The Pakistan Credit Rating Agency (PACRA) hosted a webinar in collaboration with the Securities and Exchange Commission of Pakistan(SECP).
The key focus of the webinar was financial inclusion as a necessity for the development of Pakistan and the betterment of its citizens. There have been concerted efforts on the part of both SBP and SECP in this regard. Amongst financial industry players, microfinance providers are the torchbearers in these efforts. They have a valuable contribution in enhancing access to finance, particularly for underprivileged segments of society. This has positive bearings on poverty reduction.
Most microfinance providers (MFPs) have dual goals: (a) a social objective, by serving the strata of the population that are excluded from the traditional financial system, and (b) a financial objective, to enable it to perform its mission on a sustainable basis, that is to remain commercially viable. These objectives are critical for all stakeholders of MFPs, though their respective importance may vary according to the purpose and intention of each stakeholder. However, information as to a specific MFP’s behavior against each of these objectives is usually not available. In cases where it is available, it is difficult to compare the behavior of different MFPs against each other.
The PACRA believes that the availability of a yardstick that comments on both core objectives of MFPs would be beneficial for the industry and its stakeholders. This belief has led to the development of social impact and performance (SIP) rating. The SIP rating is a unified opinion on the performance of an entity in achieving its desired social impact and becoming commercially sustainable. Notably, this is a relative opinion, which means MFPs can be conveniently compared with each other.
Chairman SECP, Aamir Khan, in his keynote address focused on the need for entities to create positive social impact and the ways to ease their access to additional funds and achieve sustainability. He co-related these to the social and economic goals of Pakistan under the Prime Minister’s vision of “Kamyab Pakistan”. The Chairman highlighted the joint efforts of SECP and PACRA in the development of Social Impact and Performance (SIP) Rating. He termed it as “an excellent initiative to evaluate the fundamental scope of microfinance providers”. SECP has actively supported this initiative and encouraged PACRA in the development of this new rating product to help entities improve their focus on social impact and sustainability. While concluding, he congratulated PACRA in achieving this milestone.
The panel discussion was held by the industry experts; Khalida Habib (Executive Director, SECP), Yasir Ashfaq (CEO – PMIC: Pakistan Microfinance Investment Company), Mohsin Ahmed (CEO – Pakistan Microfinance Network), and Aldo Moauro (CEO & Founder MFR. It is a global rating agency that specializes in inclusive and sustainable finance).
The panel discussed the importance of financial inclusion and the consequent social impact. Aldo highlighted that microfinance providers should focus on the change they are bringing through their activities. The direction and quantum of change should guide them in designing right strategies. He emphasized finding new ways to boost financial inclusion in countries like Pakistan. Ms. Khalida Habib highlighted the importance of SIP rating for both the microfinance providers and other section 42 companies that have social impact as their key goal. She elaborated SECP’s efforts in the domain of digital transformation that would foster financial inclusion. Syed Mohsin compared the industry dynamics of Pakistan’s microfinance with other neighboring countries. He was of the view that liquidity is available in the market, but it needs to channelize properly. Yasir Ashfaq presented a unique viewpoint that the essence of microfinance becomes meaningful only by incorporating social impact. He supported the idea by highlighting the economic situation of Pakistan and benefits that SIP Rating would bring.
In his closing remarks, Shahzad Saleem (CEO – PACRA) emphasized that obtaining SIP Rating would benefit such entities. This would not only comment on an entity’s sustainability but also highlights the ability to create intended social impact. This would identify areas of relative improvement, capture its positioning within the industry, offer an easy to comprehend benchmark to its lenders and donors, and provide a good measure of progress.
