Located in South Asia, Pakistan is one of the most populous countries in the world, with 194 million inhabitants. Although Pakistan faces significant economic, governance and security challenges, it has made substantial progress in reducing poverty during the last two decades. Rapid urbanization and population growth, however, are putting a strain on the quality of life in urban areas, especially in terms of housing and clean water.
FINCA entered Pakistan in 2013 by purchasing Kashf Bank, a fully-licensed financial institution with an extensive network of branches and a fast-growing customer base. Since then, FINCA Pakistan has been a leading implementer of FINCA's research program and is able to report on a full range of social indicators. With regular monitoring, we have observed that FINCA Pakistan is significantly expanding its outreach to rural areas, providing services to customers who face entrenched barriers to financial inclusion and more challenging living conditions.
Reaching the Financially Excluded
Pakistan has one of the highest rates of financial exclusion to be found anywhere. Over 90% of adults are shut out from formal financial services. FINCA is expanding rapidly in the country to fill this gap.
When FINCA entered Pakistan by purchasing Kashf Bank, most of its customers were located in densely-populated urban areas. Since then, ongoing expansion in agricultural and livestock loans is shifting this balance towards more rural communities. This trend will hopefully gather strength as FINCA Pakistan rolls-out its mobile banking platform.
Reaching women poses a challenge for FINCA Pakistan. This is partly the legacy of Kashf Bank, whose clientele was predominantly male. More broadly, it reflects local traditions and circumstances that discourage women's participation in activities outside the home. As it grows and diversifies its client base, FINCA Pakistan will continue to experiment with strategies to ensure that women are able to participate fully in the benefits of an inclusive financial institution.
Quality of Life
Virtually all of our borrowers in Pakistan enjoy electricity in their homes. This may change as FINCA acquires more rural customers. As we have observed in other FINCA locations, however, access to clean water is a problem. A third of our borrowers live in homes with no running water, which poses difficulties for sanitation and food preparation.
The other, longer-term issue for our clients' quality of life is the high incidence of breadwinners who have less than a secondary education -- a problem that is not unique to FINCA customers This issue is equally common in neighboring Afghanistan, and it signals the difficulties that many of our clients face in improving their family's quality of life. As FINCA's outreach deepens in rural areas, we have an increasing share of households that lack access to the internet. Along with low education, being cut-off from the internet isolates these families from information and other resources that would enable them to improve their quality of life.
Income & Employment
Income & Employment
Our borrowers in Pakistan earn an average profit of $3,225 annually, which is about half the amount earned by their peers in Eurasia. Nonetheless, they maintain a high rate of employment in their businesses. Each FINCA-funded enterprise in Pakistan employs 2.66 people (including the owner), second only to Malawi among the countries we've surveyed. This constitutes roughly 300,000 individuals, about a third of whom are in the services sector. This demonstrates a wide circle of lives touched directly or indirectly by FINCA.
While the total number of jobs in FINCA-funded enterprises is significant, the direct employment impact of FINCA's loans is not particularly high in Pakistan. Our borrowers estimate that the loan from FINCA increased the employment in their businesses by around 9%. Job-creation amongst our Pakistani clients is highest in manufacturing and services. Wages in Pakistan, unfortunately, are quite low. Only a third of wages earned by employees are above the national poverty line.
These findings reflect economic and labor market conditions that are well beyond FINCA's control. They may indicate, however, that the most important contribution that FINCA can make in Pakistan is to continue pushing back the frontier of financial exclusion, with a determined focus on reaching rural areas. We can also focus on helping our clients earn more profits in their businesses, cognizant that the secondary employment effects are likely to be marginal.
The economic and social roles of women in Pakistan are shaped by powerful cultural norms. In that context, FINCA's mission to empower women faces many obstacles, but it also gains a unique focus. A long-term commitment to women's participation is required, along with specific strategies that identify and meet their needs.
In particular, we observe a very close relationship between the percentage of female borrowers, the incidence of single-parent (female-headed) households, and the rate of female business ownership. Connecting these data points, we see that the women who do come to FINCA are very likely to be single parents running their own businesses.
Given these conditions, a starting point for FINCA is to ensure that its services are fully inclusive and accessible to women, especially single mothers, though they are few. Further research can illuminate their specific product needs and inform the development of tactics to attract them as customers.
Attaining Business and Personal Goals
Our customers in Pakistan are firmly focused on growing their businesses. Almost 3 out of 4 borrowers cite this as their main goal, more than anywhere else we've surveyed.
About 14% of borrowers are using FINCA’s loans for routine activities and expenses, and did not cite a specific goal. Starting a business, paying down debts, and improving their homes are each mentioned by 5% or less of borrowers.
On the whole, FINCA's borrowers are very confident that the loan from FINCA was (or will be) instrumental in achieving their goals, especially when they relate to business growth, buying an asset or improving their home. By continually diversifying its product range in response to customers' needs, FINCA can ensure that it continues to be relevant for the goals that are set by its clients.
Poverty, Economic Sectors, Jobs and Profits
FINCA Loan Sectors
Most of the loans in Pakistan are for businesses in the trade, services, crops and livestock industries.
Profit and Profit/Sales Ratio by Sector
FINCA tracks the average annual profit in USD for our clients, as well as their average profit/sales ratio by sector. Across our borrowers the average annual profit is $3,255 USD. The average profit/sales ratio is 22.2%. The sectors that perform above average when it comes to profit/sales ratio are both crops and livestock.
Jobs by Sector Due to FINCA Loan
A total of 24,633 jobs have been created in Pakistan as a direct result of FINCA loans. Nearly 300,000 people are employed by the enterprises that FINCA has provided loans to.
The numbers found in this section represent the total number of jobs in each sector created as a direct result of a FINCA loan, each year. These numbers are also provided by sector as a percentage of the total jobs created in Pakistan directly resulting from FINCA loans.