Immoral Appearance of MFI's in Potential Arcades due to Non-Productive Loans

Muhammad Ahmed Mazher (Doctor of Business Administration) Email: mian.mazher@gmail.com

There are some key immoralities that I have originated during the field investigation about different MFI's in Pakistan (Kasur & Lahore Zones). These issues are whistling huge obstacles in regards of
poverty mitigation and intensification in Pakistan microfinance sector.

PMN (Pakistan Microfinance Network), State Bank of Pakistan (SBP) and others NGO's/MFI's are dynamically annoying to resolve these destructions but still not thrive entirely.

It is surveyed that, deprived community getting the credit from different MFI's for the growth of their businesses, but they are using these loans or credits for their individual private exercises like,
educational fees of their children, medical expenses, home maintenance,
for paying their loans (the amount which is borrow from their
connections or restricted money lenders) etc.

As per MFI's aim, microcredit facilities are for poor people with indemnity that it must be used in the expansion or strengthening of their businesses. Even all banks/institutions/foundations loans officers
are familiar very well with this attitude of poor peoples to take
advantage of MFI's money for their individual desires, loan officer and
even branch managers always endorse and disburse the amount with this
pledge only that people will pay the loans installments in time to
attain for their assigned monthly loans targets. Even the loan officers
or any MFI's branch manager never like to confirm whether the disbursed
amount is using for productive or non-productive determinations.

Client side (particularly in women), borrow the money from the MFI's for business intentions and these women are giving this money to other deprived women more than banks interest rates (it should be clear that
already microfinance banks loans rate of interest are too much high),
due to illiteracy and lack of information about the MFI's and their loan
programs. All these women involved in this diversion are utilizing
microcredit amenities for non-productive purposes. As per interviewed by
different MFI's officers, about 80% to 85% MFI's clients are using
credit money in non-productive habits. It shows that mainstream of the
poor community just getting the loans not for any business expansion or
for new business setup; they are getting the loans only for their
individual desires fulfillment.

To eradicate this problem, approach should be only that MFI's delivers assets base facilities (Assets Based Loans-Islamic Lending Methodology) to the pitiable community. In this way any MFI can put the
check & balance on the creditors as well as there will be no
recovery problems and can also analysis the problems which poor are
facing during the business growth. Education, medical facility and some
others form of social help should be also part of these asset based
loans. There should be also arrangement for loan product consciousness
to the targeted communities.