Give a small loan to a woman, a family will eat her whole life

PUBLISHED ON January 02, 2022


There is a quote attribute to rock star activist Bono from U2. “Give a man a fish, he will eat a day,” he said. “Give a microcredit to a woman, she, her husband, her children and her extended family will eat their whole life. Changing post-pandemic dynamics and rising inflation and unemployment have forced people around the world to rethink how to make a living. Where the idea of ​​working women was once despised by many in Pakistani society, the aforementioned challenges have made it essential for women to contribute financially to their households.

How microfinance works

In recent years, the concept of microfinance has become a privileged means of offering social and economic mobility to people from a low income bracket. By helping them start small businesses, microfinance enables these individuals and families to work towards financial self-sufficiency.

The microfinance system relies on lending small amounts of money that can be used to start a small business. Banks have a system in place where they hire a loan officer in designated areas where they have branches. It is the duty of these loan officers to find clients who need the money to start a business or a business. When finding potential customers, the loan officer checks their file, gathers the necessary documentation, and provides advice that can range from using an ATM to explaining the loan repayment policy. To facilitate loan repayment, the agent is also responsible for regularly reminding clients of the due date of their Equal Monthly Payment (EMI).

While microfinance provides easier access to loans, these programs are not unregulated. Loan amounts, for example, are limited to Rs 75,000 without surety beyond a CNIC and affidavit. “Banks also finance businesses over Rs 75,000, but in this case we keep anything of value as collateral, be it gold, title deeds or any other asset,” Mr. * explained. , technical consultant in a microfinance bank. He explained that microfinance, as the word suggests, finances at a small level with a smaller amount to help people start their businesses. “This is mainly someone who wants to open a small sewing shop and can easily buy two machines for Rs50,000. This amount can give them an initial boost and they can easily pay off the amount in a year. “

Each loan is checked and planned separately and the main target is students and women trying to be entrepreneurs or men trying to start a small business. “The amount that the bank finances is enough to buy machinery or second-hand items to start a facility and once the customer has paid back the full amount, they can apply for more loans to expand their business,” explained Mr.

Return policies

Microfinance not only works for individual loans, but also provides loans to groups. For example, four to five people may take a larger amount together to start a business, but one of them forgo repaying the amount that the other partners have to pay. “Before releasing the money, the bank makes a monthly return plan, the penalty the customer will incur if they don’t return on time, and checks their records and business models,” Mr. Si said. does not return on time and the payment is late after 30 days, the system automatically marks the customer as overdue (OD) and the charge on the total amount keeps increasing. “When the last payment arrives and the customer hasn’t returned until then, the customer is marked as the default account. “

To make this easy and to make the system work, the loan officer is the one responsible because he works in the field and he knows the client on a personal level. But even then, if the customer’s business does not work out and he cannot repay the amount, the bank asks for insurance. “All loan amounts are insured and the bank charges the customer for them during processing in the first place,” Mr.

“The idea was just to help people start their businesses. Many people take loans, buy cycles, and start selling baked goods, toys, or even snacks. The women mainly apply for loans in order to open a grocery store in their home or a small living room with used chairs and machinery, which costs them around 25,000 rupees, ”he added.

Small loan guarantee

Any loan amount that a customer requests that exceeds Rs 75,000 needs some security because the bank needs something valuable to compensate if the customer does not repay the loan amount. “We accept anything of value, for example, property papers, gold or whatever,” said Fahad Aleem, director of a private bank. “People even offer buffaloes or other animals as collateral when they need a loan to expand their business. With such assets, our teams will mark the animals – it’s like a stamp tattoo – so that they can be kept as collateral for money. The market knows what these stamps are, so these animals are not sold anywhere in the country, ”Aleem explained. Likewise, banks have their own stationary silversmiths to verify gold. A representative of the bank accompanies the client to the goldsmith who checks, weighs and assigns a value to the gold. “The bank funds only 70% of the observed value of gold, as gold prices can fluctuate. But in all of these cases, the loans are still insured with the possibility of livestock dying or any natural disaster happening on the property, ”Aleem added.

To prevent people fraud, all data according to the regulations of State Bank of Pakistan is centralized through the Credit Information Bureau, which is a must-see SOP that every bank should verify before sanctioning a loan. “Anyone with a loan in their name will be on CIB’s list with details of the category of loan was taken out, any default payments and the loan amount remaining to be paid,” Aleem said. He also said that if someone is not in the defaults category and has paid their loan on time, the banks will usually give them another loan. “A person can have several loans in several categories, but with microfinance, the main objective is the income of the client and the loans are only sanctioned according to their income”, he added.


People keep dreaming of businesses and trying to help their family earn something and contribute to their household, but with limited resources, it is difficult for someone with a total income of less than 30,000, one of these stories is that of Nighat Parveen, a mother of four. and her husband is a driver for a transport company. “My husband earns Rs 30,000 but with Covid he was unemployed because everything was closed. I know how to sew, but I had an old sewing machine my mom gave me at the wedding, ”Parveen said. She added that she learned about microfinance from her neighbor, so she went to the bank near her home in Korangi. “With a little documentation and verification, a loan of Rs 60,000 was sanctioned for me using only my CNIC. I used it to buy two used sewing machines and started sewing.

For Parveen, it was difficult at first to manage household chores and work. “But now my oldest daughter and I are in charge of everything,” she said. Parveen paid an installment of around Rs 6,000 per month, but her shop is now established and she plans to expand it further as she charges a reasonable amount than the rest of the professional tailors in her area. “That’s why everyone from the town comes to me to sew clothes.”

Another story of will and fearlessness is that of Sakina Zulfiqar, the 36-year-old woman with little to no support, who has proven that running a business on her own is not beyond her reach. Zulfiqar is an established entrepreneur who dreams of continuing to grow.

She was a stay-at-home mom, with her husband providing financial support, but she was eager to start her own business and supplement her family’s income as part of her quest for empowerment. “I started a small school with only three rooms but due to a lack of investment funding in the early years the growth was modest,” she said. “I didn’t want the school to close for financial reasons. I heard about microfinance loans around the same time, which were to help small businesses invest in their assets.

So she asked for a small loan and was able to improve her school. “Initially, I used the loan to move to a bigger structure with more classes, which also helped enroll more students and provide classes until enrollment,” he said. she explained, adding that the ambition to build, create and learn outweighed her apprehension. Zulfiqar not only expanded his school’s infrastructure, but also added more facilities with the help of loans which ultimately attracted more students and helped his business flourish. “Today our school has over 350 students and offers classes from kindergarten to middle school,” she said. His school is considered a high quality educational institution in the community.

Non-government assistance

Besides banks, there are many other programs run by NGOs to help women feel empowered and start their own businesses, one of these programs is run by Eesha Sheikh, which is the next Forbes 1000. The program operates under the name of Chaap which is an interest-free fundraising scheme where women can submit their ideas and business plans and organizations then fund them. “Our goal is to fund women with ideas to start a business but they have no money to invest, so we provide funding of around one million rupees for a period of one year and we select 5 to 7 ideas, ”Sheikh said, adding that the amount we fund we don’t demand in return because the idea is just to help and furthermore we are not registered as any fundraising company, so the idea is to raise women who are educated, have the spark to prove themselves with good business plans, but the only obstacle is funding.

(* Some names have been changed to protect identities)

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