Pakistan

After a gap of six years, banks’ financing to small and medium enterprises rose in FY14 in Pakistan. But the number of borrowers declined, indicating that additional lending didn’t contribute to financial inclusion.

Due to the shrinking job market, the only viable alternate left for the youth is to start their own businesses — and look to become entrepreneurs. Of the many challenges faced by a budding entrepreneur, access to finance is, obviously, the most crucial.
Funding is critical to starting a business — from renting a premise, hiring staff, funding office equipment, start-up capital, construction costs among others. All of these require massive amounts of capital.

The Women’s Finance Hub (part of the SME Finance Forum) recently hosted a conversation about the World Bank Group’s WomenX program, as part of the Financing Women Entrepreneurs for Growth series. The event was moderated by Sebastien A-Molineus, Director, World Bank, with panelists Mehnaz Safavian, Program Lead, Sarah Iqbal, Program Coordinator, Women Business and the Law, and Andrew McCartney, Senior SME Banking Specialist, IFC. 

Globally, women-owned enterprises are steadily growing, contributing to household incomes and growth of national economies. However, women entrepreneurs continue to face time, human, physical, and social constraints that limit their ability to grow their businesses. Recognizing the unique challenges of female entrepreneurs, the WomenX program facilitates linkages between financial institutions and women entrepreneurs seeking necessary capital for business growth. The program is aimed at empowering women by improving their entrepreneurial ecosystem. Presently there are two country pilots ongoing in Pakistan and Nigeria. The program aims to unleash the power of women entrepreneurs by:

• Removing legal restrictions to level the playing field 
• Strengthening women’s managerial capability to increase productivity, grow enterprises and encourage sector switches
• Ensuring that women can tap into networks and gain access to markets
• Building women’s confidence through mentorship 
• Linking women to banks and sources of capital for growth and expansion.

Globally there are 865 million women who have the potential to contribute more fully to the economy, with 94% of them in developing countries. In the absence of women entrepreneurs, output per worker is 12% lower. Pakistan has the lowest rate of female entrepreneurship in the world. Only 1% of women in Pakistan are entrepreneurs compared to 21% of men. To date, despite the compelling case made for women’s participation in the global economy, women entrepreneurs are greatly outnumbered by their male counterparts, and they continue to face gender-specific obstacles that vary by country and region (in addition to the challenges faced by all SMEs in developing countries). 

Access to finance remains the top concern for women entrepreneurs. About 5.3 million to 6.6 million women-owned SMEs in developing countries are estimated to be unserved or underserved by financial institutions. In Pakistan a mere 3% of the female population has access to an account at a formal financial institution. The experience of WomenX indicates a clear need for financial and non-financial solutions for women entrepreneurs. On the financial side, banks require training to ensure they are ready with the right policies, processes, skills and products to serve the financing needs of women. On the advisory side, there is a clear need for women entrepreneurship training in markets like Pakistan. Such training needs to be scalable and sustainable, but also requires one or more integral banking partners to ensure the linkage with access to finance is made.

WEBINAR MATERIALS

WomenX Overview - Mehnaz Safavian

WomenX in Pakistan - Sarah Iqbal

WomenX and Access to Finance in Pakistan - Andrew McCartney

Video Recording

About the author: Farah Siddique is a Consultant at the SME Finance Forum.

• Traditionally been a disconnect between training programs for women and their subsequent access to finance. Research indicates
little improvement often post-training in terms of access to finance.

• On the demand side there are a number of factors which in Pakistan act as major barriers for women that go beyond needing training.

• On the supply side, simple referral mechanisms targeting banks do not work effectively, with training programs and the financial service industry often poorly positioned to support women.

Women X  is a World Bank program that unleashes the exponential power of women entrepreneurs . In Pakistan this program is active at different levels:

• Business education
• Mentoring
• Networking
• Business Clinics
• Public Campaign

Pakistan’s population is of over 180 million and women comprising half of it, and so we cannot envisage development that is sustainable without mainstreaming women into the process of economic growth.

The Wasil Foundation, a Pakistan-based microfinance institution, won the Islamic Microfinance Challenge, a global contest to identify innovative Sharia-compliant financial products. Wasil won the $100,000 grant award for its package of products aimed specifically at smallholder farmers. The theme of the Islamic Microfinance Challenge was “Beyond Murabaha.” It received entries from microfinance institutions in 11 countries. The Challenge is co-sponsored by the Islamic Development Bank, Al Baraka Banking and Triple Jump.

Bank Alfalah and the International Finance Corporation (IFC) have launched the small and medium enterprises (SMEs) Toolkit in Pakistan. It is an online solutions platform, which provides value-added resources, including business advice, local and global best practices and opportunities, to both existing and potential SMEs to grow and improve their businesses. This launch is part of Bank Alfalah and IFC’s effort to strengthen the SME sector in Pakistan through holistic solutions that provide access to more than just financial services.

State Bank of Pakistan (SBP) following its regulatory policy framework for development of SMEs sector has introduced some special incentives for both banks and SME exporters to enhance their share under export finance scheme (EFS)