Women’s empowerment or business as usual? Insights from a women-run Village Bank in Khyber Pakhtunkhwa, Pakistan

Abstract Pakistan’s thriving microfinance sector has seen the emergence of Village Banks (VBs), an innovative model of women-run and women-only provision for catalyzing women’s economic and social empowerment. This paper analyzes whether the innovation has been successful in achieving these goals or merely comprises a micro-replica of the oft-critiqued retail lending model of microfinance. The paper draws on 31 interviews conducted at a VB in Khyber Pakhtunkhwa province, Pakistan. The interviewees comprised the bank’s leadership and clients as well as the staff of an NGO that initiated it. Drawing on historical institutionalist explanations, I argue that the VB effectively extended handy credit and other facilities to rural women. However, the general antipathy of clients to interest-based lending and patron-clientelism in service delivery significantly diminished its transformative potential. Firstly, the VB’s requirement of an application fee for processing credit applications was interpreted mainly as being usurious and anathematic and, thus, reflecting the interest-based lending approach of microfinance NGOs. Secondly, the VB leadership was perceived to be susceptible to favoritism and nepotism in providing loans, disbursement of grants-in-aid, and nominating women members for training. The innovation is potentially a source of schisms in the social structure of rural Khyber Pakhtunkhwa. Thus, poor women’s economic and social empowerment is proving as elusive as it has often been in the retail lending model of microfinance NGOs.