ROLE OF MICRO CREDIT IN POVERTY ALLEVIATION

Amina Mushtaq

Submitted in partial fulfillment of the requirement for the degree of Master

of Business Administration

at

National University of Modern Languages Islamabad, Pakistan 2008

ACKNOWLEDGEMENT

I gratefully acknowledge the contribution of the residents of Muslim Colony, Dhok

Kala Khan, Tehmaspabad and Shakrial who warmly provided me the opportunity to

know about their lives. I am thankful to my supervisor Madam Fareeha for her

constant encouragement and supervision.

Executive Summary

The study tries to look at the impact of micro credit on the lives of the poor people.

There are different views on micro credit as a powerful development tool regarding its

success in developing the lives of the poor and some times these views are

contradictory. However poverty is a global issue; it is a problem that even the

wealthiest nation is facing. In this scenario country like Pakistan is facing a great

challenge to alleviate or reduce poverty because poverty is becoming cause of many

problems like suicides, illiteracy, unemployment, diseases like depression, stress etc.

In order to control these diseases first we have to control poverty. At government

level and also at international level many strategies are made every day to control

poverty. But now Dr. Younis gave a formula of micro credit that successfully worked

in Bangladesh and is now replicated all over the world and also in Pakistan so; the

purpose of the study was to observe that what role micro credit plays in Pakistan in

poverty alleviation.

The study was conducted in four urban slum areas of Rawal pindi and Islamabad that

are Muslim Colony, Dhok Kala Khan, Tehmaspabad and Shakrial. Those people are

targeted who have taken micro credit so that the comparison of living standard before

and after use of micro credit can be made and hence it can be seen that, if there is any

improvement in their living standard after using micro credit or not. The study was

based on questionnaires which were distributed after translating it into Urdu so that

respondents can easily understand it and fill it accordingly. Sample for this survey

was 200 with 50 respondents per area. The dependent variable taken in this study is

poverty reduction where as independent variable is micro credit and moderating

variable is political environment.

Some of the factors that show poverty reduction are Training and education, clean

water and hygienic environment, nutrition and adequate food, accommodation,

income and savings.

Overall we can say that training and education, clean water and hygienic environment,

nutrition and adequate food, accommodation, income and savings are important

factors of poverty reduction. Because when a person has training and education he can

improve his living standard, if a person has clean drinking water and adequate food he

will be healthy and can earn in a better way for his family, if his accommodation is

better and enough for family members and strong enough for natural disasters he can

live in a better way. And obviously if his earning is good and enough for family he

can also provide recreational activities to his children and can also afford uncertain

expenses such as sudden guest etc and can also do savings for future, then all these

things points towards a good life, a life with a good living standard and a life above

poverty line. So; all above mentioned factors plays an important role in poverty

reduction.

From data analysis it is concluded that the micro credit program is effective in giving

un employed people employment such as taxi driver, shop keeper etc and to meet

short term needs such as return debt taken from some one else, paying fee, operation,

treatment of disease etc. Mostly borrowers of Muslim colony, Dhok Kala Khan,

Shakrial and Tehmaspabad have used micro credit to purchase taxi, sewing machine

and opening small shop and improving accommodation.

But micro credit system is not the perfect one; it is not a replacement for jobs that are

not there and skills that do not exist. Important thing is to make them financially

stable, to bring them out of the poverty line and to make them able to sustain their

position and improve living condition instead of returning back to the poverty line. It

can be done in this way that micro credit institutions can make contract with driving

centers that can giving training to those people who don’t know driving on half rate,

contracts with boutiques can be made, contracts with BATA and Unilever can be

made. In those areas where BATA do not have outlet, a person can take micro credit

purchase BATA shoes and can sell them in his area. Similar contract can be made with

Unilever.

CHAPTER: 1 INTRODUCTION

1.1 Role of micro credit in poverty alleviation

Micro credit Programs extend small loans to very poor people for self

employment projects that generate income for their survival, allowing them to

care for themselves and their families. Developed over the past twenty years,

micro credit is now considered as one of the most effective tools that we used

to fight poverty. It is not charity, but investment, and to understand it we need

to look at poverty in the world today.

Poverty is a global issue. Despite changes in development paradigms in the

last half of the 20th century, the promise to bring wellbeing to all human being

remained unfulfilled. As it stands, more than 100 million children of primary

school age have never stepped inside a class room, about 29000 children die

each day from largely preventable malnutrition and disease and more than 1.2

billion people in the world are struggling to survive at the margin of human

existence “on under a dollar a day”. Poverty is the problem for all the countries

irrespective of their level of development. It can be observed in many forms. It

has both income and non income dimensions. It may be a lack of income or

resources, a lack of coping capacity, a lack of basic human capabilities, a lack

of institutional defenses or in extreme cases a lack of all of these. In a wider

sense, it may be a combination of economic, social and political deprivations.

In consideration of poverty line, people in each country can broadly be divided

into two categories namely poor and non poor. The non poor are living above

and the poor are living below the poverty line. The poor may be divided into

destitute (Bottom 10 percent below the poverty line), extreme poor (those in

the bottom 10 to 50 percentile of households below the poverty line), and

moderate poor (those top 50 percent of households living below the poverty

line are moderate poor). A further category of vulnerable non poor may also

be recognized who may slip into category of poor anytime.

The tool that is being used today in order to alleviate poverty is micro finance.

The main purpose of microfinance is to break the vicious circle of ‘low

income low investment-low profit’ by inserting capital from outside into the

economic life of poor people. According to Adam Smith “Money, says the

proverb, makes money. When you have got a little, it is often easy to get more

and the great difficulty is to get the little” (Adam Smith, 1937, 93).

Microfinance provides “the little” money where even there is total absence of

capital or profit as living is based on subsistence only. Thus microfinance

seeks to improve the condition of the poor by raising income and profit,

thereby making people free from poverty and improving living standard.

Its key feature is bringing the bank (money/capital) to the poor where

traditional banking system does the opposite and involves a lot of bureaucratic

complications and hidden costs like travel cost and sometimes bribing the

bank officials. Local moneylenders charge a very high 10 to 20 percent per

month, depending on the seasonal condition and region.

First started as an experimental project by Dr. Muhammad Yunus in a village

named Jobra, near Chittagong University (where he was a professor of

economics), in the late 1970s, the idea now grown all over the world. The

micro credit program was first initiated in 1976 with the promise of providing

credit to poor people without collateral, alleviating poverty and unleashing

human creativity and endeavor of poor people. Professor Yunus wanted to see

poverty in the museum in future. In his speech at the micro-credit summit in

Washington D.C. in 1997, he compared his dream to eradicate poverty

completely from this world with the dream of people to fly 100 years ago. He

mentioned that Wright brothers in 1903, in their first successful attempt, could

stay in the air only 12 seconds and fly only 120 feet. But, only after 65 years

of the first successful attempt of Wright brothers, people in this world are able

to go to moon and can also successfully able to come back in this world.

Professor Yunus compared his dream, complete eradication of poverty from

this world, with the Wright brothers’ attempt to fly and the following success

in flying and aviation. He mentioned that he would also be able to go to his

moon, Poverty free world, in 55 years time through the micro credit program

(Yunus, 1997).

In current overview it has been able to gain huge popularity, both in number of

clients and organizations using microfinance, and in rate of loan return.

Where the traditional banks did not considered the poor as loan worthy

because of the uncertainty of their returning ability, Grameen Bank (the largest

micro credit organization of Bangladesh and joint winner of the Nobel Peace

Prize) has claimed around 99% returning rate. It is interesting to note that the

main borrowers of this money are women and this is a policy decided by the

Bank. Women are regarded as more trustworthy and able to deal with money

more skillfully than men and this in turn has lead to their empowerment. The

high rates of loan return have helped microfinance organizations like the

Grameen Bank to become self-reliant (not depending on the donors any more)

and bring a lot of people out from the national poverty level (Yunus, 2006).

In Pakistan poverty has many dimensions. The poor in Pakistan have not only

low income but they also lack access to basic needs such as education, health,

clean drinking water and proper sanitation. The latter undermines and limits

their capabilities, limits their opportunities to secure employment, results in

their social exclusion and exposes them to exogenous shocks. Then the vicious

cycle of poverty is accentuated when government structures exclude the most

vulnerable from the decision making process.

In an era where poverty and unemployment have been growing, globally and

in Pakistan in particular, perhaps due to the policies and programs, which

collectively define globalization, public and non-governmental processes have

set upon themselves the task of reducing poverty and enhancing employment

and the quality of life of the poor.

Currently in Pakistan, a variety of institutions ranging from NGOs to private

and government sponsored rural support programs are delivering microfinance

services to the poor. Two Commercial banks i.e. First Women Bank and Bank

of Khyber are also providing lines of credit for the microfinance sector.

In Pakistan, the poor usually acquire loans from informal sources. Lack of

income and resources force them to take loans to meet basic necessities of life

and the hurdle of collateral leave them at the mercy of the informal avenues.

It is recognized that people living in poverty are innately capable of working

their way out of poverty with dignity, and can demonstrate creative potentials

to improve their situation when an enabling environment and the right

opportunity exists. It has been noted that in many countries of the world,

micro-credit Programs, provide access to small capitals to people living in

poverty (Ahmed, 2000).

1.2Broad Problem area

The greatest challenge that developing countries like Pakistan is facing is

POVERTY. Majority of population in Pakistan is living below poverty line.

This poverty is becoming cause of several problems like suicides, crimes,

depression etc in order to control these problems poverty has to be controlled,

for this purpose many strategies at government level and international level

are made every day. Purpose of this study is basically to see how micro credit

customers believe that micro credit has changed their lives. In Pakistan many

micro credit institutions are providing micro credit facilities. So; in this paper I

tried to see how micro credit institutions are affecting consumer’s living

standard.

1.3 Problem Statement

Problem statement is also often referred to, is a clear, precise and succinct

statement of the question or issue that is to be investigated with the goal of

finding an answer or solution.

Here in this study problem statement is:

Impact of micro credit on poverty alleviation

1.4 Research Objective

The main purpose of the study is to understand the success rate, and the social

and economical change created by micro finance among the poor. I found that

the issue may be approached from two different angles. Firstly from the

clients’ perspective, that is how the poor people involved with micro credit

judge the impact of it in their lives and what their understanding of

development gained by it is. It can also be approached from the perspectives

of the organizations working with micro credit, how they see the impact of

micro credit on these people’s lives and how they look at their achievement.

My objective here is to understand the situation of the client’s perspective,

how they perceive micro credit and how micro credit is changing their lives.

With this I also tried to observe the outreach, success and sustainability of

micro credit program for the poor. I put my emphasis on this approach to

know the situation from the perspective of the poor people because I think the

solution should come from those people whose lives are to be changed. They

are the one who can and should show how they want to change their lives and

what problems should be solved in order to achieve development.

1.5 Motivation for the studyInequality is increasing around the world while the world appears to come

closer due to phenomenon of globalization. Even the wealthiest nation has the

largest gap between rich and poor. In such scenario countries like Pakistan is

facing a great challenge in the form of poverty because by the time gap

between rich and poor is increasing day by day. Majority of population of

Pakistan is living at poverty line or below poverty line. According to a survey

about five million households in the country are living below poverty line.

This poverty is also becoming cause of many problems that are prevailing in

our society such as crimes, suicides, illiteracy, unemployment and diseases

like depression, anxiety, stress and many more.

In order to control these problems, first poverty should be controlled. At

government level, many strategies are made every day, world bank and

International monetary fund is also working for this purpose but now Dr.

Younis gave such a wonderful idea to alleviate poverty that really works in

Bangladesh, and is now working all over the world i-e Micro Credit.

So; I decided to study what is the Role of Micro Credit in Poverty Alleviation.

1.6 Significance of the study

Study results would be useful

In policy formulation and decision making in respect of government micro

credit.

To Government departments implementing micro credit programs.

Contribute to existing body of literature and form a basis for further research.

1.7 Transmission Mechanism of Micro credit to Poverty Alleviation

Micro creditTarget poorest segment of society

Increase in employment

Rise in income level

Better nutrition

Increase in training and education

Improvement in accommodation

Increase in savings

Improvement in living standard

Increase in consumption of goods and servicesAggregate demand increases

Increase in investment and employment opportunitiesAggregate supply increases

Economy grows and poverty declines

1.8 Type of Investigation

There are three types of investigations

Casual

Correlation

Group references

1.8.1 Casual Casual way is that in which researcher wants to delineate the cause of one or

more problems.

1.8.2 CorrelationCorrelation is that way in which researcher is interested in delineating the

important variables associated with the problem.

This study “Role of micro credit in poverty alleviation” is correlational study.

1.8.3 Group ReferencesThis method includes ranks smaller, greater.

1.9 Extent of Researcher interference with the study

The extent of interference by the researcher with the normal flow of work at

the workplace has a direct bearing on whether the study undertaken is casual

or correlational. A correlational study is conducted in the natural environment

of the work place with minimum interference by the researcher with the

normal flow of work. Though there is some disruption to the normal flow of

work in the system as the researcher administers questionnaires at the work

place, the researcher’s interference in the routine functioning of the system is

minimal as compared to that caused during causal studies.

This study is correlational study because my interference in respondents’

routine life was less as I just asked them to fill questionnaire.

1.10 Hall marks of scientific study

This study is scientific study as it possess eight hallmarks or eight main

distinguishing characteristics explained below

1) Purposiveness

2) Rigor

3) Testability

4) Replicability

5) Precision and confidence

6) Objectivity

7) Generalizabilty

8) Parsimony

1.10.1 Purposiveness

Purposiveness basically means that study should have definite aim and

purpose. Here in this study purpose is to study the Role of micro credit in

poverty alleviation.

1.10.2 Rigor

Rigor means that the study should have a good theoretical base and a sound

methodological design. This study also has a sound theoretical frame work.

Variables taken in this study are explained below

The dependent variable in this study is Poverty reduction.

Independent variable in this case is Micro Credit.

The moderating variable has a contingent effect on the independent and

dependent variables relationship. In this study environment is a

Moderating Variable.

Environment is taken in a sense that it covers Political environment, it

means that what are the government strategies to reduce poverty and to

improve living standard of its people. What are the banks policies to

reduce poverty, what is the interest rate? What are the conditions on which

bank is lending loan to people, are conditions acceptable by people, are

conditions affordable by people?

1.10.3 Testability

Collected data is statistically analyzed by using percentage, frequency, range,

mean and standard deviation. Hypothesis formed are then statistically tested to

come to know whether hypothesis is accepted or rejected.

1.10.4 Replicability

Replicability means that research conducted on this topic with these variables

should give same results again and again. In discussion part it is shown that

results of this research is mostly same as research on this topic conducted in

other areas having same variables, similar problems, similar culture and

similar economic position such as Bangladesh and also in other parts of

Pakistan such as in northern areas.

If further research on this topic is conducted within Pakistan having same

variables results would be similar.

1.10.5 Precision and Confidence

Precision refers to the closeness of the findings to "reality" based on a sample.

In other words, precision reflects the degree of accuracy or exactitude of the

results on the basis of the sample.

Confidence refers to the probability that our estimations are correct.

1.10.6 Objectivity

The conclusion drawn through the interpretation of the results of data analysis

is objective. It is based on the facts of the findings derived from actual data

and not on own subjective or emotional value.

1.10.7 Generalizabilty

The results of this study can be applied in any other area of Pakistan. The

suggestions to make micro credit more effective can be applied not only in

Pakistan but also abroad.

1.10.8 Parsimony

Results of this study are simply explained and there is no ambiguity or

confusion in results. Simple language is used and results are explained clearly.

1.11 Hypothetico-deductive method

Hypothetico-deductive method is used to study the Role of micro credit in

poverty alleviation. This method has seven steps:

1) Observation

2) Preliminary information gathering

3) Theory formulation

4) Hypothesizing

5) Further scientific data collection

6) Data analysis

7) Deduction

1.11.1 Observation

Observation is the first step in which researcher observes the problem or issue.

I observed the issue of Role of micro credit in poverty alleviation.

1.11.2 Preliminary information gathering

I used questionnaire to gather data from those people who have experienced

micro credit or are experiencing micro credit and questions regarding their

living standard before and after micro credit is asked so that an effective

comparison can be made of their living standard before and after use of micro

credit.

1.11.3 Theory formulation

Theoretical frame work is then formulated in which dependent, independent

and moderating variables are taken.

1.11.4 Hypothesizing

From the theorized network of associations among the variables certain

hypothesis are formulated.

1.11.5 Further scientific data collection

In order to analyze Role of micro credit in poverty alleviation data of

customers using micro credit is required but not only after use of micro credit,

data before use of micro credit is also needed for making comparison.

1.11.6 Data analysis

Collected data is then analyzed using Statistical Package for Social Sciences

(SPSS) and graphs are made on MS EXCEL.

Statistical tools are applied using percentage, frequency, mean, range and

standard deviation.

1.11.7 Deduction

Deduction is the process of arriving at conclusion by interpreting the meaning

of the results of the data analysis.

CHAPTER: 2 PRELIMINARY DETAILS

This chapter provides an overview of the theoretical background that provides

the premise of the study. Concepts of poverty, micro credit, objectives of

micro credit, impact of micro credit , poverty in Pakistan, phenomenon of

poverty, faces of poverty, ways to measure the impact of micro credit on

income and consumptions, Theoretical frame work, variables (Dependent

variable, Independent variable and Moderating variable), Hypothesis

development and Hypothesis statements.

2.1 Literature Review

In Pakistan poverty has many dimensions. The poor in Pakistan have not only

low income but they also lack access to basic needs such as education, health,

clean drinking water and proper sanitation. The latter undermines and limits

their capabilities and their opportunities to secure employment, results in their

social exclusion and exposes them to exogenous shocks. Then the vicious

cycle of poverty is accentuated when government structures exclude the most

vulnerable from the decision making process. Poverty in Pakistan was

reported at 31.8%, which comprises of 22.39% urban and 38.65% rural

population in the country, which is based on average calories intake of 2350

calories per adult per day that was equal to Rs. 670 per month in 1998-99, and

in 2000-01 moved up to Rs. 748 per month (Economic Survey ,2002-03).

The phenomenon of poverty was felt and observed more during the decade of

1990s, as the overall growth slowed down. While the slowed economic growth

contributed to poverty, the “trickle down effect” once thought to improve

living conditions, did not reach the lowest level owing largely to lack of

accessibility of institutions, unjust and non-poor policies (Waheed, 2001).

The major objectives of micro credit schemes are: (1) to stop exploitation of

the poor caused by expensive informal credit; (2) to provide small loans to

poor people at relatively lower cost as compared to accessible informal loans;

(3) to finance economically and socially viable projects those cannot be

financed otherwise; (4) to empower women within households as decision

makers and in society through active economic participation; (5) to create

maximum employment opportunities; (6) to create self sufficient and self-

employed people and the most importantly; and (7) to reduce poverty,

accelerate growth and improve the living standards on sustainable basis (First

Quarterly Report for FY05 on Role of micro credit in poverty alleviation).

Poverty has many faces, changing from place to place and across time, and has

been described in many ways. Most often, poverty is a situation, people want

to escape. So poverty is a call to action for the poor and the wealthy alike a

call to change the world so that many more may have enough to eat, adequate

shelter, access to education and health, protection from violence, and a voice

in what happens in their communities. Poverty amid plenty is the world’s

greatest challenge. And it has been recognized that successful development

requires a comprehensive, multifaceted, and properly integrated mandate. The

study accepts the now established view of poverty as encompassing not only

low income and consumption but also low achievement in social (education,

health, nutrition), political (voice, empowerment), and other sectors of human

development (Faheem Jehangir Khan).

Khandker (2000) considers savings as an indicator and finds that this factor

has an influence on eradicating poverty. He argues that credit programs do

stimulate savings because micro credit borrowers make mandatory savings

every week, which they are entitled to withdraw at the end of their

membership. In addition, he finds micro credit program has a positive impact

in generating not only voluntary savings but also additional savings among the

borrowers. Apart from savings, it can be argued that there are other factors

that may contribute towards eradication of such poverty. For example, income

and accumulation of assets of the household may be considered as additional

causal factors. It is likely that with the introduction of micro credit programs,

borrowers may have better income, better savings and more assets. In this

backdrop, it is necessary to analyze how these micro credit programs can

influence income, savings and assets for the borrowers.

World Bank (Micro credit Summit, 1997) classified the micro credit program

in Bangladesh as one of the most effective anti-poverty tools for the poorest.

The program extends small loans to unemployed poor people that are not

bankable. These individuals lack collateral, stable employment and therefore

cannot meet even the most minimum qualifications to gain access to formal

credit.

The dynamics of social, economic, political, cultural and environmental forces

contrive in a manner that it separates the rich from the poor, strong from the

weak, haves from the have-nots and favor those in a better position. The

chemistry of sociology and the social factors like class, gender, ethnicity,

caste, religion, age, etc., play an important role in determining the access to

and control over resources for various groups of people in a given society. It is

these relationships among people, their social structures and institutional

settings, and their access to, and commands over resource base (physical,

human, intellectual and social) and the policy framework that promote (or

hinder) development. These factors are all the more relevant in the case of

women who carry the double burden of gender and poverty (Subrahmanyam,

2000).

About 1.3 billion extremely poor people struggle to live on less than $1 a day.

They are trapped in poverty so severe, that they cannot adequately feed,

clothe, or shelter themselves or their families. Steady jobs and income elude

the very poor. To get by, many people have to create and run their own tiny

businesses or small handicraft manufacturing in the unregulated, "informal"

sector. They might sell produce at the market, or shine shoes, weave mats, or

bake bread. Micro-enterprises may be small, but their cumulative impact is

huge: depending on the country, micro-enterprises employ an estimated 30-80

percent of the working population (Charmes, 1992).

Some studies find micro credit a very successful and effective way of reaching

development goals, while other acknowledge issues such as women lacking

control over capital, creation of dependency for the loans and services, not

reaching the poorest of the poor (Thente, 2003).

Besides, rural political economy of Bangladesh consists of class relation

expressed through patron client hierarchies, with poor landowner’s

sharecroppers and landless labors being class clients tied individually to

patrons who might be landowners, moneylenders and employers, usually in

combination (Wood, 1994).

The limitations of the formal financial sector and the informal financial sector

in providing financial services, especially credit, encouraged the micro-credit

program to evolve. The micro-credit program was initiated with the objective

of providing poor people with credit without collateral. The harmony among

group members, the strict discipline in providing credit and collecting

repayments, and supervision of borrower’s activities in the micro-credit

system replaced the provision of collateral, which is very important in

receiving credit from the formal financial sector institutions. Professor Yunus

called the process of substituting the provision of collateral with group

harmony and other aspects of micro-credit as ‘freeing of credit from the

bondage of collateral (Yunus, 1997).

Micro credit is an enabling, empowering, and bottoms-up tool to poverty

alleviation that has provided considerable economic and non-economic

externalities to low-income households in developing countries. But there has

been a gradual apprehension that micro credit alone is not enough. Micro

credit is not a replacement for jobs that are not there, markets that are

inaccessible, or education and skills that do not exist. Micro credit is indeed an

essential ingredient in the development process, but not the only ingredient

(Faheem Jehangir Khan).

Credit creates opportunities for self-employment rather than waiting for

employment to be created. It liberates both poor and women from the clutches

of poverty. It brings the poor into the income stream. Given the access to

credit under an appropriate institutional structure and arrangement, one can do

whatever one does best and earn money for it. One can overcome poverty.

One can become the architect of one's destiny and the agent of change not

only for one's family but also for the society (H. I. Latifee Grameen Trust).

It is known that poor people live in a high risk and vulnerable conditions.

Their ability to take advantage of opportunities that will lead to increase their

income or economic status, to protect themselves against risks of crises, and to

cope with these when they occur is very important. Reduction of poverty is

partly a process of increasing income and economic stability which enables

fulfillment of basic needs and access to different kinds of services. This may

also be understood in the form of developing a range of assets that will reduce

the vulnerability of the poor to physical, economic and social shocks. These

assets may be defined as financial (income size, regularity and security,

savings, loans or gifts), human (skills and knowledge, ability to work, good

health, self-esteem, bargaining power, autonomy and control over decisions),

physical (housing, land, productive and nonproductive possessions etc.) and

social (networks, group and centre membership, trust based relationship,

freedom from violence and wider access to society and social institutions (H.

I. Latifee, Grameen Trust).

There are several good reasons for giving loans exclusively to women. First of

all, the Grameen Bank aims to provide loans for .the poorest of the poor. As

women are among the most disadvantaged in Bangladeshi society, the poorest

of the poor are often women. Secondly, loans given to women seem to bring

more benefit to the family than loans given to men. Women tend to use the

income generated by the loans to promote their children. Welfare rather

than for radios, motorcycles, gambling and tobacco, which is often the case

with loans given to men. Finally, women have proven better credit risks than

men have. They are less mobile and socially more vulnerable than men, and

therefore easier to apply pressure to. A married woman finds it difficult to

leave home and defaulting on a loan could damage her reputation seriously in

the village. Therefore, female borrowers go to great lengths to ensure

repayment of the loans (Rahman, 1999).

Today, the world faces the major challenge of reducing poverty. Of the

world’s six billion people, 2.8 billion live on less than 2 dollar a day and 1.2

billion live on less than 1 dollar a day. Of these 1.2 billion, 500 million live in

South Asia. General Assembly of the United Nations has recognized the

positive impact of micro credit in poverty reduction. Microfinance impact

studies have demonstrated that:

. Micro finance helps poor households meet basic needs and protects

them against risks.

. The use of financial services by low-income households leads to

improvements in household economic welfare and enterprise stability

and growth.

. By supporting women’s economic participation, microfinance

empowers women, thereby promoting gender-equity and improving

household well being.

. The level of impact relates to the length of time clients have had

access to financial services.

(First Quarterly Report for FY05 on Role of Micro credit in Poverty

Alleviation).

A sustainable micro credit system in the country is vital for the long term

development of micro credit mechanism and to provide credit to the poverty

hit poor people, especially women in Pakistan (Roshaneh Zafar, Founder

president of Kashf foundation).

A hefty sum of one trillion rupees is required to eliminate poverty from the

country. Ten million houses holds in Pakistan needed micro credit support and

one trillion rupees are required to meet the credit requirements of the

deserving people in the country who do not have access to small credit and

living in extreme poverty conditions. Out of 10 million house holds at present

only 7% of them have got micro credit. Charity and micro credit could not go

together and a viable micro credit system is the only sustainable option to

reduce poverty and to extend credit to the money less country men (Roshaneh

Zafar, Founder president of Kashf foundation).

Micro credit banking should be kicked off on commercial basis. All the human

beings, including the poorest, are endowed with endless potential and with the

provision of financial support the poor people too can perform better and

become respectable members of the society (Roshaneh Zafar, Founder

president of Kashf foundation).

In the market for micro, finance has undergone a rapid shift in the country.

There has been a marked increase in the number and the typology of players,

particularly in terms of the entry of four new micro finance banks. However,

despite this new development, scale continues to be a major challenge for the

market. An analysis of the Punjab market has revealed that the total number of

potential house holds that can access micro finance is about 5.6 million, with

1.6 million in the urban areas and four million in the rural areas. At the same

time, the overall market penetration in the Punjab is 12%, implying that 88%

of the market is still untapped (Roshaneh Zafar, Founder president of Kashf

foundation).

Micro finance has important economic and social value thus the

institutionalization and development of SMEs and micro finance sector in

Pakistan is an urgent need of the hour which can lead towards job creation,

enhancement of competitiveness and exports while pushing the overall

economic growth. Micro finance related financial services and access can

make a stepping stone towards uplifting including the borrowers and

beneficiaries middle and lower middle classes of the society for who accesses

to institutional credit was very limited previously. However, in Pakistan, this

economic phenomenon is at initial stage which needs to be implemented by

extending their network following the socio-economic ground realities of our

rural and urban society (Erum Zaidi).

Pakistan has to look at micro credit as it is successfully implemented in other

parts of the world. It then has to create a regulatory environment that will

support and promote micro credit operations. In many countries these operate

outside the banking controls regime and are not restricted in setting up entities

that enable successful operations. There are of course legal changes. In many

cases social collateral (a gathering of a group of people who know each other

and thus provide surety of the lending by the micro credit entity) or Group

lending may not be legally recognized. In certain cases even the micro finance

entity may not be in accordance with prevailing rules. Therefore the regulatory

environment has to provide for this growth (Erum Zaidi).

The Pakistan Living Standard Measurement Survey (PSLM) conducted during

2004-05 shows a sharp decline in poverty incidence as suggested by falling

Head Count Ratio (HCR). The data indicates that the number of poor (i-e;

people having income below the poverty line of Rs 878.64 per adult per

month) has shrunk by 12 million. Region wise data indicates that the decline

in rural poverty more profound (12.5 million people) that the urban decline

(9.8 million).Pakistan’s performance in reducing poverty compares well with

the MDG that has envisaged a 50% reduction in the poverty by 2015 in

accordance with which the poverty reduction strategy paper (PRSP) has

targeted to reduce the poverty level to 28% by FY06 (Erum Zaidi).

The majority of our population is referred to as a group living on

disadvantages. Comparing the economic conditions of the past years the

inflation rate of Pakistan is growing rapidly. Growing inflation has also

become one of the biggest trends in the society of Pakistan and it is affecting

nothing but the lower class of Pakistani society. The rich are growing richer

and on the other side the poor are becoming poorer. If we look at the basic

needs of the people of Pakistan, what we expect from them is, “food, clothing

and shelter” or we can form different perceptions of their basic needs “job,

education and utilities”. The proportion of their three basic needs with their

three basic perceived needs is crucial not only for the poverty alleviation but

also for rising standard of living and economic stability (Erum Zaidi).

The aim of microfinance according to (Otero, 1999) is not just about providing

capital to the poor to combat poverty on an individual level, it also has a role

at an institutional level. It seeks to create institutions that deliver financial

services to the poor, who are continuously ignored by the formal banking

sector. (Littlefield and Rosenberg, 2004) states that the poor are generally

excluded from the financial services sector of the economy so micro financing

Institutions have emerged to address this market failure. By addressing this

gap in the market in a financially sustainable manner, an micro financing

institution can become part of the formal financial system of a country and so

can access capital markets to fund their lending portfolios, allowing them to

dramatically increase the number of poor people they can reach (Otero, 1999).

(Wright, 2000) states that much of the skepticism of micro financing

institutions stems from the argument that microfinance projects “fail to reach

the poorest, generally have a limited effect on income…drive women into

greater dependence on their husbands and fail to provide additional services

desperately needed by the poor”. In addition, Wright says that many

development practitioners not only find microfinance inadequate, but that it

actually diverts funding from “more pressing or important interventions” such

as health and education. As argued by (Navajas et al, 2000), there is a danger

that microfinance may siphon funds from other projects that might help the

poor more. They state that governments and donors should know whether the

poor gain more from microfinance, than from more health care or food aid for

example. Therefore, there is a need for all involved in microfinance and

development to ascertain what exactly has been the impact of microfinance in

combating poverty.

(Mayoux, 2001) states that while microfinance has much potential the main

effects on poverty have been:

_ Credit making a significant contribution to increasing incomes of the better-

off poor, including women,

_ Microfinance services contribute to the smoothing out of peaks and troughs

in income and expenditure thereby enabling the poor to cope with

unpredictable shocks and emergencies.

(Hulme and Mosley ,1996) show that when loans are associated with an

increase in assets, when borrowers are encouraged to invest in low-risk

income generating activities and when the very poor are encouraged to save;

the vulnerability of the very poor is reduced and their poverty situation

improves.

(Johnson and Rogaly, 1997) also refer to examples whereby savings and credit

schemes were able to meet the needs of the very poor. They state that

microfinance specialists are beginning to view improvements in economic

security, rather than income promotion, as the first step in poverty reduction as

this reduces beneficiaries’ overall vulnerability.

(Chowdhury, Mosley and Simanowitz ,2004) argue that if microfinance is to

fulfill its social objectives of bringing financial services to the poor it is

important to know the extent to which its wider impacts contribute to poverty

reduction. In the following sections I will examine the findings from wider

assessments of microfinance interventions at a household and community

level, to show what learning can be gained when impact assessments have a

broad scope of analysis.

(Littlefield, Murdoch and Hashemi, 2003) state that one of the first things that

poor people do with new income from micro enterprise activities is to invest in

their children’s education. Studies show that children of microfinance clients

are more likely to go to school and stay longer in school than for children of

non-clients. Again, in their study of FOCCAS, client households were found

to be investing more in education than non client households. Similar findings

were seen for projects in Zimbabwe, India, Honduras and Bangladesh.

(Chowdhury and Bhuiya, 2004) assessed impact of BRAC’s poverty

alleviation program from a “human well-being” perspective in a program in

Bangladesh where they examined seven dimensions of ‘human-well being’.

The project included the provision of microfinance and training of clients on

human and legal rights .They noted that the project led to better child survival

rates, higher nutritional status, improvement in the basic level of education,

and increased networking in the community. Children of BRAC clients

suffered from far less protein-energy malnutrition than children of non

members, and the educational performance of BRAC member’s children was

also higher than that of children in non BRAC households. BRAC member

households spent significantly more on consumption of food items than poor

non-members did and per capita calorie intake was also significantly higher.

However, (Johnson, 2004) states that having women as key participants in

microfinance projects do not automatically lead to empowerment; sometimes

negative impacts can be witnessed. She refers to increased workloads,

increased domestic violence and abuse. This leads her to ask a crucial question

of whether targeting women is just an efficient way of getting credit into the

household, since women are more likely than men to be available in the home,

attend meetings, be manageable by field staff and take repayment more

seriously, even if they do not invest or control the loan themselves? Or on the

other hand, if such targeting is fully justified on the grounds of enhancing

gender equity. She claims the answer is probably somewhere between the two

alternatives. She argues that micro financing institutions must analyze both the

positive and negative impacts their interventions are having on women, and

that micro financing Institutions need to work with men to help pave the way

for a change in attitudes to women’s enhanced contribution to the household.

The impact of microfinance on poverty alleviation is a keenly debated issue as

we have seen and it is generally accepted that it is not a silver bullet, it has not

lived up in general to its expectation (Hulme and Mosley, 1996). However,

when implemented and managed carefully, and when services are designed to

meet the needs of clients, microfinance has had positive impacts, not just on

clients, but on their families and on the wider community. There is however a

need for greater assessment of these wider impacts if the true value of

microfinance to development is to be understood (Zohir and Matin, 2004).

Considerable debate remains about the effectiveness of microfinance as a tool

for directly reducing poverty, and about the characteristics of the people it

benefits (Chowdhury, Mosley and Simanowitz, 2004). It is notoriously

difficult to measure the impact of microfinance programs on poverty. This is

so she argues, because money is fungible and therefore it is difficult to isolate

credit impact, but also because the definition of ‘poverty’, how it is measured

and who constitute the ‘poor’ “are fiercely contested issues” .

Carney (1998) defines a livelihood as comprising “the capabilities, assets

(including both material and social resources) and activities required for a

means of living.” Chambers (1997) states that livelihood security is “basic to

well-being” and that security “refers to secure rights and reliable access to

resources, food, income and basic services. It includes tangible and intangible

assets to offset risk, ease shocks and meet contingencies.” Lindenberg (2002)

defines livelihood security as “a family’s or community’s ability to maintain

and improve its income, assets and social well-being from year to year.”

Concern also state that livelihood security is more than just economic well-

being as they define livelihood security as “the adequate and sustainable

access to and control over resources, both material and social, to enable

households to achieve their rights without undermining the natural resource

base” (Concern, 2003). Livelihood security therefore, like poverty, is not just

about income, but includes tangible and intangible assets, and social well

being.

(Johnson and Rogaly, 1997) state that “NGOs aiming for poverty reduction

need to assess the impact of their services on user’s livelihoods.” They argue

that in addressing the question of the impact of microfinance, NGOs must go

beyond analyzing quantitative data detailing the numbers of users, and

volumes and size of loans disbursed, to understanding how their projects are

impacting on clients’ livelihoods. They state that the provision of

microfinance can give poor people “the means to protect their livelihoods

against shocks as well as to build up and diversify their livelihood activities”.

Therefore when analyzing the impact of microfinance the overall impact of the

microfinance services on the livelihoods of the poor needs to be taken into

consideration.

A livelihood security approach according to Concern (2003) aims for a holistic

analysis and understanding of the root causes of poverty and how people cope

with poverty. They identify livelihood shocks such as natural disasters and

drought, the social, political and economic context, and people’s livelihood

resources such as education and local infrastructure as factors affecting

people’s livelihood security .Therefore, when analyzing the impact

microfinance is having on livelihood security, as is the objective of this

dissertation, a holistic analysis of people’s livelihood security must be

conducted, rather than just focusing on the material/economic impact

microfinance is having on the livelihoods of the poor.

Health and education are two key areas of non-financial impact of

microfinance at a household level. Wright (2000) states that from the little

research that has been conducted on the impact of microfinance interventions

on health and education, nutritional indicators seem to improve where micro

financing institutions have been working. The Research on the Grameen Bank

shows that members are statistically more likely to use contraceptives than

non-members thereby impacting on family size. Littlefield, Murdoch and

Hashemi (2003) also acknowledge the sparse specific evidence of the impact

of microfinance on health but where studies have been conducted they

conclude, “house holds of microfinance clients appear to have better nutrition,

health practices and health education than comparable non-client households”.

Among the examples they give is of FOCCAS, a Ugandan micro financing

institution whose clients were given health care instructions on breastfeeding

and family planning. They were seen to have much better health care practices

than non-clients, with 95% of clients engaged in improved health and nutrition

practices for their children, as opposed to 72% for non-clients (Littlefield,

Murdoch and Hashemi, 2003).

Littlefield, Murdoch and Hashemi (2003) state that access to micro financing

institutions can empower women to become more confident, more assertive,

more likely to take part in family and community decisions and better able to

confront gender inequities. However, they also state that just because women

are clients of micro financing Institutions does not mean they will

automatically become empowered. Hulme and Mosley (1996) also make this

point when they refer to the “naivety of the belief that every loan made to a

woman contributes to the strengthening of the economic and social position of

women”. However, with careful planning and design women’s position in the

household and community can indeed be improved. According to Littlefield,

Murdoch and Hashemi (2003), the Women’s Empowerment Program in Nepal

found that 68% of its members were making decisions on buying and selling

property, sending their daughters to school and planning their family, all

decisions that in the past were made by husbands.

(Zohir and Matin ,2004) state that many micro financing institution loans are

used for agricultural production, trading, processing and transport, resulting in

an increase in the use of agricultural inputs and increased output of

agricultural production. This leads to enhanced employment opportunities in

these sectors for the wider community and a reduction in the prices of such

produce due to increased supply. They also state that trading activities

financed by micro financing institutions can help to establish new marketing

links and increase the income of traders, and this can lead to reduced

migration due to increased employment opportunities and increased income

(Zohir and Matin, 2004). From a social perspective, they state that reduced

migration increases family cohesion and greatly contributes towards

improving child upbringing.

(Zohir and Matin ,2004) state that the interaction within micro financing

institution groups can create co-operation and trust that not only facilitates the

microfinance activities, but also contributes benefits beyond the service

provided, such as a greater sense of community, trust and reliance on the

group in times of crisis. These networks can lay the foundations for other

social capital developments in the community. They state that examples of

cultural impacts of social intermediation that affect the greater community

could be a change in attitude of society towards the acceptable age of

women’s marriage, domestic violence, dowry, etc.

From the above literature we can conclude that micro credit is an effective tool

for poverty alleviation but the important thing is that only giving credit is not

enough, micro credit is not a replacement for jobs that are not there and skills

that do not exist. Important thing is to make them financially stable, to bring

them out of the poverty line and to make them able to sustain their position

and improve living condition instead of returning back to the poverty line.

2.2 Theoretical Frame Work

After conducting surveys, completing a literature review and defining problem

statement, one is ready to develop a theoretical frame work.

A theoretical frame work is a conceptual model of how one theorizes or makes

logical senses of the relationships among the several factors that have been

identified as important to the problem.

After theoretical frame work I developed hypothesis to examine whether the

theory formulated is valid or not. The hypothesis relationships can therefore be

tested through appropriate statistical analysis.

2.3 Variables

A variable is anything that can take on differing or varying values. The values

can differ at various times for the same object or person, or at the same time

for different objects or persons.

2.3.1 Dependent Variable

The dependent variable is the variable of primary interest to the researcher.

The researcher’s goal is to understand and describe the dependent variable, or

to explain its variability, or predict it. In my study dependent variable is

Poverty reduction.

2.3.2 Independent Variable

An independent variable is one that influences the dependent variable in either

positive or negative way. That is, when the independent variable is present, the

dependent variable is also present, and with each unit of increase in the

independent variable, there is an increase or decrease in the dependent variable

also. In other words, the variance in the dependent variable is accounted for by

the independent variable. In this case independent variable is Micro Credit.

2.3.3 Moderating Variable

The moderating variable is one that has a contingent effect on the independent

and dependent variables relationship. That is, the presence of a variable

(moderating variable) modifies the original relationship between independent

and the dependent variables. I have taken environment as a Moderating

Variable.

Environment is taken in a sense that it covers Political environment, it means

that what are the government strategies to reduce poverty and to improve

living standard of its people. What are the banks policies to reduce poverty,

what is the interest rate? What are the conditions on which bank is lending

loan to people, are conditions acceptable by people, are conditions affordable

by people?

2.4 Schematic diagram for the theoretical frame work

Independent variable Dependent

variable

Moderating variable

Here micro credit is taken as an independent variable and poverty reduction as

a dependent variable. When micro credit increases poverty decreases so;

poverty reduction is dependent on micro credit.

Previous researches conducted on this topic “Role of micro credit in poverty

alleviation” shows that micro credit is an effective tool in poverty alleviation.

MICRO CREDITPOVERTY REDUCTION

POLITICAL

ENVIRONMENT

“Micro-credit is known as an effective tool for poverty alleviation. In poor

countries like Pakistan greater attention has been paid to poverty alleviation

through micro-credit, especially in the last decade. The successful use of the

micro credit is considered as a victory for the disadvantaged segments.”

(Poverty alleviation through micro credit Zahid Shahab Ahmed, Pakistan

Some of the factors that show poverty reduction are Training and education,

clean water and hygienic environment, Nutrition and adequate food,

Accommodation, Income and savings.

2.5 Problem Statement

Problem statement is also often referred to, is a clear, precise and succinct

statement of the question or issue that is to be investigated with the goal of

finding an answer or solution.

Here in this study problem statement is:

Impact of micro credit on poverty alleviation

2.6 Hypothesis development

Hypothesis can be defined as logically conjectured relationship between two

or more variables expressed in the form of a testable statement.

Once the researcher identifies the important variables in a situation and

establishes the relationships among them through logical reasoning in the

theoretical frame work, now is a time to test whether the relationships that

have been theorized do in fact hold true. By testing these relationships

scientifically through appropriate statistical analysis researcher is able to

obtain reliable information on what kind of relationship exist among the

variables operating in the problem situation. The results of these tests offer

some clues as to what could be changed in the situation to solve the problem.

Formulating such testable statements is called hypothesis development.

2.7 Hypothesis Statements

There are different formats of hypothesis statements such as if-then,

directional and non directional, null and alternate.

I have used Directional Hypothesis. It shows positive/negative relationship

between two variables.

H0: Training and education does not play any role in poverty reduction

H1: Training and education plays an important role in poverty reduction

H0: Clean water and hygienic environment has no impact on poverty

reduction

H1: Clean water and hygienic environment has an impact on poverty reduction

H0: Nutrition and adequate food is not an important player of poverty

reduction

H1: Nutrition and adequate food is an important player of poverty reduction

H0: Accommodation has no concern with poverty reduction

H1: Accommodation has an important concern with poverty reduction

H0: Income does not play an important role in poverty reduction

H1: Income plays an important role in poverty reduction

H0: Savings does not play an important role in poverty reduction

H1: Savings plays an important role in poverty reduction

CHAPTER: 3 RESEARCH DESIGN

This chapter provides perspective on the research design used to investigate

the research problem with specific reference to the Survey design, Study

setting, Unit of analysis, Type of research, Selecting location, Data collection

method, and Statistical techniques (Percentage, Frequency, Mean, Standard

deviation, Range).

3.1 Survey design

Basically I am analyzing the role of micro credit in poverty alleviation. Micro

credit is known as an effective tool for poverty alleviation. In poor countries

like Pakistan greater attention has been paid to poverty alleviation through

micro credit, especially in the last decade. Many micro credit institutions are

working in Pakistan for poverty alleviation but still we can see that gap

between poor and rich is increasing every day. Rich is becoming richer and

richer and poor is becoming poorer and poorer.

So; I compared living standard of poor people living in four urban slum areas

of Rawal pindi and Islamabad (Muslim Colony, Dhok Kala Khan,

Tehmaspabad and Shakrial) before and after utilization of the credit in order to

analyze the role of micro credit in poverty alleviation. The sample size for this

survey is 200 with 50 respondents per area. The study was based on

questionnaires which were distributed after translating it into Urdu so that

respondents can easily understand it and fill it accordingly. The dependent

variable is Poverty reduction where as independent variable is micro credit.

And moderating variable is Environment. Environment is taken in a sense that

it covers Political environment, it means that what are the government

strategies to reduce poverty and to improve living standard of its people. What

are the banks policies to reduce poverty, what is the interest rate? What are the

conditions on which bank is lending loan to people, are conditions acceptable

by people, are conditions affordable by people?

3.2 Study setting

Study setting can be contrived and non contrived.

This study is non contrived. When research is conducted in natural

environment where work proceeds normally it is non contrived setting. During

this study my interference was less in respondent’s routine life.

3.3 Unit of analysis

The unit of analysis refers to the level of aggregation of the data collected

during the subsequent data analysis stage. As my problem statement is

Impact of micro credit on poverty alleviation

So; I required data from those individuals who have experienced or

experiencing micro credit. In this way it can be observed that what impact

micro credit has on their living standard. What was their living standard before

utilization of micro credit and after micro credit?

So; here in this study unit of analysis is Individual.

3.4 Type of Research

Research can be undertaken for two different purposes. One is to solve a

current problem, demanding a timely solution. For example, a particular

product may not be selling well and the manager might want to find the

reasons for this in order to take corrective action. Such research is called

Applied Research.

The other research that I conducted in this study is Basic research. It is to

generate a body of knowledge by trying to comprehend how certain problems

that occur in organizations can be solved. Later on the knowledge gained by

the findings of basic research can be applied to solve problems.

3.5 Selecting location

This study was conducted in two cities of Pakistan i.e. Rawal pindi and

Islamabad. In both cities the study targeted four urban slum areas i.e. Muslim

Colony, Dhok Kala Khan, Tehmaspabad and Shakrial.

3.6 Data collection method

I used Questionnaire as a data collection tool. Questionnaire allows the

researcher to gather structured information from a large number of individuals.

The analysis of questionnaire is easy due to the structured information in it.

To get more relevant data I translated questionnaire into Urdu through In page

and then I distributed them to respondents so that they can easily understand

questions. Because if I asked them question in Urdu and they answer me I will

not be sure that they perceived my question in exactly that way in which I am

asking. So; to overcome this problem I found it better to translate

questionnaire into Urdu so that every one can easily read it, understand it and

answer it accordingly.

Population consists of the totality of the observations with which researcher is

concerned. Where as a Sample is a subset of a population.

Population in this study consisted of people of Muslim Colony, Dhok Kala

Khan, Tehmaspabad and Shakrial who have taken micro credit and sample

was of 200 with 50 respondents per area. Response rate was 100%.

I have used Purposive sampling which is type of Non probability sampling in

which the elements in the population do not have any probability attached to

their being chosen as sample subjects. Purposive sampling confines to specific

type of people who can provide the desired information, either because they

are the ones who have it, or confirm to some criteria set by the researcher. As I

selected those people who are using micro credit or have used micro credit.

Purposive sampling is of two types’ judgment sampling and quota sampling. I

have used judgment sampling. This sampling involves the choice of subjects

who are most advantageously placed or in the best position to provide the

information required. Because those people are experiencing micro credit or

have experienced micro credit so they can better tell what impact micro credit

has or had on their living standard. Better comparison can be made of their

living standard before and after utilization of micro credit.

The responses were tabulated and expressed in terms of percentage and

frequencies. Thus the collected data were analyzed statistically using mean,

Standard deviation and Range with the help of Statistical Package for Social

Sciences (SPSS) and graphs were made on MS Excel.

3.7 Statistical techniques

3.7.1 Percentage

A percentage is a special type of proportion where the ratio is multiplied by a

constant, 100, so that the ratio is expressed per 100.

3.7.2 Frequency

The rate at which something happens or is repeated is called frequency.

3.7.3 Mean

In statistics, the mean is the mathematical average of a set of numbers. The

average is calculated by adding up two or more scores and dividing the total

by the number of scores. Consider the following number set: 2, 4, 6, 9, and 12.

The average is calculated in the following manner: 2 + 4 + 6 + 9 + 12 = 33 / 5

= 6.6. So the average of the number set is 6.6.

3.7.4 Standard deviation

Standard deviation is a measure of the dispersion of outcomes around the

mean (or expected value), used to measure total risk. It is the square root of

the variance.

3.7.5 Range

The Range R is defined as the difference between the extreme values, i-e the

difference between the largest and the smallest values in the data.

Symbolically, the range is given by the relation.

R=xm – xo

Where xm stands for the largest value and xo denotes the smallest one. In a

frequency distribution, the range is equal to the difference between the upper

boundary of the highest class and the lower boundary of the lowest class.

CHAPTER: 4 DATA ANALYSIS

This chapter presents the most salient findings based on the empirical analysis

and provides an overview of the research findings obtained based on the

statistics for the measuring instruments which were utilized. Descriptive

statistics, Interpretations, Graphical representations of respondent's

demographics characteristics, patterns of micro credit utilization, Graphical

representation of factors showing poverty reduction, Interpretation,

comparison of results with other researchers.

Statistical analysis is done using software Statistical Package for Social

Sciences (SPSS) and graphs were made on MS EXCEL.

4.1 Descriptive statistics

Frequency( #) Percentage (%)

Gender

Male 130 65

Female 70 35

Age

20 yrs or below 19 9.5

21-30 yrs 50 25

31-40 yrs 59 29.5

41-50 yrs 54 27

Above 50 yrs 18 9

Education

Master 30 15

Bachelor 35 17.5

Intermediate 41 20.5

Matriculation 32 16

Under matric 31 15.5

Illiterate 31 15.5

Marital status

Single 147 73.5

Married 53 26.5

No. of children

0 67 33.5

1-2 57 28.5

3-4 55 27.5

5 or more 20 10

Occupation

None/ surviving on zakat,

charity and occasional labor

12 6

Driver 25 12.5

Sweeper 29 14.5

Labor 65 32.5

Peon 10 5

School teacher 44 22

Other 15 7.5

Do you have any

experience with micro

credit?

Yes 155 77.5

No 45 22.5

If Yes, how long you been

using it?

Less than 6 months 5 3.2

6 months 12 7.7

1 year 41 26

More than 1 year 97 62.5

What is the total amount

of micro credit you have

taken so far?

2000 1 0.6

4000 26 16.7

6000 11 7.0

other 117 75

What did you do with the

money?

Open shop or purchased

taxi, rickshaw, sewing

machine

63 40.6

Improve housing condition 50 32.2

Invest in children education 23 14.8

Other 35 22.5

Will you take more credit

after paying the current

due?

Yes 101 65

No 54 34.8

Are you satisfied with the

government policies of

granting loan?

Yes 71 45.8

No 84 54

Are you satisfied with the

bank policies?

Yes 57 36

No 98 63

Are you satisfied with the

interest rate you have to

pay?

Yes 42 27

No 113 73

Have you ever had any

problem in paying the

weekly payment?

Yes 106 68

No 49 31

Does the money you

borrow from micro

finance bank cover your

needs or do you have to

borrow from someone

else?

Covers 71 45.8

Not covers 84 54

Do you think this system is

perfect or it should be

improved?

Perfect 44 28.3

Need improvement 111 71.6

Do you think this system is

according to your

demand?

Yes 57 36.7

No 98 63.2

Do you have clean

drinking water and

hygienic environment?

Yes 52 33

No 103 66

Do most of diseases you

people bear are because of

unclean water and

unhygienic environment?

Yes 132 85

No 23 14

Is clean water and

hygienic environment

always available to you?

Yes 35 22

No 120 77

Do you have proper

sanitation system?

Yes 55 35

No 99 63

Do you have to face water

shortage?

Yes 122 78

No 33 21

Is drinking water

available to you at home

or you had to bring it

from some other area?

Available at home 51 33

Not available at home 104 67

Do you have your own

house, or it is rented?

Own 71 45

Rented 84 54

Is your house enough for

family members?

Enough 65 42

Not enough 90 58

What type of house it is?

Mud house 63 40

Stone house 92 59

Is your house strong

enough to bear

thunderstorm or any

other kind of natural

disaster?

Strong enough 92 59

Not enough 63 40

Does your house have

basic necessities such as

bed, chair, and electricity?

Yes 140 90

No 15 9.6

Do you have enough

rooms, or you all live in

one room?

Enough 43 27

One 112 72

Is your income enough for

family members?

Enough 44 28

Not enough 111 71

Is your income enough to

bear any uncertain

expenses (sudden guest,

child gets ill, breakage of

any property (house) due

to thunderstorm, earth

quake etc)?

Enough 45 29

Not enough 110 71

Are you the only earner of

the family?

Yes 90 58

No 65 42

What is your total family

income?

2000 5 3.2

4000 42 27

6000 28 18

Other 80 51

Is your income enough to

bear recreational activities

for children?

Yes 44 28

No 110 71

Do you want some other

sources of income?

Yes 132 85

No 23 14.8

Do you encourage

savings?

Yes 146 94

No 9 5.8

Are you able to save, or it

is difficult for you?

Able 44 28

Difficult 111 71

Do you have savings for

rainy days and any

natural disaster?

Yes 53 34

No 102 65

How much part of income

do you save?

5% 32 20

10% 18 11.6

15% 11 7.0

None 94 60

What is the objective of

your savings?

To meet any uncertain crisis

in future

62 40

For future use, if you have

nothing left with you

42 27

For children welfare 32 20

Other 26 16

Do you want to invest

your savings in any form

of business (rickshaw,

taxi, shop etc)?

Yes 99 63

No 56 36

Have you involved in any

kind of training (Auto

workshop etc) or

education program?

Yes 63 40

No 92 59

Do you feel that by

training or education you

can improve your living

standard?

Yes 81 52

No 74 47

Do you think training or

education is expense or

asset?

Expense 81 52

Asset 74 47

Have any of your children

getting any kind of

training or education?

Yes 88 56

No 67 43

Do you think training or

education is a way to solve

your problems?

Yes 117 75

No 38 24.5

If opportunity of free

education and training is

provided to you, will you

avail it?

Yes 124 80

No 31 20

Do you have enough food

every day?

Yes 81 52.2

No 74 47.7

Do you feel difficult to

manage food expenses?

Yes 107 69

No 48 31

What is your daily

average expense on food?

100 39 25

150 42 27

200 39 25

Other 35 22.5

Is there any day you live

without food?

Yes 82 53

No 73 47

Have you ever felt

uncertain about whether I

will get next time meal or

not?

Yes 87 56

No 68 43.8

What do you mostly eat?

Fresh chapatti 108 70

Meat 95 61

Lintels 68 43.8

Stale chapatti 47 30.3

Rice 99 63.8

Other 13 8.3

How do you see the

difference in your life

after you started using

micro credit?

Improve accommodation 90 58

Clean water and hygienic

environment

3 1.9

Increase income 29 18.7

Increase savings 14 9.0

Adequate food 8 5.1

Training and education 27 17.4

Other 11 7.0

4.2 Interpretation

The results for the various facets of the questionnaire to determine the Role of micro

credit in poverty alleviation are outlined in above table. Results indicate that majority

[(N=130) (65%)] of the borrowers are male. Most of borrowers [(N=59) (29.5%)]

belongs from 31-40age group. Majority [(N=41) (20.5%)] are intermediate. Major

part of the population [(N=147) (73.5%)] is single. Those who are married, their large

population [(N=67) (33.5%)] has zero children. mostly people are laborers [(N=65)

(32.5%)].total sample size was 200 out of which 155 (77.5%) has an experience of

taking micro credit. and [(N=97) (62.5%)] has an experience since more than 1 year.

[(N=117) (75%)] has taken credit more than 6000. [(N=63) (40.6)] has opened shop,

purchased taxi, rickshaw or sewing machine. [(N=101) (65%)] is planning to take

more credit after paying the current due. But [(N=84) (54%)] is not satisfied with

government policies of granting the loan and [(N=98) (63%)] is not satisfied with the

bank policies. Similarly [(N=113) (73%)] is not satisfied with the interest rate they

have to pay. [(N= 106) (68%)] faces problem with the weekly/monthly payments.

And [(N=84) (54%)] says that the money they borrow from micro finance bank does

not covers their all needs. And [(N=111) (71.6%)] says this system is not perfect for

poverty reduction it needs improvements. Similarly [(N=98) (63.2%)] says this

system is not according to their demand.

It has also been found that [(N=182) (117.1%)] micro credit beneficiaries had

improvement in their living standard after utilizing the micro credit.

Rests of 18 claims that before micro credit they used to sleep hungry but they were

relaxed as they did not have to return any credit. But after taking micro credit they

have tension of repayment credit, sometimes they have less earning and they have

tension that their earning is less then from where they can return credit. And also

those people who have purchased any taxi or rickshaw and they are worried about it

that what they will do if it is stolen. So; micro credit makes their life full of tension

according to them.

As the factors that show poverty reduction in this study are training and education,

clean water and hygienic environment, nutrition and adequate food, accommodation,

income and savings.

And we can see from the above table that [(N=90)(58%)] see improvement in

accommodation after taking micro credit.[(N=29)(18.7%)] see betterment in income.

[(N=27)(17.4%)] gets training and education after taking micro credit.[(N=14)(9%)]

see increase in savings after utilizing micro credit. [(N= 11) (7%)] uses this credit to

make payments taken from other people, marriages, purchasing land etc. [(N= 8)

(5.1%)] says they get adequate food after using micro credit. and only [(N=3) (1.9%)]

says they get clean water and hygienic environment after using micro credit.

4.3 Graphical representation of respondent’s demographic

characteristics

0

100

200

Gender

Series1 130 70

Male Female

As highlighted by above figure, the majority of the respondents in the sample are males, with 65 (N=130) of the respondents being male and 35% (N=70) of the respondents being female.

0102030405060

Age

Series1 19 50 59 54 18

20 yrs or below

21-30 31-40 41-50 Above 50 yrs

As illustrated by above figure, 59 respondents (29.5%) fall into the age group 31-40 years. 54 respondents (27%) fall into the age group 41-50 years and 50 respondents (25%) fall into the age group

21-30 years. 19 respondents (9.5%) fell into the age 20 years or below. The fewest respondents (18; 9%) fall into the age group above 50 years.

0

20

40

60

Education

Series1 30 35 41 32 31 31

Mast Bach Inter Matri Unde Illiter

Above Figure 3.6 highlights the educational level of the sample. It can be noted that 30 (15%) are masters. 35 (17.5%) holds bachelor degree. 41 (20.5%) are intermediate, 32 (16%) are matic. 31 (15.5%) are under matric and 31 (15.5%) are illiterate.

0

100

200

Marital status

Series1 147 53

Single married

Above figure depicts the marital status of respondents. According to figure 147

(73.5%) respondents are single and 53 (26.5%) respondents are married.

0

50

100

No. of children

Series1 67 57 55 20

zero one-two three- five or

From the above figure it is clear that 67 respondents (33.5%) have no children, 57

respondents (28.5%) have 1-2 children, 55 respondents (27.5%) have 3-4 children and

20 (10%) have 5 or more children.

0

50

100

Occupation

Series1 12 25 29 65 10 44 15

Non driv Swe lab peo Sch Oth

It is clear from above figure that 12 (6%) have no occupation, they survive on zakat,

charity and occasional labor. 25 (12.5%) were driver, 29 (14.5%) were sweeper, 65

(32.5%) were labor, 10 (5%) were peon, 44 (22%) were school teacher and 15 (7.5%)

belongs from other professions such as clerk, accountant, computer operator etc.

4.4 Pattern of micro credit utilization (n=200)

Training and education program Mean + SD Range

Have you involved in any kind of training or

education?

77.5+ 20.5 29

Do you feel that by training and education living

standard can be improved?

77.5+4.94 7

What do you think training or education is expense

or asset?

77.5+4.94 7

Have any of your children is getting any kind of

training or education?

77.5+14.84 21

Do you think training or education is a way to solve

your problems?

77.5+55.86 79

If opportunity of free education or training is

provided to you, will you avail it?

77.5+65.7 93

Clean water and hygienic environment

Do you have clean drinking water and hygienic

environment?

77.5+36 51

Do most of diseases you people bear are because of

unclean water and unhygienic environment?

77.5+77 109

Is clean water and hygienic environment always

available to you?

77.5+60 85

Do you have proper sanitation system? 77+31 44

Do you have to face water shortage? 77.5+62.9 89

Is drinking water available to you at home or you

had to bring it from some other area?

77.5+37.4 53

Nutrition/adequate Food

Do you have enough food every day? 77.5+4.9 7

Do you feel difficult to manage food expenses? 77.5+41 59

What is your daily average expense on food? 38.7+2.87 7

Is there any day you live without food? 77.5+6.3 9

Have you ever felt uncertain about whether I will get 77.5+13.4 19

next time meal or not?

What do you mostly eat? 71.6+36.5 95

Accommodation

Do you have your own home, or it is rented? 77.5+9.1 13

Is your house enough for family members? 77.5+17.6 25

What type of house it is? 77.5+20.5 29

Is your house strong enough to bear thunderstorm or

any other kind of natural disaster?

77.5+20.5 29

Does your house have basic necessities such as bed,

chair and electricity?

77.5+88 125

Do you have enough rooms, or you all live in one

room?

77.5+48.7 69

Income

Is your income enough for family members? 77.5+47.3 67

Is your income enough to bear any uncertain

expenses?

77.5+45.9 65

Are you the only earner of the family? 77.5+17.6 25

What is your total family income? 38.7+31.4 75

Is your income enough to bear recreational activities

for children?

77+46.6 66

Do you want some other sources of income? 77.5+77 109

Savings

Do you encourage savings? 77.5+96.8 137

Are you able to save, or it is difficult for you? 77.5+ 47.3 67

Do you have savings for rainy days? 77.5+ 34.6 49

How much part of income do you save? 38.7+ 37.8 83

What is the objective of your savings? 40.5+ 15.7 36

Do you want to invest your savings in any form of

business?

77.5+ 30.4 43

How do you see the difference in your life after 26+29.7 87

micro credit utilization?

4.5 Graphical representation of factors showing poverty reduction

Training and education program

0

20

40

60

80

100

Have you involved in any kind of the training?

Series1 63 92

Yes No

From above figure we can see that 63 respondents 40.6% were involved in training

and 92 respondents 59.3% were not involved in any kind of training or education

program.

That training in which 63 respondents were involved was related to Auto workshop,

mobile repairing etc.

70

75

80

85

Do you feel that by training or education you can improve your living standard?

Series1 81 74

Yes No

From the above figure it is clear that 81 respondents (52.2%) think that through

training or education they can improve their living standard. And 74 respondents

(47.7%) say that training or education cannot improve their living standard.

70

75

80

85

Do you think training or education is an expense or an asset?

Series1 81 74

Expense Asset

From above figure we can see that 81 respondents (52.2%) think that training or

education is an expense and 74 respondents (47.7%) says that training or education is

an asset.

0

50

100

Have any of your children getting any kind of training or education?

Series1 88 67

Yes No

88 respondents (56.7%) are giving training and education to their children and 67

respondents (43.2%) are not giving training and education to their children.

0

50

100

150

Do you think training or education is a way to solve your problems?

Series1 117 38

Yes No

Above figure depicts that 117 respondents (75%) thinks that training or education is a

way to solve your problems. and 38 respondents (24%) don’t think that training or

education is a way to solve problems.

0

50

100

150

If opportunity of free education and training is provided to you, will you avail it?

Series1 124 31

Yes No

We can see from above figure that 124 respondents (80%) say that if opportunity of

free education and training is given to them they will avail it.

Nutrition and adequate food

70

75

80

85

Do you have enough food every day?

Series1 81 74

Yes No

It is clear from the above figure that 81 respondents (52.2%) have enough food every

day and 74 respondents (47.7%) don’t have enough food every day.

30

32

34

36

38

40

42

What is your average daily expense on food?

Series1 39 42 39 35

100 150 200 Other

We can see that 39 respondents (25%) have 100 daily average expenses on food, 42

respondents (27%) have 150 daily average expenses on food, 39 respondents (25%)

have 200 daily average expenses on food and 35 respondents (22.5%) have other

expenses such as 250 etc.

65

70

75

80

85

Is there any day you live without food?

Series1 82 73

Yes No

82 respondents (53%) live without food some times, and 73 respondents (47%) have

not faced such situation of living without food.

0

50

100

150

Do you feel difficult to manage food expenses?

Series1 107 48

Yes No

Above figure depicts that 107 respondents (69%) feel difficult to manage food

expenses and 48 respondents (31%) don’t feel it difficult.

0

50

100

Have you ever felt uncertain about whether i will get next time meal or not?

Series1 87 68

Yes No

87 respondents (56%) are uncertain about whether they will get next time meal or not

and 68 respondents (43.8%) are not uncertain about whether they will get next time

meal or not.

0

50

100

150

What do you mostly eat?

Series1 108 95 68 47 99 13

Fresh chapatti

Meat Lintels Stale chapatti

Rice Other

Large number of respondents 108 (70%) eat fresh chapatti, 99 respondents (64%) eat

rice, 95 respondents (61%) eat meat, 68 respondents (44%) eat lintels, 47 respondents

(30%) eat stale chapatti and 13 respondents (8%) eat other things such as vegetables.

Clean water and hygienic environment

0

50

100

150

Do you have clean drinking water and hygienic environment?

Series1 52 103

Yes No

Only 52 respondents (33.5%) have clean drinking water and hygienic environment

and 103 respondents (66.4%) don’t have clean drinking water and hygienic

environment.

0

50

100

150

Do most of the diseases you people bear are beacuse of unclean water and unhygienic environment?

Series1 132 23

Yes No

A huge part of the sample 132 respondents (85%) thinks that most of the diseases they

people bear are just because of unclean water and unhygienic environment and only

23 respondents (15%) thinks that unclean water and unhygienic environment has no

concern with their diseases.

0

50

100

150

Is clean water and hygienic environment always available to you?

Series1 35 120

Yes No

35 respondents (22.5%) say they have clear water and hygienic environment always

available to them but a major part of sample 120 respondents (77.4%) don’t have

clean water and hygienic environment always available to them.

0

20

40

60

80

100

Do you have proper sanitation system?

Series1 55 99

Yes No

Above figure depicts that 55 respondents (35%) have proper sanitation system but 99

respondents (64.8%) don’t have proper sanitation system.

0

50

100

150

Do you have to face water shortage?

Series1 122 33

Yes No

A large part of sample 122 respondents (78.7%) face water shortage and only 33

respondents (21.2%) don’t face it.

0

50

100

150

Is drinking water available to you at home or you had to bring it from some other area?

Series1 51 104

Available at home Not available at home

Only 51 respondents (33%) have drinking water available at home and 104

respondents (67%) respondents have to bring it from other places.

Accommodation

60

65

70

75

80

85

Do you have your own house, or it is rented?

Series1 71 84

Own Rented

71 respondents (46%) have own house and 84 respondents (54%) are living in rent

houses.

0

20

40

60

80

100

Is your house enough for family members?

Series1 65 90

Enough Not enough

For 65 respondents (42%) their house is enough for their family members and for 90

respondents (58%) their house is not enough for their family members.

0

20

40

60

80

100

What type of house it is?

Series1 63 92

Mud house Stone house

63 respondents (40.6%) live in mud house and 92 respondents (59.3%) live in stone

house.

0

50

100

Is your house strong enough to bear thunderstorm or any other natural disaster?

Series1 92 63

Strong enough Not enough

92 respondents (59.3%) have strong enough houses to bear natural disasters and 63

respondents (40.6%) don’t have such strong houses.

0

50

100

150

Does your house have basic necessitities?

Series1 140 15

Yes No

140 respondents (90%) have basic necessities such as electricity, bed, chair and only

few respondents 15 (10%) don’t have these facilities.

0

50

100

150

Do you have enough rooms or you all live in one room?

Series1 43 112

Enough One

Only 43 respondents (27.7%) have enough rooms for their family and 112

respondents (72.2%) live in one room.

Income

0

50

100

150

Is your income enough for family members?

Series1 44 111

Enough Not enough

Only 44 respondents (28%) have enough income for their family and large number of

respondents 111 (71.6%) don’t have enough income for their family.

0

50

100

150

Is your income enough to bear any uncertain expenses?

Series1 45 110

Enough Not enough

Only 45 respondents (29%) have enough income to bear any uncertain expenses such

as sudden guest, child gets ill, breakage of any property such as house due to

thunderstorm, earthquake etc. and 110 respondents (70.9%) don’t have enough

income to bear such type of uncertain expenses.

0

20

40

60

80

100

Are you the only earner of the family?

Series1 90 65

Yes No

90 respondents (58%) are the only earner of their family and 65 respondents (41.9%)

are not the only earner, their children are also working (boys are working in auto

workshops, girls are working in houses), women are working in houses, in schools.

0

20

40

60

80

What is your total family income?

Series1 5 42 28 80

2000 4000 6000 Other

5 respondents (3.2%) have only 2000 income, 42 respondents (27%) have 4000

income, 28 respondents (18%) have 6000 income, and 80 respondents (51.6%) have

income more than 6000.

0

50

100

150

Is your income enough to bear recreational activities for children?

Series1 44 110

Yes No

Only 44 respondents (28.3%) have enough income to bear recreational activities for

children and 110 respondents (70.9%) don’t have enough income to bear recreational

activities for children.

0

50

100

150

Do you want some other source of income?

Series1 132 23

Yes No

A large number of people 132 (85%) want other sources of income and only 23

respondents (14.8%) don’t want other sources of income.

Savings

0

50

100

150

Do you encourge savings?

Series1 146 9

Yes No

A large number of people 146 respondents (94%) encourage savings and only 9

respondents (5.8%) don’t encourage it.

0

50

100

150

Are you able to save or it is difficult for you?

Series1 44 111

Able Difficult

Only 44 respondents (28.3%) feels that they are able to save and 111 respondents

(71.6%) feels saving as a difficult task for them.

0

50

100

150

Do you have savings for rainy days and any natural disaster?

Series1 53 102

Yes No

Only 53 respondents (34%) have savings for rainy days and any natural disaster and

102 respondents (65.8%) don’t have any savings for rainy days.

0

20

40

60

80

100

How much part of income do you save?

Series1 32 18 11 94

5% 10% 15% None

A large number of respondents 94 (60.6%) have no savings , 32 respondents (20.6%)

have only 5% savings, 18 respondents ( 11.6%) have only 10% savings and 11

respondents (7%) have 15% savings.

0

20

40

60

80

What is the objective of your savings?

Series1 62 42 32 26

To meet

For future

For children

Other

62 respondents (40%) claim that they do savings to meet any uncertain crisis in

future. 42 respondents (27%) do savings for future use; if they are left with nothing,

32 respondents ( 20.6%) do savings for children welfare, 26 respondents do savings

for other purposes such as Hajj, marriages, etc.

0

20

40

60

80

100

Do you want to invest your savings in any form of business?

Series1 99 56

Yes No

99 respondents (63.8%) want to invest their savings in any form of business such as

rickshaw, taxi; shop etc. and 56 respondents (36%) don’t want to invest their savings

in any kind of business.

Impr

ove

acco

mm

odat

ion

Cle

an w

ater

and

hygi

enic

envi

ronm

ent

Incr

ease

inco

me

Incr

ease

savi

ngs

Ade

quat

e fo

od

Trai

ning

and

educ

atio

n

Oth

er

S1

How do you see the difference in your life after utilizing micro credit?

4.6 Interpretation

We can see from above figure that 90 respondents (58%) see improvement in their

accommodation, 29 respondents (18.7%) see increase in their income, 27 respondents

(17.4%) see improvement in training and education, 14 respondents (9%) see increase

in savings, 11 respondents (7%) see improvement in their life in a way that they

utilize micro credit to pay their debt, to start business, marriage, treatment of disease,

operations. 8 respondents (5.1%) say that they get adequate food after micro credit

utilization. and only 3 respondents (1.9%) see that they get clean water and hygienic

environment after micro credit utilization.

As we can see from above data analysis that after micro credit utilization 63

respondents were engaged in training program which is 40% of the total sample

which is less than those 92 respondents which is 59.3% of total sample taking micro

credit which are not engaged in training and education program. But it is a good sign

that 81 respondents which is 52.2% of total sample using micro credit thinks that

through training or education they can improve their living standard but still they

consider it as an expense for them not an asset. which is more than 74 respondents

which is 47.7% of those people who do not think so that training or education is a way

to improve living standard and 74 (47.7%) think it as an asset. also it is a positive

sign that 88 respondents which is 56% of total sample taking micro credit is giving

their children training or education which is more then 67 people which is 43% of

total sample who are not giving their children training or education.124 people(80%)

who are ready to get training or education if they get an opportunity to get free

training or education. This ratio is more than only 31 people (20%) who are not

willing to get it.117 people (75%) consider training or education a way to solve

problems on other hand only 38 people (24.5%) don’t think it a way to solve

problems.

So; from above description it can be concluded that

H1: Training and education plays an important role in poverty reduction.

This hypothesis is proved.

Now; 103 respondents (66%) don’t have clean water and hygienic environment. Only

52 respondents have it which is 33.5% of total sample taking micro credit.132

respondents (85%) thinks that most of the diseases they bear are just because of

unclean water and unhygienic environment.

120 respondents (77%) don’t have clean water and hygienic environment available to

them. 99 respondents (63.8%) don’t have proper sanitation system.122 respondents

face water shortage. 104 respondents (67%) don’t have drinking water available at

home, they have to bring it from some other place.

So; from above discussion it is clear that

H1 : Clean water and hygienic environment has an impact on poverty reduction.

This hypothesis is proved.

If we see towards nutrition and adequate food We see that 81 people out of 155

(52.2%) have enough food every day. but 107 respondents (69%) feels difficult to

manage food expenses.82 people (52.9%) experiences such days where they live

without food.87 people (56%) feel uncertain about whether they will get next time

meal or not. Its a good sign that 108 people (69.6%) used to eat fresh chapatti and 99

people (63.8%) eat rice, 95 people (61%) used to eat meat.68 people (43.8%) used to

eat lintels, 47 people (30%) eat stale chapatti and 13 people (8.3%) eat vegetables.

It is a good sign that majority of the people have a good diet but the problem is that

this is not on regular basis as explained above 52.9% people live without food often.

From the above description it can be concluded that

H1: Nutrition and adequate food is an important player of poverty reduction.

So; H1 is accepted.

Now; we see that 84 people ( 54%) live in rented houses, 90 people (58%) claims that

their house is not enough for their family members, it is a good sign that 92

respondents (59.3%) live in stone house and their house is strong enough to bear

thunderstorms or any other kind of natural disasters and 63 people (40.6%) live in

mud house and their house is not strong enough to bear thunderstorms or any other

kind of natural disaster.140 people (90%) have basic necessities in their house such as

electricity, bed, chair. But unfortunately 112 people (72%) live in one room house.

From above discussion it can be concluded that

H1: Accommodation has an important concern with poverty reduction.

So; H1 is accepted.

If we look at income we see that 111 people ( 71.6%) claims that their income is not

enough for family members and 110 people (70.9%) claim that their income is not

enough to bear any uncertain expenses such as sudden guest, child gets ill, breakage

of any property such as house due to thunderstorm, earth quake etc, and also they

cannot afford recreational activities for their children.90 people (58%) are the only

earner of their family.132 people ( 85%) want some other source of income.

So; we can conclude from above discussion that

H1: Income plays an important role in poverty reduction.

This hypothesis is proved.

Last factor of poverty reduction in my study is Savings.

146 people (94%) encourage savings but 111 people (71.6%) feels difficult to do

saving and 102 people (65%) don’t have any savings for rainy days.

So; we can say that

H1: Savings plays an important role in poverty reduction.

So; this hypothesis is accepted.

Overall we can say that Training and education, clean water and hygienic

environment, Nutrition and adequate food, accommodation, Income and Savings are

important factors of poverty reduction. Because when a person has training and

education he can improve his living standard, training can be of any type; auto

workshop, mobile repairing etc he can earn in better way, if a person has clean

drinking water and adequate food he will be safe from various diseases, he will be

healthy and can work in a better way, if his accommodation is better and enough for

family members and strong enough from natural disasters he can live in better way.

and obviously if his earning is good and enough for family, he can also provide

recreational activities to his children and can also afford uncertain expenses such as

sudden guest etc and can also do savings for future then all these things point towards

a good life, life with a good living standard and a life above poverty line. So; all

above mentioned factors plays an important role in poverty reduction.

4.7 Comparison of results with other researchersAccording to Zahid Shahab Ahmed (Pakistan) POVERTY ALLEVIATION

THROUGH MICRO CREDIT

Value of significance shows (Table: 11) that there is a significant association between

respondents’ age and their economic status after utilizing the micro-credit. Also it has

been found that micro credit beneficiaries from all the age groups had improvement

to their economic status after utilizing the micro-credit. There is also a significant

association between respondents’ total number of family members and their economic

status after utilizing the micro credit. It has been found that the beneficiaries with

smaller family size had significant increase to their economic status after utilizing

credit as compared to those having greater family size. This could be due to less

economic pressure on the smaller families. There is also a significant association

between respondents’ monthly household income and their economic status after

utilizing the micro credit. Further, it has been found that respondents’ with greater

monthly household income had better economic status after utilizing the credit, as

compared to those with lesser monthly household income.

Table: 11

Associations Economic status after micro

credit utilization

     

  Chi-square d.f. Significance Gamma

Age  12.470  6  0.050  -0.449

Family size  8.157  3  0.043  0.102

Total income

after credit

utilization

 11.990  3  0.007  0.620

Associations

According to Mohammad Jahangir Alam Chowdhury THE ROLE OF MICRO-

CREDIT IN ALLEVIATION OF POVERTY: A STUDY OF THE GRAMEEN

BANK IN BANGLADESH shows better results in favour of program households in

terms of school attendance of 6 to 13 years old children compared to that of

comparison households, but the chi-square value does not reject the null hypothesis

on school attendance of 6 to 13 years old children. Therefore, there is no significant

difference between the program households and the comparison households in terms

of ‘school attendance of 6 to 13 years old children in the household’. The t-test result

rejects the null hypothesis on ‘yearly educational expenditure’ i.e. there is a

significant difference between the program households and comparison households in

terms of ‘yearly educational expenditure’. It means that micro-credit increases

entitlement of program households on education through increasing capability to

spend more on education of children. The chi-square result rejects the null hypothesis

on ‘households reporting sick children’. The rejection of the null hypothesis means

that there is a significant difference between the program households and the

comparison households in terms of fewer than five sick children. The sickness of an

under five child indicates the malnutrition of that child and it also indicates lack of

enough capability of the parents of that child to provide required nutritious food to the

child. The rejection of the null hypothesis on ‘under 5 sick children’ indicates that

program households have higher capabilities to provide required nutritious food to

their under 5 children. The t-test result rejects the null hypothesis on yearly household

medical expenditure, i.e. there is a significant difference between the program

households and comparison households in terms of yearly household medical

expenditure. This result reveals that program households spend significantly higher

amount of money on health and medical purposes than that of comparison

households. There is a significant difference between the program households and

comparison households in terms of the immediate last medical advice taken by the

households during the immediate last sickness of a member of the household as the

chi-square rejects the null hypothesis. This means that program households have more

ability to pay fees of a qualified private practitioner and also have more ability to

purchase medicine. Therefore, the rejection of null hypotheses on fewer than five sick

children, the average yearly medical expenditure of households and the immediate last

medical advice indicates that micro-credit increases entitlement of program

households on health through increasing the capabilities of program households to

spend more on health. The impacts of micro-credit on shelter have been assessed

through comparison of different indicators related to shelter of program households

with those of comparison households. For analyzing the shelter status of program

households and comparison households, four indicators related to shelter have been

used. These four indicators are (a) the average total area of living space, (b) housing

condition (roof), (c) housing condition (side-wall) and (d) the average value of

dwelling houses. It shows that a program household (00.76% of program households)

and a comparison household (00.78% of comparison households) have a permanent

roof. 71.32% of program households and 77.10% of comparison households have a

roof of tin. 8.53% of program households and 2.29% of comparison households have

a roof of partially tin and partially leave. 19.37% of program households have a roof

of leaves only. On the other hand, 19.85% of comparison households have a roof of

leaves only. It shows the condition of side-walls of dwelling houses. It shows that

program households have better status in terms of the condition of side-walls than that

of comparison households. While 15.50% of program households have permanent

side-walls, the percentage share decrease to 6.11% for comparison households has

permanent side-walls. From the perspective of side-walls of tin, 4.65% of program

households and 2.29% of comparison households have this type of side-walls, i.e. tin.

It also shows that 13.95% of program households and 18.32% of comparison

households have side-walls of bamboo fence, 3.88% of program households and

5.34% of comparison households have side-walls of leaves, and 67.94% of program

households and 62.02% of comparison households have side-walls of mud. It shows

the present market value of dwelling houses of households. The average value of the

dwelling houses of program households and comparison households are Taka 36298

and Taka 21950 respectively. The average value of dwelling houses of program

households is 65% higher than the value of the comparison households. It shows that

t-test result rejects the null hypotheses on the average total area of living space of

households and the average value of dwelling houses. The chi square value rejects the

null hypothesis on the condition of side-walls of dwelling houses of households.

Therefore, the rejection of null hypotheses means that program households have

significantly higher average area of living space, higher\ average value of dwelling

houses and better condition of side walls of dwelling houses than that of comparison

households. It indicates program households have higher entitlement on shelter

compared to comparison households. It shows the weekly food consumption

expenditure of households. The average ‘weekly food consumption expenditure’ of

program households is Taka 858.58 and the average ‘weekly food consumption

expenditure’ of comparison households is Taka 588.85. The average ‘weekly food

consumption expenditure’ of program households is 46% percent higher than the

average ‘weekly food consumption expenditure’ of comparison households. It shows

the availability of food of program households and comparison households. The

program households can arrange enough food for the members of the household on an

average 11.58 months of a year. On the other hand households can arrange food for

the members of the household on an average 9.31 months of a year. These two

averages demonstrate that food is more available in program households than

comparison households. The co-efficient of variation of ‘availability of food in

months’ of program households and comparison households are 0.13 and 0.26

respectively. It shows the distribution of ‘availability of food in months’ of

households. The distribution also shows better distribution for program households.

While 62.60% of comparison households have food deficit, only 10.86% of program

households have food deficit. It shows that the t test value rejects the null hypothesis

on ‘weekly food consumption expenditure’ and ‘food availability of households’.

According to Adeolu B. Ayanwale and Taiwo Alimi MICRO FINANCING AS A

POVERTY ALLEVIATION MEASURE Results of the salient socioeconomic

characteristics of the respondents are presented in Table 1 below. Most (48.44

percent) of the respondents fall in the age range 41-50 years, while about 70 percent

fall between 31 and 50 years of age. The recipients are relatively young and in their

productively active years. The gender distribution is almost equal since a simple

random sample produces an almost equal number of male and female. Thus we can

assert that FADU loan scheme is gender sensitive.

Most of the respondents (39.0 percent) have a family size of between 5 and 8 people,

with the average family size of 10 people.

The average number of years spent in formal institution is three and a half years. Most

of the respondents (34.37 percent) completed their secondary school education, while

only (14.06 percent) had no formal education. Furthermore most (32.81 percent) of

the respondents have less than 10 years of farming experience.

The implications of these socio-economic characteristics are that “the FADU

beneficiaries are educated, young and have an average family size of 10. The fact that

they are educated means they will be able to keep farm record, since education

enables farmers to keep production and farm records and therefore boosts farm

output.

FADU encourages her beneficiaries to save. Table 2 shows the savings patterns of the

respondents. Most (32.81 percent) of the respondents save between N1000 and 2000

per annum, altogether about 60 percent of the respondents saves between N11000 and

N30000 per annum. The average amount of savings is N27, 530.00 which was about

68 percent of the mean amount of loan requested, which was N40, 250.00.

Table 1: Socio-economic characteristics of respondents

Variable Frequency % age Mean

Age (years) 5 3.05

21-30 36 21.95

31-40 79 48.17

41-50 41 25

51-60 3 1.83

>60 164 100

Total 46.28

Sex

Male 89 54.27

Female 75 45.73

Total 164

Family size

4 Jan 10 6.1

8 May 64 39.02

12 Sept 54 32.93

13-16 26 15.85

> 17 10 6.1

Total 100 10

Education level

No formal

education

23 14.02

Primary school

completed

36 15.85

Primary school

not completed

8 4.88

Secondary

school

completed

56 34.15

Secondary

school not

completed

18 10.98

Territory 23 14.02

Total 164 100 3.52

Source: Analysis of Field Survey Data (2002)

Table 2: Resource availability of the respondents

Variable Frequency % age Mean

Savings

None 23 14.02

< 10,000 53 32.32

Nov-00

21-3000 44 26.83

31-4000 8 4.88

41-5000 10 6.1 46.28

>50,000 13 7.93

Total 164

Amount of

loan requested

27530.0

< 30,000 75 45.73

31-60,000 75 45.73

> 60,000 14 8.54

Total 164

Amount of loan

granted

40245

< 10,000 46 28.04

10,000-20,000 16 9.76

21,000-30,000 75 45.73

31,000-40,000 19 11.59

> 40,000 8 4.88

Total 164 38,000

Most (45.90 percent) of the respondents have between N21000 and N30000 granted

to them as loan out of the amount requested. Since the beneficiaries are compelled to

save to obtain credit line, both the lender and the borrower will benefit for the

scheme, being stakeholders they will ensure a success of the venture.

The average amount of loan granted N38, 000 is 94.44 percent of the average amount

of loan requested. FADU loans are short time loans that are repayable within one

production season, where most (65.57 percent) of the loan obtained is repayable

between 4 to 6 months.

Table 3: Loan repayment time

Repayment time

(Months)

Frequency Percentage

4-6-Apr 108 65.85

7-9 Jul 46 28.05

10-12 Oct 10 6.10

Total 164 100

Table 4 shows the various forms of assistance given by FADU to her loan

beneficiaries. These forms of assistance encourage monitoring and enable the NGO to

assess the repayment ability of the borrower on time with a view to intervene at

critical periods to prevent default. The FADU takes special interest in monitoring the

loan utilization and repayment as reported by most (31.10 percent) of the respondents.

Training and evaluation of the funded project was also a very important form of

assistance as reported by 23.17 percent of the beneficiaries each. The reported forms

of assistance may be responsible for the success of the FADU loan scheme. The

specific forms of assistance may need to be noted by other bodies involved in micro

credit delivery to enhance their effectiveness and possible efficiency.

Table 4: FADU’s assistance to farmers after Loan

Form of

Assistance

Frequency Percentage

Monitoring and

training

38 23.17

Monitoring loan

repayment and

utilization

51 31.10

Evaluation

process

38 23.17

Technical

assistance

6 3.66

Distribution of

requested

farm needs

21 12.80

None 10 6.10

Total 164 100.00

Table 5 shows the breakdown of the socioeconomic characteristics of the respondents

by gender. From the table, it could be observed that the women beneficiaries are

younger in age 29 years compared with 35 years for men, have more years a formal

education 3.72 years compared with 3.34 years for men. The women have less years

of farming experience 14.28 years while men had 22.94 years of experience.

Furthermore, women have lower number of children (about two) while men had about

three children on the average. In terms of access to productive resources, more

women purchase land than men, although more men obtain land by lease, rent and

gifts than the women.

In other words access to land by women is more by outright purchase than any other

means; women have restricted access to land as a productive venture, except they

want to purchase it outright which is costlier. Women seem to have less family size

(about eleven) than men (about twelve), maybe because men are prone to polygamy

and as a consequence have more children.

Women have more hoes and cutlass (7.92) than men (5.50) on the average, and, men

make use of tractors more than women. This may be because women have smaller

farm size than men, hence may not need the service of tractors.

Women obtained more loans (N36900.00 from FADU, and N25840 from

Cooperatives) on the average than men (N32500 from FADU and N25000 form

Cooperatives). Although men have more of their loan request granted (61.13 percent)

than women’s (57.90 percent), women obtain more loan (N24660) than men

(N23310) absolutely.

The World Bank had prescribed a threshold income of $1.00 per day as poverty line.

Results of the study showed that men reported a mean income of $751.76, while

female reported an income of $326.72. These figures are above the World Bank’s

minimum threshold income of $1.00 per day. This is encouraging given the reported

widespread prevalence of poverty in the country. The amount of savings also reported

translated to about $220.24 per annum which is an indication of the success of the

FADU’s savings mobilization effort.

The amount of income obtained by the FADU beneficiaries also indicated an

improvement when compared with the reported national average income level of N3,

770. Obtained in 1997 (CBN 1999). Furthermore, the threshold income of FADU’s

potential beneficiaries was put at $260 per annum. If we compare the average annual

income obtained by the beneficiaries the mean annual income obtained $721.76 by

men and $326.72 by women to the national average income we can safely assert that

the welfare of beneficiaries has improved.

Table 5: Gender analysis of FADU beneficiaries

Male Female

Characteristics Mean T ratio

Gender 89 75

Age (years) 48.69 43.38 2.905*

Educational

level

3.34 3.72 -0.918

Farming

Experience

(YRS)

22.94 14.28 3.330*

Rent land 8.315 0.235

Purchase land 15.89 60 -2.792

Lease 19 10 1.069

Gift 1.83 1.72 0.998

Family size 11.75 10.5 0.26

No. of children 2.32 1.71 1.803*

Hoes 4.46 5.48 -1.456*

Cutlass 5.50 7.92 -1.710*

Tractor 1.37 1.17 1.779

Amount spent

on food

2263.64 2065.52 0.671

Amount spent

on children

education

6152 3850 0.677

Amount of loan

obtained

cooperative

from N’000

25 25.84 3.856*

Amount of loan

obtained from

FADU

32.50 36.9 2.005*

Income

obtained from

operations

93.97 40.84 3.013*

Loan requested

N’000

38.13 42.59 -0.731

Loan granted

N’000

23.31 24.66 -0.348

Amount of

contribution

1.44 1.74 1.230

N’000

Amount put in

cooperative

N’000

0.59 0.943 -0.935

Total Savings 35.88 17.45 2.775*

According to Sayeed Al Russel A SOCIAL AND FINANCIAL ASSESSMENT OF

MICROFINANCE FOR THE EXTREME POOR- A CASE STUDY FROM

BANGLADESH .It can be concluded from the data that micro credit has brought

some positive changes in the life of these people, mostly in terms of food

consumption and other expenditure. It has given more ‘options’ to the extreme poor

people's lives and they are trying to adapt with these options and changes to use them

successfully in developing their living condition. I think the most important change

has occurred by creating awareness in various sectors of their lives and these changes

are related directly or indirectly with micro credit. Almost all the children are

attending primary school and people are more serious about their education. Similar

development can also be seen in health sector like drinking water from tube well,

using sanitary latrine, vaccination of children etc. These changes have occurred not

only by creating awareness by the development organizations but also for their

various supports and facilities provided in these sectors. However, it can not be said

that Micro credit has created similar development in financial condition of all the

people. Except the four families who have permanent income during the whole year,

others still have not been able to make stable financial base from where they can start

for gradual development. There was mention of two families who left the village for

being unable to pay the loan. Though Micro credit has smoothed living expense and

food consumption it has not been able to create a stable financial security. From this

perspective it can be said that micro credit has failed to serve its main purpose for

these people. Moreover, many claimed that there situation has deteriorated since they

started taking micro credit. They are now suffering from chronic debt and have to

remain worried all the time about weekly installment People are using micro credit to

pay loan from the traditional money lenders and at the same time they are also taking

loan from the local traditional money lenders to pay installment of the micro credit. It

was found that about sixty percent of the households are in debt to the local money

lenders. This has created a circle among the clients, micro credit NGOs, and the local

money lenders. The clients have developed a loan dependent living pattern. Many

clients asserted that they do not want to take micro credit unless they fall in problem

and they will try not to take any credit after repaying the existing loan. However, it

was also found that some households take credit just as soon as they have enough

primary savings (which makes them eligible for taking loan) without making any

prior plan to use the money for income generation.

The distinct nature of the poverty of the extreme poor people is their vulnerable

condition and insecurity in life. Villagers said that they used to starve when they did

not have any money to buy food, now they are using micro credit to face these

situations. From this point their life has become less vulnerable to hunger or disease

but they have become trapped in loan.

As most of these extremely poor families have no regular permanent income or

savings and live from day to day basis it is not easy for them to use micro credit in the

desired way. Very often they fall in difficult situations like illness and food shortage

when it becomes priority to solve these problems any how. They have to take micro

credit or sell the investment of micro credit (rickshaw, cattle etc.) to meet the needs in

these situations. All the households have faced such situations from which it was very

hard for them to recover. In case if their micro credit investment (like rickshaw or

cattle) gets stolen or dies they have to suffer a lot to recover from the loss. “For them

the loss of a chicken is like the loss of a cow to a farmer” an NGO worker asserted.

Besides the lack of permanent income source there is also lack of skill in using capital

successfully. It has to be kept in mind that these people are living as agricultural

laborer for a long time and they have long established living pattern. With this they

also have a cultural and psychological construction about their life and ambition. The

biggest problem of their life is hunger and they are worried more about today than

tomorrow. They try to use any kind of opportunity to meet these problems first.

Besides, changing from the life of a wage laborer to a self employed entrepreneur

requires ambition and skill. Especially the management of the credit has to be learnt

and it requires time to do that. While trying to learn it is easy to make mistakes and

suffer the consequences for the people who are not oriented with such kind of

practices. Thus micro credit, a powerful tool of development, can bring the opposite

of the desired result.

CHAPTER: 5 CONCLUSION

In this section the prominent findings of the research will be discussed,

conclusion of this study, some recommendations for making micro credit more

effective and useful for poverty alleviation and limitations of the study.

5.1 Conclusion

I have tried to assess the role of micro credit in poverty alleviation through the

comparison of living standard of borrowers before and after use of micro

credit.

From data analysis it is concluded that the micro credit program is effective in

giving unemployed people employment such as taxi driver, shop keeper etc ,

and to meet short term needs such as return debt taken from some one else,

paying fee, operation, treatment of disease etc.

Mostly borrowers of Muslim colony, Dhok Kala Khan, Shakrial and

Tehmaspabad have used micro credit to purchase taxi, sewing machine and

opening small shop and improving accommodation.

But I would say that although micro credit is working well for poverty

reduction but still it is not the only way on which we can depend. This method

also needs improvement which I have explained in previous chapter.

Reasons for improvement in this system are: micro credit is creating people

tenser then they were before. Most of the taxi drivers claim that “Before micro

credit we slept without meal but we were not tense about returning credit, or

about this thing that we have no place to park taxi inside house, we park it

outside and we are worried that what will happen if any of its mirror is broken

as children used to play outside, what will happen if someone steal it? These

questions can’t make us sleep all night”

As Dr. Younis said that best customers for micro credit is females I agree with

it because females mostly used to sew cloths for their family and earn for

them, it also gives them empowerment and they are also good in management

so they better manage to earn such amount from which they return credit and

also keep some money for their daily use. On other hand some of the males

used to spend some of the amount on their drugs, purchase TV which is just a

one time investment.

Still further research is needed in this area and I think it would be a good

research question that whether the poverty alleviation through micro credit in

Pakistan is on sustainable basis or is it a temporary phenomenon?

5.2 Recommendations to make micro credit more effective and

useful in poverty alleviation

Poverty reduction is not only the task of the Government and the whole

society, but it is first of all the responsibility of the poor themselves to develop

the capacity to escape from poverty.

Although it is the responsibility of government to help eliminate social and

economic constraints and barriers in order to eliminate hunger and reduce

poverty, the outcome will be weak if the poor themselves do not actively strive

to improve their living conditions.

Poverty reduction must be seen as the mission of poor people and poor

communities themselves; because it is their own self help efforts to escape

from poverty that is the driving force and necessary condition for attaining the

goal of poverty elimination in all countries.

The State will support the poor to enable them to learn how to escape from

poverty and avoid falling back into poverty when risks befall them. Apart

from providing direct material support to the poor, providing them with

guidance on how to produce and do business and how to develop their

economic activities, given their particular conditions and circumstances, is the

very condition for rapid and sustainable achievement of poverty reduction.

Although micro credit is a good concept but Micro finance institutes in

Pakistan are making people more dependent then independent. People know

that when they will need money they can take it from micro credit institutions

easily and will return amount back on small interest. People of Pakistan are

like that; If you walked down the street and gave every passerby rupees

hundred, many would just spend it right away or gamble it rather than

managing it and trying to make it grow .I would say that purpose of micro

credit institution should be to make people independent not dependent, to

make them able to set any source of income for their family.

Poverty reduction objectives should be consistent and visionary: the goal

should be to not only improve the living standards of the people, but also to

create opportunities and a legal foundation for improving the Poor’s

intellectual level and sense of law compliance to enable their participation in

the economic, political and social life of the nation. State policies and

mechanisms should not only focus on fighting against poverty but also on

preventing the falling back again into poverty.

First of all micro credit institutions should brief clients that what can be the

best use of this credit. For example in Muslim Colony, Dhok Kala Khan,

Tehmaspabad and Shakrial clients can keep cows and sell its milk, hens and

can sell its eggs, open shops, sew cloths and drive taxi, rickshaw.

Micro credit system can be improved in such a way (for above mentioned

areas and can be implemented in other areas as well) that micro credit

institutions can do a contract with companies like BATA and Unilever.

Suppose micro credit institution do a contract with BATA. Micro credit

institution gives credit to their client he then purchase BATA sandals and sell

them in his area. This method will be beneficial for both company and client.

With Unilever a contract can be made that a person takes credit from micro

credit institutions and purchase sachets of soap, toothpaste and shampoo of

Unilever and sell them in his area.

For female Clients micro credit institutions can make a contract with

boutiques and clients can take credit from micro credit institutions purchase a

sewing machine and can sew cloths for boutiques and can earn income for

their family. Through this they can earn enough to return credit.

Micro credit institutions should hire training managers or they should do

partnership with those institutions that will be core staff, equipped with basic

knowledge and qualified to brief people and their duty will be to train

customers with fewer fees for the purpose they are taking credit. In one

specific area for example Dhok Kala Khan mostly trend is to take taxi. So; in

this area micro credit institution should hire training managers (expert in

driving) or they can do partnership with driving centers who will train them

drive. Otherwise credit will be of no use. Let’s say customer is taking money

to purchase a taxi but he doesn’t know driving then there is no use of that

credit. First he has to learn how to drive by paying heavy fee to driving centre

but through micro credit trainers he will learn driving in less than half fee.

Other important issue is Monitoring. Micro credit institutions should have a

proper monitoring system.

Such a system has to be made in which a proper record has to be prepared that

for what purpose credit is taken it is used for that purpose or not. If not then

why it is not used for that purpose? For which purpose it is used then?

If it used for one time investment only such as motor bike, radio, television

then restrict them and make a condition that credit will be only given for

income generating purpose. This amount cannot be used for any other

purpose.

For this purpose certificate should be signed that “I will use this amount for

this purpose” and at the time when the customer is returning loan he has to

show its receipt which will prove that credit is used for the purpose it is taken.

Micro credit can also play an important role in poverty alleviation in the form

of community.

For example there are two houses. They collectively take loan and distribute

duties. Let’s say they purchase hen and decides to sell eggs. Now, one house

takes responsibility of marketing and other house takes responsibility of

selling. And they share profit and collectively return loan.

Beggars are also major part of Pakistan’s population which is totally ignored

to become an effective part of the society. Micro credit institutions should also

recruit beggars as their customers and turn them into a sales force. They can

offer small interest free loans of about $12 which beggars can use to purchase

“cookies or toys” which can be sold. The loan can be paid back at anytime.

In this way micro credit institution can play an important role in poverty

alleviation and making people able to earn for their family.

5.3 Limitations of the study

One of the limitations of my study is that I was not able to spend more time

among the community. It was not possible for a number of reasons. Such as it

will not seem ‘normal’ to the community to live among them in order to get to

know about their condition, to overcome this problem I tried to make such

questionnaire which will be easy for them to read, understand and fill it. That

is why I translated questionnaire into Urdu which everyone among them can

read and understand.

But I think it would have been better if I could spend more time.

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