ANALYSIS OF MICRO-CREDIT IMPACT ON POVERTY REDUCTION OF PAKISTAN

A STUDY ON BANKING ENVIRONMENT OF TWINCITIES, PAKISTAN

Submitted BY
Muhammad Asif Latif
Roll No. AL 538549
Reg. No. 03PRI3364

Commonwealth of MBA/MPA Program

Allama Iqbal Open University, Islamabad

Year 2017
ANALYSIS OF MICRO-CREDIT IMPACT ON POVERTY REDUCTION OF PAKISTAN
A STUDY ON BANKING ENVIRONMENT OF TWINCITIES, PAKISTAN

Submitted to : Head, Col MBA/MPA Program

Allama Iqbal Open University, Islammabd
Supervised By: Mr. Abdul Rauf Kashif
Submitted By: Name of Student: Muhammad Asif Latif
Roll # : AL-538549
Registration# : 03PRI3364
Address : House # DK 839 Dhoke Kashmirian
Rawalpindi
Email Address: [email protected]

Cell #: 0334-5739034
COMMONWEALTH OF MBA/MPA PROGRAM

ALLAMA IQBAL OPEN UNIVISITY

Year 2017
 ALLAMA IQBAL OPEN UNIVERSITY

Department of Administration & Business

Supervisors certificate for submission of Project

It is certified that Ms/Mr. Muhammad Asif Latif Registration No 03PRI3364 Roll No

AL538549 has worked under my close supervision for development of project entitled

Analysis of Micro-Credit Impact on Poverty Reduction of Pakistan

A study on banking environment of twin cities, Pakistan.

I have gone through the project and found it satisfactory for the thesis and further discussion by

the experts.

Supervisors Name: Mr. Abdul Rauf Kashif

Signature: ________________________

Date: ________________________
ATTESTATION OF AUTHORSHIP

i
 DECLARATION

This thesis is a presentation of my original research work. Wherever contributions of

others are involved, every effort is made to indicate this clearly, with due reference to the
literature, and acknowledgement of collaborative research and discussions. The work was done
under the guidance of Mr. Kashif Rauf, at the Institute of Management and information
technology.

Muhammad Asif Latif

Roll Number: AL -538549
Program: MBA-Executive

ii
 ACKNOWLEDGMENT

I would like to thank Mr. Kasif Rauf for his invaluable assistance and insights leading to
the writing of this paper. My sincere thanks also go to the all faculty members of my graduate
committee for their patience and understanding during the course of study for effort that went
into the production of this paper. Another special thanks to Amir Muhammad Khan who
provided the previous thesis template upon which much of this is based and for help with
graphics packages.

Muhammad Asif Latif

Roll Number: AL -538549
Program: MBA-Executive

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 DEDICATION

In the name of Allah, Most Gracious and Most Merciful

The significant research project ANALYSIS OF MICRO-CREDIT

IMPACT ON POVERTY REDUCTION OF PAKISTAN A STUDY ON
BANKING ENVIRONMENT OF TWINCITIES, PAKISTAN is dedicated to
my parents and teacher Mr. Abdul Rauf Kashif, who are always source of
encourager and adherent to me pursuing the corridor of dignity , courage and
integrity.

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 ABSTRACT

The topic of micro-finance and poverty are very important and has researched by

scholars. This paper has very importance due to this is an analysis of impact to micro-finance on

poverty. The overall image that emerges from the literature is positive: researchers shows that

using micro-credit for poverty alleviation is the best technique. This study recovers some of the

researchers work such as Otero concluded micro-finance for poor and very poor and most

effective work by Grameen Bank. Micro-credit is the most effective and powerful tool for

poverty reduction and is apparently increasing. In this paper a study has been taken to conduct a

survey including interviews and questionnaires in order to find either it is successful or not.

Interviews include different types of questions about their life and the questionnaire is included

questions for modern poverty reduction surveys. So we can say that the paper has primary data

which will be collected for the proposed research study through structured questionnaires. The

regression p-value has been used to conclude the result of the paper.

The study has emphasis on children education, basic needs, and health issues of the

micro-finance and results have shown that microfinance has a strong positive impact on children

education and enterprise financial performance. This research has significant importance because

it revealed that micro-finance can improve the standard of life of common man through

improvement in children education, basic needs and health issues.

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TABLE OF CONTENTS

ATTESTATION OF AUTHORSHIP................................................................................................i
DECLARATION.............................................................................................................................ii
ACKNOWLEDGMENT................................................................................................................iii
DEDICATION................................................................................................................................iv
ABSTRACT....................................................................................................................................v
CHAPTER 1....................................................................................................................................8
INTRODUCTION...........................................................................................................................8
1.1 Background of Study:...........................................................................................................................................8
1.2 Rationale of the Study:.......................................................................................................................................11
1.3 Problem Statement:............................................................................................................................................13
1.4 Objective:...........................................................................................................................................................13
1.5 Significance of the Study....................................................................................................................................14
1.6 Limitations..........................................................................................................................................................15
CHAPTER 2..................................................................................................................................17
LITERATURE REVIEW...............................................................................................................17
2.1 Micro Credit Loan..............................................................................................................................................18
2.2 Micro Enterprises:..............................................................................................................................................21
2.3 Relationship of Micro-Credit and Basic Need...................................................................................................23
2.4 Relationship of Micro-Credit and Health Issues................................................................................................25
2.5 Relationship of Micro-Credit and Education.....................................................................................................27
2.6 Model..................................................................................................................................................................29
2.7 Hypothesis..........................................................................................................................................................29
CHAPTER 3..................................................................................................................................30
RESEARCH METHODOLOGY..................................................................................................30
3.1 Population of the Study:.....................................................................................................................................30
3.2 Sampling Technique:..........................................................................................................................................30
3.3 Sample Size:.......................................................................................................................................................31
3.4 Research Tools and Model:................................................................................................................................31
3.4.2 Reliability:...................................................................................................................................................32
3.4.3 Inferential and Descriptive Statistics:.........................................................................................................32
3.5 Correlation and Regression Analysis:................................................................................................................33
CHAPTER 4..................................................................................................................................34
DATA ANALYSIS AND INTERPREATION (TOOLS AND TECHNIQUES)............................34

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CHAPTER 5..................................................................................................................................58
CONCLUSION..............................................................................................................................58
5.1 Findings...................................................................................................................................58
5.2 Conclusion...............................................................................................................................59
5.3 Recommendations....................................................................................................................60
Annex 1:...................................................................................................................................................................62
Annex 2: Summary of Results on the Basis of Loan Amount vs Basic Need, Health Issues and Children Education
..................................................................................................................................................................................64
Annex 3: List of Micro-Finance Banks....................................................................................................................74
REFERENCES..............................................................................................................................75

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 CHAPTER 1

INTRODUCTION

1.1 Background of Study:

The definition of poverty is very important and because it is considered as curse in the
developing countries. There are various studies about how it can be reduced. There are living
standards in our society. Some people live in big houses, having luxury life and some people are
living without any home and do not have finances to pay even for basic needs like bread, cloths,
education, etc. If the people live below standard life we call the poor and it is poverty. This is
curse and worlds best economies and institutions are working on them in order to reduce this
curse.

There are different methodologies and strategies defined by scholars for reduction of
poverty such as aid to the government by different donor agencies, women empowerment,
industrialization, micro-credit, etc. In this paper we focus only on micro- credit.

Micro credit is the practice of extending small loans to people in poverty so that they can
start small businesses and develop savings. It is the extension of small loans to entrepreneurs to
poor to qualify for traditional bank loans (Micro Credit Summit, 1997) . The focus of the micro-
credit has been extended and introduces micro-finance; it is used to reduce poverty (Robinson
(2001) . Robinson states that Credit is a powerful tool that is used effectively when it is made
available to the creditworthy among the economically active poor participating in at least a
partial cash economy people with the ability to use loans and the willingness to repay them. Its
also called revolution because it involves different strategies such as social mobilization, micro-
insurance, helping the distribution of products and marketing of the products. It creates
revolution towards reduction of poverty with targeted objectives.

Micro-finance is important for poor. Money is a tool for prosperity in life if it is used for
profitable objectives. There are different aspects of life and one of the aspects is money. People
need money for their basic needs and in current era, micro-finance is playing vital role for
reduction in poverty. Micro-credit is directly related to poor and very poor (Otero, 1999).

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 The history of micro-finance is connected to research of Professor Muhammad Yunus
started at Chittagong University. He experimented to give micro-loan to poor without any
collateral. This technique was successful in a village Jobra (a village near Chittagong University,
Bangladesh) in 1976-1979. Bangladesh expended it to bank known as Grameen Bank where this
bank works for just micro-finance and poverty reduction. On the basis of this successful financial
change Professor Muhammad Yunus was given Nobel prise. The Grameen Bank was working on
credit to use as cost effective weapon to fight poverty and it is most effective tool for socio-
economic change.

There are different micro-finance lending models effective throughout the world. There
are few most commonly used models in micro-finance institutions. The community forms groups
or associations where people save their money and use to expand their businesses especially
micro-enterprises. These groups are formed by male, female or mixed community members.
There is no restriction of political, religious or cultural issues. In Pakistan these groups are
commonly known as community organizations, village development organizations, and local
support organizations. These organizations are connected to government, NGOs, Development
Organizations or INGOs and are being monitored by them. Monitoring includes suggestion
regarding formulation, structure, exposure, and aid to the groups or associations. These
associations have strong legal or social bondages and it works as collateral to the micro-finance
lending. In Pakistan there are two types of micro-finance institutions: Micro-finance bank and
Micro-enterprise development programme. The micro-finance banks are registered with state
bank of Pakistan and follow all rules and regulations formed by state bank of Pakistan.

In micro-finance banking or institutions of Pakistan, NRSP (National Rural Support

Programme) is the most effective organization all-round the country. NRSP is working in four
sectors for community micro-finance, human resource development, Physical Infrastructure
Development and Social Sector Services. NRSP is working on social mobilization model where
it works as gross root level. The slogan of NRSP is harnessing peoples potential through
themselves. This organization is working solely on poverty reduction and one of its most
effective weapons is micro-credit.

The other organizations of micro-finance in Pakistan include First Micro-Finance Bank,

Khushali Bank, FINCA Micro-finance bank limited etc. These banks use different micro-finance

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tools associations, bank guarantees, community banking, groups, Individuals, Intermediary,
Cooperatives, Credit Unions or rotating savings and credit associations. There are different short
comings and weaknesses in these formal micro-finance banks because they are working on
commercial bases. They are not limited to poverty reduction. These are for-profit organizations.
In this case, main objective of the micro-finance changed and it divert the focus of micro-
financing. Another problem is the beneficiaries are not limited to poor. These loans may be given
to other than poor.

Micro enterprises are said to add value to a country's economy by creating jobs,
enhancing income, strengthening purchasing power, lowering costs and adding business
convenience.

Because micro enterprises typically have little to no access to the commercial

banking sector, they often rely on "micro-loans" or micro credit in order to be
financed. Microfinance institutions often finance these small loans, particularly in the Third
World. Those who start up micro enterprises are usually referred to as entrepreneurs. Micro-loans
are a way for organizations and entrepreneurs to make small loans to those in poverty often in
third world countries. The term "micro-loans" is more commonly referred to as Micro credit.

Government support for micro enterprises varies from country to country. Plan for
Achieving Self Support is a program offered by the United States Social Security
Administration(or SSA) to encourage persons that are Supplemental Security Income (or SSI)
eligible who are disabled to set aside moneys for various reasons: training, schooling and
funding micro enterprise as a Work Goal.

The NEIS (New Enterprise Initiative Scheme) is a government program in Australia,

which assists unemployed people to start their own businesses. Although it is not specifically for
micro-businesses, many if not most businesses started in this program are micro-businesses (in
the senses of having limited capital, and only one person involved in the business).

In developing countries, micro enterprises constitute the vast majority of the small
business sector a result of the relative lack of formal sector jobs available for the poor. Micro
enterprises in developing countries, then, tend to be the most frequent form/size of business.

10
 Most micro credit clients are not micro entrepreneurs by choice. They would gladly take
a factory job at reasonable wages if it were available. We should not romanticize the idea of the
"poor as entrepreneurs." The International Labour Organization (ILO) uses a more appropriate
term for these people: "own-account workers." (Aneel Karnani, 2007)

Paper to Pearls is another example of a micro-enterprise program, which is based in the

United States, but works with women in northern Uganda.

The International Fund for Agricultural Development (IFAD) Vietnam country

programme supports operations in 11 poor provinces. Between 2002 and 2010 around 1,000
saving and credit groups (SCGs) were formed, with over 17,000 members; these SCGs increased
their access to micro credit for taking up small-scale farm activities.

1.2 Rationale of the Study:

With reference to literature review of this paper, microfinance is a tool which is very
effective in order to reduce poverty by penetrating in to society. The key reason behind this
popular tool is it is using the root cause of social problems as basic support to the society. The
basic social problems are primary health care, basic education and shelter. It is effective in
Pakistan since several decades but there is still gap exist between ideal condition of results of this
tool. Pakistan has initiated this programme in almost all region and it has almost access to all
areas but there is question exist Is microfinance programme effective in reducing poverty.

But the question is what is the targeted areas of the poverty reduction. If we review the
literature it is easy to find there are three main areas of the human basic need. First of all a man
require essential food for not only him/herself but for his/her family. In Pakistan there is scarcity
for food and it is very expensive. It is very difficult for below poverty level people to get food for
his/her family. There should be permanent and security earning required. The second target is to
generate the literacy of the new generation. In Pakistan the people living below poverty level do
not have access for their children to study in schools.

This paper is focused on poverty reduction and one of the main topic is basic need. It is
used as an approach to measure absolute poverty in developing countries. In order to find the

11
basic needs for long term physical well-being we should define absolute minimum resource
necessity. After finding answers to that question we can then defined as the amount
of income required to satisfy those needs. For the first time International Labour organization
started to define basic needs in World Employment Conference 1976. Perhaps the high point of
the WEP was the World Employment Conference of 1976, which proposed the satisfaction of
basic human needs as the overriding objective of national and international development policy.
The governments and workers recognized the basic need approach for first time. It inclined the
programmes and policies of major multilateral and bilateral development agencies, and was the
precursor to the human development approach. A traditional list of immediate "basic needs
food (including water), shelter and clothing. Many modern lists emphasize the minimum level of
consumption of 'basic needs' of not just food, water, clothing and shelter, but
also sanitation, education, and healthcare. Different agencies use different lists. the basic needs
approach has been described as consumption-oriented, giving the impression "that poverty
elimination is all too easy." Amartya Sen focused on 'capabilities' rather than consumption.

In the development discourse, the basic needs model focuses on the measurement of what
is believed to be an eradicable level of poverty. Development programs following the basic
needs approach do not invest in economically productive activities that will help a society carry
its own weight in the future, rather it focuses on allowing the society to consume just enough to
rise above the poverty line and meet its basic needs. These programs focus more on subsistence
than fairness. Nevertheless, in terms of "measurement", the basic needs or absolute approach is
important. The 1995 world summit on social development in Copenhagen had, as one of its
principal declarations that all nations of the world should develop measures of both absolute
and relative poverty and should gear national policies to "eradicate absolute poverty by a target
date specified by each country in its national context.

This study will show the direct relationship between micro-credit and improvement of
heath care, basic education and provision of shelter because micro-credit with support and
succeed the micro enterprises. So in short the rationale of the study is every enterprise
requirement funds to be succeeded and this is a basic tool for their success.

This research on the basis of past researches shows that micro-financing and poverty
reduction have direct relationship. If authorities like government and other development

12
organizations focus on right implementation of poverty reduction plan the poverty can be
reduced. There are different models and techniques used in all round the world. Here in the paper
we discuss about Pakistan poverty problems and implementation of micro-credit. The
beneficiaries should be bound to utilize the loan amount to their micro-enterprise business
because it will harness them from their own efforts. If beneficiaries use it for their other personal
needs its impact on poverty reduction is minimal. This paper will also show strategies of social
mobilization towards poverty reduction. The micro-finance creates risk, for the reduction of this
risk micro-insurance has been introduction and implemented with micro-finance. There are other
supports that are connected to micro-finance which are distribution of products and marketing.

1.3 Problem Statement:

Is the micro credit for micro-enterprises related to the poverty reduction (satisfaction of
basic needs, education of their children and health issue of their family)? In the past there are
several attempts has been made to answer this question but every time the results show some
cases. The previous research shows that some researchers found no relationship between the two
variables and some researchers found strong and positive relationship between them. In this
study we will try to determine whether there is any relationship micro-credit loan and satisfaction
of their basic needs, education of their children and health issues of their family.

1.4 Objective:

The long term goal of the study is develop formalized relationship between microfinance
and poverty reduction. The objective of the current study in relation to impact of micro-financing
to the poverty reduction is to provide comprehensive review of literatures and organizational
practices in relation to analysis. Particularly, the study has the following sub-objectives:

1. To provide overview of micro-finance particularly regarding poverty reduction

2. To quantify the impact of micro-finance on poverty reduction

3. To provide details of threats to the objective of micro-finance

The objective of this research is to provide evidence that there is strong relationship
between micro credit and poverty reduction and it is best tool to be used to reduce.

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1.5 Significance of the Study

The paper will show main issue of current age is Microfinance which comprises
spreading small loans, savings and other basic financial services to people that dont currently
have access to capital. The research shows that people should contribute to the modern age and
this is the key strategy in helping poors and this strategy with which helps them become more
resilient and better able to provide for their families in times of economic difficulty. Because in
Pakistan people living below poverty level this paper will show how micro-finance reduce
poverty. This paper highlights the six benefits of micro-finance.

It is not possible for commercial banks to engage in small scale loans and people with no
assets because their main focus is commercial. But micro-finance institutions focus is poor
people with poverty reduction. This paper will show how importance has of micro-finance
institutions on poverty reduction.

There is an issue discussed in the micro-finance departments that there is better loan
repayment ratio for female borrowers than male borrowers. So this paper highlights that these
loans help empower women, and they are often safer investments for those loaning the funds.
one of the Pakistans problem is people do not afford children education thats why they are
pulling their children out of school for economic reasons. Discussion has made how micro-
finance is effective for the solution this problem. It has been highlighted there is scarcity of
resources for clean water, better sanitation, hospitalization facilities etc. This problem exists due
to poverty and people do not afford these facilities. After using micro-credit facility a discussion
has been made how micro-enterprises are contribution in eradication this problem.

There is plenty of talent existing in Pakistan but people do not have financial resources
to start new business. Due to this reason people do not afford common living facilities and this
study has put this problem in research to show how successful micro-finance is to reduce
poverty. During research interview there different stories collected that they are now successful
in launching new micro-enterprises.

Pakistan has very high ratio in unemployment and people need new jobs for earning.
After successful launch of micro-enterprises people got jobs in different sectors of micro-
enterprises.

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 In short this paper is helpful in order to answer Impact of micro-credit on success of
micro-enterprises in order to reduce poverty. The basic needs of common man are basic living
(bread, shelter, medicine), health issues and children education. There is survey conduction from
community to find how successful micro-credit impact on eradication of these issues is.

The main significant feature of the micro-credit is reduction in poverty. For the poor, they
face different problems. First of all they have issues for their basic need. What is basic need?
Human being needs food, shelter and clothing for living. Due to poverty they do not afford. The
micro-credit has direct impact on micro-enterprises. The micro-business grows with micro-
credit. In this way their income increases and this will lead to affordability of basic need. People
can afford food, shelter and clothing.

The next common issue for poverty is education for children. People living below
poverty line cannot afford education for their children. Free education does not mean people can
afford it because there other interrelated expenditures i.e. uniform, books, stationary,
transportation and study material. The micro credit has direct impact on children education.
There are many different examples available where people increase their income to support
children education.

The most emergent issue for the poverty is health issues. The health issues include
malnutrition, pure water, hospitalization and emergency response. The people living below
poverty do not have access to above issues. In the developing countries it is big issue because
government do not have apparent control over hospitalization, pure water, and emergency.
People have increased their income due to micro-finance and harness their potential to help
themselves.

1.6 Limitations

Study Design Limitation: Before starting this study paper, it should be noted that there
are a study design limitation which is the possible results or outcomes of this paper cannot be
obtained without integration of social mobilization strategy implementation, micro-insurance
techniques and other support such as distribution of product and marketing support. First of all,
all banks do not provide micro-financing to the low income households so this facility is

15
available to limited areas and people. In Pakistan micro-financial institutions are providing this
facility to more than half of the districts of Pakistan. But due to hardness of areas some of the
poor areas are still deprived of this facility.

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 CHAPTER 2

LITERATURE REVIEW

Microfinance is a source of financial services for entrepreneurs and small businesses

lacking access to banking and related services. The two main mechanisms for the delivery of
financial services to such clients are: (1) relationship-based banking for individual entrepreneurs
and small businesses; and (2) group-based models, where several entrepreneurs come together to
apply for loans and other services as a group (Dr. K. Maneiah, 2012). In some regions, for
example Southern Africa, microfinance is used to describe the supply of financial services to
low-income employees, which is closer to the retail finance model prevalent in mainstream
banking.

For some, microfinance is a movement whose object is "a world in which as many poor
and near-poor households as possible have permanent access to an appropriate range of high
quality financial services, including not just credit but also savings, insurance, and fund
transfers." Many of those who promote microfinance generally believe that such access will help
poor people out of poverty, including participants in the Microcredit Summit Campaign. For
others, microfinance is a way to promote economic development, employment and growth
through the support of micro-entrepreneurs and small businesses.

Microfinance is a broad category of services, which includes microcredit. Microcredit is

provision of credit services to poor clients. Microcredit is one of the aspects of microfinance and
the two are often confused. Critics may attack microcredit while referring to it indiscriminately
as either 'microcredit' or 'microfinance'. Due to the broad range of microfinance services, it is
difficult to assess impact, and very few studies have tried to assess its full impact. Proponents
often claim that microfinance lifts people out of poverty, but the evidence is mixed. What it does
do, however, is to enhance financial inclusion.

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2.1 Micro Credit Loan

The microfinance revolution has changed attitudes towards helping the poor in both Asia
and Latin America, and in some countries has provided substantial flows of credit, often to very
low-income groups or households, who would normally be excluded by conventional financial
institutions (Heather Montgomery and John Weiss, 2005).

Rural areas, many activities that would be classified in the developed world as financial
are not monetized: that is, money is not used to carry them out. This is often the case when
people need the services money can provide but do not have dispensable funds required for those
services, forcing them to revert to other means of acquiring them. In their book The Poor and
Their Money, Stuart Rutherford and Sukhwinder Arora cite several types of needs:
Lifecycle Needs: such as weddings, funerals, childbirth, education, home building,
widowhood and old age, Personal Emergencies: such as sickness, injury, unemployment, theft,
harassment or death, Disasters: such as fires, floods, cyclones and man-made events like war or
bulldozing of dwellings, Investment Opportunities: expanding a business, buying land or
equipment, improving housing, securing a job (which often requires paying a large bribe), etc.

People find creative and often collaborative ways to meet these needs, primarily through
creating and exchanging different forms of non-cash value. Common substitutes for cash vary
from country to country but typically include livestock, grains, jewellery and precious metals. As
Marguerite Robinson describes in The Micro finance Revolution, the 1980s demonstrated that
"micro finance could provide large-scale outreach profitably," and in the 1990s, "micro finance
began to develop as an industry" (Marguerite Robinson, 2001). In the 2000s, the micro finance
industry's objective is to satisfy the unmet demand on a much larger scale, and to play a role in
reducing poverty. While much progress has been made in developing a viable, commercial micro
finance sector in the last few decades, several issues remain that need to be addressed before the
industry will be able to satisfy massive worldwide demand. The obstacles or challenges to
building a sound commercial micro finance industry include, inappropriate donor subsidies, Poor
regulation and supervision of deposit-taking micro finance institutions (MFIs), Few MFIs that
meet the needs for savings, remittances or insurance, limited management capacity in MFIs,

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Institutional inefficiencies, Need for more dissemination and adoption of rural, agricultural micro
finance methodologies

Microfinance is the proper tool to reduce income inequality, allowing citizens from lower
socio-economical classes to participate in the economy. Moreover, its involvement has shown to
lead to a downward trend in income inequality (Hermes, 2014).

Notwithstanding the mixed evidence, microfinance reduces poverty, vulnerability to

health shocks and hastens recovery after a natural disaster. There are heterogeneous impacts in
terms of womens empowerment across households that vary with gender defined social norms.
Group lending attempts to overcome the dual problem of missing collateral and lack of
intermediary capital (Raghav Gaiha, Vani S. Kulkarni, 2013).

Practitioners and donors from the charitable side of microfinance frequently argue for
restricting microcredit to loans for productive purposessuch as to start or expand
microenterprise. Those from the private-sector side respond that, because money is fungible,
such a restriction is impossible to enforce, and that in any case it should not be up to rich people
to determine how poor people use their money.

To strike a balance between outreach and poverty alleviation, an intensive growth

strategy would have been more cost effective at the initial stages of development. This would
have reflected in improved performance, efficiency and productivity. Instead the sector adopted
an extensive growth strategy which involved huge investment in physical infrastructure and rapid
increase in recruitment and branch network (Shahnaz A. Rauf and Tahir Mahmood 2009).

There has been a long-standing debate over the sharpness of the trade-off between
'outreach' (the ability of a microfinance institution to reach poorer and more remote people) and
its 'sustainability' (its ability to cover its operating costs and possibly also its costs of serving new
clientsfrom its operating revenues). Although it is generally agreed that microfinance
practitioners should seek to balance these goals to some extent, there are a wide variety of
strategies, ranging from the minimalist profit-orientation of Bankbook in Bolivia to the highly
integrated not-for-profit orientation of BRAC in Bangladesh. This is true not only for individual
institutions, but also for governments engaged in developing national microfinance systems.

19
 Without question, there are several gender challenges for microfinance that need to be
addressed if microfinance is to truly empower women, Massification challenge: How to enable
greater access to the vast majority of unreached women, Microfinance primarily targets women
who have very little access to assets, and hence it may increase debts for women and perhaps be
contributing to making their overall net worth negative, at least at a basic level. Microfinance
pushes the debt and poverty burden almost exclusively on women as it considers women more
credit-worthy and less of a credit risk. Microfinance has traditionally supported women in group
settings self-help groups, joint liability groups, solidarity groups, etc but has done very little
to enhance womens access to larger individual loans required for establishing and running small
and medium sized enterprises (SMEs). (Ramesh S Arunachalam, 2007).

Microfinance's emphasis on female-oriented lending is the subject of controversy, as it is

claimed that microfinance improves the status of women through an alleviation of poverty. It is
argued that by providing women with initial capital, they will be able to support themselves
independent of men, in a manner which would encourage sustainable growth of enterprise and
eventual self-sufficiency. This claim has yet to be proven in any substantial form. Moreover, the
attraction of women as a potential investment base is precisely because they are constrained by
socio-cultural norms regarding such concepts of obedience, familial duty, household
maintenance and passivity. The result of these norms is that while micro-lending may enable
women to improve their daily subsistence to a more steady pace, they will not be able to engage
in market-oriented business practice beyond a limited scope of low-skilled, low-earning,
informal work. Part of this is a lack of permissively in the society; part a reflection of the added
burdens of household maintenance that women shoulder alone as a result of micro financial
empowerment; and part a lack of training and education surrounding gendered conceptions of
economics. In particular, the shift in norms such that women continue to be responsible for all
the domestic private sphere labour as well as undertaking public economic support for their
families, independent of male aid increases rather than decreases burdens on already limited
persons.

If there were to be an exchange of labour, or if women's income were supplemental rather

than essential to household maintenance, there might be some truth to claims of establishing
long-term businesses; however when so constrained it is impossible for women to do more than

20
pay off a current loan only to take on another in a cyclic pattern which is beneficial to the
financier but hardly to the borrower. This gender essential zing crosses over from
institutionalized lenders such as the Grameen Bank into interpersonal direct lending through
charitable crowd-funding operations, such as Kava. More recently, the popularity of non-profit
global online lending has grown, suggesting that a redress of gender norms might be instituted
through individual selection fomented by the processes of such programs, but the reality is as yet
uncertain. Studies have noted that the likelihood of lending to women, individually or in groups,
is 38% higher than rates of lending to men.

This is also due to a general trend for interpersonal microfinance relations to be

conducted on grounds of similarity and internal/external recognition: lenders want to see
something familiar, something supportable in potential borrowers, so an emphasis on family,
goals of education and health, and a commitment to community all achieve positive results from
prospective financiers. Unfortunately, these labels disproportionately align with women rather
than men, particularly in the developing world. The result is that microfinance continues to rely
on restrictive gender norms rather than seek to subvert them through economic redress in terms
of foundation change: training, business management and financial education are all elements
which might be included in parameters of female-aimed loans and until they are the fundamental
reality of women as a disadvantaged section of societies in developing states will go untested.

2.2 Micro Enterprises:

Microfinance is an effective way for the economic active poor to increase their economic
security and thus reduce poverty. (Joseph N. Taiwo, P. O. Alege, & Felicia O.Olokoyo, 2016).

Internationally, most microenterprises are family businesses employing one or two persons.
These micro entrepreneurs operate microenterprises by choice. Most microenterprise owners are
primarily interested in earning a living to support themselves and their families.

The terms microenterprise and micro business have the same meaning, though
traditionally when referring to a small business financed by microcredit the term microenterprise
is used. Similarly, when referring to a small, usually legal business that is not financed by
microcredit, the term micro business is used.

21
 The concept of this paper is reduction in poverty through micro-finance. The term micro-
finance is already in use and declared as main poverty reduction tool. The concept of micro
enterprise and microfinance was pioneered in 1976 by Nobel Prize recipient Muhammad Younas,
founder of the Grameen Bank (Bank of the Poor), in Bangladesh. The bank was established for
the purpose of making small loans to the poor predominantly women to help them obtain
economic self-sufficiency. The fundamental principle behind the Grameen Bank is that credit is a
human right. This strategy was highly effective as the bank grew exponentially; from fewer than
15,000 borrowers in 1980, Grameen bank had 2.34 million members by 1998, 7.67 million at the
end of 2008, 97% of whom are women, and 9.4 million today (Sadik Hasan, 2002).

This paper advocates that Pakistan can use this concept for poverty reduction. This
technique is already functional and this paper will analyse the impact of micro-finance to poverty
reduction. Is it fully functional or there are some constraints?

The term micro enterprise refers to different entities and sectors depending on the
country. In Australia, it refers to a business with a single owner-operator, having up to 20
employees. The European Union EU defines "micro-enterprises" as those that meet two of the
following three criteria and do not fail to do so for at least 10 years, fewer than 10 employees,
and balance sheet total below EUR 2 million, Turnover below EUR 2 million.

In the United States, a different model is used, but the stated goals and core values are
similar. Here, a microenterprise is defined as a business with five or fewer employees. Many of
these businesses have no employees other than the self-employed owners. Additionally, such
microenterprises generally need less than $35,000 in loan capital and do not have access to the
conventional commercial banking sector. The basis of microenterprise in the U.S. is
entrepreneurship, recognizing a fundamental right of people to apply their individual talents,
creativity and hard work to better their lives.

Microenterprise programs, therefore, are built around the philosophy that the unique
ideas and skills of entrepreneurs and would-be entrepreneurs should be provided business
assistance and small amounts of credit to support the development or start-up of a small business,
primarily through the U.S. Small Business Administration. Most organizations in the field also
focus their services on those micro entrepreneurs who, as defined by federal government
standards, are low-to-moderate income. By definition, most of these entrepreneurs are minorities,

22
recent immigrants, women, disabled or for other reasons have special challenges that reduce their
ability to access traditional credit and other services.

2.3 Relationship of Micro-Credit and Basic Need

In this paper we use Micro Credit Loan as independent variable while the dependent
variables are Basic Needs, Education and Health Issues. In order to measure the impact we can
use questionnaire designed by National Rural Support Programme as Poverty Score Card as
research tool which is attached in the end. We can survey the clients of micro credit loan. On the
basis of severity of the response we can analyse the main statement of the research paper.

There is one of the absolute approaches for measuring poverty is basic need in developing
countries. This approach defines how many absolute resources necessary for living of common
man in terms of long term physical well-being in terms of consumption of goods. After finding
this limit of how much earning required to satisfy those needs we can discuss on poverty. The
term basic need was first introduced by International Labour Organizations World
Employment Conference in 1976. In this conference it was proposed the satisfaction of basic
human needs and undermining the other objectives of national and international development
policy.

After review traditional research paper, the immediate basic needs are food (including
water), shelter and clothing. The "Basic Needs" addressed in this report serve as the foundation
for other services that can lead to self-sufficiency. While there are a wide range of other services
and supports that may be essential for an individual to reach self-sufficiency, this assessment is
focused on meeting basic survival necessities. There are many other issues, such as child care,
affordable housing, education and job training, etc., which impact self-sufficiency, but are the
subject of other assessments. In addition, transportation needs and elder care are frequently
mentioned, but are not addressed sufficiently within the current issue areas. It is important to
note, however, that each of these needs are interrelated, and cannot be addressed without taking
into account the overall picture. There are many other issues, such as child care, affordable
housing, education and job training, etc., which impact self-sufficiency, but are the subject of
other assessments. In addition, transportation needs and elder care are frequently mentioned, but
are not addressed sufficiently within the current issue areas. It is important to note, however, that

23
each of these needs are interrelated, and cannot be addressed without taking into account the
overall picture.

In the development discourse, the basic needs model focuses on the measurement of what
is believed to be an eradicable level of poverty. Development programs following the basic
needs approach do not invest in economically productive activities that will help a society carry
its own weight in the future, rather it focuses on allowing the society to consume just enough to
rise above the poverty line and meet its basic needs. These programs focus more on subsistence
than fairness. Nevertheless, in terms of "measurement", the basic needs or absolute approach is
important. The 1995 world summit on social development in Copenhagen had, as one of its
principal declarations that all nations of the world should develop measures of both absolute
and relative poverty and should gear national policies to "eradicate absolute poverty by a target
date specified by each country in its national context.

The concept of poverty needs a clear and practical definition; it is still very much an ill-
defined concept. It often finds company with the terms such as deprivation, shortages,
backwardness, disempowerment, lack of development, lack of well-being, poor quality of life,
human suffering, and so on. But what exactly it means to be poor?

The traditional idea of poverty associates it with lack of sufficient money, so it tries to
measure poverty in terms of shortage of income. Taking forward the logic, the efforts for poverty
removal then revolve around eliminating unemployment which is connected with the economic
processes. It is a one-dimensional approach focused on income or lack of it.

Poverty researchers, in their efforts to quantify poverty, came up with the clearly tangible
idea of headcounts of the poor so that some number can be attached with poverty. This gave birth
to the concept of monetary poverty lines people with income below the poverty line came to be
labeled poor. Modern research demands concepts that can be converted into explicitly
measurable parameters. That certainly lead to simplification (often oversimplification) of the
concept on the paper, but the complexity of human life stays as it is. However, a lot of people
still see peoples well-being only in income terms.

If we try to follow the same logic, we can also come up with other one-dimensional ideas
of poverty. The poor also lack good health, so how about some benchmark (say food or nutrition
shortage) of health and then see peoples well-being only in terms of health parameter.

24
 They also lack education so another benchmark of poverty can be education level. They
also lack proper shelter, sanitation, clean water etc. In fact, each of these can provide a
benchmark, although they might not be as clear-cut as some income poverty line.

The truth is, the poor live deprived of most of these essentials of life at the same time. So,
no single dimensional parameter can ever satisfactorily describe the state of poverty. Human
well-being is a complex issue and is affected by many factors both material and non-material.
In fact, people's well being depends upon a plethora of factors that can be psychological, social,
cultural, political and environmental. Any oversimplified measure can provide convenience but
cant ever present the complete picture. It helps to the keep this fact in mind.

2.4 Relationship of Micro-Credit and Health Issues

Worldwide, 1.2 billion people live in extreme poverty. This means they may have little or
no access to safe housing, clean water, basic toilet facilities, or any health care. Educational
levels in poor areas are often low. Poor people have a shorter life expectancy than wealthier
people, and more mothers and children die in poor areas than in richer areas. Each year, 9.7
million children worldwide die before their fifth birthday.

Infectious diseases of all types are present in poor areas. Close contact among persons
sharing housing and limited sewage and waste treatment means that infections can spread more
easily, including infections spread by insects. Unsafe sex practices and prostitution spread
sexually transmitted diseases, including the human immunodeficiency virus (HIV). HIV is a
major health issue in all areas of the world, and the number of infected individuals has increased
rapidly in Asia, Africa, and the Americas.

Individuals living in poor areas often lack preventive health care or the means to manage
chronic diseases, even in developed countries. Children and adults who live in poverty may have
poor nutrition, including vitamin deficiencies and protein-calorie malnutrition, which can affect
mental functioning and physical health.

Education may not be available in poor areas of the world. If schools are available, many
children may not be able to attend because they must work to support themselves or their
families. Low literacy rates (number of persons who can read and write) and educational levels
contribute to poor health and to the cycle of poverty.

25
 The United Nations has created the Millennium Development Goals to reduce poverty
and improve health globally by 2015. The goals address many health-related issues, including
reducing extreme poverty, reducing child mortality, and improving maternal health, halting the
spread of HIV/AIDS, and providing universal education.

Poverty and poor health worldwide are inextricably linked. The causes of poor health for
millions globally are rooted in political, social and economic injustices. Poverty is both a cause
and a consequence of poor health. Poverty increases the chances of poor health. Poor health in
turn traps communities in poverty. Infectious and neglected tropical diseases kill and weaken
millions of the poorest and most vulnerable people each year.

The economic and political structures which sustain poverty and discrimination need to
be transformed in order for poverty and poor health to be tackled.

Marginalised groups and vulnerable individuals are often worst affected, deprived of the
information, money or access to health services that would help them prevent and treat disease.

Very poor and vulnerable people may have to make harsh choices knowingly putting their
health at risk because they cannot see their children go hungry, for example.The cultural and
social barriers faced by marginalised groups including indigenous communities can mean
they use health services less, with serious consequences for their health. This perpetuates their
disproportionate levels of poverty.

The cost of doctors fees, a course of drugs and transport to reach a health centre can be
devastating, both for an individual and their relatives who need to care for them or help them
reach and pay for treatment. In the worst cases, the burden of illness may mean that families sell
their property, take children out of school to earn a living or even start begging.

The burden of caring is often taken on by a female relative, who may have to give up her
education as a result, or take on waged work to help meet the households costs. Missing out on
education has long-term implications for a womans opportunities later in life and for her own
health.

Overcrowded and poor living conditions can contribute to the spread of airborne diseases
such as tuberculosis and respiratory infections such as pneumonia. Reliance on open fires or

26
traditional stoves can lead to deadly indoor air pollution. A lack of food, clean water and
sanitation can also be fatal.

2.5 Relationship of Micro-Credit and Education

Its hard to argue that poverty does not affect education. Its hard to argue that children
who come from homes where they may be wantingwanting for food, for time, or for resources
dont enter the school door with a little less than others. And its hard to argue that children
living in poverty and attending schools that are underfunded, under resourced, and understaffed
are not literally up against the system.

We have established a system where those who are poor are more likely to stay poor, and
lately we have seen a sharp increase in those considered poor. In fact, a recent research
bulletin from the Southern Education Foundation highlights that, as of this year, the majority of
public school children come from poverty. It is a well-documented fact that children from low-
income households are significantly less likely to be successful than their middle and upper class
counterparts. Studies have repeatedly shown that family income is one of the strongest predictors
available for measuring success, both in the classroom and later in life.

With fewer resources and less of a focus on education at home, children growing up in
poverty are behind from the very beginning. Household stresses from living in poverty build up
in the child, making it extremely difficult to concentrate on education.

Even if they are going to school regularly, children in poverty often fail to get an
adequate education due to the stress of destitution. Since they have such a difficult time in the
classroom, the kids fall into the poverty trap, in which their lack of education prevents any rise
on the social ladder.

Until recently, it was unclear exactly what biological process made that the case.
However, recent studies have pointed towards working memory as the key psychological factor
linking poverty and education, specifically in academic achievement. working memory is a
temporary storage mechanism that lets us hold information and facts in our head for short-term
usage and manipulation. The process of using working memory is central for reading, problem-
solving and learning new languages.

27
 A number of studies have shown that children with the best working memories also tend
to have the highest test scores and the best grades. Children in poverty consistently have a less
developed working memory than those above the poverty line.

With a dearth of educational resources in poor countries, an underdeveloped working

memory often goes unnoticed and untreated. This means that in addition to dealing with stress at
home, children in poverty also have trouble remembering basic facts and instructions at school.
Unable to stay on task, and struggling to keep up, their failure at school only adds to their stress
level.

Whats more, a study published in the Development Science journal showed that, Stress
in early childhood negatively affects a childs working memory in adulthood.

The problems for children in poverty become even bigger problems in their adult lives.
While a poor working memory for a child only means bad grades, it spells unemployment and
crushing poverty for an adult.

The answer must come well before adulthood. With properly trained educators, an
underdeveloped working memory can be easily spotted and rectified before it becomes a larger
problem.

The lack of a proper education makes up a major part of the poverty trap a
phenomenon in which people living in poverty cannot rise up due to scarce resources,
depression, lack of opportunity and other issues. The poverty trap can start before the child ever
enters the classroom, and it has long-term psychological consequences.

Even from early childhood, poverty can create both a biological obstacle and an
inescapable trap that collectively reduces the likelihood for academic and monetary success.

2.6 Model

The model of the research is based on poverty score card survey conducted by National
Rural Support Programme (Pakistan). In this paper my idea is based on this paper in order to
calculate the level of poverty of individual household.

In this paper we use Micro Credit Loan as independent variable while the dependent
variables are Basic Needs, Education and Health Issues. In order to measure the impact we can

28
use questionnaire designed by National Rural Support Programme as Poverty Score Card as
research tool which is attached in the end. We can survey the clients of micro credit loan. On the
basis of severity of the response we can analyse the main statement of the research paper.

Figure 2.1: Impact of micro credit loan on basic needs, children education and health issues

Basic Needs

Micro Credit Loan Children Education

Health Issues

2.7 Hypothesis

H1: There is direct relationship of micro credit loan on improvement of basic needs of
poors.

H2: There is direct relationship between micro credit loans and education

H3: There is direct relationship between micro credit and Health Issues

29
 CHAPTER 3

RESEARCH METHODOLOGY

3.1 Population of the Study:

Because the study is specifically designed for Micro Credit so the population of the study
is no. of borrowers of MFIs of twine cities of Pakistan. The men and women who belong to the
Community Organisations want and need credit for income generation. Without material
collateral, farmers, micro-entrepreneurs and home-based labourers have no way of accessing
affordable credit. Instead they must rely on money-lenders who often charge usurious rates of
interest. The MFIs provides credit for activities that generate revenue and build assets. The
majority of our clients need credit for agricultural inputs such as seed and fertilisers, so they can
increase their yields. Credit for livestock is also in high demand. A major sector that has been
increasing in importance over time is enterprise development in urban and rural areas. In a few
situations, when conditions have warranted it, we have provided credit to individuals for lift
irrigation, land-levelling and other productive infrastructure.

Credit alone is not enough to provide the opportunity to enhance incomes: we offer skill
development through vocational training and enterprise development training. In addition we
offer training in financial management, business development, natural resource management and
livestock management to our credit clients.

3.2 Sampling Technique:

In statistics, a simple random sample is a subset of individuals (a sample) chosen from a

larger set (a population). Each individual is chosen randomly and entirely by chance, such that
each individual has the same probability of being chosen at any stage during the sampling
process, and each subset of k individuals has the same probability of being chosen for the sample
as any other subset of k individuals. This process and technique is known as simple random
sampling, and should not be confused with systematic random sampling. A simple random
sample is an unbiased surveying technique.

30
3.3 Sample Size:

The sample size of the data will represent the whole population which will be gathered
randomly. Sample size will be 200-250 from twine cities of Pakistan.

3.4 Research Tools and Model:

In this paper primary data tool will be used for this study and questionnaire is adopted
from the poverty targeted survey of NRSP).

In this paper Poverty Score Card will be used to measure the poverty level of the
community. The questionnaire will be developed and will ask questions about impact of micro
credit on their basic needs, education of the children, and health issues of their family. The
questionnaire will be designed and distributed in three types of questions, first is about basic
need, second is education of their children and health issues of their family. The time for impact
has divided into two types, one is score of poverty score care before use of loan and other is
score after use of loan amount.

Table 3.1: Model for hypothesis

Use of Loan Level of satisfaction

Questions about basic need

Questions about Education of their children
Questions about health issue of their family

A statistical tool of percentage change will be used which will show impact from past to
the present condition of the micro-credit clients. In order to find the relationship of our
hypothetical problem formation, the following regression model is being used:

Model 1Impact of Micro-credit loan on Basic Needs

(Micro Credit Loan)= + 1 (Basic Need) +

Model 2Impact of Micro Credit Loan on Education of their children

31
 (Micro Credit Loan)= + 1 (Education of their children) +

Model 3Impact of Micro Credit Loan on Health Issues of their family

(Micro Credit Loan)= + 1 (Health Issues of their family) +

Model 4Impact of Micro-credit loan on Overall Poverty Score

(Micro Credit Loan)= + 1 (Basic Need) + 2 (Education of their children) + 3 (Health

Issues of their family) +

Here is the intercept and 1, 2 & 3 are coefficients in its unique condition.

After the survey, the results will be interpreted and we will show the impact by
acceptance or reject of p value of the hypothesis analysis.

3.4.2 Reliability:

In this paper the reliability will be tested trough test-retest. In this test we test twice
over a period of time to the same group of people and the results will be compared to each other
from Time 1 to Time 2. We will use correlation analysis for reliability and its results will
evaluated for stability over time period.

3.4.3 Inferential and Descriptive Statistics:

In this paper inferential and descriptive statistics tools will be used and there are four
main stages in doing research: designing a study, collecting the data, obtaining descriptive
statistics and perhaps performing some inferential statistics. Descriptive statistics summarise the
data, making clear any trends, patterns etc. which may be lurking within them; they consist of
visual displays such as graphs, and summary statistics such as means. Inferential statistics
attempt to make inferences about the parent population on the basis of the limited samples
actually obtained. The term inferential statistics is usually reserved for the various statistical tests
used for comparing two or more groups of subjects within an experiment, etc.

32
3.5 Correlation and Regression Analysis:

Correlation analysis will be used to strength of that relationship with available statistical
data. In this we will use statistical softwares like SPSS to determine whether a relationship
between two variables is present, and how strong it might be. In statistical modelling, regression
analysis will be used as a statistical process for estimating the relationships among variables. It
includes many techniques for modelling and analysing several variables, when the focus is on the
relationship between a dependent variable and one or more independent variables (or
'predictors').

33
 CHAPTER 4

DATA ANALYSIS AND INTERPREATION (TOOLS AND TECHNIQUES)

Reliability Test

For the reliability test Crobachs Alpha is being used. The resulting coefficient of reliability
ranges from 0 to 1 in providing this overall assessment of a measures reliability. If all of the
scale items are entirely independent from one another (i.e., are not correlated or share no
covariance), then = 0; and, if all of the items have high covariances, then will approach 1 as
the number of items in the scale approaches infinity. In other words, the higher
the coefficient, the more the items have shared covariance and probably measure the same
underlying concept.
Although the standards for what makes a good coefficient are entirely arbitrary and depend
on your theoretical knowledge of the scale in question, many methodologists recommend a
minimum coefficient between 0.65 and 0.8 (or higher in many cases); coefficients that are
less than 0.5 are usually unacceptable, especially for scales purporting to be unidimensional (but
see Section III for more on dimensionality).

Are the clients are satisfied after using loans for health issues, children education and basic
needs?

Reliability Statistics

Cronbach's
Alpha Based on
Cronbach's Standardized
Alpha Items N of Items

.716 .881 4

For this purpose we use SPSS software, after running reliability test we find that there is high
reliability between the three questions.

Frequency Distribution

34
 Statistics

Children
Loan Amount Education Health Issues Basic Needs

N Valid 200 200 200 200

Missing 0 0 0 0

Mean 6.3550 3.6150 4.0050 3.6600

Median 6.0000 4.0000 4.0000 4.0000

Mode 8.00 4.00 5.00 5.00

Std. Deviation 4.05229 1.28649 1.08205 1.24586

Loan Amount

Cumulative
Frequency Percent Valid Percent Percent

Valid 10000 12 6.0 6.0 6.0

20000 38 19.0 19.0 25.0

30000 11 5.5 5.5 30.5

40000 29 14.5 14.5 45.0

50000 2 1.0 1.0 46.0

60000 16 8.0 8.0 54.0

80000 41 20.5 20.5 74.5

100000 33 16.5 16.5 91.0

140000 9 4.5 4.5 95.5

160000 9 4.5 4.5 100.0

Total 200 100.0 100.0

35
 Children Education

Cumulative
Frequency Percent Valid Percent Percent

Valid Strongly Disagree 15 7.5 7.5 7.5

Disagree 36 18.0 18.0 25.5

Neutral 20 10.0 10.0 35.5

Agree 69 34.5 34.5 70.0

Strongly Agree 60 30.0 30.0 100.0

Total 200 100.0 100.0

Health Issues

Cumulative
Frequency Percent Valid Percent Percent

Valid Strongly Disagree 3 1.5 1.5 1.5

Disagree 24 12.0 12.0 13.5

Neutral 26 13.0 13.0 26.5

Agree 63 31.5 31.5 58.0

Strongly Agree 84 42.0 42.0 100.0

Total 200 100.0 100.0

Basic Needs

Cumulative
Frequency Percent Valid Percent Percent

Valid Strongly Disagree 7 3.5 3.5 3.5

Disagree 45 22.5 22.5 26.0

Neutral 23 11.5 11.5 37.5

Agree 59 29.5 29.5 67.0

Strongly Agree 66 33.0 33.0 100.0

Total 200 100.0 100.0

36
Descriptive Statistics

Descriptive Statistics

Mean Std. Deviation N

Loan Amount 6.3550 4.05229 200

Children Education 3.6150 1.28649 200

Health Issues 4.0050 1.08205 200

Basic Needs 3.6600 1.24586 200

Regression Analysis:

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate

1 .803a .645 .639 2.43233

a. Predictors: (Constant), Basic Needs, Children Education, Health

Issues

The R value represents the simple correlation and is 0.803 (the "R" Column), which
indicates a high degree of correlation. The R2 value (the "R Square" column) indicates
how much of the total variation in the dependent variable, Loan Amount can be

37
explained by the independent variable, Basic Needs. In this case, 64.5% can be
explained, which is very large.

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) -3.397 .744 -4.566 .000

Children Education -.890 .290 -.282 -3.067 .002

Health Issues .655 .224 .175 2.926 .004

Basic Needs 2.827 .307 .869 9.207 .000

a. Dependent Variable: Loan Amount

Hypothesis Test:

Model 1 Impact of Micro Credit Loan on Basic Need

In this paper we analyse impact of micro credit loan on basic need and have following results
which shows significant relationship as given below:

Null hypothesis: - There is no association between loan amount and basic need.

Alternative hypothesis: There is an association between loan amount and basic need.

Significance level: = .05

Interpretation: Since the Sig = 0.000 is less than = .05, the relationship is significant so null
hypothesis is rejected. So it is inferred that there is a difference between location of loan amount
used and meeting the basic need of a common man.

Model 2 Impact of Micro Credit Loan on Children Education

In this paper we analyse impact of micro credit loan on children education and have following
results which shows significant relationship as given below:

38
Null hypothesis: - There is no association between the loan amount and level of satisfaction of
their children

Alternative hypothesis: There is an association between the loan amount and level of
satisfaction of their children

Significance level: = .05

Interpretation: Since the Sig = 0.002 is less than = .05, the relationship is significant so null
hypothesis is rejected. So it is inferred that there is a difference between location of loan amount
used and meeting the children education of a common man.

Model 3 Impact of Micro Credit Loan on Health Issues

In this paper we analyse impact of micro credit loan on health issues and have following results
which shows significant relationship as given below:

Null hypothesis: - There is no association between the loan amount and level of satisfaction of
their children

Alternative hypothesis: There is an association between the loan amount and level of
satisfaction of their children

Significance level: = .05

Interpretation: Since the Sig = 0.004 is less than = .05, the relationship is significant so null
hypothesis is rejected. So it is inferred that there is a difference between location of loan amount
used and meeting the health issues of a common man.

39
40
 CHAPTER 5
CONCLUSION
5.1 Findings

The data analysis and interpretation has raised many findings which are described below:

1. Outreach of Microfinance Clients: The rural clients are much outreached and were not
easy to be accessed. For this purpose there was different micro-credit financial
institutions were accessed and got help. There were two type of survey included
questionnaire based and interviews. People were very not able to express their
difficulties.

2. Gender based Survey: In this survey it was particularly observed that there were 55%
male participated and 45% female participated. In the rural areas female are working with
males and they make their business on regular basis.

3. It was observed that most of the micro entrepreneur is young and working more
efficiently than old entrepreneurs. They have adopted innovative techniques. For this
purpose they require investment. Microfinance programme has supported very well for
this purpose. So they were successful in this matter.

4. Vital Role of Micro-Enterprise: The research shows that micro-finance has played vital
role for micro-enterprises. All the hypothesis that were created have results in the favour
of relationship between micro-finance and micro-enterprise development

5. Repeat Loan: Due to success of the micro-finance programme, people have got
repeatedly loans and repaid the amount and succeeded in their business. They have
promoted their business.

6. Reason of Taking Loans: It was found that all of the micro-finance organizations have
restricted their client for micro-enterprise development but there are few cased other than
above stated purpose. There are many skilled people who want to venture into the market
and they have succeeded.

41
 7. Role of education and skill in the success of the entrepreneurs: It matters at very high
success rate for most of the entrepreneurs who are educated and have unique skill for
their business. They can communicate very well and have qualities in their products.

8. Micro-Credit and Children Education Expenditure: It was observed that due to success in
their business their expenditure for children education was met and people were satisfied
for their children in terms of their education.

9. Health Issues and Micro-Credit Loan: For this purpose most of the people were not
satisfied before micro-credit loan facility. Now due to introduction of micro-insurance
programme people are very happy. It should be noted that most of MFIs have merged
micro-credit with micro-finance programme. In this way people have automatic facility to
meet the medical expenditures.

5.2 Conclusion

It is concluded that micro-enterprises have despite need of micro-finance to survive and to meet
the expenditures of their entrepreneurs for basic need, health issues and their children education.
The results presented above have shown that the rural clients that are outreached and were not
easy to be accessed have much importance for MFIs because people were very not able to
express their difficulties. In this survey it was particularly observed that there were 55% male
participated and 45% female participated. In the rural areas female are working with males and
they make their business on regular basis. It was observed that most of the micro entrepreneur is
young and working more efficiently than old entrepreneurs. They have adopted innovative
techniques. For this purpose they require investment. Microfinance programme has supported
very well for this purpose. So they were successful in this matter. The research shows that micro-
finance has played vital role for micro-enterprises. The entire hypothesis that was created has
results in the favour of relationship between micro-finance and micro-enterprise development.
Due to success of the micro-finance programme, people have got repeatedly loans and repaid the
amount and succeeded in their business. They have promoted their business. It was found that all
of the micro-finance organization has restricted their client for micro-enterprise development but
there are few cased other than above stated purpose. There are many skilled people who want to
venture into the market and they have succeeded. It matters at very high success rate for most of

42
the entrepreneurs who are educated and have unique skill for their business. They can
communicate very well and have qualities in their products. It was observed that due to success
in their business their expenditure for children education was met and people were satisfied for
their children in terms of their education. For this purpose most of the people were not satisfied
before micro-credit loan facility. Now due to introduction of micro-insurance programme people
are very happy. It should be noted that most of MFIs have merged micro-credit with micro-
finance programme. In this way people have automatic facility to meet the medical expenditures.

5.3 Recommendations

Due to deep survey and thorough research the study is able to reach following recommendations:

1. Need for MFIs to build strategy for Outreach Areas and People: It was observed that
people are not able to communicate and not able to express their issues so the MFIs
should create new programmes for outreach areas.

2. More Female Participation is recommended: In this survey it was particularly observed

that there were more male participated than female participation. In the rural areas female
are working with males and they make their business on regular basis. There is more
vacuum available for female for the participation in micro-enterprise programme.

3. Skilled Programmes and Trainings Required for Successful Entrepreneurship: There is

desperate need for skilled programmes to be implemented in the rural areas for
innovative business creation.

4. Micro-Enterprise vs Micro-Finance Programme: Micro-Finance Programme is the base

for micro-enterprises development. So the MFIs should create new programmes for
newly established micro-enterprises.

5. Revised Strategy Required for Repeat Loan: The MFIs should state new strategy for
repeat loans and analysis previous practice of the clients. To monitor MFIs clients
organization should establish level of success of Micro-Enterprises.

6. MFIs should introduce new policies for Children Education Insurance Programme.
People should create their relationship with these Insurance Programme.

43
7. MFIs should also create new programme for outstanding students.

8. Health Issues and Micro-Credit Loan: There are few micro-insurance programmes
introduced by the MFIs but for the emergency issues there is no help. So the MFIs also
introduces emergency health insurance programme.

44
Annex 1:

Age: Gender:

5 = Strongly Agree, 4 = Generally Agree, 3 = Neutral 2= Generally Disagree, 1 = Strongly Disagree, N/A = Not Applicable

Sr.
Questionnaire 1 2 3 4 5
No.
Micro-Credit

1. Does micro-credit loan plays a vital role in poverty Alleviation?

2. How many times you have received loan amount?

3. How much you received amount as a loan?

4. Micro-Credit Loan is a real hope for rebuilding of life?

5. What was the reason of taking loan?

Education

6. Does your education help you to come out from poverty?

Does micro-credit loan helped you to cover your educational
7.
expenditure?
Can you easily pay the fees of your children after expanding your
8.
business?
Health Issue
Before this loan, were you satisfied with health issues of your
9.
family?
Is your familys health problems solved after expanding your
10.
business?
11. Can you consult doctor in health emergency of your family?

12. Is your familys nutritions requirement achieved?

Basic Need

45
 Before using micro-credit facility, were you satisfied with basic
13.
needs?
14. Do you have your own house?

15. Do you have sufficient food for your family for entire year?

16. Can you bear expenditures of clothes for your family?

17. Do you have wash room in your house?

46
Annex 2: Summary of Results on the Basis of Loan Amount vs Basic Need, Health
Issues and Children Education

Level of Level of Level of

Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)

1 0 - 2 1 3

2 4 80,000 5 5 5

3 2 40,000 4 4 4
1
4 5 00,000 5 5 5

5 1 20,000 3 3 3
1
6 5 00,000 5 5 5
1
7 8 60,000 5 5 5

8 0 - 1 1 2

9 2 40,000 4 4 4

10 1 20,000 2 2 2

11 4 80,000 4 5 4

12 4 80,000 4 4 5

13 3 60,000 4 5 4
1
14 5 00,000 5 5 5

15 0 - 2 1 3

16 4 80,000 5 5 5

17 2 40,000 4 4 4
1
18 5 00,000 5 5 5
19 1 3 3 3

47
 Level of Level of Level of
Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)
20,000
1
20 5 00,000 5 5 5
1
21 8 60,000 5 5 5

22 0 - 1 1 2

23 2 40,000 4 4 4

24 1 20,000 2 2 2

25 4 80,000 4 5 4

26 4 80,000 4 4 5

27 3 60,000 4 5 4
1
28 5 00,000 5 5 5

29 2 40,000 4 4 4

30 4 80,000 4 4 4
1
31 7 40,000 5 5 5

32 0 - 2 1 1

33 0 - 1 1 2

34 1 20,000 3 2 3

35 0 - 2 1 1

36 1 20,000 3 3 2

37 3 60,000 4 3 4

38 4 80,000 4 5 4

39 4 80,000 4 4 5
40 3 4 5 4

48
 Level of Level of Level of
Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)
60,000
1
41 5 00,000 5 5 5

42 2 40,000 4 4 4

43 4 80,000 4 4 4
1
44 7 40,000 5 5 5

45 0 - 2 1 1

46 0 - 1 1 2

47 1 20,000 3 2 3

48 0 - 2 1 1

49 1 20,000 3 3 2

50 3 60,000 4 3 4

51 4 80,000 4 4 5

52 3 60,000 4 5 4
1
53 5 00,000 5 5 5

54 2 40,000 4 4 4

55 4 80,000 4 4 4
1
56 7 40,000 5 5 5

57 0 - 2 1 3

58 4 80,000 5 5 5

59 2 40,000 4 4 4
1
60 5 00,000 5 5 5
61 1 3 3 3

49
 Level of Level of Level of
Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)
20,000
1
62 5 00,000 5 5 5
1
63 8 60,000 5 5 5

64 0 - 1 1 2

65 2 40,000 4 4 4

66 1 20,000 2 2 2

67 4 80,000 4 5 4

68 4 80,000 4 4 5

69 3 60,000 4 5 4
1
70 5 00,000 5 5 5

71 2 40,000 4 4 4

72 4 80,000 4 4 4
1
73 7 40,000 5 5 5

74 0 - 2 1 1

75 0 - 1 1 2

76 1 20,000 3 2 3

77 0 - 2 1 3

78 4 80,000 5 5 5

79 2 40,000 4 4 4
1
80 5 00,000 5 5 5

81 1 20,000 3 3 3
82 5 1 5 5 5

50
 Level of Level of Level of
Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)
00,000
1
83 8 60,000 5 5 5

84 0 - 1 1 2

85 2 40,000 4 4 4

86 1 20,000 2 2 2

87 4 80,000 4 5 4

88 4 80,000 4 4 5

89 3 60,000 4 5 4
1
90 5 00,000 5 5 5

91 2 40,000 4 4 4

92 4 80,000 4 4 4
1
93 7 40,000 5 5 5

94 0 - 2 1 1

95 0 - 1 1 2

96 1 20,000 3 2 3

97 0 - 2 1 1

98 0 - 2 1 3

99 4 80,000 5 5 5

100 2 40,000 4 4 4
1
101 5 00,000 5 5 5

102 1 20,000 3 3 3
103 5 1 5 5 5

51
 Level of Level of Level of
Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)
00,000
1
104 8 60,000 5 5 5

105 0 - 1 1 2

106 2 40,000 4 4 4

107 1 20,000 2 2 2

108 4 80,000 4 5 4

109 4 80,000 4 4 5

110 3 60,000 4 5 4
1
111 5 00,000 5 5 5

112 2 40,000 4 4 4

113 4 80,000 4 4 4
1
114 7 40,000 5 5 5

115 0 - 2 1 1

116 0 - 1 1 2

117 1 20,000 3 2 3

118 0 - 2 1 1

119 1 20,000 3 3 2

120 3 60,000 4 3 4

121 0 - 2 1 3

122 4 80,000 5 5 5

123 2 40,000 4 4 4
124 5 1 5 5 5

52
 Level of Level of Level of
Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)
00,000

125 1 20,000 3 3 3
1
126 5 00,000 5 5 5
1
127 8 60,000 5 5 5

128 0 - 1 1 2

129 2 40,000 4 4 4

130 1 20,000 2 2 2

131 4 80,000 4 5 4

132 4 80,000 4 4 5

133 3 60,000 4 5 4
1
134 5 00,000 5 5 5

135 2 40,000 4 4 4

136 4 80,000 4 4 4
1
137 7 40,000 5 5 5

138 0 - 2 1 1

139 0 - 1 1 2

140 1 20,000 3 2 3

141 0 - 2 1 1

142 1 20,000 3 3 2

143 3 60,000 4 3 4

144 0 - 2 1 3
145 4 5 5 5

53
 Level of Level of Level of
Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)
80,000

146 2 40,000 4 4 4
1
147 5 00,000 5 5 5

148 1 20,000 3 3 3
1
149 5 00,000 5 5 5
1
150 8 60,000 5 5 5

151 0 - 1 1 2

152 2 40,000 4 4 4

153 1 20,000 2 2 2

154 4 80,000 4 5 4

155 4 80,000 4 4 5

156 3 60,000 4 5 4
1
157 5 00,000 5 5 5

158 2 40,000 4 4 4

159 4 80,000 4 4 4
1
160 7 40,000 5 5 5

161 0 - 2 1 1

162 0 - 1 1 2

163 1 20,000 3 2 3

164 0 - 2 1 1

165 1 20,000 3 3 2
166 3 4 3 4

54
 Level of Level of Level of
Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)
60,000

167 0 - 2 1 3

168 4 80,000 5 5 5

169 2 40,000 4 4 4
1
170 5 00,000 5 5 5

171 1 20,000 3 3 3
1
172 5 00,000 5 5 5
1
173 8 60,000 5 5 5

174 0 - 1 1 2

175 2 40,000 4 4 4

176 1 20,000 2 2 2

177 4 80,000 4 5 4

178 4 80,000 4 4 5

179 3 60,000 4 5 4

180 0 - 2 1 3

181 4 80,000 5 5 5

182 2 40,000 4 4 4
1
183 5 00,000 5 5 5

184 1 20,000 3 3 3
1
185 5 00,000 5 5 5
1
186 8 60,000 5 5 5
187 0 1 1 2

55
 Level of Level of Level of
Total Loan
No. of Satisfaction for Satisfaction for Satisfaction for
Amount
Sr. No. Loans their children their Family their Basic
Received
Taken education (Avg Health Issues Needs (Avg
(PKR)
Score) (Avg Score) Score)
-

188 2 40,000 4 4 4

189 1 20,000 2 2 2

190 4 80,000 4 5 4

191 4 80,000 4 4 5

192 3 60,000 4 5 4
1
193 5 00,000 5 5 5

194 2 40,000 4 4 4

195 4 80,000 4 4 4
1
196 7 40,000 5 5 5

197 0 - 2 1 1

198 0 - 1 1 2

199 1 20,000 3 2 3

200 0 - 2 1 1

56
Annex 3: List of Micro-Finance Banks

Khushhali Bank Limited

NRSP Microfinance Bank

Apna Microfinance Bank Ltd

FINCA Microfinance Bank Limited

Mobilink Microfinance Bank Limited

Pak-Oman Microfinance Bank Ltd

Telenor Microfinance Bank Limited(TMFB)

The First Microfinance Bank Ltd(FMFB)

Sindh MicroFinance Bank Ltd (SMFB)

U Microfinance Bank Limited

Advans Pakistan Microfinance Bank Limited

57
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59