Microfinancing: A solution to alleviate Poverty in Pakistan

By

Khurram Shahzad

M.phil Economics, subject: Research Methodology Preston University Islamabad

Overview

Definition & Concept of Micro-Financing The experience of Grameen Bank Theoretica Frame!ork Samp e Data "na y#i# Conc u#ion & $ecommendation#

Continued

Definition & Concept

in producti&e capacitie#' the#e micro entrepreneur# #pend# the %orro!ed oan' generate# income and repay the oan to the (ender#)*D+B$"' ,-../

Microfinance can %e defined a# gi&ing acce## to poor peop e to %orro! oan and exp ore their #ki #

"ccording to Mu#tafa & 0#mai o& *,--1/ 0n de&e oping countrie# poor peop e ha&e inno&ati&e idea# %ut they don2t ha&e enough finance to go for %u#ine## !hich ead# to more po&erty' MF0# doe#n2t on y pro&ide financia #er&ice# %ut a #o #ocia intermediation #uch a# training' management de&e opment and financia iteracy' !hich are norma y not app ica% e in commercia %anking) Microfinance i# pro&ided in different form#

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The 3xperience of Grameen Bank

Dr) Muhammad 4unu# i# a Bang ade#hi #ocia entrepreneur' %anker' economi#t and ci&i #ociety eader !ho !a# a!arded the 5o%e 6eace 6rize in ,--7) 4unu# founded the Grameen Bank and pioneered the concept# of microcredit and microfinance)

The Grameen Bank i# a 5o%e 6eace 6rize-!inning microfinance organization and community de&e opment %ank founded in Bang ade#h) 0t make# #ma oan# *kno!n a# microcredit to the impo&eri#hed !ithout re8uiring co atera a%out !hich 91: are !omen)

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Theoretica Frame!ork
too to te#t it# #ignificance' MF0S ike 5G+#' $ura #upport program#' Go&ernment microfinance program#' 0# amic microfinance +rganization#' Microfinance Bank#) The#e in#titution# are con#idered a# Key 0ndependent &aria% e# inf uencing the dependent &aria% e 6o&erty a #o taking into account the #u% &aria% e# ike entrepreneuria #ki # of the %orro!er#' education' age'

Microfinance in#titution# !orking in 6aki#tan and integrated them a# a com%ined

Fami y #ize and gender to find out the impact# of Microfinance)

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Samp e and Data

5$S6 *5ationa rura #upport 6rogram/ !a# cho#en a# micro credit pro&iced in Di#trict S!a%i)' ;ue#tionnaire# !ere di#tri%uted among microfinance %orro!er# ocated in di#trict #!a%i !ith the he p of the #taff !orking in 5$S62# pro<ect) The #amp e #ize cho#en !a# 7-' .7 8ue#tion# !ere a#ked from the %orro!er#) +ut of 7- participant# =, re#ponded to the 8ue#tion# a#ked) $i#e in income i# taken a# key dependent &aria% e and the key independent &aria% e# inc uded in the #tudy are Gender' "ge' 3ducation' 6rofe##ion' Marita #tatu# and num%er of dependent#)

Results and Conclusion

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Corre ation Matrix

The $e#u t# ha&e #ho!n that microfinancing i# an effecti&e #trategy for eradicating po&erty in 6aki#tan #pecia y in rura area# %ut #ki # need# to %e de&e oped fir#t a# mo#t of the peop e don>t ha&e enough kno! edge a%out ho! to uti ize the oan#) "# the corre ation matrix #ho!# that there i# corre ation %et!een education' microfinancing' age' gender and fami y #ize)

De#pite the ack of #ki #' microfinance re#u t# are #ati#factory) ?hich ha# a #o ri#en the income# of poor thu# ri#e in income indicate# impro&ement in i&ing #tandard)

Recommendations
The microfinance institutions should minimize their cost by ada ting latest technology such as the use of cell hones The microfinance institutions should charge low interest rate which will reduce the re ayment burden on borrowers Trainings and awareness rograms be arranged to rovide timely information to the borrowers Microfinance institutions should e! and their network in rural areas and should ada t an easy loan rovision strategy" Microfinance institutions should give an e#ual o borrowing criteria for women should be low" ortunity to women and the

Thank you