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Promoting Inclusive Markets and Financial Systems

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Spotlight on Financial Inclusion Leaders Series: Inclusive Finance for Low Cost Private Schools in Pakistan

by on Dec 18, 2014  |  posted in Association Services, Microfinance  |  0 Comments

SEEP is pleased to conclude our series of case studies developed with support from Citi Microfinance titled Spotlight on Financial Inclusion Leaders. This series profiles selected microfinance associations, showcasing the ways in which they are supporting their members and meeting the challenges of value-added growth in financial inclusion. These associations are leaders in implementing innovative and locally-responsive approaches to financial inclusion. Their work is having a clear and measured impact on the lives of their clients, and their experiences bring valuable new knowledge to the industry at large.


The fourth installment in the series is available now!

Inclusive Finance for Low Cost Private Schools in Pakistan: Serving a new client segment with sector-specific strategies

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Pakistan’s microfinance sector has undergone new changes in the past few years, evolving from a single product, microcredit-driven industry towards greater product diversification with savings, insurance, and remittances products for low-income households. However, significant challenges remain as providers try to expand access to both households and firms. Enterprise lending has become an increasingly important segment for microfinance providers and recently, the State Bank of Pakistan set new guidelines which have increased the maximum microenterprise loan amount. This means that enterprises such as low-cost private schools (LCPSs), which demand higher loan amounts, can benefit from microfinance services. Currently there are approximately 5.1 million children not attending primary school and girls, rural children, and children from poorer households are disproportionately affected. Pakistan has around 70,000 LCPSs filling the quality and capacity gaps of public education and almost all gains in primary school enrollment during the last decade can be attributed to private schooling. Accordingly, providing LCPSs with greater access to finances will be key for improving Pakistan’s educational outcomes.

The Pakistan Microfinance Network (PMN), a network of 55 members engaged in microfinance services, has played a key role in the development of the LCPS-sector specific strategy for the microfinance sector. With leadership and funding support from the UK Department for International Development (DFID), PMN and a group of other key stakeholders contributed to a research study on the overall market for LCPSs and their financing needs. PMN then co-hosted the launch event to disseminate the results and begin the follow-up pilot study and implement the proposed LCPS lending methodology resulting from the DFID study. The four microfinance providers engaged in the pilot study are PMN members and once the pilot is complete, PMN plans to continue engaging in market building activities and supporting their members’ ability to offer financial products for LCPSs. Thanks to PMN’s facilitating role, microfinance providers and other stakeholders in the LCPS sector are now linked and working together to optimize skills and resources across both sectors. This is a new, innovative shift in the microfinance sector which should help expand financial and educational opportunities to the Pakistani population.

Low Cost Private Schools: The market at a glance

  • The LCPS model has been replicated across Pakistan and has grown quickly, accounting for 30% of total school enrollment as of 2012.
  • Even LCPSs with the lowest fees generate a healthy net profit margin. While profitable enterprises, they are in need of access to additional capital for growth and the LCPSs sector could use upwards of PKR 77 billion (750 billion USD) in funding.
  • LCPS owners are interested in and willing to explore external finance opportunities for quality improvements and sustainable expansion.
  • The business strategy of LCPSs aligns with parental preferences for proximity, an attractive environment for the education of girls, and a flexible pricing structure. LCPSs are perceived as local and customized solutions that offer better learning opportunities to lower-middle and low income segments of the Pakistani population.

Read more about PMN’s efforts, the LCPS sector, the new lending methodology, and what lies ahead for the Pakistani microfinance and LCPS market in the full article, available now!

Click here to access a PDF Download of "Inclusive Finance for Low Cost Private Schools in Pakistan."


Catch up with previous articles in the series:

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