CHALLENGES TO THE EXPANSION OF MICROFINANCE

1. 
   Inadequate access to productive resources and social services has resulted in low indicators of well-being and lack of employment opportunities. This situation is compounded in rural areas where access is even more difficult due to inadequate or complete lack of basic infrastructure.
   

2. 
   The gender orientation of organizations, products, and delivery mechanisms is insufficient to enhance outreach to women. Inadequate social preparation adversely affects group cohesion, the quality of loan portfolio, and ultimately the sustainability of MF operations.
   

3. 
   Poor households forego potentially viable technologies, production choices and income opportunities due to risk aversion. Mechanism’s to mitigate such risks are not available.
   

4. 
   A policy environment is required to encourage innovations and to allow a diverse set of institutions to provide a range of services, particularly savings, in a supervised and regulated environment.
   

5. 
   Because limitation with the current institutions by the Government, microfinance has been perceived as high risk and unprofitable in Pakistan. Consequently, potential suppliers have avoided entry into microfinance sector.
   

6. 
   Delivery of financial services to the poor, particularly in rural areas is constrained by low population density in some provinces, inadequate communication services, small loans, and low household savings that increase transaction costs. Seasonally of the agriculture business cycle, the main occupation for poor households, and the high probability of risks add to the problems of providing MF services to the rural poor
   

THE ORANGI PILOT PROJECT

The Orangi Pilot Project refers to a socially innovative project carried out in 1980s in the slum areas of Orangi, Karachi, Pakistan. It was initiated by Akhtar Hameed Khan, and involved the local residents solving their own sanitation problems. Innovative methods were used to provide adequate low cost sanitation, health, housing and microfinance facilities.
The project also comprised a number of programs, including a people's financed and managed Low-Cost Sanitation Program; a Housing Program; a Basic Health and Family Planning Program; a Program of Supervised Credit for Small Family Enterprise Units; an education Program; and a Rural development Program in the nearby villages.
Sanitation was the major problem identified by Orangi residents. OPP held meeting in the lanes of Orangi and informed the people that if they formed a lane organization ; elected, selected or nominated a lane manager; then the OPP-RTI would provide them technical assistance in building their under ground sewage system. There are 7,256 lanes in Orangi containing 104,917 houses. Of these, 6,082 lanes containing 91,531 houses have built their sewage systems. The houses have also built their latrines and 409 collector sewers have also been built. The people have invested Rs. 80,664 million (US $ 1.50 million) in this effort. If the government had done this work, the cost would have been at least seven times more.
Four barriers that the community has faced in the adaptation of this model are:

1. 
   The psychological barrier: communities feel that infrastructure development is the work of government agencies. This barrier is overcome once communities accept that the lane in front of their houses also belongs to them.
   
2. 
   The social barrier: this is overcome once a lane organization is formed and is able to clearly identify its immediate objective.
   
3. 
   The Economic barrier: this is overcome once the cost of development becomes affordable.
   
4. 
   The technical barrier: this is overcome by availability of designs, estimates, tools and training for implementation.
   

The study identified the local building components manufacturing yard (called a thalla) and its owner (thallawala) as the most important actors in the housing drama. The thallawala provides building materials, skilled labor and often credit for house building. As such he is also the architect and housing bank of the Orangi residents. Therefore, the housing program has focused on four issues:

1. 
   It has upgraded the quality of concrete blocks by mechanizing production at the thallas and by introducing the manufacturing of cheap pre-cast concrete roofing elements at the thallas to replace tin sheets. In addition, advantages of proper curing of concrete and good aggregate were also explained to the thallawalas and the house builders. The new houses can carry a second floor. Thallas were given credit (an average of Rs 75,000 or US$ 1,400) and advice for mechanization and improvement. So far, 54 thallas have made use of the OPP-RTI package. In the process they have more than tripled their production, increased employment and financial returns and Orangi has become a major exporter of machine made concrete blocks and roofing elements.
   
2. 
   Ninety six Orangi masons have been trained to use the new technologies and they in turn are training their apprentices.
   
3. 
   Technical guidance and advice is being provided to communities on issue related to design, costs and the nature of relationships they should have with the thallawala and skilled workers they employ.
   
4. 
   The OPP-RTI has initiated a two years program for training educated young men from the Orangi communities as para –architects so that they can advice individual residents on design and construction.
   

Approximately 4,000 units per year benefit from the housing program’s technical research and its extension and provision of credit.

1. 
   The Orangi pilot project-research and training institute (OPP-RTI) dealing with sanitation, housing, education, research and training.
   
2. 
   The Orangi charitable Trust (OCT) dealing with micro credit.
   
3. 
   Karachi Health and social Development Association (KHASDA) dealing with health.
   
4. 
   Rural Development Trust dealing with technical and credit support in rural areas.
   
5. 
   The OPP Society which channelises funds from the infaq foundation (a Pakistani charity) to the other four institutions.
   

1. 
   Organizing village-level institutions;
   
2. 
   Funding physical infrastructure projects;
   
3. 
   Promoting natural resource management in agriculture, livestock, and forestry;
   
4. 
   Training and human resource development; and,
   
5. 
   Marketing and enterprise development.
   

By the end of 1994, 1,834 Village Organizations (VOs) and 763 Women’s Organizations (WOs) had been established with 101,304 total members. These VOs and WOs (VO/WOs) covered over two-thirds of the rural households in the program area. In addition, 1,501 productive physical infrastructure projects had been initiated to the benefit of 85,189 households; 986 training courses had been given to villagers; 200 hectares of forest and more than 2,000 forest nurseries had been established; and nearly 2.5 million fruit trees had been planted.

AKRSP management depends on its Monitoring, Evaluation, and Reset (MER) section to provide accurate and timely operational reporting. The MER section also studies the effectiveness of various activities in attaining their desired development goals. AKRSP provides support, training, and oversight to the savings and credit activities conducted by or through VOs and WOs.