Impact of COVID-19 on Islamic Microfinance Institutions (IMFIs) and Poverty in Pakistan

The epidemic of COVID-19 has been emerging as a threat not only to a global health system and draining of economic resources but it is also contributing to increase the level of poverty with a fear and chaos that prevent us from making the right decision at right time. The COVID-19 has exponentially spread across the world and led to 29 million cases with 933 thousands deaths till September 2020 around the globe. Shari’ah compliant microfinance solution for poverty eradication is considered as one of the acceptable and suitable way-outs to alleviate poverty but now it is facing numerous types of challenges like lack of capital and funding, sustainability, high cost of funds, innovation and diversification of products, availability of human resource with Islamic financial expertise etc. The objective of the study is to find out the impact of COVID-19 on Islamic Microfinance Institutions (IMFIs) in terms of income, risk and portfolio. Further, to find out the impact of regulatory steps toward sustainability of IMFIs, we have collected data through self-administrated questionnaires consisting of seven parts. Descriptive and frequency analysis have been used to describe the results. Results depict that the portfolio and income of the IMFIs have decreased. Further, operational cost and productivity of the employees have also decreased. Therefore, industry demands relief package from regulators for growth and sustainability to save the Shari’ah compliant poverty eradication solutions. This might be helpful to compensate the losses of deferment and diversification of products. The findings of the study hope to contribute toward sustainability of IMFI’s, which have been damaged due to COVID-19