Microfinance initiatives introduced around 1995, are now considered an integral part of a country’s financial system. But as these initiatives have gained popularity, the question regarding their sustainability and outreach has also become a thought provoking question. In Pakistan, the increasing return on equity from -78.4 to -1.1% during 2005-06 and increasing number of borrowers’ especially females are an evidence of a flourishing MFI system. But the question that will they ever reach sustainability still remains the same. Though the trends are positive but the stream of donations and numbers of cash aids are also staggering. This paper tries to analyze the growth in sustainability and outreach of MFI’s overtime with a simultaneous review of the social and political situations faced by Pakistan. A link socio-political condition and MFI’s financial reports has been built. This linkage is then further shown to find a refined version of the results and show that despite the fragile legal framework, no political stability and natural disasters in the past, MFI’s have shown consistent progress. Hence, they deserve to be further explored and reviewed for improvement in this sector leading to ultimate targets.

1. Microfinance institutes in Pakistan: Outreach and Financial Sustainability Analysis through a Socio-Political Lens

3. Current inflation in context of financial sustainability.

5. Background Of Microfinance Institutions

6. Trends Of Outreach The total number of borrowers from 23 different MFI’s reaches up to a total of almost 1 million by 2006 which makes the aim to reach 3 million by 2010 unrealistic On average in 2006 61% of the loan receivers were from rural areas, while women borrowers accounted for 50.6% of the total borrowers in 2007

7. Trends Of Sustainability We can observe that the profits observed in recent years are fairly handsome. With the yield on gross portfolio in nominal terms as high as 40% for ASA Pakistan and 31.78% for KASHF bank, the overall growth in profits is a great achievement. The debt to equity ratio though high for some banks is even negative or negligible for others. For example KASHF bank has a ratio of 1.27 while others like NMFB with a debt to equity ratio of only 0.47.

8. Socio-Political situation analysis for Future prospects of MFI’s Sources::http://essay.utwente.nl/59295/1/scriptie_S_Ahmad.pdf http://essay.utwente.nl/59295/1/scriptie_S_Ahmad.pdf

10. Return on equity not only sustained rather grew to an average of -1.1% from an average of -78.4% during the earthquake disaster.

11. The Return on Assets and Return on Equity averaged and overall showed great improvements.

12. Similarly in 2007 the death of Benazir Bhutto caused political instability which increased violence in the country. Since turmoil began at the beginning of the year, this affected the flow of funds to MFI’s by the donor agencies as well. But in fact data shows that the Return on equity overall remained negative but sustained and rather improved from 2006. E.g. KASHF bank showed financial revenue/assets grew from 22.3%to 26.83%. Khushhali bank showed financial revenue/assets grew from10.56% to 11.48%.

13. KASHF showed a magnanimous increase in ROE i.e. from 16.32% to 26.15%.

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