ANALYSIS OF CRITICAL FACTORS OF MICROFINANCE INSTITUTIONS OF PAKISTAN

Abstract

This article is about the performance of Microfinance Institutions - MFIs of Pakistan. In this article the types of MFIs operating is Pakistan is discussed with their details i.e. Microfinance Banks, Rural Support Programs and NGOs. Some other organizations are also involved in micro financing but their percentage is very low. It is found that Rural Support Programs RSPs are not totally involved in microfinance but have a large chunk of funds for microfinance. Micro loans are given for various purposes including starting a new business. The real theme of microcredit is to give money to a poor person to start a small or micro business and increase his family income but micro loans are often used for many other purposes such as paying another expensive loan, paying for medical expenses of bread earner of the family, marriages, construction etc. In this research work the researcher has tried to analyze the performance of MFIs of Pakistan and to find out those factors which contribute in their effectiveness. Two approaches of microfinance i.e. Institutionists Approach and Welfarists Approach are discussed. To analyze the performance of MFIs both approaches are considered i.e. Institutionists and Welfarists. Seventeen parameters are selected, many of these are financial ratios and these are divided into four groups i.e. sustainability, transparency, outreach and efficiency. Some ratios/figures of each area of these MFIs are taken in the data and analysis is performed to find out that which ones are contributing more or less. This research can be helpful for the MFIs which want to improve their performance and check their areas of significance for further improvement and development considering their approach of alleviating poverty from the society.