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SAZH-TAF Report on FDI

Industry - Microfinance

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Our expert, from the Pakistan Microfinance Network was asked to share the issues his member companies who were micro-finance banks were facing in attracting foreign investment. He shared the common problems that nearly all industries are facing, i.e., inconsistent policy, rule of law, inflation and foreign exchange concerns, etc.

 

One issue he shared in particular was part of the environmental crisis. Often banks give individual small loans to working people who then invest the same in their small businesses, yet no one in the MFB market offers any protection against environmental damage. On a microfinance level, environmental issues/force majeure is a big problem. He shared that due to Pakistan’s investment environment, foreign or local investors are not investing in climate change or environmental disaster risk management. The need for this was readily apparent, as seen in recent floods, yet the options available to rest of the banking sector, such as disaster insurance, are not being offered in micro-finance due to a lack of government policy and incentive for the same. He shared that it would be thoroughly unsustainable if we continue to ask for foreign or donor aid to resolve this matter, and the government needs to invite policy makers to make sustainable business plans for this missing sector.

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