Financial inclusion or confusion in Sahiwal.

The city of Sahiwal is the headquarter of an Administrative Division by the same name in Punjab. Walking through its streets the other day gave one the feeling that the next door Harappa had better streets some 3,500 years before Christ. The environment is polluted by the coal fired power plant and the maize fields around the city are being encroached by the real estate mafia. In the markets around these streets are seen the wretched of the earth trying to eke out an existence. A father and son vending samosas and potato chips, a mother and daughter managing a tandoor, boys and girls running hair and beauty salons and electronic copy-paste shops are some of the beneficiaries of micro loans provided by the National Rural Support Programme. These are really small loans ranging from Rs30,000 to Rs75,000. In the bazaar, however, the access to the interest free loan scheme launched with great fanfare is being eagerly awaited. The excitement is not just about zero interest rate. It is also about the size of the Tier 1 loan meant for the poor and marginalised with no collateral to offer. At up to Rs500,000, it is about seven times the upper limit set by the nonbank microfinance institutions like the NRSP. Such populist schemes have a history of sudden endings. But they have had the long run impact of gradually de-sustaining the microfinance institutions. Most are spending more time in recovering past loans than extending new ones. With the discount rate touching historic heights, the mark up charged is even higher at 36%. The borrowers are waiting to secure interest free loans from the PM scheme to repay the loans from the microfinance institutions.

It seems that the National Financial Inclusion Strategy (NFIS) launched by the State Bank in May 2015 is going nowhere. Like all donor-funded initiatives disregarding local wisdom, this World Bank-assisted project envisions that 'individuals and firms can access and use a range of...