Does Microfinance Enhance Gender Equality in Access to Finance in Pakistan?

Does Microfinance Enhance Gender Equality in Access to Finance in Pakistan?

Millions of donor dollars continue to be poured into microfinance interventions despite mounting evidence that microfinance is not able to improve development indicators, gender inequality being one of them. In a new paper published in Feminist Economics (2016), Ghazal M. Zulfiqar questions the wisdom of continued investment in microfinance when there are other, more direct ways available to tackle gender disparity.

Pakistan’s microfinance sector is divided between microfinance institutions (MFIs), that employ the NGO-model, and microfinance banks (MFBs), that follow the banking model. In a country that ranked 144th out of 145 countries in the World Economic Forum’s 2015 Global Gender Gap Index, Zulfiqar finds no evidence of improvement in gender equality in access to finance through microfinance.

While the MFI sector as a whole lends primarily to women rather than to men, most institutions do not require that the women who bear the loan in their names use it themselves. These institutions understand that given current patriarchal realities, the majority of Pakistani women’s microcredit loans will be used by their male relatives. They remain reluctant to take action against this practice or to discourage it. The result is that women’s own enterprises remain cash-strapped and their financial needs unmet.

Even more blatantly discriminatory is the lending practice of MFBs, for the majority of their clients constitute male borrowers. In Pakistan, MFBs end up worsening the gender gap in access to finance. More than 90 percent of the loans lent by MFBs that have spun off from MFIs, who lent exclusively to women, include loans given out to men.

Another practice that sets poor women back is gold-collateralized lending. Gold is usually the only asset poor and middle-class Pakistani women call their own and which contributes to their social and economic security. MFBs have been lending against gold since 2010, but stepped it up in 2012 after the State Bank assigned gold-backed microcredit a risk-free rating. Some MFBs increased their gold-backed lending up to 70 percent of their total credit portfolio. Lending against gold has been used to disburse emergency cash to poor and lower-middle income households by MFBs, a practice that will lead to many women either losing their gold permanently or not being able to see it anytime soon because of repeated loan rollovers.

The author argues that the primary reason these practices have proliferated in the microfinance industry is the competing claims on microfinance institutions. The double bottom line, one social and the other financial, makes these institutions inherently unstable, leading to a much heavier emphasis on the financial. This is accentuated by the commercialization of microfinance in global markets over the past two decades, which has placed intense pressure on lenders to focus on repayment rates, cash, and income flows.

These findings are based on extensive and in-depth fieldwork including 140 semi-structured interviews, non-participant observations of the entire microcredit loan process, and group meetings of borrowers and loan officers.


Zulfiqar, Ghazal (2016). Does Microfinance Enhance Gender Equity in Access to Finance? Evidence from Pakistan. Feminist Economics.


Ghazal M. Zulfiqar is Assistant Professor at the Suleman Dawood School of Business, LUMS. She teaches policy analysis, microeconomics, and women and policy. She is also the director of the LUMS Social Enterprise Development Centre (SEDC). Her research interests include political economy of poverty, gender, and class-based inequality. Her work has been published in Feminist Economics.