The Microfinance Paradigm: Poverty Alleviation and Economic Empowerment (A Case Study of Bahawalpur Division)

Abstract

The focus of this study is mainly on impact of microfinance on poverty alleviation and economic empowerment as well as on the effectiveness of economic, social and institutional factors in manipulating the role of microfinance. It also investigates the impact of different microfinance models and gender differential on poverty alleviation and economic empowerment in the prospective of microfinance. It is a primary data research conducted in the Bahawalpur division, Pakistan. The study employed the tool developed in collaboration by Assessing the Impact of Microenterprise Services (AIMS) and Small Enterprise Education and Promotion network (SEEP). The tool has been modified in the local context. Like all the AIMS studies, the present study also used the group of incoming clients as the comparison group in order to deal selection bias. The sample consists of 1524 respondents, out of which 773 are established clients (treatment group ) and 751 are incoming ones (control group), belonging to different microfinance providers of Pakistan that are NRSP, AKHU, FMFB, KASHF, KB, NRSP-B, TMFB. Data has been collected through face to face structured interviewing using a questionnaire. Independent Sample T-Test, Logit and Multiple regression have been used for analysis. The main findings of the study are that microfinance alleviates poverty as the net difference of 23 percent between both groups with respect to category ‘non-poor’ can be attributed to participation in microfinance programmes, however it does not reach the poorest of the poor, as microfinance providers mostly targeted the moderate poor. The results show that participation to microfinance programme has negative effect on poverty status of borrowers, and substantial positive effect on income, food security, housing, household assets, household saving and decision making empowerment of borrowers. However its effect on education of children, household health, productive assets and employment presents a mix picture. Because microfinance has been found to have a strong positive impact on some indictors of these variables while very minute positive impact or even no impact on some other indicators. Female mature clients have been found poorer than male ones. However they have been found more conscious about quality of housing, education of children and household health as compared to male clients. Only 14 percent of female clients take the decision themselves about use of microloan. It has been found that economic wellbeing and economic empowerment of borrowers after availing microfinance is positively affected by consumer protection, education of borrowers, experience, business training, number of employed persons, length of membership, relation to household head, area and family reaction to business activity but negatively by diversion of loan, interest rate, age of the borrowers and number of dependents. It also has been found that gender does not matter in determining the role of microfinance in alleviating poverty and enhancing economic empowerment; however microfinance modelling matters in this connection.