Small and Medium-sized Enterprises (SMEs) heavily rely on traditional loans for start-up capital, cash flow, and investments, and borrowing from a bank is the most common source of finance for many individuals and SME owners in Pakistan. However, this method comes with its fair share of obstacles and comprehensive documentation, obfuscating the entire process for a layman. This is where microfinance banks come into play.
While explaining how a traditional loan helped jump-start his dying business, Sarfraz Ali from Galimnagar, Larkana City shared, “I applied for a small loan from Mobilink Microfinance Bank Limited (MMBL) to buy new shop items for my Kiryana store in Larkana City. The new shop items immediately attracted new customers and allowed the store to produce good revenue.”
Considering the significant contribution of Small and Medium Enterprises (SMEs) to Pakistan’s GDP — around 40% — and their share in non-agriculture labor force standing at over 80%, it is not a segment that can be continuously ignored if holistic and broad-based development is desired. Limited access to finance, lack of financial knowledge, and absence of complete financial inclusion, however, are some of the main reasons that restrict SMEs to grow in Pakistan. At the end of June 2021, SME financing stood at a meagre PKR 437.57 billion or just 6.57% of the total private sector credit in the country with only 172,893 SME borrowers. The numbers are dismal and call for immediate action to support the sector, which has a major role to play in the country’s economic uplift.
“Lack of financial literacy in rural areas and small cities restrict many individuals and small business owners like me from identifying opportunities and making sound financial decisions,” explained Sarfraz.
“Before applying for the loan, my Kiryana store was not generating enough revenue to feed the family. I struggled to put food on the table and pay for my children’s tuition. Upon discussing my problems with a close friend, I was introduced to the idea of applying for a loan. At first, I was hesitant but then I met with Majid Ali, a Relationship Officer from MMBL working in the Larkana branch, who explained the bank’s seamless and efficient loaning system in detail and answered all my queries. Without delay, I submitted the required documentation and received a loan of PKR 100,000,” he added.
Finance, coupled with the power of hard work and perseverance, aids growth and this is exactly what Sarfraz experienced soon after he utilized the loan from MMBL. The amount enabled Sarfraz to introduce new items to his Karyana store, which attracted a variety of customers generating more revenue than ever before. Increased income enabled Sarfraz to meet all financial commitments, such as paying for his children’s school fees and the surplus revenue aided him in buying a sewing machine for his wife as well.
“My small business was able to accelerate rapidly with the financial assistance from the loan provided by MMBL. The financial advice from Mr. Majid also helped us maximize our earnings. Seeing that MMBL was able to provide the perfect solution to all my financial problems, I decided to apply for a second loan of PKR 125,000. Upon receiving the second loan from MMBL, I opened a new store in the main market in Larkana and was also able to assist my wife in setting up her own sewing business,” added Sarfraz.
He said that small loans finance the dreams of small businesses across Pakistan. “Taking a loan can be a daunting task for small business owners. And none of this would have been possible without the expert financial advice, invaluable support, and financial services in rural hometowns like mine, offered by MMBL.”
The retail trade in Pakistan is estimated at $152 billion and accounts for 34% of the services sector. Retail can be split into modern trade, like superstores, while traditional trade comprises of kiryana stores (general stores). The traditional trade dominates the market and neither the creation of high-end malls nor the exponential rise of e-commerce has made any serious dent in the market, neither is it expected to. E-commerce’s share even in the most digitally advanced countries has not crossed 25%. In Pakistan, it is currently less than 1%. Through it’s unique financial products and services, MMBL aims at empowering this sector and contribute towards its digitalization, one step at a time.
The bank has facilitated tens of thousands of individuals and small business owners to start and grow their businesses across Pakistan. It is committed to ensuring inclusive growth and sustainable development to support its financial inclusion strategy. Striving to elevate SMEs, MMBL aims to further foster financial inclusion for all by introducing customer-centric products and services, that are customized to meet the unique needs of the people. MMBL plays a leading role in the expansion of financial services such as savings, microloans, insurance, remittances, branch banking, and branchless banking across the country.