Staff Reporter Karachi
The Covid-19 pandemic has presented itself as a crisis, which, for the first time, has affected both global capital markets and local economies down to the poorest neighborhoods.
With a sharp drop in economic activity around the world over the course of 2020, Corona Virus pandemic impacted the livelihoods of millions in significant ways.
Talking about the banking industry, the pandemic and lockdown has had a major negative impact on the microfinance sector.
As a form of financing that provides small amounts of money to typically very poor fledgling entrepreneurs to encourage self-sufficiency, microfinance in Pakistan has played an instrumental role in financially empowering the economically disadvantaged segment of society and alleviating poverty.
Pakistan’s microfinance industry serves about 7.3 million poor households and micro-enterprises with a gross loan portfolio of over Rs300 billion.
With the Covid-19 outbreak and the subsequent lockdown, the ability of micro-lenders to conduct normal operations, especially to collect repayments, was interrupted. The typical low-income microcredit borrower also suffered as a result.
Pakistan Microfinance Network (PMN) conducted a survey on the impact of the Covid-19 outbreak on borrowers.
According to the survey, 82pc of the respondents said their businesses had been negatively affected in the month of May.
In June, however, the industry began recovering from the effects of the health crisis and started disbursing new credit
However, in the face of a major health emergency that swept across the country, it merits praise that Pakistan’s microfinance institutes showed greater resilience than expected and weathered the storm by shifting microfinance to a digital model.
Pakistan’s largest microfinance bank, Khhushali Microfinance Bank, continued to serve customers during the pandemic peak through online channels.
It introduced new delivery channels, i.e. Internet & mobile banking, and easier and faster cheque clearance services from customers’ doorsteps.