly instalments were collected by one member and than deposited 

together at the designated office. However, the women did not seem to mind these 

monthly trips. 

35

The clients had no problems in the monthly repayment of the loan, which is also reflected 

in the 100 percent recovery rate of UPAP clients. The interest rate was not an issue either, 

and none of the women seemed bothered about it. 

Similar to NRSP, programme flexibility was again apparent in the case of UPAP, as a 

new client, an old woman of around 60 years, openly conceded in front of the loan officer 

that she would use part of her loan to repay another debt and use the other part for 

investment in her son’s shop. Other women present agreed that one of the main reasons 

for their support for the programme was that it provided them with a financial cushion, 

while at the same time the amount was not so large and they usually made up through 

other means to fulfil the proposed purpose for the loan. 

Successive loaning was common among the UPAP borrowers and most clients continued 

with new loans to expand on-going productive activities. However, borrowers felt that the 

loan amount was too small and the ceiling should be at least Rs. 20,000. 

UPAP introduces group savings amongst all their clients in the initial process of group 

formation and loan appraisal. Savings are mandatory for all group members in the first 

five meetings held every week during the initial group formation period. The total 

savings of each member should equal one instalment of the individual loans. The 

objective was to introduce the concept of savings and build mutual trust among the group 

members. The savings are kept together by one of the members. The group leadership 

revolves among the three members as the meetings also rotate to each member’s home 

every month. 

The savings mechanisms was perceived to be a bit irksome by some of the women as it 

became quite difficult to save a specific amount for five consecutive weeks. However, it 

was not a major issue and people understood the idea behind the practice. Borrowers 

including females seemed quite comfortable with the UPAP staff and loan officers, which 

probably is a significant programme strength as it has provided clarity and transparency 

between the service providers and the clients. 

36


Appendix A.7.1 

NRSP Institutional Background 

Table A.7.1.1: NRSP Micro-Finance and Enterprise Development Programme: 

Progress Overview as of November 30 th 2006 

Total Disbursement (Rs) 10,768,161,889 

Agriculture (Rs) 6, 426, 345, 834 

Livestock (Rs) 2, 138, 519, 500 

Enterprise (Rs) 2, 098, 464, 039 

S.I.I.E (Rs) 104, 832, 516 

No. of Loans 833,303 

Men 657, 285 

Women 176, 018 

Agriculture 471, 371 

Men 447, 468 

Women 23, 903 

Livestock 182, 282 

Men 107, 684 

Women 74, 598 

Enterprise Development 174, 386 

Men 97, 294 

Women 77, 092 

Small Infrastructure Individual Enterprise 5, 264 

Men 4, 839 

Women 425 

Beneficiary COs 38, 342 

Men 23, 178 

Women 13, 786 

Mixed 1, 378 

No. of Active Loans 173, 213 

Receivable from COs (Rs.) 1, 769, 800, 139 

Recovery Rate 99% 

No. of Districts Covered 35 

No. of Districts in which the Credit Programme is 29 

fully Operational 

Rawalpindi, ICT, Attock, Jehlum, Khushab, 

Bhakkar, Mianwali, Bahawalpur, Lodhran, Vehari, 

R.Y. Khan, Rajanpur, Malakand, Charsadda, 

Mardan, Swabi, Swat, Badin, Thatta, Hyderabad, 

Mir pur Khas, Matiari, Tando Allahyar, Tando 

Muhammad Khan, Nawabshah, Muzaffarabad 

Table A.7.1.2: NRSP Credit Disbursement by Loan Type 

Type of Credit Amount (Rs) Average Loan Size Cumulative Recovery 

(Rs) 

Rate % 

Agriculture Inputs 6, 426, 345, 834 13, 633 100% 

Livestock Development 2, 138, 519, 500 11, 732 98% 

Enterprise Development 2, 098, 464, 039 12, 033 99% 

37

SIIE 104, 832, 516 19, 915 97% 

Total 10, 768, 161, 889 12, 922 99% 

38


Results from NRSP Survey 

Table - A. 7.2.1 


[NRSP] 

Respondent 

Category 


Respondent 

s 

% 

680 100.0 

324 47.6 


Non-Borrowers (Same 

Area) 

118 17.4 

Non-Borrowers (New 

Area) 

130 19.1 

Table - A. 7.2.2 


[NRSP] 

Loan 

Taken 

Borrowers % 

432 100.0 

One 182 42.1 

Two 92 21.3 

Three 69 16.0 

Four 52 12.0 

Five 30 6.9 

Six 6 1.4 

Seven 1 .2 

Table - A. 7.2.3 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Total 

Respondents 324 108 248 680 

47.6 15.9 36.5 100.0 



Primary 19.4 20.4 22.6 20.7 

Middle 18.2 19.4 16.9 17.9 

Metric 24.1 16.7 19.4 21.2 

Inter 4.3 3.7 6.9 5.1 

Graduate and above 1.9 2.4 1.8 

39


Have Training .8 .3 

Table - A. 7.2.4 


[NRSP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 324 108 248 680 

47.6 15.9 36.5 100.0 



Technical Service Provider .4 .1 

Transport Service Provider .6 .9 1.6 1.0 

Agriculture – Crop Production 47.8 30.6 33.5 39.9 

Livestock Management 18.8 19.4 14.9 17.5 

Service 4.3 3.7 4.0 4.1 

Table - A. 7.2.5 


[NRSP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 324 108 248 680 

47.6 15.9 36.5 100.0 


4-6 Person 43.8 49.1 45.2 45.1 

7-9 Person 35.8 36.1 32.7 34.7 

More than 9 17.0 11.1 17.3 16.2 



40

Table - A. 7.2.6 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Total 

Respondents 324 108 248 680 

47.6 15.9 36.5 100.0 

House owners 98.1 94.4 99.2 97.9 





Table - A. 7.2.7 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Total 

Respondents 324 108 248 680 

47.6 15.9 36.5 100.0 





Table - A. 7.2.8 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Total 

Respondents 324 108 248 680 

47.6 15.9 36.5 100.0 




Poor Households (% below 

Official Poverty Line) 

41 44 49 44 


41



The Official Poverty Line is Rs 1,000 per capita per month – see Montgomery (2006) 

Table - A. 7.2.9 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


School Going Children - Boys 

% 

90 85 91 89 

School Going Children - Girls 

% 

73 65 73 72 

Children going to Private 

School % 

27 20 25 25 




Monthly Expenditure on 

Education 

394 241 193 302 


Active 

Borrowers 

Table - A. 7.2.10 


[NRSP] 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Incomplete 

Course 

30.1 25.0 35.7 31.4 



Table - A. 7.2.11 


[NRSP] 

Members reported illness (Last 30 

days) 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 

2 2 2 2 

42



Table - A. 7.2.12 


[NRSP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 










Table - A. 7.2.13 


[NRSP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 







Gas 1 1 1 1 


Rent 0 1 0 0 






- Eggs (days) 10 10 10 10 


43

Table - A. 7.2.14 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 

Own House 97.2 94.4 98.8 97.4 

Refrigerator 26.5 21.3 34.7 28.7 

Colour TV 55.6 46.3 53.2 53.2 

Motor Cycle 21.6 15.7 22.6 21.0 

Prize Bond .9 1.6 1.0 



Bed with Foam 17.6 16.7 23.8 19.7 

Urban Property 1.5 2.0 1.5 

Gold 45.7 40.7 37.9 42.1 

Mobile phone 38.3 45.4 35.1 38.2 


Table - A. 7.2.15 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 

Family Workers (engaged in 

business) 

1 1 1 1 


Permanent on Daily Wages/Piece 

Rate 

1 1 1 1 

Seasonal/Occasional 



Machinery 9016 6098 4591 6394 

Instruments 4188 1698 4233 3748 


44

Table - A. 7.2.16 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Economic Empowerment - Score out 

of 14 

8.8 10.7 8.5 9.3 

Income Empowerment - Score out of 

5 

2.7 3.4 3.1 3.0 


Empowerment Related with Education 

and Health - Score out of 10 

6.0 5.9 6.2 6.0 

Social Empowerment - Score out of 

10 

4.4 4.1 4.4 4.3 


Table - A. 7.2.17 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Do you take decisions on the aspects 

of purchase, modification or repair of 13 44 26 25 

house 

Do your husband discuss with you 

when decision on modification/repair 67 66 70 67 

of house is made 

Do you take decisions on the purchase 

or sale of livestock 

25 46 23 30 

Did your husband discuss with you 

before sale or purchase of livestock 

52 44 42 47 


family 

49 80 53 59 


family 

84 95 79 86 

Do you purchase gold and jewellery 

for your family 

55 80 63 64 


money 

57 68 49 58 

45

Do your husband discuss with you on 

the issues of borrowing money 

71 83 58 71 

Do you spend money you have 

borrowed 

61 83 37 60 


borrowed 

61 78 42 60 


involving household Equipments 

42 66 40 48 



when he has made the debt 

71 90 67 75 


Table - A. 7.2.18 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 



Do you spend it for the family 

yourselves 

54 61 53 56 

Do you need the permission of your 

husband to spend your income 

42 49 44 44 

Do you get any part of your family 

income or husbands income to your 42 66 40 48 

hands regularly 


when he spends income for the family 68 93 65 74 

requirements 


Table - A. 7.2.19 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Do you possess any household 

asset 

6 2 2 4 

Do you have cash savings in your 

own name 

17 27 42 27 

46

Do you operate Bank account in 

your name 

Do you pledge, Sell, or exchange 

any of the above said assets 

yourself 

Do your need permission from 

your husband to sell, pledge, 

exchange any of the assets 

Do you have purchased land in 

your own name 


your name 


your and husband name 


12 14 7 

12 15 2 10 

48 32 40 41 

3 2 2 

6 2 2 4 

67 73 72 70 

Table - A. 7.2.20 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Do you take decisions on the issues of 

your children education 

41 66 44 48 

Do your husband consult with you 

when he takes decision on the education 83 93 81 85 

of children 

Do you think you can decide on how 

many children you can have 

25 5 14 16 

Do you think you can decide on the 

spacing between children 

30 20 47 32 


treatment of your and your family 39 56 16 37 

member illness 


method of treatment for your family 46 49 19 39 

members 


type of contraceptive to be used 

42 24 47 39 


the issues of health aspects of children 

83 78 79 80 

Do you have any choice of food 

prepared and served in your home 

86 95 79 86 

Are you able to take care of the 

nutritional requirements of your self, 65 78 79 73 

family and children 


47

Table - A. 7.2.21 


[NRSP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 



friends and relatives with out 30 29 35 31 

permission 

Do you have the choice of the dresses 

you wear 

81 93 74 82 


beliefs on you and make you accept 6 2 2 4 

them 

Do you have any association with 

political parties 

3 10 12 7 


democratic procedure 

51 56 67 57 


ideas on you and make you accept 19 10 2 12 

them 

Do you participate in the meetings of 

NGO programmes or in other social 42 29 35 37 

events 


participating in such programmes 

25 12 14 18 

Do you take decisions on the marriage 

of your son-daughter 

59 56 47 55 


the issues of the marriage of children 81 88 72 80 

and close relatives 


Table - A. 7.2.22 


[NRSP] 

Borrower 

s 

Loan was 

used by: 

Self 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

324 108 432 

75.0 25.0 100.0 

88.9 81.5 87.0 


48

Spouse without your 

suggestion 

.6 3.7 1.4 

Other Members 2.2 .9 1.9 


Table - A. 7.2.23 


[NRSP] 

Borrower 

s 

Loan was 

used for: 

Business Activity 

Repayment of 

debts 

Consumption 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

324 108 432 

75.0 25.0 100.0 

98.8 98.1 98.6 

.6 .5 

.6 1.9 .9 


Table - A. 7.2.24 


[NRSP] 






Problems in Obtaining Loan 

(%) 


No Problem 76.9 

Collateral .6 



Too many Documentations .9 


Group Making .3 

49

Table - A. 7.2.25 


[NRSP] 

Loan Taken 

Overall 

One Two Three Four Five Six Seven 

Number of Borrowers 74 92 69 52 30 6 1 324 

Sale of asset/Sale of Animals 39.2 53.3 56.5 82.7 76.7 100.0 100.0 58.6 

Borrow loan from relative/friends 87.8 79.3 84.1 84.6 73.3 66.7 100.0 82.4 

Borrow loan from Microfinance 39.2 41.3 30.4 19.2 16.7 16.7 100.0 32.4 


Banks 

2.7 3.3 7.2 5.8 10.0 4.9 

Borrow 

from 

Moneylender/Commission agent 

13.5 12.0 11.6 28.8 16.7 33.3 15.7 

Reduce 

Consumption 

Expenditure 

4.1 3.3 1.4 3.8 10.0 3.7 


Extra hours in existing 

occupation 

4.1 6.5 13.0 5.8 3.3 6.8 



Table - A. 7.2.26 


[NRSP] 

Loan Taken 

Overall 




life 

70.3 77.2 73.9 65.4 66.7 66.7 71.6 

Deteriorated 1.4 1.4 1.9 3.3 1.2 

No Change 28.4 22.8 24.6 32.7 30.0 33.3 100.0 27.2 

Family eat your fill As much as wanted (all types) 67.6 60.9 66.7 67.3 70.0 66.7 100.0 65.7 

As much as wanted (not all 

32.4 

types) 

38.0 31.9 30.8 30.0 33.3 33.3 

Sometimes felt hunger 1.1 1.4 1.9 .9 

Have more to eat Have more to eat now 

now 

48.6 64.1 56.5 44.2 56.7 66.7 54.9 

Have more to eat in earlier 

times 

1.4 3.3 1.4 1.9 3.3 2.2 

Equal 50.0 32.6 42.0 53.8 40.0 33.3 100.0 42.9 

Family health Health is better now 25.7 48.9 44.9 36.5 20.0 33.3 37.7 


Equal 74.3 51.1 47.8 57.7 66.7 66.7 100.0 58.6 

Sustainable Yes 

increase in income 

82.4 85.9 79.7 90.4 83.3 100.0 84.3 

50

No 17.6 14.1 20.3 9.6 16.7 100.0 15.7 


Table - A.9.2.27 


[NRSP] 


Overall 

Non- 

Borrowers 

(Same 

Area) 

Non- 

Borrowers 

(New 

Area) 


100.0 100.0 100.0 


No 23.7 5.4 14.1 

Do not need 11.9 2.3 6.9 






Table - A. 7.2.28 


[NRSP] 


Overall 

New 

Borrowers 

Non- 

Borrowers 

(Same 

Area) 

Non- 

Borrowers 

(New 

Area) 






Banks 

3.7 1.7 6.2 3.9 

Borrow 

from 

Moneylender/Commission agent 

13.9 6.8 9.2 9.8 

Reduce 

Consumption 

Expenditure 

6.5 3.4 8.5 6.2 

Search for extra work .9 .8 3.1 1.7 

Extra hours in existing 

occupation 

8.3 5.9 10.8 8.4 

Have Enough Saving 1.7 .8 .8 


51


Table - A. 7.2.29 


[NRSP] 


Overall 

New 

Borrowers 

Non- 

Borrowers 

(Same 

Area) 

Non- 

Borrowers 

(New 

Area) 


Effect on overall quality Improved 

of life 

58.3 44.1 42.3 47.8 


No Change 38.9 51.7 50.0 47.2 


As much as wanted (not all 

types) 

46.3 32.2 40.8 39.6 

Sometimes felt hunger .9 .8 1.5 1.1 


Have more to eat in earlier 

times 

2.8 5.1 10.8 6.5 

Equal 44.4 51.7 50.0 48.9 



Equal 67.6 62.7 56.9 62.1 


52


UPAP Institutional Background 

Table A.7.3.1 UPAP Disbursement and Recovery Data as of November 2006 

Rawalpindi/Is Faisalaba Faisalaba Karachi Multan Lahore Total 

lamabad d d (1) 

Number of groups 7,142 3, 759 3, 748 2, 824 2,136 322 19, 331 

Number of Members 27, 456 12,433 10,356 9, 500 6, 564 966 67, 275 

Number of Credit 59, 191 20, 172 17, 897 16, 505 9, 231 858 123, 854 

Cases 

Amount Disbursed 

(Rs) 

662, 995, 569 210, 

112,000 

182, 

883,000 

179, 040, 

000 

107, 

290,000 

11, 

822,000 

1,354, 142, 

569 

Amount Recovered 

(Rs) 

602, 968, 361 175, 868, 

320 

158, 276, 

984 

159, 209, 

66 

132, 985 2,085, 261 1,146, 491, 

120 

Principle Recovered 

(Rs) 

542,593,081 151,926,9 

77 

137,012,0 

59 

121,463,3 

31 

56,973,75 

2 

1,688,397 1,011,657,5 

97 

Service Charge 

Recovered (Rs) 

60,288,769 23,937,69 

6 

21,260,71 

6 

19,686,68 

6 

9,158,572 396,864 134,729,303 

Excess Recovered 

(Rs) 

86,511 3,647 4,209 9,192 661 0 104,220 

Principle Balance 120,402, 488 58, 185, 

023 

45, 870, 

941 

57,576,66 

9 

50,316,24 

8 

10, 133, 

603 

342,484,972 

Current Cases 15,116 7,736 6,358 6,956 5,814 856 42,836 

Closed Cases 44,075 12,436 11,539 9,549 3, 417 2 81, 018 

Expired Cases 54 0 0 0 0 0 54 

Cumulative 100% 100% 100% 100% 100% 100% 100% 

Recovery Rate 

On-time Collection 99.96% 100% 100% 100% 100% 100% 100% 

Rate 

Source: NRSP Update November 2006 

53

Appendix A.7.4 UPAP Survey Results 

Table - A.7.4.1 


[UPAP] 

Respondents % 

Respondent 

Category 

678 100.0 





Table - A.7. 4.2 


[UPAP] 

Borrowers % 

Loan 

Taken 

438 100.0 

One 148 33.8 

Two 125 28.5 

Three 92 21.0 

Four 51 11.6 

Five 20 4.6 

Six 2 .5 

Table - A.7. 4.3 


[UPAP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 315 123 240 678 

46.5 18.1 35.4 100.0 



Primary 15.2 16.3 15.8 15.6 

Middle 9.8 12.2 16.3 12.5 

Metric 8.9 9.8 18.3 12.4 

Inter 2.9 3.3 7.5 4.6 

Graduate and above .3 .8 1.7 .9 


Have Training .6 .3 

54

Table - A.7. 4.4 


[UPAP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 315 123 240 678 

46.5 18.1 35.4 100.0 



Goods Supplier .3 1.3 .6 





Livestock Management 3.8 .8 2.1 2.7 

Service 6.3 3.3 .4 3.7 

Table - A.7. 4.5 


[UPAP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 315 123 240 678 

46.5 18.1 35.4 100.0 


4-6 Person 42.5 53.7 54.2 48.7 

7-9 Person 40.3 31.7 34.2 36.6 

More than 9 10.2 6.5 4.2 7.4 



55

Table - A.7. 4.6 


[UPAP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 315 123 240 678 

46.5 18.1 35.4 100.0 

House owners 74.3 74.8 69.2 72.6 





Table - A.7. 4.7 


[UPAP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 315 123 240 678 

46.5 18.1 35.4 100.0 





Table - A.7. 4.8 


[UPAP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Respondents 315 123 240 678 

46.5 18.1 35.4 100.0 





Poverty Line) 

25 19 22 23 





56

Table - A.7. 4.9 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 










Table - A.7. 4.10 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 





Table - A.7. 4.11 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 




57

Table - A.7. 4.12 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 










Table - A.7. 4.13 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 







Gas 3 3 3 3 


Rent 4 5 6 5 






- Eggs (days) 9 10 9 9 


58

Table - A.7. 4.14 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Own House 74.6 74.0 69.6 72.7 

Refrigerator 36.2 33.3 48.8 40.1 

Colour TV 73.7 69.1 74.6 73.2 

Motor Cycle 12.7 11.4 16.3 13.7 

Prize Bond .6 2.4 2.5 1.6 



Bed with Foam 26.7 21.1 20.4 23.5 

Urban Property .8 1.3 .6 

Gold 44.1 35.8 25.4 36.0 

Mobile phone 41.9 35.0 39.2 39.7 


Table - A.7. 4.15 


[UPAP] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 







Machinery 2132 6103 3708 3410 

Instruments 1609 432 3359 2015 


59

Table - A.7. 4.16 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 









60

Table - A.7. 4.17 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 






made 

73 68 65 70 






family 86 85 84 85 


family 87 86 88 87 




money 76 73 55 70 





borrowed 78 78 23 64 







61

Table - A.7. 4.18 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 








regularly 

83 78 67 78 




Table - A.7. 4.19 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 




name 36 28 41 36 


name 1 2 5 2 






20 21 20 20 


own name 1 1 1 






62

Table - A.7. 4.20 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 












illness 

78 71 72 75 











children 

87 84 87 87 


63

Table - A.7. 4.21 


[UPAP] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 





wear 89 92 86 89 




parties 14 28 21 19 














70 68 78 72 


Table - A.7. 4.22 


[UPAP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 


71.9 28.1 100.0 

Loan was Self 

used by: 

38.7 39.0 38.8 


Spouse without your suggestion .3 .8 .5 

Other Members 13.7 9.8 12.6 


64

Table - A.7. 4.23 


[UPAP] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 


71.9 28.1 100.0 

Loan was Business Activity 

used for: 

84.8 87.0 85.4 

Repayment of debts 1.6 1.1 


The use of other household members 1.6 2.4 1.8 

Death/Illness of household members .3 .2 

Other 5.1 2.4 4.3 


Table - A.7. 4.24 


[UPAP] 







Collateral .3 




Group Making .3 


65

Table - A.7. 4.25 

Borrower’s Perceptions - Coping Strategy 

[UPAP] 

Loan Taken 


Overall 


Sale of asset/Sale of Animals 16.7 7.3 9.1 21.6 15.0 11.4 

Borrow loan from relative/friends 96.7 95.2 90.9 86.3 90.0 50.0 92.1 

Borrow loan from Microfinance 26.7 16.9 26.1 37.3 30.0 24.4 


1.6 .6 

Banks 

Borrow 

from 

Moneylender/Commission agent .8 1.1 .6 

Reduce Consumption Expenditure 3.3 16.1 19.3 19.6 10.0 15.9 

Pull out children from school 50.0 .3 

Search for extra work 10.0 10.5 18.2 17.6 13.0 

Extra hours in existing occupation 3.3 2.4 8.0 3.9 15.0 5.1 




Table - A.7. 4.26 


[UPAP] 

Loan Taken 


Overall 



life 

70.0 86.3 85.2 80.4 80.0 100.0 83.2 

Deteriorated 

.8 2.3 2.0 5.0 1.6 

No Change 

30.0 12.9 12.5 17.6 15.0 15.2 

Family eat your fill As much as wanted (all types) 56.7 46.8 62.5 62.7 80.0 50.0 56.8 

As much as wanted (not all types) 43.3 52.4 36.4 37.3 20.0 50.0 42.5 

Sometimes felt hunger .8 1.1 .6 

Have more to eat now Have more to eat now 50.0 69.4 64.8 64.7 65.0 50.0 65.1 

Have more to eat in earlier times 6.7 3.2 2.3 2.0 2.9 

Equal 43.3 27.4 33.0 33.3 35.0 50.0 32.1 

Family health Health is better now 36.7 48.4 44.3 47.1 40.0 45.1 

Health was better earlier 6.7 3.2 3.4 2.0 5.0 3.5 

Equal 56.7 48.4 52.3 51.0 55.0 100.0 51.4 


in income 

83.3 83.1 89.8 86.3 75.0 50.0 84.8 

No 16.7 16.9 10.2 13.7 25.0 50.0 15.2 


66

Table - A.7. 4.27 

Non-Borrower’s Perceptions - Getting Loan 

[UPAP] 


Overall 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 


100.0 100.0 100.0 


No 29.0 36.2 32.5 

Do not need 33.1 6.0 20.0 

Amount of Instalment is high 4.0 .9 2.5 



Do not know office address 44.8 21.7 

Amount of loan is very low .8 .4 


Table - A.7. 4.28 


[UPAP] 


Overall 

New 

Borrowers 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 






Banks 

.8 .8 4.3 1.9 

Borrow 

from 

Moneylender/Commission agent .8 .3 


Search for extra work 13.0 14.5 .9 9.6 





67

Table - A.7. 4.29 


[UPAP] 


Overall 

New 

Borrowers 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 



life 

63.4 65.3 41.4 57.0 


No Change 31.7 29.8 37.1 32.8 



Sometimes felt hunger .8 2.4 4.3 2.5 



Equal 42.3 46.8 51.7 46.8 



Equal 54.5 51.6 54.3 53.4 


68

Chapter Eight: Kashf 



Kashf Foundation, a non-profit microfinance institution started in Lahore in 1996. It was 

founded by Roshaneh Zafar after being inspired by the success of the Grameen Bank. 

Roshaneh wanted to achieve two things with Kashf; one was to alleviate poverty and the 

other was to work towards women’s empowerment. Therefore, Kashf started with the 

mission to ‘provide quality and cost effective microfinance services to low income 

households especially women in order to enhance their economic role and decision 

making capacity’. 

At the start, Kashf was registered under the Society’s Registration Act 1860; however, it 

is changing the legal status to a non-profit Company by Guarantee under section 42 of the 

Companies Ordinance, 1984. The reason for the change is to bring the organization under 

stricter regulation and thus improve its image. 

In September 2006, Kashf celebrated its 10 year anniversary with accomplishments such 

as being one of the first sustainable MFIs in Pakistan, providing loans to over 250,000 

poor households with plans to reach 850,000 clients by 2010. Over the years Kashf has 

received many awards for its spectacular performance, such as the AGFUND 

International award and CGAP financial transparency record. 

Kashf started with micro loans for women; however, with the changing needs of the 

market it has also started offering larger individual loans for micro entrepreneurs. In the 

past year Kashf has rapidly expanded its branch network and from 35 branches at the end 

of 2005, it has increased it to 70 branches at the end of 2006, and they are planning to 

open 50 more branches in 2007(list in Appendix). With its systems and processes all 

streamlined and proven, Kashf is rapidly expanding its outreach. 

In 1996, Kashf started as an action research programme with support from the Grameen 

Bank. The initial two years were spent in understanding the market and the needs of the 

clients in peri-urban and urban settings. At this point there was no entity in Pakistan that 

specialized in providing microfinance services to low income communities, and most 

programmes were implementing a holistic approach, where microcredit was one 

component of their overall development strategy. 

Kashf started its microfinance programme in Lahore, however, now it has expanded to 

Kasur, Gujranwala, Faislabad, Karachi, Khushab and their surrounding areas. Most of 

these branches are for the General Loan category, though six have a specialized section 

for the Individual Loan category. By December 2006, Kashf had an outreach of 135,000 

clients (Figure 8.1), a staff of 600 and a portfolio of approximately 4 billion rupees, with 

PAR under 1 percent

Figure 8.1 

160,000 

140,000 

120,000 

100,000 

80,000 

60,000 

40,000 

20,000 

0 

Outreach 

135,000 

75,520 

67,552 

59,389 

29,655 

2002 2003 2004 2005 2006 

Year 

Kashf started in 1996 as an action research phase with the objective to replicate the 

Grameen Bank model. Kashf chose 3 villages, where groups of 5 women were given a 

basic productive loan starting at Rs.4,000 with a monthly repayment cycle and a 

mandatory savings product. The outcome of this trial lending was that a large number of 

loans were stuck; therefore Kashf rethought its lending methodology and organized group 

members into larger groups of 25 with a fortnightly repayment process. During the 

research phase it was also realized that a consumption loan to meet contingencies was 

required so that it did not interfere with the loan repayment process, as a consequence, 

the emergency loan was developed. 

The action research phase was followed by a more focused approach to expand outreach 

and manage growth. The main aspect of this phase from 1999 to 2001 according to the 

Kashf Management was applying the experience of McDonald’s to expand operations. 

This included standardization of products, systems and policies and simplification of 

procedures and reporting requirements. It was realized that the vision and mission had to 

be consistently followed to achieve the goals of the organization. Branches were 

decentralized and made responsible for their own portfolios and given clear cut targets. 

As a result of these measures in 3 years Kashf established 10 branches and reached out to 

3600 clients. 

However, growth was erratic as funds for on-lending were not readily available. In 2000 

CGAP along with UNCDF and Australian Aid provided a grant based on achieving 

financial benchmarks. This not only provided the organization with much needed funds 

but also spurred it to enhance its sustainability, as in 1999 Kashf’s OSS was at 12 percent 

and FSS was at 11 percent Accordingly, Kashf worked on creating better accounting and 

reporting procedures and enhancing its efficiency. Consequently by 2001 OSS increased 

to 67 percent and FSS to 52 percent. 

In the years 2001-03 the main strategy was to enhance outreach and deepen product 

offerings through cost effective and sustainable Kashf branches. Credit assessment tools 

2

were introduced at several levels and reporting regarding overdue and delinquency was 

re-engineered. During this period client attrition increased from 10 to 20 percent, 

therefore client satisfaction was focused on and several research initiatives were 

undertaken, like customer satisfaction surveys and assessment of exit clients. 

During 2001-03, Kashf followed a lateral growth path by entering new markets and 

managing dispersed units. Throughout this period sustained improvements in policies, 

systems and procedures were undertaken to ensure client satisfaction. Kashf managed 

growth by widening outreach and deepening access by offering new products like microinsurance 

and revamping the existing savings products. A new post of an Area Manager 

(AM) was created in an attempt to further decentralize and achieve outreach targets, 

enhance financial performance and improve policy compliance. An operational manual 

was put together, which benchmarked functions from the LO up to the AM. All these 

steps resulted in annual growth increasing to 209 percent and branch level productivity 

went up to 2200 clients with each LO managing 563 clients. The OSS increased to about 

130 percent though FSS was still below 100 percent At the end of 2003 Kashf had 30 

branches with 5 to 6 LOs per branch and almost 60,000 clients. The following Figure 8.2 

shows the evolution of operational and financial self sufficiency of Kashf since 2001. 

Figure 8.2 

200 

Operational and Financial Self Sufficiency 

187 

175 

Percentage 

150 

100 

50 

125 129 

67 

75 

52 57 

143 

0 

2001 2002 2003 2004 2005 2006 

Year 

OSS FSS 

In 2004 and 2005 Kashf consolidated the growth achieved and planned for the future. 

Kashf had experienced a fast rate of growth in the past 3 years so the management had to 

ensure that previous growth was maintained and new issues arose that had to be dealt 

with. The issues included staff attrition, improving financial management and improving 

second tier management at the field level. In 2005 Kashf started to work on automating 

all its branches and exploring areas to open new branches. In 2005 a new product, the 

Business Sarmaya Loan for micro entrepreneurs was launched and additional research 

was undertaken to offer new products such as the home improvement loan. However, 

client and staff attrition were major problems during 2004-05. Kashf has also revised the 

household income criteria for prospective clients from Rs.3,500 to Rs.6,000, to Rs.4,000 

to Rs.10,000 based on poverty analysis as the basic wage went up from Rs.100 to Rs.200 

3

per day. During this time period, the number of LOs at a branch were also increased from 

6 to 10 so that outreach could be further deepened in the areas of operation. 


Kashf is run by a highly qualified and diversified voluntary Board of Directors who meet 

bi-annually. The structure of the Board is three-tier with executive, non-executive and 

specialist Board members. Recently, Dr. Ishrat Hussain (the previous SBP Governor) 

joined the Kashf Board as Chairman. The Board meets twice a year and authorizes 

budgets, future plans and various other matters. 

The organisation is led by the President and Founder, Roshahneh Zafar, who is supported 

by the CEO and the CFO. The operations, human resources, MIS and the Advocacy 

Department are managed by the CEO, while the Research and the Internal Audit 

departments directly report to the President. The operations department is the core arm of 

the organization and responsible for all the microfinance activities. (Organization Chart 

attached in Appendix A.8.XXX) 

Kashf’s branches operate as independent units but they all have an identical setup and 

follow the same policies and procedures. The typical setup of a branch consists of 6-10 

Loan Officers (LOs), one Branch Manager, one Computer Operator, an Office boy and a 

security guard. Each LO is responsible for managing 24-26 centres with 25 members 

each, which translates to about 600-650 customers. Moreover, each LO has to conduct 3 

centre meetings daily. The branches are decentralized and are responsible for managing 

their own portfolios. The branches report to their respective Area Manager (AM) and 

each AM is responsible for 4-8 branches and is stationed in one of the centrally located 

branches in his/her area. 

Due to the expansion, a new post of the Regional Manager is being created who will be 

stationed in the regional office. The regional office will be a monitoring arm of the head 

office and will be responsible for ensuring expansion, client satisfaction, networking and 

managing the staff in his respective region. 

4

Box 8.1 

Kashf’s Core Values 

Service: 

Integrity: 

Innovation: 

Reciprocity: 

Responsibility: 

Respect: 

Commitment: 

Productivity: 

We delight our customers 

We believe in integrity in all that we do 

We respond positively to change 

All for one and one for all 

We believe in excellence in quality 

We mutually respect and care for each other 

We are part of the solution and not of the problem 

We process feedback positively 

Kashf has adopted these values so that the staff members know what is the ‘right thing to 

do’ when formulating decisions. Kashf believes such values have impact on an 

institution’s integrity and ethics, and helps in guiding the organization in achieving its 

objectives. 


8.1.3.1 Group Loans 

Kashf’s group lending programme is a Grameen Replication, adopting the classic 

Grameen Bank model with some adaptations. Kashf provides one basic loan, called the 

General Loan (GL), for 12 months at a flat interest rate of 20 percent per annum. All 

members are women and each borrower belongs to a group of five borrowers, and 

together five of these groups form one centre. Members repay their loans in bi-weekly 

centre meetings attended by Kashf loan officers. There is no collateral, therefore, the 

centre takes collective responsibility for loan repayment. Each of the five groups has a 

Group Leader, and there is one Centre Manager and one Centre Secretary. Together these 

seven women form the credit committee and are responsible for maintaining discipline in 

the centre. 

Kashf lends to married, divorced or widowed female clients. Divorced and widowed 

clients are encouraged in the Group lending approach so that they can earn for themselves 

by starting a business or by increasing their current business portfolio. The process of 

selecting beneficiaries at the grassroots level is done by the clients who are assisted by 

loan officers, after a process of door to door mobilization has been completed. Branch 

staff also arrange community meetings and meet influential people in the target area to 

find potential clients and inform them about the Kashf programme and products. From 

the pool of potential clients, individuals who fall within the Kashf poverty criteria of 

household income between Rs.4-10,000, have a low asset base and high dependency 

ratio, are encouraged to organize themselves into groups and centres. Once the centres 

are formed, application forms for the loan are filled by the LOs and verified by the pair 

LO. 

5

The documents required for the loan application are copies of the new National Identity 

Card (NIC) of the applicant and her husband/son, as well as utility bills to check 

ownership status of their current residence. Clients who own their own residence are 

preferred to those who live in rented accommodation, because for the latter the owner of 

the house has to give a guarantee. The loan officers also carry out credibility checks for 

all new applicants by asking their neighbours and nearby shopkeepers to gauge the 

applicant’s reputation in the community. Hence, Kashf relies extensively on word of 

mouth. 

The LO and the pair LO make surprise visits during business hours to the applicant’s 

homes to confirm the information in the forms. Once both the LOs have completed their 

screening, the Loan applications are passed on to the BM who re-screens all the 

applicants. The Screening Pattern followed is given in Table 1. 

Table 8.1 Screening Pattern 

Type LO Pair LO BM 

New Centre 100% 100% 100% 

Repeat Centre 

Same BM, same LO 

100% 100% 3 clients from each 

Group (15 clients) 

Repeat Centre 

100% 100% 100% 

New BM, same LO 

Repeat Centre 

Same BM, new LO 

100% 100% 3 clients from each 

Group (15 clients) 

Repeat Centre 

New BM, new LO 

100% 100% 100% 

Once the BM completes the screening, a centre recognition meeting is held and the loan 

disbursed. The cheques are given to the centre manager who gives it to the centre 

secretary who passes them on to the group leaders. The group leaders give the cheques to 

their respective group members and hence a sense of ownership and responsibility is 

developed in the members of the credit committee. After the loan disbursement, meetings 

take place fortnightly and the credit committee collects the instalments from all the centre 

members and two of the committee members deposit the proceeds at a branch of Muslim 

Commercial Bank (MCB) before the centre meeting. The deposit slip is submitted to the 

LO at the meeting where the LO gives the deposit slip for the next recovery to the Centre 

Manager. The recovery is based on the premise that each member will be responsible for 

the other in case of emergency and non-repayment and thus social collateral replaces the 

need for physical collateral. 

Clients who take the GL also have the option of taking the Emergency Loan (EL) for 

contingencies. However, the EL is only disbursed if it is approved by the credit 

committee and they are willing to take responsibility. At the centre meetings, loan 

officers also discuss various social issues with the clients such as importance of 

education, cleanliness and immunization, harmful effect of drugs and so on. The social 

6

issues are in the social theme booklet designed by the Gender Empowerment and Social 

Advocacy department. 

8.1.4 Products 

8.1.4.1 General Loan (GL) 

The purpose of the General Loan (GL) is to invest in income generating activities and can 

be used for an existing business or a new one. The loan size begins with Rs.10,000 and 

has a ceiling of Rs.25,000, the loan is repayable over 24 instalments in the course of 1 

year at a service charge of 20 percent. Successive loan cycles entitle clients to an 

accretion in loan amounts of up to Rs.4,000 depending on their absorptive capacity. 

The GL comprises about 87 percent of the product wise share. According to Kashf this 

loan is utilized both by women who aspire to establish a small business for themselves or 

others who pass it on to their husbands/sons to diversify household income sources. 

The total disbursement of the GL stands at 3.9 billion rupees with 322,589 loans given 

out. It has grown exponentially over the last year due to the expansion efforts of Kashf as 

seen in Figure 8.3. The Average Loan size (ALS) for year 2006 was Rs.12,101 and the 

average loan balance per active borrower to per capita income is 25 percent. This attests 

to the program’s focus towards catering to the poorer segments of the population who 

have limited absorptive capacity. 

Figure 8.3 

Millions 

4500 

4000 

3500 

3000 

2500 

2000 

1500 

1000 

500 

0 

GL Disbursement 

3903.66 

707.53 

446.33 

16.98 32.3 

189.37 

2001 2002 2003 2004 2005 2006 

Year 

8.1.4.2 Emergency Loan (EL) 

Emergency Loan (EL) is a service that is available to the existing Kashf clients, who are 

already availing a general loan. The idea behind this loan is to provide a buffer/support to 

clients to fulfil any unforeseen expenses. The amount of this loan ranges from Rs.2,000 

to Rs.4,000 with a 20 percent flat annual interest rate. This loan is repayable in 11 equal 

instalments over a period of six months. The amount of loan disbursed under the 

emergency loan is approximately Rs 0.6 billion with an average loan size of Rs.2,696. EL 

disbursement represents 13 percent of the total product demand at Kashf. In Figure 8.4 

7

we can see that the disbursement of EL has grown 10 times in the last year due to Kashf’s 

accelerated growth. 

Figure 8.4 

Millions 

700 

600 

500 

400 

300 

200 

100 

0 

EL Disbursements 

596.19 

1.72 0.74 18.55 32.82 

60.38 

2001 2002 2003 2004 2005 2006 

Year 

The EL has been helpful to clients in relieving periodic financial stresses and enables 

them to pay school fees, utility bills, health related expenses or accessories for festivals 

such as clothing, etc. The EL equips clients to meet their personal expenses and saves 

them from turning to moneylenders and paying exorbitant interest rates to meet such 

needs. It has proven to be an asset for the programme since it ensures client loyalty and 

motivates the client to remain with the programme to overcome her poverty in a 

respectable manner. 

8.1.4.3 Business Sarmaya Loan (BSL) 

The Business Sarmaya loan is intended for the ‘missing middle’ of the market, i.e., both 

men and women with running businesses who demonstrate a financial need for working 

capital and/or fixed assets. Small entrepreneurs are provided with access to capital in 

addition to advisory support for their respective ongoing businesses that can include 

trade, production and services. 

The starting loan size is Rs.30-50,000 while in the second loan cycle it can be up to 

Rs.100,000 and is payable in monthly instalments. The individual loan product focuses 

on clients with higher monetary needs than those engaged in the group lending 

programme as well as male micro entrepreneurs. Kashf maintains that the Business 

Sarmaya loan acts as an inducement for existing customers involved in group lending to 

maintain a suitable credit history and to abide by the procedures of the programme, but it 

also targets new clients. 

The features of the Business Sarmaya Loan are the result of in-depth research. Since most 

respondents who were part of the research did not have access to bank accounts or 

significant physical collateral, conditions for access to the individual loan have taken 

these factors into account. Consequently eligible entrepreneurs have to possess a fixed 

8

usiness address, attest to experience of at least 3 years of managing a business and 

provide their ID cards and signatures of spouse/family. 

The BSL is marketed through flyers given out in markets and through the old Kashf 

branches. The LOs for BSL require a higher qualification than the regular LOs as the loan 

appraisal process is more rigorous and includes detailed financial analysis and projections 

of the client’s business. One guarantor is also required who gives an assurance about the 

character of the applicant and also pledges to pay the loan in case the client defaults. 

The current disbursements of the BSL are 53 million and a total of 1,413 loans have been 

given out. The average loan size is Rs.37,711. For individual lending the target for 2007 

is to open 8 new branches, with 2 in Karachi and one in Sialkot and give out 15,000 new 

loans. Currently, Kashf has 6 branches for Individual loans with 3 in Lahore, 2 in 

Faislabad and 1 in Gujranwala, and has given out 2000 loans. 

8.1.4.4 Savings 

Any customer availing a GL can deposit savings of any amount (in denominations of Rs 

10) with the branch manager. This product acts like a savings account. On every bimonthly 

meeting, the Loan Officer gives an account of the amount of savings each 

customer has made to date. Savings is a completely voluntary product. It is a service that 

the customers can decide not to avail at all. Despite the fact that it is a voluntary act and 

there is no interest paid by Kashf on the amount saved, the amount of savings held by 

clients’ amounts to Rs.5.6 million with an average deposit size of Rs.53. 

The average deposit size has been falling, even though savings would be expected to 

cater for emergencies and investment for lifetime events. Research by Kashf has revealed 

that they prefer the RoSCA system for improving their access to sizeable amounts of 

money and that rather than depending on savings for unforeseen expenditures they would 

rather resort to credit facilities. Small deposits of savings have entailed enhanced 

transaction costs; for clients these amounts to costs associated with time management, 

‘nuisance’ value of meetings, etc. For the organization the operational cost of mobilizing 

small deposits and maintaining them at commercial financial institutions has proved to be 

substantial. Consequently, this product is not being promoted or marketed aggressively 

at present, but has been preserved as an option for clients. 

8.1.4.5 Insurance 

It is obligatory upon all Kashf clients to take insurance. Insurance charges are 1.5 percent 

of the loan amount (General Loan) and are taken up-front when the loan is disbursed. 

This insurance facility applies in case of accidental or natural death of the client. Its 

benefit includes the writing-off of the outstanding loan amount and the family receives 

Rs.7,500 to cover for funeral expenses. 

8.1.4.6 Gender Empowerment and Social Advocacy (GESA) 

In accordance with Kashf’s mandate for social empowerment, GESA is a part of the 

consolidated approach towards capacity building. The idea behind the social aspect of the 

programme is to build social capital among clients through greater awareness of 

9

innovative ideas, rights of women and social interaction and networking. In addition to 

providing microfinance services to clients, Kashf also organizes borrower trainings, holds 

meetings with male members of the client’s families to inform them about the credit 

programme, and conducts leadership trainings, reproductive health sessions and gender 

training with the clients on a quarterly basis, thus keeping alive the gender and 

empowerment vision of the programme. Recent activities of GESA for the quarter July to 

September 2006 are attached in the Appendix. 


8.1.5.1 Human resources 

Kashf has well-qualified and professional staff at all levels. The field staff plays the most 

important role in shaping the overall portfolio quality of a microcredit organization. In 

this regard loan officers (LOs) are the most critical employees because they are the key 

point of interaction between Kashf and its clients. Recognizing the importance of the LOs 

role, Kashf has placed a minimum requirement of an Intermediate degree for an LO. The 

induction process of LOs at Kashf is around one month during which a fresh recruit is 

sensitized on the activities of the organization. A fresh recruit is given a combination of 

classroom and field training. Previously, the training time of fresh recruits was three 

months but this was brought down as it was realized that such a long period was not 

needed and it was quite costly as well. 

Other than this initial training, LOs also attend training sessions which develop their 

personal and technical skills. Not only do new recruits receive training but older staff 

members also regularly attend international and national workshops. According to Kashf, 

these trainings assist staff to innovate and see things in their work environment from a 

new angle and thus provide the organization with a qualified and skilful staff pool that 

sustains the organization’s growth rate. 

LOs are evaluated on an annual basis and their performance is measured with the targets 

set for them and they are given an increment accordingly. The top management and the 

AMs are evaluated on a six monthly basis. A whole set of benefits is given to staff 

members such as health and life insurance, provident and pension fund and travel 

benefits. About 70 percent of the positions are filled by internal promotion in each tier. 

Internal promotions are given to keep motivation high. Fringe benefits are also revised 

regularly. Kashf aims to provide a safe, secure and friendly environment for its staff so 

that they are motivated and perform to the best of their abilities. 

Kashf regularly undertakes staff satisfaction surveys and recently it undertook an 

extensive exercise of salary mapping of staff and upgraded compensation. Over the years 

Kashf has actively tried to maintain a gender balance, however, with the rapid expansion 

this has been compromised, and one of the goals for 2007 is to improve this. 

8.1.5.2 Strategic Initiatives 

Kashf recently set up a learning centre for its staff where they can train 50 people on a 

daily basis. Kashf is rapidly expanding and the need for trained staff is high, therefore, 

10

the learning centre has been set up. At the centre not only are new recruits trained, but 

previous staff are also given trainings on various issues. Due to the high client attrition 

rate of 2005, customer care has become a serious issue and specific training on this is 

held. Furthermore, Kashf undertakes regular customer satisfaction surveys and focus 

groups so that it is aware of the changing preferences of clients. 

In 2006, Kashf completed the automation of all its branches which was a major goal for 

the year. However, integration of finance and HR with the operations side is still to be 

completed. Kashf reports that the efficiency gains from the automation have been 

significant, consequently the caseload for LOs have been increased to 650, which is very 

high according to the industry standards. 

Kashf transfers centres among LOs on an annual basis. Generally the centre is passed on 

to the pair LO; however, problematic centres might be passed on to a new LO. This is 

done to prevent fraud or collusion of any form. The organization tries to relocate branch 

staff to counter this risk. 

Recently, the organizational structure was strengthened and two new positions of Chief 

Executive Officer and Chief Financial Officer were introduced. This was done in an 

attempt to strengthen and develop leadership within Kashf. Kashf also has comprehensive 

documentation of all its operations and processes. There are manuals for financial risk 

management, credit risk management, human resource policy manual, a treasury manual 

and an operations manual. 

8.1.5.3 New Products 

To keep up with the changing needs of its clients, Kashf is developing new products. The 

latest product in the pilot stage is the Home Improvement Loan. Research for its design 

was completed in the summer of 2005 and focused on the demand for a housing product. 

The aspects evaluated were the target market’s capacity to carry additional debt, and any 

risks posed by a lack of property rights and mobility. The results indicated that housing 

was a priority for many of Kashf’s clients and 84 percent of the surveyed, demanded a 

home improvement loan. The research also indicated that housing was the leading use for 

which households dedicated their savings. The loan size ranges from Rs.50-70,000 and 

has a 4 year term with 15 percent rate of interest. The accompanying documents required 

include photocopies of titles of the residence, and the loan is given to a group of 3-5 

women. The loan cannot be used for new construction; it is only for renovation or adding 

a new room/bathroom. The pilot phase of the Home Improvement Loan (HIL) is running 

in two of Kashf’s branches: Ravi Rayon and Jorah Pull. The response to this new product 

is very encouraging and the pilot phase is being monitored to streamline all operational 

and policy features 

Two more products are in the research/planning phase. One is a loan to treat Hepatitis C 

and its feasibility is currently under study. In Lahore the infection rates are alarming with 

at least 13 to 16 percent of the city’s population infected with the virus. The motivation 

behind this loan is that the majority of the cases in Pakistan can be cured with 

11

conventional therapy, if diagnosed and treated early. The Yaki Gate branch has been 

earmarked as the pilot branch due to the incidence of the disease in the area. 

The other product is Health Insurance, which shall provide medical services to the people 

of low income households at very nominal rates. Kashf asserts that health care facilities 

are inadequate and have limited outreach and women are denied access to care in the face 

of limited mobility and lack of money. Therefore, Kashf in collaboration with a Health 

Insurance Company has mapped out the design, market and service of the health 

insurance product and is planning to pilot it in the coming year. 

8.1.5.4 Geographical Coverage: 

Kashf has opened around 40 branches in 2006 and entered 10 new districts. The total 

number of branches stands at 70. They plan to open 50 more branches in the urban and 

semi-urban areas of Punjab and Karachi in 2007. Kashf has a graduated plan to expand 

all over Punjab, in the past Lahore was treated as a hub and new branches were set up 

close to the city. However, now Kashf is also operational in Karachi and Rawalpindi and 

ready to start operations in Multan and, therefore, each of these cities will work as a 

regional hub. 

New areas for operations are selected after in-depth research in the respective area. A 

research team consisting of a minimum of 4 people visits the union/district council of the 

area and collects information on demography, competitors, household size, education and 

income level of the area. New branches are approved by the President, Roshaneh, if 

approximately 100 centres can be set up and there are 2-3,000 potential clients. The area 

chosen should not be notorious for any reason and public transport and a commercial 

bank should be in the vicinity. 

Out of the eligible areas Kashf chooses the one with the larger market. In larger centres 

operations can be easily scaled up and it is easier to find entrepreneurial spirited people 

and qualified staff. 

8.1.5.5 Competition and Expansion Strategy 

The competition in the operational area of Kashf has been gradually building up, 

however, the majority of the market is still untapped. Only 7 percent of the market has 

been penetrated; therefore, Kashf Management is not threatened. In Lahore, which is a 

hotbed of competition 75 percent of the market is also untapped. Therefore, competition 

is not a serious issue for Kashf. 

However, Roshaneh Zafar states that there is a problem with unfair competition such as 

Khushali Bank which has been given a huge subsidy and provides credit at an 

unsustainable interest rate. Such measures by the government spoil the market as 

Khushali Bank’s effective interest comes to only 24 percent while that of Kashf is at 34 

percent. 

The increased competition has led Kashf to renew its commitment towards providing 

quality services to the poor. They have taken new initiates in the area of product 

12

development and undertaken market surveys to gauge the needs of the potential market 

and the future for expansion. They are also keeping a tab on what the competitors are 

doing in their areas of operation. 

Kashf’s future plans are to reach 850,000 women by 2010. The plan for 2006 was to 

reach 125,000 clients, which Kashf surpassed by 10,000. The plan for the next year 2007, 

is to reach 325,000 and for 2008 it is 400,000. Kashf has already secured funding for 

2007, however, it is still trying to procure the money for the expansion plans of 2008. 

Kashf also plans to move into rural finance sometime in the future. 

Another initiative Kashf is planning to take is to start a Bank to which the BSL portfolio 

will be shifted. The costs associated with turning Kashf into a Bank are huge and not part 

of Kashf’s plan as just undertaking a feasibility study, altering the organizational 

structure and setting up the relevant channels would cost Rs.112 million. Furthermore as 

an NGO MFI, Kashf does not pay profit tax of 34 percent, which would have to be paid if 

it were a Bank and this further reduces the feasibility. The Bank that will be setup would 

offer deposits and will take over the higher end of Kashf’s portfolio which is the BSL 

portfolio. It is a relatively small portfolio with only 8 branches and thus the transfer 

would be easy. However, the feasibility and the demand and supply analysis still has to 

be carried out. 


Kashf is not regulated as a microfinance institution as it is registered as a society. 

However, it follows all the standards set in the microfinance ordinance such as 30 percent 

of the assets are liquid. The issues that Kashf has with the regulatory environment are that 

it cannot take deposits from its clients, therefore, it has to mobilize funds from other 

sources which are much more expensive. Kashf would like to get a provisional license 

like those offered in Bangladesh and Bolivia to be able to offer savings to its clients; 

however, it is not on the agenda of the government. The interim license would bring them 

within the tenors of financial regulation but they will still not be a microfinance bank. 

They will offer savings through the affiliated Bank they plan to set up and those savings 

would be channelled to Kashf to lend on. 

8.1.5.7 Dropouts 

Kashf has had a very high drop out rate of 26 percent in 2004 as compared to other MFIs 

in Pakistan and the region. According to a client exit survey conducted by Kashf it was 

found that the majority of client exits comprised of voluntary exits which included 

households who no longer needed the loan or had migrated to another area. The 

remaining were cancelled by Kashf for not meeting all the policies and conditions. 

Furthermore, the branches in Sheikhupura were closed due to low demand and credit 

unworthy behaviour of clients as more than 70 percent of the loans were overdue. This 

exacerbated the client attrition rate. 

13

Figure 8.5 

Client Attrition Rate 

Percentage 

30% 

25% 

20% 

15% 

10% 

5% 

0% 

26% 

21% 

9% 

9% 

2003 2004 2005 2006 

Kashf has brought down its drop out rate considerably. For 2006 it is around 9 percent 

(Figure 8.5) and Kashf has put in a lot of effort to reduce it. A ‘Win-Back’ initiative was 

launched and a new value ‘Delight the Customer’ was added to Kashf’s core values. A 

review of services and products was undertaken to assess the changing needs of the 

clients. Other efforts made included remarketing the products, flexibility in policies for 

good clients, focus on customer care and dealing with clients with optimism. 

Furthermore, disbursement time was brought down from 15 days to 3 days for repeat 

centres and 7 days for new centres. 

Better monitoring polices and weekly tracking of pending centres has also reduced client 

delinquency and dropout rates to a considerable extent. The recovery rate has been 

maintained at 100 percent, while PAR has also fallen. Moreover, many old clients came 

back to Kashf after being dissatisfied by the competition. 


The MIS system for the branches has full connectivity with the head office. Kashf calls 

the MIS software, Miracle Worker, and it allows efficient processing of the loan 

application, tracks clients’ loan cycles and generates effective reports for efficient 

decision making and management. The system has modules for Loan and Saving 

Management, General Ledger and Security. It is an Oracle based software and 

information is sent to the head office daily, where back-ups are maintained on tape drives 

and disks. At the branch, the loan officers give in their recovery and savings sheets to the 

Computer Operator daily who enters them into the Miracle Worker. Kashf estimates that 

due to the Miracle Worker, LOs save 40 percent of their time which they previously spent 

on paperwork. Consequently LOs now use that time to build better relations with clients 

and their caseload has been increased to 650 clients from 600. 

Kashf completed the automation of all of its branches in mid 2006 and now real time data 

is available at the Head Office from which data is consolidated and reports by city, 

district and the overall region are available for analysis. As yet the financial and HR 

14

information has not been integrated but will be done so over the year. Currently at the 

head office finance and operations are manually integrated. Recently the finance 

department has revised the General Ledger software, used for accounting purposes; it 

now has multi-user accessibility and has all the database of Kashf’s branches. 

8.1.5.9 Audit Systems and Financial Planning 

The internal audit department audits all the branches every six months though the plan is 

to bring it down to once a year. However, for the high risk branches, the audit will be 

more frequent. There are five teams from the department which go out to audit the 

branches, compile reports and share findings with the CEO and the board. There are 

manuals for the audit department on the procedures and compliance regulations. The 

focus of the internal audit is regularly changed based on the issues that are emerging from 

the branches. An external auditor also audits the accounts of the organization on an 

annual basis. The auditor is changed every three years by the Board and is educated on 

CGAP standards so that Kashf is audited according to international norms. 

On the operations side, the AM spends one day a week in each branch and screens a 

sample of clients while also monitoring the accounts and operations. Due to the 

expansion, Kashf is planning to set up regional offices headed by a Regional Manager 

(RM), who will spend 15 days out in the field to monitor the branches. He will select the 

areas randomly each month to audit and would monitor all operations, finances and also a 

small sample of centres. Teams from the Quality Assurance section of the Operations 

department at the head office also regularly go out to monitor branches and this will 

continue even when the regional offices have been set up, however, it will be on a smaller 

scale. 

Centres have to submit full payments and partial payments are not accepted by Kashf. If 

delinquency is detected, the credit committee is closely involved to ensure recovery, as 

well as all the branch staff, so that the problem can be quickly resolved. A special LO is 

sometimes assigned to manage the delinquent centres so that the problem does not get out 

of hand. 

A new loan can only be issued to a client after full payment of all dues. In case a client 

causes minor problems in paying the dues, her case is reviewed by the AM and 

documented before a loan is reissued. However, if a client has made late payments 

consistently and displayed unreliable behaviour, her membership may be cancelled. 

Kashf also has a very strict policy towards fraud and negligence. Clear cut branch cash 

management systems are given. Each branch has a standardized budget given by the 

finance department and also overseen by them. If the budget is exceeded by a branch, the 

manager is called in and the matter is investigated. 


Kashf has very good portfolio quality. Its repayment rate is 100 percent and it has almost 

always been so. The PAR at one day late was 0.8 percent at the end of 2006 and its trend 

over the years is given in Figure 8.6. At the end of the year, Kashf writes off loans that 

15

are more than 90 days old in the overall accounts, however, they are not written off from 

the individual branch’s records and they are supposed to recover them. 

Figure 8.6 

Portfolio at Risk 

Percentage 

6% 

5% 

4% 

3% 

2% 

1% 

0% 

5% 

1% 1% 

0.15% 0.61% 0.32% 0.08% 

2000 2001 2002 2003 2004 2005 2006 

Kashf generated an income of Rs.87 million from its portfolio during the period July to 

September 2006. In terms of diversification, Kashf’s portfolio is reasonably diversified in 

lending for different kinds of activities and with time the geographical diversification of 

the loan portfolio is also increasing as Kashf is expanding and moving its operations to 

other urban centres around the country. 


8.1.6.1 Mobilisation of funds 

Kashf is working on its long term financing strategy as it plans to provide microfinance 

to 850,000 people by 2010. The objective of the strategy is to secure adequate funds to 

fuel the projected growth. The intended steps and sources include commercial sources 

(financial and money market), privately and publicly placed bonds, funds from 

international agencies and subsidized funds. Kashf has already secured funding for its 

growth plans for 2007 and is now working on funds for 2008. The main funding comes 

from PPAF and DFID, but due to the extensive growth plans Kashf is also in negotiation 

with commercial banks. It is in the process of finalizing its agreement with two local 

banks and one international bank. The funds from these sources will be available at 

KIBOR plus 2.5 percent. 

Currently, Kashf’s operations are funded from four sources, Pakistan Poverty Alleviation 

Programme, Grameen Trust, MCB and Acumen Fund. The interest paid and the 

outstanding balances are given in Table 8.2. 

16

Table 8. 2 Financing Sources: September 2006 

Source Limit Interest Loan Outstanding as on Sep 

rate proceeds 30,2006- Rupees in millions 

PPAF 1.350M 6-8% 279.66M 536.83 

MCB 300M 10% RF 9.3 

Grameen 21.19M 2% NIL 21.19 

Acumen 8.9 M 6% NIL 8.9 

Total 576.22 

8.1.6.2 Asset, liability and equity composition 

Kashf has deployed 62 percent of its assets in loans, and the other major category is cash 

in hand and in the bank which is about 21 percent. Investments consist of 12 percent of 

assets and the remaining 5 percent is in various other categories. The loan portfolio 

increased by 62 percent over the year, while total assets increased by 50 percent. 

About 91 percent of the liabilities constitute borrowings, which are either under a mark 

up arrangement for short term running expenses or long term loans for on-lending. The 

capital structure breakdown of Kashf is given in Figure 8.7. 

Figure 8.7 

Capital Structure 

Commercial 

Debt 

17% 

Subsidized 

Debt 

19% 

Other 

Liabilities 

2% 

Retained 

Earnings 

22% 

Donor Equity 

40% 


Kashf Foundation became operationally self-sufficient in FY2003 and financially selfsufficient 

in FY2004. For the year 2005, OSS of the organisation was 180.2 percent while 

FSS was 117.21 percent. These figures give clear indication of Kashf’s superior 

performance in the region when compared to the OSS and FSS averages of 127 percent 

and 115 percent for the rest of the region and 89% and 79% respectively for other MFIs 

in Pakistan (Kashf Foundation, 2005). 

The profitability indicators for Kashf show a commanding lead when compared to other 

MFIs in the region. The return on assets is 6.86 percent as compared to a dismal -7 

17

percent for the MF Industry in Pakistan. The return on equity (adjusted) fares quite well 

at 13.31 percent as compared to Kashf’s peer group in Pakistan at -497 percent. Yield on 

Portfolio is around 38 percent as compared to 14 percent for the industry in Pakistan. 

The key to Kashf’s success lies in the fact that it is a dynamic and growing organization. 

At Kashf active research and innovation is encouraged at all levels. It is highly 

decentralized, which has put loan officers and the field staff at the fore front of all 

operations and thus enabled Kashf to expand efficiently. However, the organization needs 

to concentrate on maintaining portfolio quality and offer a wider range of products and 

services to cater to the needs of its clientele. 


In this section we present the results from our survey for Kashf. The results are based on 

the data collected on the basis of the questionnaire – see the Appendix of the Report. A 

select few of the results are presented here in table form, in the main text of this Chapter, 

while the substantial majority of tables are presented in the Appendix of the Chapter. The 





















years, and ‘new’ areas where they are about to enter an identify and enlist clients. 








18


Since Kashf is one of the oldest MFIs in Pakistan, it is one of those which has clients in 

its third cycle and beyond. In fact, as Table A.8.2.2 shows, about a third of Kashf’s 

sample is in its fourth (or longer) loan cycle, which makes Kashf one of the best MFIs to 

undertake an impact assessment analysis. As in the case of some other MFIs which work 

with women, we see that in the case of Kashf as well, most women are in the Business of 

operating shops – Table A.8.2.4; also, unlike Active or Pipeline Borrowers, most women 

in the Non-Borrowers category are involved in Cottage Industries. 

The Housing Characteristics of Active Borrowers, on average, seem to be slightly better 

than those of the other categories – Tables A.8.2.6 and A.8.2.7. The average Income Per 

Capita and the Expenditure Per Capita for Active Borrowers is much higher for Active 

Borrowers than for all other borrowers. The value of Household Assets of Active 

Borrowers are also much higher than all others. However, as in the case of the targeting 

of the ‘Official Poor’, i.e., those below the Official Poverty Line, very few of Kashf’s 

clients fall below that Line – Table A.8.2.8. The difference in the Household Assets 

Ownership position – Table A.8.2.14 – does not seem to be large amongst the three 

groups. 

Table A.8.2.26 which shows the perceptions of Borrowers on the impact the programme 

is having on them, reveals, as it does in most other MFI cases, that as the number of loan 

cycles increase, in general, so does the positive perception about impact. This is not a 

surprising result, as one would expect that someone will stay on with a programme only 

if their real or perceived quality of life has improved. If they felt that their lives were not 

improving, they should have left the programme. Also, as in the cases of most other 

MFIs, new (Pipeline) Borrowers have a far better perception about the change in the 

quality of life, than do Non-Borrowers – Table A.8.2.29. 

Unlike most of our other partner MFIs, data from Kashf allows us to see whether there 

was much impact on account of the microfinance intervention, mainly because Kashf has 

been in the sector for more than a decade and there are numerous clients who are in their 

fourth and beyond loan cycle. Table 8.3 shows, for example, that the differences that 

relate to better living Housing conditions for Kashf’s Active Borrowers are significantly 

better than the other three categories. 

Most important, however, is the hugely significant improvement in Per Capita Income, 

Per Capita Expenditure, Value of Household Assets, etc, which accrues to Kashf clients 

compared to those who are new to the programme or do not belong to it – Table 8.4 

brings out this difference very sharply. In the case of Children’s Education – Table 8.5 – 

not surprisingly, we do not find much significant difference between those who are 

Active Borrowers and the other categories. This is probably because, as we speculate and 

as our tables in the Appendix show, most women send their children to school anyway 

and one does not necessarily expect much difference on account of the microfinance 

intervention. A curious result from Table 8.5, which is also found in other MFIs, is the 

statistically significant difference between children who attend private schools of Active 

19

Borrowers and the others. It is surprising that fewer children of Active Borrowers attend 

private schools than do those of Non-Borrowers and Pipeline Borrowers. 

Table – 8.3 

KASHF – Housing 


Deviation 

t-value 

Significance 

Level 

House owners Active Borrowers 93.7238 24.30425 2.992 .003 

New and Non- 

Borrowers 

85.6089 35.16493 


New and Non- 

Borrowers 

3.2895 1.77538 

Houses with baked bricks Active Borrowers 99.5816 6.46846 5.352 .000 

New and Non- 

Borrowers 

88.1919 32.33013 


New and Non- 

Borrowers 

30.6273 46.17974 


New and Non- 

Borrowers 

37.2694 48.44162 




Table – 8.4 

KASHF – Economic Status 


Deviation 

t-value 

Significance 

Level 


New and Non- 

Borrowers 

1382.1862 588.18874 

Per Capita Food Active Borrowers 

Expenditure 

858.0294 322.48533 .970 .333 

New and Non- 

Borrowers 

830.9796 306.96651 


New and Non- 

Borrowers 

1550.0408 749.29919 


New and Non- 

Borrowers 

6.31 2.094 


New and Non- 

Borrowers 

299592.0976 318946.72808 

20




Table – 8.5 

KASHF – Children Education 


Deviation 

t-value 

Significance 

Level 

School Going Children % Active Borrowers 87.2143 23.26893 1.482 .140 

New and Non- 

Borrowers 

81.8200 25.30298 


% 

90.0585 27.97030 1.845 .067 

New and Non- 

Borrowers 

80.0000 35.61127 


% 

75.1389 39.28180 1.185 .238 

New and Non- 

Borrowers 

67.1405 42.72509 


School % 

38.8528 47.51905 -3.226 .001 

New and Non- 

Borrowers 

59.8700 45.11408 


Education 

409.0000 435.23233 1.518 .131 

New and Non- 

Borrowers 

326.1560 355.05028 




The differences on Household Ownership Assets – Table 8.6 – between Active 

Borrowers and others are also large and significant, implying that Active Borrowers own 

more/better Household Assets. Table 8.7 also shows the significant difference between 

the value of sales of Active Borrowers compared to the other categories. 

Perhaps the most surprising and unexpected results on impact, which relate to not Kashf 

alone but to almost all MFIs, relates to the decrease in women’s empowerment in most 

cases. Although, there is a significant (positive) difference at the Women’s Economic 

Empowerment level between Active Borrowers and the other three categories, in the case 

of other types of Empowerment, such as Income, Assets, Health and Education, we find 

that those women who have not joined the programme are ‘better-off’. What this suggests 

that while women begin to take decisions related to Economic issues far more 

independently, perhaps they compromise the additional income earned by allowing their 

spouses/sons to control this income 

21

Table – 8.6 

KASHF – Household Assets Ownership 


Deviation 

t-value 

Significance 

Level 



Refrigerator Active Borrowers 33.8912 47.43333 3.083 .002 







Machine 

74.0586 43.92331 4.645 .000 

Sewing 

Machine 



89.1213 31.20248 -1.871 .062 




Gold Active Borrowers 18.4100 38.83794 .647 .518 








22

Table – 8.7 

KASHF – Business Characteristics 


Deviation 

t-value 

Significance 

Level 

Monthly Sale [Rs.] Active Borrowers 18368.62 12139.060 6.820 .000 

New and Non- 

Borrowers 

11940.96 9075.918 

Value of Assets - Active Borrowers 

Shop/Workshop 

6093.30 35215.210 -.734 .463 

New and Non- 

Borrowers 

8612.55 41453.424 

Machinery Active Borrowers 6057.32 22503.791 2.656 .008 

New and Non- 

Borrowers 

2156.83 8299.247 

Instruments Active Borrowers 970.71 3495.841 1.033 .302 

New and Non- 

Borrowers 

694.83 2504.775 

Other Active Borrowers 4456.07 19849.699 .436 .663 

New and Non- 

Borrowers 

3773.80 15451.121 




Table – 8.8 

KASHF – Women’s Empowerment 


Deviation 

t-value 

Significance 

Level 



New and Non- 

Borrowers 

6.0369 2.65806 



New and Non- 

Borrowers 

2.8044 1.38060 


Score out of 8 Active Borrowers 1.1757 .80602 -4.752 .000 




New and Non- 

Borrowers 


1.6605 1.38346 

4.9582 2.59248 -4.108 .000 

New and Non- 5.8487 2.30362 

23

Borrowers 



New and Non- 

Borrowers 

4.2214 1.39406 









The Difference in Differences (DID) impact model estimated for Kashf is 











As Kashf has been around for 10 years, the clients we interviewed were anywhere 

between 1 to 7 loan cycles. Therefore to see the impact of continued borrowing we 

divided the clients into groups, one was the group of young borrowers (borrowed 3 times 

or less) and the other was of old borrowers (borrowed 4 times or more). On each of these 

groups we estimated impact separately. 

A Single Difference equation is also estimated for to assess impact between active 

borrowers and the pipeline clients. This exercise was done for both young and old 

borrowers. The form of the equation is as follows and the variables are defined as stated 

above. 


1 For Kashf nine household characteristics were included in the regression out of 15 tested through 

ANOVA. 

24

The results from the estimation of δ are given in Table 8.9. Generally the results of Kashf 

show positive impact for both young and old borrowers except for empowerment. We 

find that young borrowers have 10 percent higher per capita income (p=0.10) and 

household expenditure (p=0.076) compared to pipeline clients, while old Borrowers are 

doing even better with approximately 20 percent higher per capita income (p=0.001) and 

household expenditure (p=0.00) (Single Difference estimation). Similarly, old borrowers 

perform better on household and respondent income in both estimations and the same 

goes for young borrowers except for the DID estimation of household income. The only 

anomaly in the results is the significant negative impact on food expenditure for young 

borrowers in both single difference (10%; p=0.01) and DID (14%; p=0.04). 

On asset score Kashf borrowers do well regardless of which estimation we look at. Old 

borrowers score 1.05 to 1.50 points higher than other respondents on asset score while 

young borrowers score 0.66 to 1.14 points higher as compared to others. All these results 

are significant. 

Old Kashf borrowers are also spending significantly more on health than pipeline clients. 

A higher percentage of children of old borrowers are enrolled in school as compared to 

pipeline clients (11.8%; p=0.046). This higher percentage predominantly pertains to girls 

as we see in our results that almost 13 percent more girls from households of old 

borrowers are enrolled in school (p=0.014). We find a similar result for young borrowers 

when they are compared to pipeline clients (p=0.036). 

In sharp contrast to these great impact results we have the empowerment indices where 

Kashf borrowers are scoring significantly less as compared to other respondents. A 

deeper investigation of these results indicates that the coefficient on the member dummy, 

the people who self-select themselves into the borrowing programme, is significant and 

positive. In fact in the majority of the double difference regressions for both young and 

old borrowers the value of this dummy is twice as high as that of δ. What we can 

conclude from these results is that individuals who self-select themselves into the 

programme are more empowered than non-borrowers. However the pipeline clients 

score better on these indices than active borrowers and the difference is significant even 

though it is less than one point as shown in Table 8.9 under Single Difference estimators. 

All these results indicate is that newer clients of Kashf are more empowered. 

In the regressions the member dummy was positive and significant for household and per 

capita income implying that self-selected individuals are richer compared to nonborrowers. 

However, the member dummy was significant and negative for expenditure 

on health. This was true for both young and old borrowers. 

Another interesting finding in our results was that for young borrowers the effect of a 

female head of the household was negative and generally significant on most outcomes 

except for the empowerment indices. This was validated by both single difference and 

DID estimation. However, for older borrowers this was not true, and the effect of a 

female head of the household was usually positive and at times even significant. Here 

again both estimation methods generated the same result. 

25

The variable respondent’s education had a positive and significant effect for young 

borrowers on income and expenditure outcomes. However, for old borrowers this did not 

hold. The number of earners in the household was generally positively related with 

household income and expenditure outcomes for all borrowers in both kinds of 

estimations. 

These regression results show that Kashf borrowers, both young and old are doing well 

with regards to income and expenditure as compared to other respondents and this has 

also had a positive impact on assets and schooling of girls. On the other hand Kashf 

borrowers do not score well on the empowerment indices, but in general all individuals 

who self-select themselves into borrowing have high score on the indices. 

Table 8.9 Regression results 


Old Borrow 

Single Difference Double Difference Single Difference Do 


Coefficient t-value 1 Coefficient t-value Coefficient t-value Co 

Log(Respondent Income) 0.14 2.14 ** 0.16 1.72 * 0.23 3.29 *** 

Log(Household Income) 0.01 0.14 ** -0.02 -0.31 0.13 3.29 *** 

Log(Per Capita Income) 0.09 1.65 * 0.01 0.14 0.21 3.23 *** 

Log(Total Household Expenditure) 0.09 1.78 * 0.04 0.51 0.19 3.66 *** 

Log(Food Expenditure) -0.10 -2.62 *** -0.14 -2.12 ** -0.03 -0.76 

Educational Expenditure -19.00 -0.31 -20.00 -0.27 59.00 0.78 

Health Expenditure 21.50 1.54 5.59 0.24 57.00 2.26 ** 

Savings -11.60 -0.23 -79.00 -1.17 10.30 0.17 

Asset Score 1.14 5.23 *** 0.66 1.69 * 1.52 6.58 *** 

Children Enrolled in School(%) 6.65 1.29 7.50 0.89 11.80 2.00 ** 

Boys Enrolled in School(%) -1.80 -0.30 -0.25 -0.03 1.40 0.20 

Girls Enrolled in School(%) 9.16 2.10 ** 8.90 1.11 13.60 2.48 *** 

Women's Empowerment (Overall Index) 2 -3.86 -4.22 *** -4.01 -3.47 *** -2.58 -3.13 *** 

Economic Empowerment -0.35 -0.96 *** -0.97 -2.01 ** -0.16 -0.45 

Income Empowerment -0.79 -4.02 *** -0.89 -3.56 *** -0.75 -3.66 *** 

Asset Empowerment -0.89 -5.17 *** -0.67 -3.08 *** -0.69 -3.89 *** 


Health -0.81 -2.39 ** -0.77 -1.65 * -0.44 -1.33 

Social Empowerment -1.02 -5.11 *** -0.76 -2.73 *** -0.55 -2.70 *** 



Note: Young Borrowers are clients who have taken between 1 to 3 loans and Old borrowers are those who have taken between 4 to 7 loans. 







26

A total of three focus group discussions were conducted in two Kashf programme 

localities in Lahore. These discussions were organized according to the client categories, 

according to which one FGD was conducted with the second loan cycle category in Kot 

Lakpat Branch, while two were held with fourth and sixth cycle categories of clients in 

Chungee Branch area. Two groups had 7 to 9 participants, while the third had more than 

10 participants. 

Both the localities were highly populated with the majority belonging to the low to lower 

middle incomes groups. According to the groups’ participants, people in these areas 

indulged mostly in small enterprise development, while many were also employed in the 

industrial and service sectors as labourers and support staff. 


Kashf gives loans for household entrepreneurship, but only through female clients. If 25 

women from the same locality are able to form a group and are prepared to act as 

guarantors for one another, they are eligible to become Kashf clients. Most of the women 

in the three groups were between the age brackets of 30 to 45 years, with low education 

levels, and monthly average incomes ranging from Rs. 4,000-35,000. 

Similar to other microcredit clients of other programmes, women in Kashf areas were not 

very aware of formal financial institutions or such services. Although, every participant 

in both localities mentioned banks as a major source of credit, but none reported having 

any interaction with any bank either as an independent account holder or a borrower. 

Women felt that bank processes were too tedious for them to handle and family male 

members did not have that much time to spare due to their busy work schedules. 

‘We are mostly illiterate women and cannot handle all the complications that are 

involved with banks. Besides, I just don’t know how to go about accessing a loan from a 

bank. how to get there, who to talk to and then whether I am taking the right decision in 

availing a bank loan; these are a few of the questions which make me nervous’. 

(FGD Participant, Kot Lakpat, Lahore) 

Life cycle events were mostly managed through personal loans from neighbours and 

family, which were gradually paid off. In addition, all women said that they had a habit 

of saving whatever was possible, even prior to Kashf interventions, which always helped 

in times of immediate need. However, the Kashf savings mechanism has definitely 

institutionalized the savings concept as now it is mandatory for them to contribute some 

amount in the group savings, which is another additional source of finances for them. 

Savings were also utilized for paying utility bills and other outstanding dues. 

The committee system was not very common among the participants as most could not 

afford to spare yet another amount from within their household budgets. Before Kashf 

interventions, some women use to participate in the committee system, but don’t have the 

need to do so. 

27

‘Before Kashf, I use to put in money in a committee. But now I prefer Kashf as the 

payment in this system is up-front and you get your amount immediately, while in a 

committee one has to wait for the turn.’ 

(FGD Participant, Kot Lakh Pat, Lahore) 

A few women had actually taken the loans for their personal business development; 

otherwise, in most cases, loans were used for family business development managed by 

the husband or the son. A significant number of borrowers reported noticeable 

improvement in their socio-economic conditions after the Kashf credit. However, this 

change was more reflective amongst the old time borrowers (three or more credit cycles). 


Kashf has stringent programme procedures and clients have to adhere to strict 

institutional policies and recovery orders. Borrowers have to stick to certain rules like 

complete quorum of 25 members and strict recovery procedures. Therefore, it was 

understandable that the 2 nd cycle category group participants were finding difficulties in 

adjusting to the hard and fast organizational rules as compared to the other two categories 

who were quite comfortable with the workings of the credit cycle. 

Women in the early cycle group felt that it was quite inconvenient for them to have a 

complete quorum of all the members, as sometimes because of one member’s absence 

they had to wait for hours, which wasted a lot of time. 

In addition, the recovery procedure was also very strict no matter what one had to pay on 

the designated day. The women felt that there was no need for this kind of a rule because 

the borrowers were very conscious of the fact that they had to pay their instalments, so if 

someone was unable to pay back on the said day there must have been a genuine reason 

for this. Many group members also mentioned that twice a month recoveries were also 

burdensome and monthly instalments were more feasible for them. 

‘Once we had to wait for almost the whole day because one of the members had to attend 

a funeral and could not come to the meeting. We kept telling the credit officer that she 

might not be able to come but it was useless. We were let off after that woman returned in 

the evening.’ 

(FGD Participant, Kot Lakh Pat, Lahore) 

Comparatively, the more mature borrowers (4 or more loan cycles) gave a more positive 

feedback of the MFI interventions. There was a sense of ownership amongst the group’s 

members, who said that now they all felt like an extended family because of the frequent 

interaction. The group meetings provided them with an opportunity to socialize and share 

each other’s problems. One of the FGD localities in Chungee is a pilot test area, where 

Kashf has initiated a once a month group meeting of the members, although, the recovery 

is still twice a month. The women in the group said that they preferred twice a month 

meetings and missed the get-togethers. 

28

The positive impact of the credit was also apparent as many women said that not only had 

the business prospects improved through the credit, but also their families ate better food, 

and had better education and health facilities. Most women started their credit 

programme with Kashf on Rs. 6,000 and now had gone up to Rs. 30,000. At this point, 

many borrowers felt that the loan amount should be increased to Rs. 50,000 or more, as 

they required more to expand the business further and were also in a better financial 

situation to repay it. At least a 50 percent increase was reported in the family income 

after the Kashf loan by the mature borrowers. 

Eight years back, Perveen’s husband divorced her leaving behind two young children. 

She had no family of her own and no other source of livelihood either. All she knew was 

how to sew and stitch, so she started making small earnings through stitching 

neighbourhood women’s clothes. Six years ago, Kashf came into the area. Her first loan 

was Rs. 6,000 from which she bought cloth from Peshawar and sold it on profit in her 

area. Gradually Perveen started buying more and more cloth and sold it in the Lahore 

market on a profit margin. She has been a Kashf client for the last 6 years and has taken 

a loan again this time of Rs. 20,000. Her monthly income is almost Rs. 10,000 a month, 

which according to her, she could not have accomplished without Kashf. 

Dropout cases were reported, but were few. According to one of the group participants, 

that in their four years of being together as a group only two women had been dropped 

out of the group by the members, as they did not pay on time and the other group 

members had to pay on their behalf. 

These women were quite comfortable with the various mechanisms of the Kashf 

programme and organized their savings and personal loans provisions according to their 

needs. 

‘We also do personal savings other then Kashf savings. I use the personal savings for 

everyday needs, like if a guest comes over and a special dinner has to be organized I 

don’t need to go to the neighbour’s house to borrow some amount; the Kashf savings I 

leave aside for emergencies like an illness, etc. The Kashf personal loan I use for home 

repairs or other personal needs at that time.’ 

(FGD Participant, Chungee) 

Only when probed or told about a more flexible recovery mechanisms, did women state 

that they wanted lower interest rates; however, there was no unprompted mention of 

higher interest rates. Clients felt that as they were paying twice a month, the burden of the 

interest rate did not bother them as much. 

The mature clients also had a higher awareness level regarding the reasons for certain 

Kashf rules and procedures. Some of the women explained that they understood why the 

organization wanted 25 members and not less. 

Having 25 members reduces the operational cost of the programme. If there were fewer 

women, we would have to pay higher interest rates. 

29

(FGD Participant, Chungee, Lahore) 

In the Chungee area, other microcredit programmes like Asasah and Akhuwat are also 

functioning. The women reported that one of these programmes was giving credit without 

any interest, but they would continue working with Kashf as they were happy with their 

services and found them to be much more accessible. 

Accessibility was a major incentive for most women in terms of easy availability of 

services at the local level and access to the local Kashf office in their area, whereby they 

could walk the short distance whenever there was an issue or a meeting. The majority of 

the women, including the second time borrowers, said that they wanted to continue their 

relationship with Kashf and would borrow from the same source again due to 

convenience and transparency of the system. 

30


A.8.1.1 

Institutional Snapshot 

Indicators 2006 

Age 10 



Branches 70 


Total disbursements (Rs) 

4.6 billion 

Average loan disbursed (Rs) 12,101 



Employee turnover (%) 5 


Total income(Rs) 

79 million 

Operational self-sufficiency (%) 164 

Financial Self-sufficiency (%) 114 

Adjusted Return on assets (%) 3.2 

Portfolio yield (%) 35 

Cost of borrowings(%) 6.25 

Operational Efficiency(%) 25 

Portfolio at risk (>30 days) (%) 0.8 

A.8.1.2 Products Profile 

Loan Product General 

Loan 

Emergency 

Loan 

Business 

Sarmaya Loan 

Housing 

Loan 

Purpose 

Income Consumption Small Business Construction 

Generation Needs 

Development 

Term/Duration 12 months 6 months 6-18 months 3-4 years 

Loan size Rs.10,000 - Rs.4,000 - Rs.30,000 - Rs.50,000 – 

Rs.25,000 Rs.10,000 Rs.100,000 Rs.70,000 

Interest rate 20% 20% 20% 15% 

Repayment term Fortnightly Fortnightly Monthly Monthly 

Processing Fee - - - - 

Savings Voluntary - - - 

Insurance 1.5% of loan - 1.5% of loan 1.5% of loan 

31

A.8.1.3 List of Kashf Branches 

Area -1 

1 Bedian SU 

2 Chungi U 

3 Kahna SU 

4 Kot Lakhpat U 

5 Kainchi U 

6 Green Town U 

7 Walton U 

Area-2 

8 Jorah Pull U 

9 Siraj Pura U 

10 Baghban Pura U 

11 Dharam Pura U 

12 Yakki Gate U 

13 Ichra U 

Area-3 

14 Bund Road U 

15 Karim Park U 

16 Shadarah U 

Moore 

17 Shadarah U 

Town 

18 Ravi Rayon SU 

19 Ali Park U 

20 Rehmat U 

Colony 

Area - 4 

21 Kasur - 01 SU 

22 Kasur - 02 U 

23 Khudian R 

24 Mustafa Abad R 

25 Raiwind SU 

Area- 5 

26 Pattoki R 

27 Chunian R 

28 Ellah Abad R 

29 Okara-1 U 

30 Okara-2 SU 

Area- 6 

31 Farid Town SU 

32 Rahwali U 

33 Ladeywala SU 

34 Kamoke SU 

35 Wazirabad U 

36 City Br. U 

Area- 7 

37 GM abad U 

38 Razaabad U 

39 Jang Rd U 

40 Saman abad U 

42 Samundri SU 

Area- 8 

43 People Col. U 

44 Nishat Abad U 

45 Hajvery Town U 

46 Mansorabad U 

47 Jaranwala SU 

48 Chak Jhumra SU 

Area- 9 

49 Millat Abad U 

50 Old Civil lines U 

51 Khushab SU 

52 Bhalwal SU 

53 Sillawali SU 

32

54 Jawarian R 

55 Behra R 

56 Sahiwal SU 

Area- 10 

57 Saddar U 

58 Jail Road U 

59 Chechawatni SU 

Karachi 

60 Korangi-1 U 

61 Korangi-2 U 

62 Landhi-1 U 

63 Malir-1 U 

IL 

64 Dharam Pura U 

65 Ferozpur Road U 

66 Yakki Gate U 

67 Multan Road U 

68 Razaabad-Fsd U 

69 Gujranwala 

City 

U 

33

A.8.1.4: 

Organizational Structure 

President 

Internal Audit 

Finance Department 

Research Development Unit 

CEO 

Operations Information Human Gender, Social 

Operational Structure 

Manager 

Operations 

Data Analyst 

Poverty Lending Programme 

Business Sarmaya 

Programme 

Growth 

Delinquency 

Assistant Manager 

Management Team 

Management Team 

Associate 

Associate 

Associate 

Associate 

M 

Area 

Branch 

Manager 


34

A.8.1.5: GESA Activities 

Initiatives 

Gender Client 

Council 

Out comes 

The Gender Client Council is envisioned as a council comprising of Kashf clients and 

non-clients with regular meetings to debate issues related to gender, environment, and 

community development. The idea is for the council to act as a catalyst for 

communities to analyse their problems, come up with solutions and to initiate relevant 

actions. The role of Kashf is to facilitate this process. 

These GCC conduct monthly meetings and its methodology is as under: 

‣ initial field visit 

‣ orientation council meeting 

‣ explain concept 

‣ talk about main problems 

‣ prioritize problems 

‣ main problem to work on 

‣ work-plan 

‣ assign responsibilities 

During this quarter, monthly meetings were conducted for two old client councils, 

furthermore, process initiated for the establishment of 2 new councils in Baghbanpura 

and Qainchi branch. After the establishment, the councils in Qainchi raised issue of 

health and it is in the resolution process in collaboration with NGOs focusing on health 

provision. A new water and sanitation project has been initiated in Baghbanpura with 

the connivance of Interactive Resource Centre. 

Kashf’s 

orientation for 

Councillors 

Councillors at the Union Council level are one of the important stakeholders in terms 

of Kashf’s operations. This initiative aims to ensure that: councillors are aware of 

Kashf’s mission and operations; that they have some knowledge of microfinance 

within its larger context; and are aware of the different ways in which they could 

facilitate Kashf’s operations and staff security 

Media/ 

Networking 

The core objective of this program is to build Kashf’s image as a socially responsible 

MFI and develop linkages with other stakeholders. This includes dispensing 

information about the organization within the media and interfacing with different 

channels about Kashf’s role in the past, present and future. Furthermore, rapport and 

public relationing is also undertaken by this cell. 

Theatre 

A strong awareness-raising medium and is the most promising and dynamic initiative 

undertaken by GESA. The content of the performances is carefully planned and 

monitored by GESA. 3-4 themes have been developed and are being performed in 

communities. We focus on clients’ perspectives while developing these themes. 

During this Quarter, 25 performances have been conducted in area 1, 2 & 3 and 

awareness generated on Hadood Ordinance, Gender Discrimination and Harassment 

amongst 4000 clients. Impact assessment study is going on gauge the impact of the 

program, 6 focus groups were conducted in area 1 and 6 to fulfil the purpose. 

Our overall strategy is to establish area based theatre groups to conduct area-based 

performances on societal issues to raise awareness amongst Kashf’s clients. 

35

Leadership 

Training 

Social themes 

Gender and 

Development 

workshops 

This training is targeted at Kashf’s Centre Managers. The module has been designed to 

enhance their leadership qualities and based on questions such as: 

what are CM leadership needs 

what leadership skills can be developed in one session 

how to design follow-up sessions 

The Social theme package consists of 24 themes. It is a much more interactive package 

than the previous booklet. Monitoring is on going part of regular operations. Only spot 

monitoring is conducted by GESA. In addition to training LOs, there will also be an 

attempt to develop strong incentives for LOs to maintain a high standard of quality 

when delivering social themes. 

The empowerment vision of Kashf and GESA’s mandate both make it imperative that 

high-quality gender sensitization training be carried out for all Kashf staff. During this 

quarter, 2 gender sensitization workshops were conducted for the new loan officers. 

In order to keep up with staff expansion, GESA will also invest resources in building a 

cadre of in-house, high quality trainers 

36

Table - A.8.2.1 


[KASHF] 

Respondents % 

Respondent 

Category 

510 100.0 





Table - A. 8.2.2 


[KASHF] 

Borrowers % 

Loan 

Taken 

330 100.0 

One 139 42.1 

Two 38 11.5 

Three 46 13.9 

Four 57 17.3 

Five 30 9.1 

Six 16 4.8 

Seven 4 1.2 

Table - A. 8.2.3 


[KASHF] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


46.9 17.8 35.3 100.0 



Primary 7.9 8.8 10.6 9.0 

Middle 3.8 8.8 5.0 5.1 

Metric 2.9 3.3 6.1 4.1 

Inter 1.7 .6 

Graduate and above .4 1.1 .6 .6 


37

Table - A. 8.2.4 


[KASHF] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


46.9 17.8 35.3 100.0 



Goods Supplier 1.3 3.3 2.8 2.2 





Agriculture – Crop Production .6 .2 

Service .6 .2 

Table - A. 8.2.5 


[KASHF] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


46.9 17.8 35.3 100.0 


4-6 Person 53.1 38.5 43.9 47.3 

7-9 Person 27.6 38.5 34.4 32.0 

More than 9 2.5 2.2 5.0 3.3 



38

Table - A. 8.2.6 


[KASHF] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


46.9 17.8 35.3 100.0 

House owners 93.7 84.6 86.1 89.4 





Table - A. 8.2.7 


[KASHF] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


46.9 17.8 35.3 100.0 





Table - A. 8.2.8 


[KASHF] 


Total 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 


46.9 17.8 35.3 100.0 




Poor Households (% below the Official 

Poverty Line) 

5 18 22 14 



Average Indebtedness 10000 10000 10000 


39

Table - A. 8.2.9 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 










Table - A. 8.2.10 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 



No Vaccination 1.3 3.8 2.3 


Table - A. 8.2.11 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 




40

Table - A. 8.2.12 


[KASHF] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 










Table - A. 8.2.13 


[KASHF] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 







Gas 3 3 3 3 


Rent 1 1 2 2 

Traveling 2 3 3 3 





- Eggs (days) 4 6 5 5 


41

Table - A. 8.2.14 


[KASHF] 


Overall 

Active 

Borrowers 

Pipeline 

Borrowers 

Non- 

Borrowers 

Own House 93.3 89.0 85.6 89.8 

Refrigerator 33.9 12.1 26.7 27.5 

Colour TV 87.9 78.0 74.4 81.4 

Motor Cycle 6.3 3.3 7.8 6.3 

Prize Bond 



Bed with Foam 40.6 18.7 33.3 34.1 

Urban Property 

Gold 18.4 2.2 23.3 17.3 

Mobile phone 39.7 28.6 33.3 35.5 


Table - A. 8.2.15 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 


Permanent on Monthly Salary 1 2 1 

Permanent on Daily Wages/Piece Rate 3 3 




Machinery 6057 2087 2192 3985 

Instruments 971 940 571 824 


42

Table - A. 8.2.16 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 









43

Table - A. 8.2.17 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 






made 

70 74 63 68 






family 70 90 63 71 


family 78 95 77 80 




money 59 66 29 50 





borrowed 61 71 6 43 







44

Table - A. 8.2.18 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 








regularly 

41 66 42 46 




45

Table - A. 8.2.19 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 




name 18 52 32 29 


name 1 0 






8 22 18 14 


own name 


your name 5 32 20 15 




46

Table - A. 8.2.20 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 












illness 

27 45 37 34 











children 

88 98 86 89 


47

Table - A. 8.2.21 


[KASHF] 

Active 

Borrowers 


Pipeline 

Borrowers 

Non- 

Borrowers 

Overall 





wear 85 98 93 90 




parties 4 1 




ideas on you and make you accept them 2 1 










76 71 83 78 


48

Table - A. 8.2.22 


[KASHF] 

Borrowers 

Loan was 

used by: 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

239 91 330 

72.4 27.6 100.0 

Self 28.0 12.1 23.6 


Other Members 

6.3 11.0 7.6 


Table - A. 8.2.23 


[KASHF] 

Borrowers 

Loan was 

used for: 


Active 

Borrowers 

Pipeline 

Borrowers 

Total 

239 91 330 

72.4 27.6 100.0 

Business Activity 97.5 98.9 97.9 

Repayment of debts .8 .6 

Consumption 

1.7 1.1 1.5 


Table - A. 8.2.24 


[KASHF] 








49

Table - A. 8.2.25 


[KASHF] 

Loan Taken 


Overall 


Sale of asset/Sale of Animals 4.0 .8 

Borrow loan from relative/friends 80.0 86.5 75.6 68.4 66.7 81.3 75.0 75.7 

Borrow loan from Microfinance 32.0 35.1 35.6 45.6 56.7 31.3 75.0 40.2 

Reduce Consumption Expenditure 2.2 6.3 .8 

Search for extra work 2.0 2.2 .8 

Extra hours in existing occupation 6.0 10.8 2.2 7.0 23.3 25.0 8.4 



Table - A. 8.2.26 


[KASHF] 

Loan Taken 


Overall 



life 

100.0 94.6 97.8 100.0 100.0 100.0 100.0 98.7 

No Change 

5.4 2.2 1.3 

Family eat your fill As much as wanted (all types) 48.0 59.5 55.6 61.4 70.0 50.0 75.0 57.7 

As much as wanted (not all types) 52.0 40.5 44.4 36.8 30.0 50.0 25.0 41.8 

Sometimes felt hunger 1.8 .4 

Have more to eat now Have more to eat now 92.0 86.5 91.1 91.2 100.0 87.5 100.0 91.6 


Equal 8.0 10.8 8.9 7.0 6.3 7.1 

Family health Health is better now 82.0 67.6 68.9 78.9 70.0 56.3 25.0 72.4 

Health was better earlier 4.0 5.4 2.2 3.5 6.7 3.8 

Equal 14.0 27.0 28.9 17.5 23.3 43.8 75.0 23.8 


in income 

100.0 94.6 95.6 98.2 100.0 87.5 100.0 97.1 

No 5.4 4.4 1.8 12.5 2.9 


50

Table - A. 8.2.27 


[KASHF] 


Overall 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 


100.0 100.0 100.0 


No 38.9 43.3 41.1 

Do not need 8.9 20.0 14.4 






Table - A. 8.2.28 


[KASHF] 

New 

Borrowers 


Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 

Overall 






Extra hours in existing occupation 3.3 2.2 1.8 




51

Table - A. 8.2.29 


[KASHF] 


Overall 

New 

Borrowers 

Non- 

Borrowers 

(Same Area) 

Non- 

Borrowers 

(New Area) 



life 

87.9 51.1 36.7 58.7 

Deteriorated 1.1 18.9 15.6 11.8 

No Change 11.0 30.0 47.8 29.5 






Equal 25.3 33.3 52.2 36.9 



Equal 39.6 46.7 58.9 48.3 


52

Chapter Nine: Conclusions 

For anyone who has read any of the Chapters 3-8, in which we present the analysis and 

results of the social and economic impact of microfinance interventions on clients, the 

first thing that will probably strike them, is the observation that the results are ‘mixed’, 

are contradictory, and probably in many cases, surprising and unexpected. Before we 

discuss the general results from the last six Chapters, it is important to reemphasise a 

number of points that have been made in the previous Chapters, so that we can 

understand our results better. 

We have looked at six microfinance institutions which are fairly (and in some cases, 

radically) different from each other. We have MFIs which cater to women, and some 

which do not differentiate on the basis of gender, with the result that only a very small 

handful of its clients are women; we have group lending and individual clients, with 

some group lenders increasingly moving towards individual lending programmes; we 

have development organisations for whom microfinance is one intervention, while there 

are others which specialise only on microfinance – microcredit, more correctly – and do 

not claim to do anything else; we have purely rural MFIs, MFIs which work in both rural 

and urban areas, and purely urban MFIs in our sample. The management styles of the 

MFIs are very different, with some tightly structured and hierarchical and top-heavy, 

while others are thinner in the way they are structured and less tightly managed. Many of 

our MFIs are highly dependent and accountable to donors, with others being less 

dependent and less accountable to such interests, claiming to have a great deal of 

autonomy and freedom in how they work and in their style of work. Even a cursory 

reading of Chapters 3-8 shows that we have a very diverse group of MFIs in our sample, 

and hence the repeated warning about the need to examine each MFI separately based on 

what it does, rather than to compare the results and make statements that such-and-such 

MFI has the greatest impact on its clients. As the Chapters show, each microfinance 

institution has some sort of impact which others may not have. 

Along with the repeated caution about comparison, there is greater concern about 

observing, leave alone measuring, impact. All previous studies which have examined 

‘impact’ of poverty alleviation interventions – microfinance being one such important 

intervention – warn about problems with data and methodology. This is why there have 

been so few impact assessments of microfinance interventions, and the ones that have 

been conducted, have all been criticised for some short-coming or the other. Perhaps the 

main reason why impact assessment studies have been difficult, is that it takes many 

years before impact can be observed and quantified, if at all, convincingly. Moreover, the 

desire to show that microfinance interventions have an impact on softer indicators, such 

as ‘empowerment’ and ‘gender equalisation’, makes matters worse, as such indicators are 

not just difficult to measure, in more traditional settings such impacts may take much 

longer to emerge than say, impact on income. Clearly, on all counts, one has to be fairly 

cautious about reading impact assessment studies, whether they show a positive effect, a 

negative effect, or no effect, despite many years’ of intervention. It may still have to take 

some years when the methodology improves to be able to actually capture impact.

After these general comments above, we turn to some of the more important general 

findings which emerge from this Study of these six microfinance institutions working in 

Pakistan. Specific findings related to each MFI are discussed in their specific Chapters 

and are not repeated here, and in this last Chapter, we state some generic, general, results 

and observations. 

Although in some areas and sectors and with regard to some microfinance institutions, 

one finds signs of positive ‘impact’, the single most important finding from this Study is 

that the social and economic impact on the lives of those who take credit, for the most 

part, is limited. The differences observed in the economic and social aspects of the lives 

of those who take credit and those who do not, are, for the most part, statistically 

insignificant. While this result may be disappointing for those who think that 

microfinance is the answer to all the problems of the poor, it is not a very unexpected 

result given the characteristics of microfinance institutions and of the microfinance 

sector, as a whole. Given the nature and structure of the microfinance sector – mainly that 

it is very young – our results are in line with the findings of many other studies conducted 

elsewhere and need not be cause for concern. However, the results, even if they are 

interpreted to be ‘negative’ (which they are not) – or not positive enough – are important 

for they help temper the enthusiasm of those who believe that microfinance is the Magic 

Bullet for all ills, and allows one to take a more realistic picture of development-related 

interventions. We do not say that the impact of microfinance interventions is negative; 

what we do say is that the impact from microfinance is ‘not positive enough’, and that we 

are not in a position to state categorically, that microfinance has a positive impact. We do 

find improvement in the lives of many borrowers, but this improvement is not significant 

enough. Moreover, this result may also mean that, perhaps, we need some additional 

interventions, along with microfinance, to make a significant impact on poverty. Some of 

the other important findings that emerge from this Study, follow. 

The first observation to be made is, that most of the MFIs in our sample, are recent 

practitioners of microfinance and are young and fairly new MFIs. Of the 2,185 Borrowers 

surveyed, only 15 percent were in their fourth (or greater) loan cycle. Hence, 85 percent 

had not as yet completed their third loan cycle. Clearly, impact, so early on in the process 

of intervention, will be difficult to observe or to measure. Most of our results in the last 

six Chapters also show that impact has been limited (or unobserved and un-measurable) 

in most cases, probably on account of most clients being new to microfinance 

interventions. On account of this factor, the greatest impact that we do find in most 

indicators, is that amongst microfinance institutions which have been providing credit for 

many years. This result, while perhaps not unexpected, leads to questions about 

differences in management style and structure being significant factors in suggesting 

impact, rather than just the extended time spent with clients. 

Other factors that could also be responsible, relate to the idea of microfinance not being 

sufficient on its own as a poverty alleviation tool and requiring additional social capital 

and physical infrastructure support. Nevertheless, despite the fact that many factors could 

contribute to why the two MFIs with the oldest clients seem to have greater impact, we 

can say with a great deal of assurance, that a minimum number of years of microcredit 

2

are necessary for impact to take place. It is difficult to say what those minimum ‘numbers 

of years’ are, but repeat clients in their fifth and sixth loan cycles seem to show greater 

impact, and the fact that they voluntarily keep coming back to the MFI, suggests that the 

clients themselves, perceive significant (or at least some worthwhile) impact. 

If the number of years for impact is important, partly on account of better entrepreneurial 

ability, better use of the credit market, experience, the relationship with the MFI, and a 

host of other reasons which accrue over time, the second observation from our survey 

relates to the greater impact observed on account of loan size. Apart from this cocktail of 

reasons – experience, relationship – each loan cycle is (usually) greater than the previous 

amount. Hence, our results, linked to the number of years argument presented above, 

relate to the fact that larger loan sizes – or at least a loan size above a minimum – has a 

greater impact than does a small loan amount. Table 9.1 displays the loan cycle amounts 

of all the MFIs which were part of this Study, and a reading of any Chapter will shed 

some light about observable impact. Our results suggest that a longer relationship with 

microfinance and/or higher amounts of credit, will have a greater impact, clearly not a 

very surprising or unintuitive result. 

The question worth asking is whether a higher loan amount would have the same impact, 

or whether it is a combination of a longer relationship with greater amounts It is difficult 

to answer this question conclusively, although in the case of one MFI, our results suggest 

that a longer-term relationship on its own is not enough and that there has to be a’ 

substantial’ – however defined – loan amount to make microcredit work. It is also 

possible that a higher amount on its own, from the first loan, without that special, longerterm 

relationship, could also show a greater impact. Hence, new entrants in the 

microfinance provision sector, might be able to show greater impact by starting at higher 

credit levels. Whether any new MFI would take such risks with new, unknown and 

untested clients, is a questionable point. Another fact that may be related to loan-size, 

deals with the difference in Group Lending and Individual Lending. Most of our MFIs 

follow the Group Lending method. This means that the group may limit the upward 

amount of a loan and weigh it down. In the case of Individual Lending, MFIs are free to 

lend as much as they want and can select clients individually and more carefully, after 

which they can offer them higher loans. With many MFIs in Pakistan moving from 

Group Lending to Individual Loans, we might see the average loan size of these MFIs 

increasing. 

3

Table – 9.1 

Average Amount of Loan 

Microfinance Institution 

Loans Taken 

OCT SAFWCO Akhuwat Asasah Kashf NRSP UPAP 

One 10000 7500 10000 12000 10000 10000 10000 

Two 15000 10000 12000 18000 14000 15000 10000 

Three 15000 15000 13500 20000 18000 20000 13000 

Four 25000 18000 15000 20000 24000 25000 13000 

Five 30000 20000 25000 30000 13000 

Six 40000 27500 30000 14000 

Seven 28000 35000 

Thirdly, with the exception of only one MFI, all the MFIs state that they are in the 

business of poverty alleviation. In their Mission and Vision statements, they all state that 

their microfinance (and in the case of one MFI, its development-related interventions) are 

all for the poor and that their clientele is also from the ‘poor’. The problem then, is 

around the definition of the notion of ‘the poor’. As we found in our Institutional 

Reviews of each MFI, all MFIs carry out some sort of in-house ‘poverty assessment test’, 

where they identify localities and people whom they consider to be ‘poor’. By this 

criteria they may actually be targeting those whom they call the ‘poor’. However, if an 

objective criterion for poverty is used, such as the Government of Pakistan Official 

Poverty Line – Rs 1,000 per capita – then, very few clients can officially be called ‘poor’. 

Our results show that only 23 percent of urban Borrowers – 65 percent of our sample – 

are below the Official Poverty Line (OPL). On the other hand, 50 percent of the Non- 

Agricultural Rural Borrowers and 61 percent of the Agricultural Borrowers, are below 

the Official Poverty Line. Clearly, by the criterion of the Official Poverty Line, the 

clients selected by urban-based MFIs suggests, belong to the ‘non-poor’. However, one 

needs to make a few important points regarding poverty-line criteria. 

The OPL figure of Rs 1,000 per capita is a controversial statistics and many economists 

feel that the amount is too low, and a poverty line ought be drawn at a somewhat higher 

level. If this is the case, then the proportion below the poverty line for all MFIs would 

rise, depending on what alternative minimum level was chosen. If one used the poverty 

line of the US one Dollar-a-Day criterion, the proportion below the poverty line targeted 

by the MFIs can rise considerably. Secondly, MFIs are not meant to carry out household 

poverty studies and do not know what the OPL is, and nor how one measures it. 

Moreover, one questions why any MFI ought to stick to the OPL criterion, when they are 

carrying out the provision of microfinance based on their own criteria of who the ‘poor’ 

are. Thirdly, most studies on microfinance interventions across the world have shown, 

that the poor are often by-passed, ignored or over-looked, and the clients of many wellknown 

MFIs, are above the poverty line. The reasons for this are understandable and it 

seems that most MFIs in Pakistan follow their own criteria. It is unlikely that one will see 

much change in this pattern. Moreover, perhaps it is also inadvisable to suggest that all 

MFIs follow the strict OPL criterion. 

4

Another finding from the survey suggests that there is not a huge deal of difference in the 

profile of Borrowers and Non-Borrowers living in similar localities. This is not a 

surprising result on account of which we get a lot of similar sets of characteristics – in 

terms of Household Assets, Education, etc – amongst old, new and Non-Borrowers. Also, 

not surprising, is the huge awareness about MFIs across our entire sample, particularly, 

but not solely, in urban areas. Urban non-clients are all familiar with microfinance 

programmes, while many MFI clients have been previous clients of other MFIs as well. 

Moreover, our Focus Group Discussions also tell us that many of the clients of any 

particular MFI, are also familiar with clients (and practices) of other, competing, MFIs in 

the region. They state that they choose to stay with their particular MFI because they 

think it is better. 

While impact has been difficult to quantify in many cases for reasons discussed above 

and in Chapter 2, the perceptions of a very large majority of old Borrowers towards the 

programmes, are very positive. More interesting is the finding that new Borrowers, who 

have been with a programme for only a few months, think that there has been a 

considerable improvement in their Quality of Life. 

The one overall surprising result from the survey has been the finding that the 

microfinance interventions do not seem to have a significant positive impact on the 

different aspects of Women’s Empowerment. The results for almost all MFIs in the 

Economic Empowerment category for Women are positive and significant showing that 

most women do tend to be more ‘empowered’ on account of economic activities, but in 

most other categories where we have tried to measure and quantify Empowerment, this is 

not the case. We had expected far more positive results in this regard, but with very few 

exceptions, the results show that not only has there been little improvement, in some 

noticeable cases, Women’s Empowerment has deteriorated after joining a programme. 

While we realise that it is very difficult to capture and quantify indicators like 

‘Empowerment’, this result, no matter how tentative, is cause for concern and needs to be 

addressed by MFIs. Changes in Empowerment take much time and social conditions 

inhibit improvement more so than in the case of income enhancement, but still, one needs 

to examine this area for each MFI, more carefully. 

Recommendations 

Based on our individual and collective findings, a few general recommendations can be 

made. 

Firstly, given that this is still a young sector, a social and economic impact assessment 

exercise ought be conducted of a large number of microfinance institutions once they 

have been in the credit business for at least seven or eight years. Anything prior to this, as 

we found out, will show varied and mixed degrees of impact. Since it takes some time for 

impact to come through, it is better to wait for the MFIs to mature rather than to prove 

impact when little is evident. 

5

Secondly, if staying power matters as the longer the microfinance institution stays with 

its clients and the greater the likelihood of impact being observed and measured, an 

institution should stay the course with its clients and develop their clientele over a longer 

period of time. 

Thirdly, linked with the time factor, is that of loan size. Perhaps MFIs should raise the 

loan size for their clients sooner and more substantially so that the loan amount makes a 

difference. Each MFI will have to work out the optimum ranges of loan size offered with 

regard to particular and specific needs and requirements. 

Since all MFIs state that they are intervening in the market to ‘alleviate poverty’, they 

need to clearly state what those poverty criteria are. Whether they are following the 

Official Poverty Line criteria, or whether they are developing their own criteria. 

Whatever they do, they should state where their poor lie in terms of the poverty line, who 

they are, and what determines the definition of the ‘poor’ for them. They need to assess 

their own performance with these sets of criteria. 

Many MFIs stated said that the inability to use the client deposits for further lending was 

a problem. These MFIs do not actively promote savings as it is very expensive for 

them, but there is a need to encourage them to promote savings, which, in turn, could 

enhance impact, as savings were seen to be very important for sustainability and coping 

with vulnerability. While it was not the Brief of this Study to look at microfinance policy, 

given the importance of savings, one can suggest that regulations ought to be 

reconsidered or amended, and licenses to on-lend savings be given, based on an MFI’s 

performance and sustainability. 

We did not find much impact on education or health, even though there is some impact 

on income for older MFIs. This probably suggests that specific measures for these social 

services need to be taken. The simple view that microfinance will sort out everything is 

too simplistic; if these services are not available or of decent enough quality, 

microfinance will not help very much. Maybe the MFI's could link-up with government 

or other NGO programmes on these social issues and improve these services in their own 

areas and for their clients. 

Similarly, since on the Empowerment factor most results have been unimpressive, there 

is a need for each MFI which claims that it also has Empowerment as an objective, to 

evaluate its methodology of intervening on this count. Does microfinance automatically 

translate to Empowerment Does it require special, separate, intervention How should 

MFIs evaluate indicators of Empowerment 

A Final Word 

Impressionistically and anecdotally, we all know that microfinance ‘works’ and that it 

makes a huge difference in the lives of borrowers; otherwise they would not continue to 

come back for more loans. The fact that this does not show through in our results does 

not mean that there is little impact. Given methodological issues, and the nature and form 

6

of the microfinance sector in Pakistan, one needs more time and perseverance to capture 

quantifiable results. One hopes that another (more sophisticated) study five years from 

now, when the sector has matured, will capture that impact better and we will find greater 

proof that, in fact, the social and economic impact of microfinance programmes in 

Pakistan, is considerable. 

7

Appendix 1: Questionnaire for the Survey 

Questionnaire 

[Including Data Files Structure, Variable Names and Codes] 

SOCIAL IMPACT ASSESSMENT 

OF MICROFINANCE

Section 1 – IDENTIFICATION 

File: ‘Key Variables’ 

Respondent’s Identification 

[HID] 

Institution: ________________________ [INSTITUT]** 

District ________________________ [DISTRICT]** 

City _________________________ [CITY]** 

Tehsil _________________________ [TEHSIL]** 

Locality/Village _________________________ [LOCALITY]** 

Branch _________________________ [BRANCH]** 

Institutional Reference ____________________ [REFERENC] 

Respondent’s Category: 

[B_CAT] 

1) Borrowers 

2) Borrowers-to-be 

3) Matched Sample – Neighbor (Same Area) 

4) Matched Sample – Neighbor (New Area) 

Respondent’s Area Status: 

[R_CAT] 

1) Urban 

2) Rural 

21) Rural - Agriculture 

_________________________________________________ 

Variable names are given in square brackets. Codes of variables with ** are provided in the appendix. 

[Note: Respondent of Non-Borrowers Category should be head of household or main earner, has not 

obtained any microfinance loan and preferably is self-employed] 

Questionnaire – Social Impact Assessment of Microfinance 

2

1. Respondent’s Characteristics 

Section 2 – All Respondents 

File: ‘RESPONDENT’ 

1.1 Name ________________________________ 

1.2 Home Address ________________________________ 

1.3 Sex [1] Male [SEX] 

[2] Female 

1.4 Age (Years) [AGE] 

1.5 Relationship with Head [1] Head [RELATION] 

[2] Spouse 

[3] Father/Mother 

[4] Mother, Father In-Laws 

[5] Brother/Sister 

[6] Son/Daughter 

[7] Other _______________ 

1.6 Marital Status [1] Married [M_STATUS] 

[2] Unmarried 

[3] Widowed 

[4] Divorced 

1.7 Formal Education Number of Years [EDUC_R] 

1.8 Technical/Vocational Training 

[Put ‘0’ if no education, 21 if religious 

education (madarsa)] 

Major Field 

Type 

[Codes] 

1 [TRAIN1]** [TR1] 

2 [TRAIN2]** [TR2] 

3 [TRAIN3]** [TR3] 

Type Code: 

1. On the Job Training/Apprenticeship 

2. Diploma 

3. Certificate/Short Courses 

4. Degree 

5. Other 


3

1.9 Occupation – Primary _____________ [OCCUP_M] 

1.10 Occupation – Secondary _____________ [OCCUP_S] 

2. Demography Total Male 

2.1 Total Family Member [FS] [FSM] 

2.2 Number of Family Members – Upto 5 [CHILD5] [CHILD5M] 

6 – 15 Years [A615] [A615M] 

16 – 30 Years [A1630] [A1630M] 

31 – 65 Years [A3165] [A3165M] 

Above 65 [A65] [A65M] 

2.3 Number of Earners [EARNERS] 

(Excluding the respondent and unpaid family workers) 

3. Technical Education 

Type of Education 

Numbers 

Male Female 

Monthly 

Expenditure 

Rs. 

Technical/Vocational [TECH1_M] [TECH1_F] [TECH1_E] 

Apprenticeship [TECH2_M] [TECH2_F] 


4


File: ‘CHILD ENROLLMENT’ 

Education (Formal/Informal Education) 

Name/Number 

SEX 

1 = Boy 

2 = Girl 

CLASS 

TYPE 

1 = Government 

2 = Private 

3 = Madarsa 

Monthly 

School 

Fees 

[Rs.] 

Monthly 

Tuition 

Fees 

[Rs.] 

Monthly 

Transport 

[Rs.] 

[NUMBER] [SEX] [CLASS] [TYPE] [FEES] [TUITION] [TRANS] 


5

Section 4a – All Respondents 

File: ‘HOUSING’ 

4. Housing Characteristics and Services 

4.1 House Status [OWNH] 

[1] Own 

[2] Rented 

[3] Other 

4.2 Type of House [Observe] [HTYPE] 

[1] Independent 

[2] Flat 

[3] Part of Large Unit 

[4] Part of Compound 

[5] Other ___________ 

4.3 Type of major material of the outer wall [WALL] 

[Observe] 

[1] Brick (Baked) 

[2] Concrete Blocks 

[3] Unbaked Brick, Adobe 

[4] Wood 

[5] Tin, Zinc Shelling 

[6] Mud 

[7] Bamboo, Canvas 

[8] Other ___________ 

4.4 Type of major material of the roof [ROOF] 

[Observe] 

[1] Asbestos sheet 

[2] Concrete 

[3] Metal Sheet 

[4] Unbaked Bricks 

[5] Wood 

[6] Thatch 

[7] Canvas, Felt 

[8] Other __________ 


6

4.5 Type of Floor Construction [FLOOR] 

[1] Katcha 

[2] Bricks 

[3] Cemented 

[4] Tile 

[5] Other __________ 

4.6 Number of Rooms [ROOMS] 

[Excluding bathroom, kitchen] 

4.7 Sources of Water [WATER] 

[1] Inside 

[2] Outside 

4.8 Telephone Connection [PTCL] 

[1] Yes 

[2] No 

4.9 Electricity [ELECTRIC] 

[1] Yes 

[2] No 

4.10 Type of Cooking Fuel [GAS] 

[1] Cooking Gas 

[2] Wood 

[3] Kerosene Oil 

[4] Other ________ 

4.11 Type of Latrine [LATRINE] 

[1] Flush 

[2] Pore 

[3] Pitt 

[4] No Latrine 

4.12 Major Repairing/Improvement/Construction/Expenditure on Utility Connections 

[During Last Five Years, how much expenditure you made on house repair, 

improvement, construction or obtaining connections of utilities] 

Total Rupees ___________________________________ 

[REPAIR] 


7

Section 4b – All Respondents 

File: ‘HOUSE REPAIR’ 

Please provide following detail. 

Major Repairs/ 

Improvement/Construction 

[Call Out each Item] 

Approximate 

Year Cash 

Expenditure 

[CODES] [YEAR] [AMOUNT] 

1 Roof 

2 Outer Wall 

3 Floor 

4 Additional Rooms 

5 Kitchen 

6 Bathroom 

7 White-Wash, Paints 

8 Water Connection – Fittings and Other 

Expenditure 

9 Electricity Connection – Fittings and Other 

Expenditure 

10 Cooking Gas – Fittings and Other 

Expenditure 

11 Telephone Connection – Fittings and Other 

Expenditure 

12 Other ______________________ 


8

Section 5a – All Respondents 

File: ‘HEALTH COMPLAINTS’ 

What health complaints did your family has in the last 30 days 

[Multiple Answers Possible] 

What health complaints 

did your family has in 

the last 30 days 


Family 

Members 

Reported 

How many 

times did your 

family 

member visit 

a health care 

facility 

What kind of 

health care 

facility or health 

care provider did 

your family 

member visit 

How much 

did your 

family spend 

on health 

care facility 

[HCODE] [NUMBER] [FREQ] [SOURCE] [EXPEND] 

1 Stomach disorder 

2 Cough 

3 Cold 

4 Back pin 

5 Asthma 

6 Stomach ache 

7 Headaches 

8 Toothaches 

9 Ear pain 

10 Diarrhea 

11 Skin problem 

12 Fever 

13 Accidents 

14 Malaria 

15 Joint/muscle pain 

16 

17 Others 

Source Codes: 

1. Public Hospital 

2. Public Health Clinic 

3. Basic Health Unit 

4. Rural Health Centre 

5. Private Hospital 

6. Private Clinic 

7. Medical Store 

8. Private Doctor 

9. Hakim / Homeopathic Doctor 

10. Lady Health Visitor 

11. Other __________________ 


9

Section 5b – All Respondents 

File: ‘IMMUNIZATION’ 

Have your children been immunized 

[All Children Below Five years] 

Name/Number 

Fully 

Immunized 

Partly 

Immunized 

Not 

Immunized 

[Child] 

[ISTATUS] 

CODES 

1 2 3 


10


File: ‘EXPENDITURE’ 

6.1 Household Expenditure on: [Call Out each Item] 

6.1 Monthly Expenditure (Rupees) 

1) Total Monthly Expenditure [TEXP] 

2) Food [FOOD] 

3) Education (fee, stationary etc.) [EDUC] 

4) Health (Doctor/Medicine) [HEALTH] 

5) Electricity Bill [EXP_EL] 

6) Cooking Gas Bill [EXP_GAS] 

7) Telephone – PTCL/Mobile [TELEPH] 

8) House Rent [HRENT] 

9) Soap/ Soda / Laundry [SOAP] 

10) Toothpaste/Cosmetics [TPASTE] 

11) Toys/Game/Recreation [TOYS] 

12) Kerosene [KOIL] 

13) Charcoal, Firewood, Dung Cakes [COAL] 

14) Traveling [TRAVEL] 

15) Match box, Candle [MATCH] 

16) Monthly Installment Repayment of Loan [REPAY] 

17) Monthly Saving (Bank, BISI etc.) [SAVING] 

6.2 Food Consumption 

During last month, how many days did you and your family eat 

Meat (Chicken, beef, mutton, fish) 

Fruits 

Eggs 

[MEAT] 

[FRUIT] 

[EGGS] 

[Note: Make sure that there were neither special occasion in the household during last month nor 

guests visited unusually] 


11

Section 7 – Only for Non-Agriculture Households 

File: ‘INCOME’ 

7. Household Income 

7.1 Respondent’s Income 

Respondent/ 

Income Frequency 

Borrower 

If Frequency is daily 

[Rs.] 

[Codes] How many days you 

have worked during 

last month 

From Primary Occupation [INC1] [FREQ1] [DAYS1] 

From Secondary Occupation [INC2 [FREQ2 [DAYS2] 

Frequency Codes: 

1 = Daily, 2 = Monthly, 3 = Bi-Annually, 4 = Annually, 5 = Occasionally 

7.2 During last month, what was the average monthly income of other earners 

Other Earners Total Income Age Sex 

1 Earner – 2 [AINC2] [AINC2_A] [AINC2_S] 



7.3 Other Household Regular Monthly Receipts [Call Out each Item] 

1 Pension/EOBI [OINC1] 

2 Domestic Remittance [OINC2] 

3 Foreign Remittance [OINC3] 

4 Rent [OINC4] 


12

Section 8a – Only for Borrowers (Category 1 and 2) 

File: ‘CURRENT MF LOAN’ 

8. Microfinance Loans (from Institution recorded on front page) 

8.1 Current Microfinance Loan 

1) When Received Month [L_MONTH] Year [L_YEAR] 

2) Amount Received (Rs.) [AMOUNT] 

3) Total Repayment Period – Months [R_MONTH] 

4) Repayment Frequency [P_CODE] 

1) Monthly 

2) Bi-Monthly 

3) Fortnightly 

4) On Harvesting 

5) Other ________ 

5) Amount of Installment [INSTAL] 

6) Loan amount was used by: (Multiple Codes Possible) [USE] 

1) Self 

2) Spouse with your suggestion 

3) Spouse without your suggestion 

4) Other Members 

7) Loan amount was used for [PURPOSE] 

[Multiple Codes Possible] 

1) Business/Agriculture Activity 

2) Repayment of debts 

3) Consumption 

4) Marriage of Daughter/Son 

5) The use of other household members 

6) Death/Illness of household members 

7) Other ____________________ 


13

8) Do you regularly pay the loan installment [REGULRAR] 

1) Yes 

2) No 

9) (If No in 8) What problems do you face [PROBLEM] 

1) Cash Turnover 

2) Slack Season 

3) Business Problem 

8.2) How many loans you have taken before [LNUMBER] 

from this institution (Excluding the current loan) 

8.3) Has the institution a Microfinance Saving Program [SAV_MFI] 

1) Yes 

2) No 

8.4) (If Yes in 8.3) How much you have deposited [S_AMOUNT] 

during last 12 months 

8.5) (If No in 8.3) Do you want to have a saving program [S_PROG] 

in this institution 

1) Yes 

2) No 


14

Section 8b – Only for Borrowers (Category 1) 

File: ‘PREVIOUS MF LOANS’ 

History of Microfinance Loans 

(From Institution recorded on front page, excluding the current loan) 

Loan 

Number 

Total Amount 

Received 

When 

Received 

[Year] 

Purpose 

[Codes] 

Total 

Amount 

Paid 


Months to 

Repay 

[Months] 

Sources of 

Repayment 

[Codes] 

[LCODE] [L_AMOUNT] [YEAR] [PURPOSE] [REPAID] [R_MONTH] [R_SOURCE] 

1 st 

2 nd 

3 rd 

4 th 

5 th 

6 th 

7 th 

Codes for Purpose of Loan 

1) Retail Shop 

2) Vendor 

3) Suppliers of Goods 

4) Workshops/Garage 

5) Small Scale (Cottage) Industry 

6) Tailoring 

7) Beauty parlor 

8) Taxi/Rickshaw 

9) Education Institution 

10) Training (skill) Institution 

11) Livestock 

12) Agriculture Inputs 

13) Consumption 

14) Other _______ 

Codes for Repayment Sources: 


1) From loan related activity 

2) From own income 

(other than loan related activity) 

3) Loan from relatives/friends 

4) Loan from Bank/other MF institution 

5) Sale of Assets / Animals 

6) Others _____________ 


15


File: ‘LOAN HISTORY’ 

Household Loan History (Last Five Years) 

[Other than Institution recorded on front page] 


Loan 

Loan Amount 

When 

Received 

Amount 

Paid 


Repayment 

Any Balance 

Due 

Recipient’s 

Status 

[Codes] 

[Rupees] 

[Year] 

[Rupees] 

[Codes] 

[Codes] 

1 

[SOURCE] [AMOUNT] [YEAR] [REPAID] R_SOURCE] [BALANCE [L_WHO] 

2 

3 

4 

5 

6 

Codes for Sources: 

Codes for Repayment Sources 

Codes for Recipient’s Status 

1) Family Relatives/Friends 

2) Local Money Lender 

3) Shopkeeper (Other than supplier’s credit) 

4) Commission Agent 

5) Microfinance Institution ______________ 



8) Commercial Banks 

9) HBFC 

10) First Women Bank 

11) Landlord 

12) Other _____________________ 

1) From loan related activity 

2) From own income (other than loan related) 

3) Loan from relatives/friends 

4) Loan from Bank/other Microfinance institution 

5) Sale of Assets / Animals 

6) Others ___________________ 

1) Recipient/Respondent 

2) Other Family Member 


16

Membership in NGO Programs 


File: ‘NGO MEMBERSHIP’ 

10.1 Have you been a member of any NGO/Microfinance program and has left the 

group or program 

Which NGOs you have left 

NGOs 

Left 

[Codes] 

When 

Dropped 

Out 

[Year] 

Reasons for dropped out 

[Multiple Codes possible] 

[Codes] 

1 2 3 5 

[LEFT] [LYEAR] [REASON1] [REASON2] [REASON3] [REASON4] 

Codes for NGOs: 

1. Kashf 

2. NRSP 

3. SRSP 

4. OPP-OCT 

5. Asasah 

6. Akhuwat 

7. FMFB 

8. DAMEN 

9. SAFWCO 

10. SUNGI 

11. Taraqee 

12. TRDP 

13. PRSP 

14. Bank of Khyber 

15. ORIX 

16. Rozgar 

17. Community Support Concern 

18. Other ______________ 

Codes for Reasons [1-4]: 

1. Did not ready credit in time 

2. Had problems with other group members 

3. Did not pay required weekly saving 

4. No time for lengthy meetings 

5. Do not need credit anymore 

6. Do not need any other service anymore 

7. Head of household ask me to leave the NGO group 

8. Wanted to join other NGO. Name _________________ 

9. Had problem with NGO agent/worker 

10. Other reasons __________________ 


17

10.2 Had you wanted to join a program, and applied for membership, but application 

was rejected 

NGOs 

[Codes] 

When 

Applied 

[Year] 

Reasons for Rejection 

[Multiple Codes possible] 

[Codes] 

5 6 7 8 

[REJECT] [RYEAR] [REASON5] [REASON6] [REASON7] [REASON8] 

Codes for NGOs: 

1. Kashf 

2. NRSP 

3. SRSP 

4. OPP-OCT 

5. Asasah 

6. Akhuwat 

7. FMFB 

8. DAMEN 

9. SAFWCO 

10. SUNGI 

11. Taraqee 

12. TRDP 

13. PRSP 

14. Bank of Khyber 

15. ORIX 

16. Rozgar 

17. Community Support Concern 

18. Other ______________ 

Codes for Reasons [5-8]: 

1. Being too rich (rejected by NGO agent/worker) 

Other group members did not accept me Because: 

2. I am too poor 

3. I am too rich 

4. of my sex 

5. of my religion 

6. I do not live close to other members 

7. of my marital status 

8. of my age 

9. of my main occupation 

10. of my creditworthiness and indebtedness 

11. I don’t know why I was rejected 

12. Other reasons __________________ 


18

Section 11,12 – Only for Non-Agriculture Households 

File: ‘BUSINESS’ 

11. Characteristics of Business 

[For which Microfinance loan was obtained or applied for] 

11.1 Type of business [BTYPE]** 

11.2 Do you fully own this business [1] Yes [BOWN] 

[2] No 

11.3 [If Not], What is your share (%) [BPERCENT] 

11.4 When Started this business (Year) [BYEAR] 

11.5 Workers/ Employees/Family Members in business activity 

Employees/Workers 

Now 

Numbers 

[If Borrower] 

When Obtained 

First Loan 

Average Wage 

Per Worker 

Now [If Borrower] 

When Obtained 

First Loan 

Family Members 

Permanent – Monthly Salary 

Permanent - Daily Wages 

Seasonal/Occasional 

[If Non-Borrower] 

One Year Before 



[CE1] [PE1] 

[CE2] [PE2] [CW2] [PW2] 

[CE3] [PE3] [CW3] [PW3] 

[CE4] [PE4] [CW4] [PW4] 

11.6 Approximate Return from business 

Now 

[If Borrower] 

When Obtained First Loan 



Monthly Sales (Rupeess) [CSALE] [PSALE] 


19

11.7 Business Assets 

Business Assets (Rupees) 


Current 

Value 

[If Borrower] 




Shop/Workshop (If Separate from House) [CA1] 

[PA1] 

Machinery [CA2] 

[PA2] 

Livestock [CA3] 

[PA3] 

Other_______________ [CA4] [PA4] 

11.8 Working Capital 

Amount Required to 

run the operation of 

the business 

Current 

Value 

Value (Rs.) 

[If Borrower] 




Per Day Per Per Day Per 

Month 

Month 

Working Capital [CDWC] [CMWC] [PDWC] [PMWC] 

11.9 Business Liabilities 

Current 

Value (Rs.) 

[If Borrower] 


Business Liabilities: 




Banks/Microfinance Institution 

[CL1] 

[PL1] 

Personal (Friends/Relative) [CL2] 

[PL2] 

Market (Traders) [CL3] 

[PL3] 

Others [CL4] [PL4] 


20


File: ‘HOUSEHOLD SAVING’ 

Household Saving 

13.1 Do you maintain and operate any bank account 

[1] Yes [ACCOUNT] 

[2] No 

13.2 [If Yes in 13.1] [SAMOUNT] 

How much have you deposited in this account since last 12 month 

13.3 [If Yes in 13.1] [WAMOUNT] 

How much have you withdrawn from this account since last 12 month 

13.4 Since last 12 months, how much did you put into the committee (BISI) 

Total 

[BC] 

Monthly Installment 

[BCINST] 

13.5 Since last 12 months, how much did you put into the [PS] 

postal saving account 

13.6 Since last 12 months, did your household purchase 

[Rupees} 

Prize Bonds 

Defense Saving Certificate 

Khas Deposit Certificate 

[PB] 

[DSC] 

[KDC] 


21


File: ‘HOUSEHOLD ASSETS’ 

Household Assets [Call Out each Item] 

Items 

Owned 

Yes = 1 

No = 0 

Current 

Market 

Value 

[Rupees] 

When Last 

Purchased/ 

Obtained 

[Year] 

[ACODE] [OWNED] [CVALUE] [PYEAR] 

1 House 

2 Other Buildings 

[Shed/Kitchen/Shop] 

3 Agriculture Land _______ Acres 

4 Refrigerator 

5 Colored TV 

6 Black and White TV 

7 Radio/Tape Recorder/DVD/VCD 

8 Motor-cycle 

9 Cycle 

10 Prize Bond 

11 Washing Machine 

12 Sewing Machine 

13 Bed with Foam 

14 Bed without Foam 

15 Furniture 

16 Property – Urban 

17 Property – Rural 

18 Livestock 

19 Hand-pump (for home) 

20 Electric Motor (water) 

21 Jewelry 

22 Cell-Phone 

23 Other ____________ 

Note: Put ‘999’ in value column, if respondent has an asset and refuses to tell current value. Similarly, put 

‘999’ in year column, if the asset has not purchased by respondent or he/she do not know the year of 

purchase. 


22

Section 15 – All Respondent 

File: ‘SALE OF ASSETS’ 

Did your household sale any asset during last 12 months 

Type of 

Asset 

Owner of 

Asset 

What was the 

price 

When did 

household 

sell 

Why did you 

sell asset 

[Codes] 

[Codes] 

[Rupees] 

[Month] 

[Codes] 

1 

2 

3 

Codes for Type 

1 House 

2 Other Buildings 

3 Agriculture Land 

4 Refrigerator 

5 Colored TV 

6 Black and White TV 

7 Radio/Tape Recorder 

8 Motor-cycle 

9 Cycle 

10 Prize Bond 

11 Washing Machine 

12 Sewing Machine 

13 Bed 

14 Table 

15 Chairs 

16 Other Furniture 

17 Property – Urban 

18 Property – Rural 

19 Livestock 

20 Hand-pump (for home) 

21 Electric Motor (water) 

22 Jewelry 

23 Hand Saw 

24 Husking Mill 

25 Husking Machine 

26 Husking (traditional) 

27 Axe 

28 Pushcart 

29 Power Tiller 

30 Other __________ 

[ACODE1] [OWNER] [SVALUE] [SMONTH] [REASON] 

Codes for Owner of Assets 

1 Joint Household Property 

2 Recipient/Respondent 

3 Other Family Member 

Codes for ‘why sold’ 

1 Food 

2 Health (Doctor/Medicine) 

3 Positive Social event (marriage etc.) 

4 Education 

5 Agriculture Equipment 

6 Agriculture Inputs 

7 Livestock 

8 Poultry 

9 Cycle/Bike 

10 Purchase/Rent-in Land 

11 Hiring Tubewell 

12 Hiring Tractor 

13 Input for other business activity 

14 Dowry to be given 

15 For house repair 

16 Purchase of house 

17 Radio/TV/Crockery 

18 Household Electrical Equipment 

19 Clothes 

20 House Furniture 

21 Negative Social Event (Death etc.) 

22 Repayment of other debts 

23 Other __________________ 


23

Section 16,17,18 – All Respondents 

File: ‘PERCEPTIONS’ 

Loan Utilization and Perception of Loan Impact 

(Q.16.1 to Q.16.11 for Borrowers, Category 1) 

16.1 Percentage of the amount of loan which 

is utilized for same purpose for which it was 

obtained (%) 

[Q161] 

16.2 Is the amount of loan sufficient for your 

current Business [1] Yes [Q162] 

[2] No 

16.3 How much time does it take from loan [Q163] 

application to obtaining the current loan 

(Days) 

16.4 How much expenditure occurred for getting [Q164] 

the current loan [Transport, food etc.] 

16.5 What significant problems did you face in obtaining current loan 

[Q1651]** 

[Q1652]** 

[Q1653]** 

16.6 In case of urgent financial needs/ financial emergency, [Q1661] 

what steps you will now adopt 

[Q1662] 

(Multiple Codes Possible) 

[Q1663] 

[1] Sale of asset/Sale of Animals 

[2] Borrow loan from relative/friends 

[3] Borrow loan from Microfinance 

[4] Borrow loan from Commercial Banks 

[5] Borrow from Moneylender/Commission agent 

[6] Reduce Consumption Expenditure 

[7] Pull out children from school 

[8] Search for extra work 

[9] Extra hours in existing occupation 

[10] Have Enough Saving 

[11] Any other _____________________ 


24

16.7 Is there any effect on your overall quality of life [Q167] 

after getting the loans 

[1] Improved 

[2] Deteriorated 

[3] No Change 

16.8 Did you and your family eat your fill [Q168] 

[1] Consumed as much as wanted (all types) 

[2] Consumed as much as wanted (not all types) 

[3] Sometimes felt hunger 

[4] Often felt hunger 

16.9 Do you have more to eat now or before taking loan [Q169] 

[1] Have more to eat now 

[2] Have more to eat in earlier times 

[3] Equal 

16.10 Is your family’s health better now or before taking loan [Q1610] 

[1] Health is better after taking loan 

[2] Health was better earlier 

[3] No difference 

16.11 Did the loan result in sustainable increase in income [Q1611] 

[1] Yes 

[2] No 

[3] No difference 

(Q.17.1 to Q.17.2 for Non-Borrowers) 

17.1 Do you know there is facility in your area to obtain credit [Q1711] 

[1] Yes 

[2] No 


25

17.2 [If Yes in 17.1], Why you did not take the loan [Q172] 

(Q.18.1 to Q.18.5 for New and Non-Borrowers) 

[1] Do not need 

[2] Amount of Installment is high 

[3] Interest is high 

[4] Regular payment is difficult 

[5] Do not know Office Address 

[6] Do not like to borrow 

[7] Do not know procedure 

[8] Amount of loan is very low 

[9] Applied for 

[10] Application Rejected 

[11] Religious Reason 

18.1 In case of urgent financial needs/ financial emergency, [Q1811] 

what steps you will now adopt 

[Q1812] 


[Q1813] 

[1] Sale of asset/Sale of Animals 

[2] Borrow loan from relative/friends 

[3] Borrow loan from Microfinance 

[4] Borrow loan from Commercial Banks 

[5] Borrow from Moneylender/Commission agent 

[6] Reduce Consumption Expenditure 

[7] Pull out children from school 

[8] Search for extra work 

[9] Extra hours in existing occupation 

[10] Have Enough Saving 

[11] Any other _____________________ 

18.2 Is there any effect on your overall quality of life [Q182] 

compared with last year 

[1] Improved 

[2] Deteriorated 

[3] No Change 

18.3 Did you and your family eat your fill [Q183] 

[1] Consumed as much as wanted (all types) 

[2] Consumed as much as wanted (not all types) 

[3] Sometimes felt hunger 

[4] Often felt hunger 


26

18.4 Do you have more to eat now or one year before [Q184] 

[1] Have more to eat now 

[2] Have more to eat in earlier times 

[3] Equal 

18.5 Is your family’s health better now or one year before [Q185] 

[1] Health is better now 

[2] Health was better earlier 

[3] Equal 


27

Section 19 – Only for Female Respondent 

File: ‘WOMEN EMPOWERMENT’ 

IF RESPONDENT IS A SPOUSE OF HOUSEHOLD {19.1 to 19.5) 

19.1 ECONOMIC ASPECTS 

[Score: Yes =1, No =0] 

Indicators: 

Do you take decisions on the aspects of purchase, modification or repair of house 

Do your husband discuss with you when decision on modification/repair of house is made 

Do you take decisions on the purchase or sale of livestock 

Did your husband discuss with you before sale or purchase of livestock 

Do you purchase your dresses for the family 

Do you purchase the utensils for your family 

Do you purchase gold and jewellery for your family 

Do you take decisions on borrowing money 

Do your husband discuss with you on the issues of borrowing money 

Do you spend money you have borrowed 

Do you repay the money you have borrowed 

Do you take decisions on transactions involving household Equipments 

Do you have any debt in your name 

Do your husband discuss with you when he has made the debt 

19.2 INCOME 


Indicators: 

Do you have your own income 

Do you spend it for the family yourselves 

Do you need the permission of your husband to spend your income 

Do you get any part of your family income or husband’s income to your hands regularly 

Do your husband discuss with you when he spends income for the family requirements 

19.3 ASSETS 

Score 

[E1] 

[E1] 

[E1] 

[E1] 

[E1] 

[E1] 

[E1] 

[E1] 

[E1] 

[E10] 

[E10] 

[E12] 

[E13] 

[E14] 

Score 

[INC1] 

[INC2] 

[INC3] 

[INC4] 

[INC5] 


Indicators: 

Do you possess any household asset [Record all assets owned by spouse] 

Do you have cash savings in your own name 

Do you operate Bank account in your name 

Do you pledge, Sell, or exchange any of the above said assets yourself 

Do your need permission from your husband to sell, pledge, exchange any of the assets 

Do you have purchased land in your own name 

Is the house you stay registered in your name 

Is the house you stay registered in your and husband’s name 

Score 

[A1] 

[A2] 

[A3] 

[A4] 

[A5] 

[A6] 

[A7] 

[A8] 


28

19.4 EDUCATION & HEALTH 


Indicators: 

Do you take decisions on the issues of your children’s education 

Do your husband consult with you when he takes decision on the education of children 

Do you think you can decide on how many children you can have 

Do you think you can decide on the spacing between children 

Do you think that you can decide on the treatment of your and your family member illness 

Do you think you can decide on the method of treatment for your family members 

Do you think you can decide on the type of contraceptive to be used 

Do your husband discuss with you on the issues of health aspects of children 

Do you have any choice of food prepared and served in your home 

Are you able to take care of the nutritional requirements of your self, family and children 

Score 

[EH1] 

[EH2] 

[EH3] 

[EH4] 

[EH5] 

[EH6] 

[EH7] 

[EH8] 

[EH9] 

[EH10] 

19.5 SOCIAL ASPECTS 


Indicators: 

Are you free to go out and visit your friends and relatives with out permission 

Do you have the choice of the dresses you wear 

Do your husband impose his religious beliefs on you and make you accept them 

Do you have any association with political parties 

Do you participate in voting and other democratic procedure 

Do your husband impose her political ideas on you and make you accept them 

Do you participate in the meetings of NGO’s programs or in other social events 

Do your husband prevent you from participating in such programs 

Do you take decisions on the marriage of your son/daughter 

Do your husband discuss with you on the issues of the marriage of children and close relatives 

Score 

[S1] 

[S2] 

[S3] 

[S4] 

[S5] 

[S6] 

[S7] 

[S8] 

[S9] 

[S10] 

IF RESPONDENT IS NOT A SPOUSE OF HOUSEHOLD 

19.6 Who in your household decides about children’s education [Q196] 

[1] Head/Father decides alone 

[2] Head/Father in consultation with his/her spouse 

[3] Head/Father in consultation with the woman concerned 

[5] Head and spouse in consultation with the woman concerned 

[6] Head/Father and other male members decide 

[7] Other_____________________ 

19.7 Who in your household decides whether you can seek or [Q197] 

remain in paid employment 






[7] Other _______________ 


29

19.8 Who in your household decides where and when you [Q198] 

should be married 






[7] Other _____________________ 

Ask if she is currently married 

19.9 Who in your family decides whether you can use [Q199] 

birth control methods 

[1] Husband alone 

[2] Woman herself 

[3] Husband & woman jointly 

[4] Mother of woman or husband 

[5] Nobody 

[6] Other ____________________ 

19.10 Who in your family decides whether you [Q1910] 

should have more children 

[1] Husband alone 

[2] Woman herself 

[3] Husband & woman jointly 

[4] Mother of woman or husband 

[5] Nobody 

[6] It is in the hands of God 

[7] Other _________________ 

19.11 Who in your household usually makes decisions about purchase of following 

consumption items 

Food, Clothing and Footwear 

Medical Treatment 

Recreation 

Traveling 

Codes: 

Codes 

[Q19111] 

[Q19112] 

[Q19113] 

[Q19114] 

1. Head/Father decides alone 

2. Head/Father in consultation with his/her spouse 

3. Head/Father in consultation with the woman concerned 

4. Head and spouse in consultation with the woman concerned 

5. Head/Father and other male members decide 

6. Other _________________ 


30

SCHEDULE – 2 

For 

AGRICULTURAL HOUSEHOLDS 


31

Section 20a – Only for Agricultural Households 

File: ‘NON CROP INCOME ’ 

20.1 Respondent’s Occupation Category [OCCUP_AP] 

[OCCUP_AS] 

[1] Landowner 

[2] Owner operator 

[3] Sharecropper 

[4] Daily wages labor 

[5] Land leaseholder 

[6] Livestock 

[7] Service (Government/Private) 

[8] Supplier of Goods 

[9] Business (specify) 

[10] Other ______________ 

20.2 [If Sharecropper] 

Share in agriculture produce (%) 

[SHARE] 

20.3 [Code 1, 2 and 3] 

How many family members actively engaged 

in household farm activity 

[MEMBER] 

20.4 Household’s Monthly Income from Dairy products. 

Milk 

Butter 

Ghee 

Yogurt 

Cheese 

[MILK] 

[BUTTER] 

[GHEE] 

[YOGURT] 

[CHEES] 

20.5 Household’s Monthly Income from poultry products. 

Chicken 

Eggs 

20.6 Household’s Annual Income from Livestock 

products [Kids, hair, wool, skin] 

[P_CHICKS] 

[P_EGGS] 

[L_SALE] 

20.7 Household’s Monthly Non-farm Income [NONFARM] 

[Salaries, Wages, Profit, Business etc.] 

[Also include income of other members of household] 


32

20.8 Agricultural land rental Expense (Leased In) [RENT_EXP] 

20.9 Other Household Regular Annual Receipts [Call Out each Item] 

1 Pension/EOBI [PENSION] 

2 Domestic Remittance [REMIT1] 

3 Foreign Remittance [REMIT2] 

4 Rent – Agriculture (leased land) [RENT_A] 

5. Rent – Non-Agriculture [RENT] 

20.10 Livestock Ownership: 

How many head of the following animals does your household own 

Cows 

[COW] 

Buffaloes 

[BUFFAL] 

Oxen 

[BULLOCK] 

Sheep 

[SHEEP] 

Goats 

[GOATS] 

Donkeys 

[DUNKEY] 

Camels 

[CAMEL] 

Chicken 

[CHICKEN] 

20.11 Monthly Expenditure on Livestock 

[Out-of-pocket cash expenditure, (if in-kind) write estimated cash value. Do 

not include own fodder and labor] 

Commercial feed 

[LIVE_EXP] 

Veterinary services/medicine [VET_EXP] 

20.12 Farm Machinery and Other Assets 

[Business Assets [Call Out each Item] 

Land 

Livestock 

Non-agriculture Machinery 

Hand Saw 

Husking Mill 

Husking Machine 

Axe 

Pushcart 

Other Agriculture Machinery 

Current Value 

[LAND] 

[LIVESTK] 

[MACHINE] 

[SAW] 

[HMILL] 

[HMACHINE] 

[AXE] 

[CART] 

[OTHER1] 


33

Section 20b – Only for Agricultural Households 

File: ‘RABI CROP’ 

Household Receipts and Sale from RABI (2006) 

Table Columns: 

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 

Column – 1 Crop Codes (1-20) [CROP1] 

Column – 2 Crops’ Name 

Wheat 

Barley 

Pulses 

Sunflower 

Other Oil Seeds 

Onion 

Other Vegetables 

Spices 

Barseen / Lucern 

Sugarcane 

Other _______ 

Other ________ 

Other ________ 

Column – 3 Cultivated Area (Acres) [ACRE] 

Column – 4 Per Acre Cost of Seed (Rupees) [SEED] 

Column – 5 Per Acre Cost of Fertilizer (Rupees) [FERT] 

Column – 6 Per Acre Cost of Pesticide (Rupees) [PEST] 

Column – 7 Total Harvest (Quantity - Maund) [OUTPUT] 

Column – 8 Paid in-kind to labor as wages (Maund ) [KIND1] 

Column – 9 Paid as rent (Quantity - Maund) [KIND2] 

Column – 10 Received as Rent from other land (Maund) [KIND3] 

Column – 11 Received in-kind as wages from other land [KIND4] 

Column – 12 Consumed by Household (Maund) 

[HOME] 

Column – 13 Crop Sale (Quantity - Maund) 

[SALE] 

Column – 14 Price /per Maund (Rupees) 

[RATE] 

Column – 15 Total Amount Received (Rupees) 

[AMOUNT] 


34

Section 20c – Only for Agricultural Households 

File: ‘KHARIF CROP’ 

Household Receipts and Sale from last KHARIF (2005) 

Table Columns: 

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 

Column – 1 Crop Codes (21-40) [CROP2] 

Column – 2 Crops’ Name 

Basmati Rice 

Other Rice 

Maize 

Jawar 

Bajra 

Cotton 

Mung 

Other Pulses 

Fodders 

Tomato 

Other Vegetables 

Sugarcane 

Other _____________ 

Other _____________ 

Column – 3 Cultivated Area (Acres) [ACRE] 

Column – 4 Per Acre Cost of Seed (Rupees) [SEED] 

Column – 5 Per Acre Cost of Fertilizer (Rupees) [FERT] 

Column – 6 Per Acre Cost of Pesticide (Rupees) [PEST] 

Column – 7 Total Harvest (Quantity - Maund) [OUTPUT] 

Column – 8 Paid in-kind to labor as wages (Maund ) [KIND1] 

Column – 9 Paid as rent (Quantity - Maund) [KIND2] 

Column – 10 Received as Rent from other land (Maund) [KIND3] 

Column – 11 Received in-kind as wages from other land [KIND4] 

Column – 12 Consumed by Household (Maund) 

[HOME] 

Column – 13 Crop Sale (Quantity - Maund) 

[SALE] 

Column – 14 Price /per Maund (Rupees) 

[RATE] 

Column – 15 Total Amount Received (Rupees) 

[AMOUNT] 


35

Page is left intentionally blank 


36

Enumerator’s Observations /Remarks 

Name of Enumerator 

____________________________________ 

Signature of Enumerator _____________________________________ 

Date of Interview 

_______________ 

Time of Interview From _____________ To ____________ 

First Contact on [Date] 

Second Contact on [Date] 

______________ 

______________ 

Name and Signature of Supervisor 

_______________________ 


37

Appendix: Additional Codes 

___________________________________ 

Institution: [INSTITUT] 

OPP 1 

SAFWCO 2 

AKHUWAT 3 

ASSASA 4 

KASHF 5 

NRSP 6 

UPAP 7 

____________________________________ 

District: [DISTRICT] 

KARACHI 1 

SANGHAR 2 

MATIARI 3 

LAHORE 4 

CHAKWAL 5 

GUJER KHAN 6 

BAHAWALPUR 7 

RAHIMYAR KHAN 8 

RAWALPINDI 9 

ISLAMABAD 10 

KASUR 11 

GUJRANWALA 12 

___________________________________ 


38

__________________________________________________ 

City: [CITY] 

Karachi 1 

Shahdah pur (urban) 2 

Bhit shah 3 

Lahore 4 

Chakwal 5 

Bahawalpur (hasilpur) 6 

Rahimyar khan (bhundi) 7 

Rawalpindi (dhok ratta) 8 

Islamabad (muslim colony) 9 

Gujer khan (doultala) 10 

Gujranwala 11 

Raiwind 12 

Kot radha kishan 13 

Kasur 14 

Kamoky 15 

Shahdadpur rural (1) = lundo 21 

Shahdadpur rural (2) = maqsood rind 22 

Shahdadpur rural (3) = sarhari 23 

Bhit shah rural (uderolal) 31 

__________________________________________________ 

Tehsil: [TEHSIL] 

Karachi 1 

Lahore 4 

Kamoky 10 

Kasur 11 

Gujranwala 12 

Shahdadpur 51 

Hala 52 

Rahimyar Khan 54 

Sadiqabad 55 

Matiari 56 

Hasilpur 57 

Chakwal 58 

Talaganj 59 

Kallan Kahar 60 

Rawalpindi 81 

Gujer Khan 82 

Islamabad 83 

____________________________________ 


39

_________________________________________________________ 

Area: [LOCALITY] 

MFI Branch Area Codes 

Township 

Township 1 

Kot Lakhpat 2 

Data Nagar 1 

Tezab Ahata 2 

Karim Park 3 

AKHUWAT 

Badami Bagh 4 

Data Darbar 

Khokhar Road 5 

Kasoor Pura 6 

Bilal Ganj 7 

Malipura 8 

Yadgar Yadgar 1 

Kamonky Kamonky 2 

ASSASA Gujranwala Gujranwala 3 

Kot Radha Kishan Kot Radha Kishan 4 

Raiwind Raiwind 5 

Karim Park Karim Park 1 

KASHF Kahana Kahana 2 

Kasoor Kasoor 3 

Noorani Basti Noorani Basti 1 

UPAP 

Bazarta Line Bazarta Line 2 

Rawalpindi Dhok Ratta 12 

Islamabad Muslim Colony 13 

Urban UC – 4 1 

Shahdadpur Rural UC Lundo 2 

SAFWCO 

Rural UC Sarhari 3 

Matiari 

UC Bhit Shah 4 

UC Uderilal 5 

Chakwal Chakwal Rural 1 

NRSP Gujar Khan Doltala 2 

Rahim Yar Khan Bhundi 3 

Bahawalpur Hasilpur 4 

OPP 

Orangi Orangi 1 

Baldia Town Baldia Town 2 


40

____________________________________________________ 

Branch: [BRANCH] 

AKHUWAT – Township 11 

AKHUWAT – Data Darbar 12 

ASASAH – Yadgar 13 

ASASAH – Kamonky 14 

ASASAH – Gujranwala 15 

ASASAH – Kot Radha Kishan 16 

ASASAH – Raiwind 17 

KASHF – Karim Park 18 

KASHF –Kahana 19 

KASHF –Kasoor 20 

UPAP – Noorani Basti 21 

UPAP – Bazarta Line 22 

OPP – Orangi 23 

SAFWCO – Shahdadpur Urban 51 

SAFWCO – Shahdahpur Rural 52 

SAFWCO – Bhit Shah 53 

UPAP Dhok Ratta 54 

UPAP MuslimColony 55 

NRSP Chakwal Rural 56 

NRSP Daultala 57 

NRSP Bhundi 58 

NRSP Hasilpur 59 

____________________________________________________ 


41

______________________________________________ 

Q – 1.8 : [TRAIN1, TRAIN2 TRAIN3] 

Lathe machine 

Watch repair 

Embroidery 

Auto Workshop 

Thread Dying 

Welding 

Electrician 

Tailor 

Computer Repairing 

Electric Plating 

Drafting 

Garments Manufacturing 

Driving 

Embroidery 

Auto Parts 

Cobblers 

Hakim 

Computer Hardwear 

Refrigeration 

Nickel Polish 

OT Technician 

Photography 

Textile Designing 

Auto Electrician 

Wood Trading 

Loom 

Medical shop 

Motor Winding 

Computer Basics 

Mechanical Training 

Typing 

Engineering 

Show Making 

Pipe Fitting 

Mobile Phone Repairing 

Nursing 

Handy Crafts 

Cycle Repair 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

31 

32 

33 

34 

35 

36 

37 

38 


42

______________________________________________ 

Q – 16.5 : [Q1651, Q1652, Q1653] 

No Problem 

Collateral 

0 

1 

Pictures Requirement 2 

Delay in Payment 3 

Requirement of Utility Bill 4 

Complicated procedure 5 

Staff Bad behavior 6 

Too many meetings 7 

Too many documentation 8 

Too many visits 9 

Group Making 10 

____________________________________________________ 

Q- 1.9, Q-1.10, Q-11 [OCCUP_M, OCCUP_S, BTYPE] 

Business (Retail Shops with fixed outlet) 

Business (Vendor with no fixed outlet) 

Goods Supplier (No fixed or moving objects) 

Personal Community Service providers 

(Barber, beauty parlor, photographer, tailoring, education etc.) 

Technical Service Provider 

(Mechanics, plumber, electrician, TV repair, welding shops etc.) 

Cottage Industry (shoe making, pot making, roti making etc.) 

Transport services (rickshaw, donkey cart, Suzuki van, tanga etc.) 

Agriculture – Crop Production 

Livestock Management 

Service 

701 

702 

703 

704 

705 

706 

707 

708 

709 

710 

_______________________________________________________ 


43

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