Country-Level Effectiveness and Accountability Review (CLEAR) with a Policy Diagnostic: Pakistan

Publication Date: Apr 2007
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Paper

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This report states that funding and a sound regulatory framework are not sufficient to build strong and sustainable institutions to reach poor people.

This report presents the findings of a ‘Country-Level Effectiveness and Accountability Review’ (CLEAR) that The Consultative Group to Assist the Poor (CGAP) conducted in Pakistan along with a ‘Policy Diagnostic’ in November and December 2006.

The review team interviewed over 100 people in Pakistan, including staff from the central bank and various government ministries, funding agency representatives, microfinance managers and clients in order to analyze the Government’s and funders' contribution to the three levels of the financial system.

The report states that:

• Microfinance in Pakistan has been largely regarded as a social service rather than a financial service;
• The emphasis on providing immediate assistance to target groups rather than on providing ongoing access to financial services means that microfinance programs have not achieved sustainability, despite large injections of development funds;
• There is an ambivalent attitude toward sustainability and a lack of commitment to interest rates that cover costs amongst funders and the Government of Pakistan (GoP);
• However, currently, heightened interest on the part of Government and several new donor projects offer opportunities for a new direction.

The report concludes with recommendations on how funders and the GoP can support a more sustainable model for expanding financial services:

• Insist on sustainability;
• Encourage innovation, new actors, and new approaches;
• Promote a commercial wholesale market;
• Diversify use of funding instruments;
• Create a joint technical assistance facility;
• Delineate government’s appropriate role as facilitator.