REPORT OF

Microenterprise
Credit
Wednesday, January 27, 2010

Khawaja Naveed Haider

073605-085
 Microenterprise Credit

A microenterprise is a type of small business having ten or fewer

employees and requiring seed capital of not more than $35,000.
Because microenterprises typically have little to no access to the
commercial banking sector, they often rely on "micro-loans" or micro
credit in order to be financed. Microfinance institutions often finance
these small loans, particularly in the Third World. Community
Development Financial Institutions (CDFI's), particularly Community
Development Loan Funds frequently offer loan capital for
microenterprises in the United States. Those who found
microenterprises are usually referred to as entrepreneurs. Micro-Loans
are a way for organizations and entrepreneurs to make small loans to
those in poverty often in third world countries. The term "micro-loans"
is more commonly referred to as Microcredit.
There are some advantages of Microenterprises. One of them is that
people don’t need heavy capital to start their business and it can be a
full time and part time job for the micro enterprise. Because of low
capital requirement, low risk is involved in this kind of business. There
is one more interesting thing in this kind of business is that people can
do what they want. They can take decisions easily in no time that
makes enterprise operations more efficient. They also play an
important role in the economy of any country as they cater one of the
largest portions of GDP and create more jobs than the large scale
industries. It also helps in decreasing the rate of poverty in the country
and unemployment rate and facilitates more people.
There are some businesses that can be put under the umbrella of
micro enterprises. It includes:
• Local General Store
• Fabric Shop
 • Medical Store
• Currency Exchanger
• Small Sewing Plants
• Meat Shop etc…
These kinds of businesses don’t need much capital and have fewer
employees. Most of them are self employed.
The share of total output of microenterprises in Pakistan’s GDP is very
low among many
countries. You can
see the graph given
below that is
discussing the same
thing.
There are various
sources by which
poor people can be
funded for microenterprises in any country. Like they can have their
own cash that they can give to their business. They can take micro
credits from micro finance banks names are given below, friends and
relatives on easy installments. They can also make small partnerships
with their sons, brothers and some other relatives to support by any
means.
There are some Micro Finance Banks in Pakistan which support
microenterprises. Names are listed below:
1. KASHF MICROFINANCE BANK LIMITED
2. KHUSHHALI BANK LIMITED
3. ROZGAR MICROFINANCE BANK LIMITED
4. TAMEER MICRO FINANCE BANK LIMITED
5. PAK OMAN MICROFINANCE BANK LIMITED
6. THE FIRST MICRO FINANCE BANK LIMITED
If we talk about Pakistan, in Punjab, there are only 7.8% microfinance
banks and in Sindh, NWFP, and Balochistan, there are 6.13%, 3.0% and
0.97% micro finance banks available respectively. There is a golden
opportunity for micro finance banks to penetrate in more than
140,00,000 potential customers and it can play a very important role in
decreasing the poverty and unemployment rate in Pakistan. But due to
less capital and other policies, it is becoming hard for micro finance
banks to penetrate among those prospects.

In the end, I just want to say that micro finance banks should decrease
the interest rate and should give microenterprise credit to the needy
persons on easy and affordable installments. Women of Pakistan
should come out for the business as the micro finance banks are very
special and can be very helpful in changing their fortune. Micro finance
credit helps in many ways to build the economy of any country.