The IMF has raised the alarm bell on Pakistan’s microfinance sector. Where does it stand?

Microfinance in Pakistan is in dire straits and has become a bit of a ticking time bomb because of the high risk of loan defaults and Covid era damages

In its recent report released in May 2024, the International Monetary Fund (IMF) has raised a significant alarm regarding Pakistan’s microfinance sector, pointing out ‘persistent vulnerabilities’ in its recent report.This concern is not new; the sector has been grappling with severe challenges for a couple of years.

This has been the case for a few years now. In 2022, Profit did a story on the microfinance sector’s dire state describing it as a “time bomb” ready to explode. 

Read: Microfinance Banks on the verge of crisis

The primary issue threatening the equity of these microfinance banks was the high risk of loan defaults, exacerbated by the COVID-19 pandemic. This crisis is far from resolved, with the situation in 2024 remaining just as precarious.

Despite efforts by the State Bank of Pakistan (SBP) and the government to provide relief and stabilize the sector, the outlook remains bleak. The sector’s current state prompts a crucial examination of its performance and the key players involved.


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Mariam Umar Farooq
Mariam Umar Farooq
The author is a business journalist and a member of the staff. She can be reached at [email protected]


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