Microcredits in Pakistan: a small contribution with a big impact

A microcredit of approximately EUR 200 can improve the life of a Pakistani woman—not just financially, but also socially. Three women tell us how the OMV supported microcredit program of the Pakistani Kashf Foundation helped out.

Safiya Khatoon’s motorcycle is fully loaded with papad, the typical fried Pakistani crackers that can be bought almost everywhere here. And like practically every other day, Safiya Khatoon’s husband hops on his wife’s motorbike to make sure that the papads make it to the shops.

“My husband used to deliver the goods on bike. That was very time consuming. So the reason I took out a microloan was actually the motorcycle,” says Safiya Khatoon. The 45-year-old has lived and worked in Khairpur city of Sindh Province in northern Pakistan since she was born. Her workday is eight hours long: She dries the uncooked papads in the sun, fries them and packs them up. Her husband, who runs a small grocery store, sometimes helps her and takes care of the delivery. The work sounds exhausting, but Safiya Khatoon is happy.

With the help of a microcredit, we can pay for our daughters’ weddings, guarantee their education, and live comfortably ourselves.
Safiya Khatoon, Businesswomen in Khairpur, Pakistan

Kashf Foundation: Long-term support

However, several organizational steps are necessary before the women receive the financial support: The Pakistani Wealth Management Company for low-income households, the Kashf Foundation, one of the largest providers of microcredits in Pakistan, is in charge of issuing the loans there. Therefore, Kashf is the perfect cooperation partner. At the initiative of OMV Pakistan, Kashf expanded its model to the areas in which OMV is working. Currently, two branches of Kashf are established and run with OMV’s support and will be self-sustainable after two years. The Kashf Foundation contacts each woman interested in a loan directly. These women are then visited at home or at work to assess their creditworthiness. After the loan is granted, regular contact with the client is closely maintained by Kashf employees. They visit the clients once a month or so to get their feedback.

Microcredits bring opportunity

Asma Bano Mangrio, Community Relations Assistant at OMV Pakistan, also stays in contact with the borrowers. The goal of the initiative is to empower women who live around the areas in which OMV is working. What’s more, they are given financial advice which should help them to spend the money sensibly.

The local population has high expectations from us when it comes to services and jobs. Therefore we are trying to offer women economic opportunities through microcredits so they can increase their family income.
Asma Bano Mangrio, Community Relations Assistant at OMV Pakistan

Even though the financial contribution from a loan like this might seem small for some people - an average of about EUR 200 per month - it can increase the family income of the borrowers as well as improve the social status of women in the family and in the society.

For example, 37-year-old Pathani Marwari weaves and sews bed linens, scarves, and rillis, the colorful Pakistani patchwork quilts: “People appreciate my work and particularly my ability to process orders in the shortest possible time. Everyone thinks it’s great that I contribute to the family income”.

Financial security through hard work and microcredits

More than 1,700 women have benefited from the program since December 2014. Most of the borrowers work in the cottage industry. Like Safiya Khatoon in Khairpur, Pathani Marwari works from home and her daughter helps with production. “My husband’s income wasn’t enough anymore, so I took out a microcredit and expanded my business. At the time it was more of a necessity than a wish,” Pathani explains. “But now I’m happy that I’m no longer dependent on my husband’s income. I feel more confident and empowered.” The financial situation for the family of eight has also improved considerably: “We pay for the daily expenses with my income. We save my husband’s income for larger expenses in the future, like a better place to live.”

Microcredits help to stand on their own feet

Many of the women have little to no formal education—like Munawar Khatoon, the wife of a daily wage laborer. She never had the opportunity to go to school, says the 30-year-old: “My family was poor and there was no school nearby”. It was only much later, when Munawar Khatoon took out a microcredit to expand her candy store into a grocery store, that she was able to add to the family income. Like so many women in Pakistan, Munawar Khatoon married young and has several children: “There were times when there was nothing to eat for our six children. That’s what motivated me to take out a microcredit”. Her husband, friends, and neighbors are supportive of her work, says Munawar Khatoon. But some of her husband’s relatives are critical: “I work outside and not in our house. That is not very much appreciated upon here.” Nevertheless, she advised other women to take out a microcredit so they can stand on their own two feet: “I’m really pleased that I have managed to convince and encourage some of them. A few of them have really gone for it and taken out a credit already”.

The microcredit initiative of OMV Pakistan

• The program is part of the OMV Women’s Empowerment Program (WEP) in Pakistan within the frame of OMV sustainability strategy Resourcefulness.
• 1,736 women took out microcredits between December 2014 and September 2015.
• A total of about EUR 0.35 mn in credits have been disbursed by the Kashf Foundation in cooperation with OMV until September 2015.
• All borrowers and their interested family members received basic financial literacy training, 515 women clients of the total received further in-depth financial education training by the Kashf Foundation.