Tackling the Failure of Microfinance Efforts Through Amalgamating Microfinance with Charity: Two Viable Alternatives in the Context of Pakistan

The drastic shift in the microfinance paradigm during the early 1990s, when the donorcommunity adopted a new approach as to the sustainability of microfinance institutions,changed the overall scenario of the paradigm. Instead of providing subsidized financialservices to microfinance institutions (MFIs) for their life time, the donors started emphasizingself-sustainability on the part of MFIs through making them adopt principles ofcommercialism. The shift in the donors’ approach, although relieved of their burden to aconsiderable extent, gave rise to an increase in the interest rates on loans for the poor. Manyscholars considered it as a drift from the primary mission. This conceptual paper presents twoviable alternatives which, through amalgamating microfinance and charity principles, canpotentially help the sector achieve the dual objective of boosting the supply of subsidizedfinancial resources to the sector and ensuring the poor’s access to an affordable source offinancial help.