Is Microfinance a Magic Bullet for the Well-being of Poor Households in Pakistan? A Case Study of Southern Punjab

Abstract

Microfinance is used one of the tools for the poverty reduction. Microfinance institutions supply small loans to poor people, farmers and small enterprises. The research provides analysis of microfinance and poverty reduction at Muzaffargarh district Punjab Pakistan. This study is based on the qualitative and quantitative methodologies in order to find out the feasible solution of this research question: to explore the role of microfinance on reduction of poverty in rural areas? The research mainly focus on the impact of NRSP on this area, borrowers have been taken as a sample from NRSP and customers selected randomly. Multi stage sampling techniques were used to get total of three hundred respondents and finally analyzed by using SPSS. Data were collected to close ended and open ended questionnaires. Data analysis was based on descriptive statistics using various statistical tools percentages, frequency distribution and empirical analysis was conducted by using Logit regression model and Paired t-test. The research finds that provision of microfinance is very useful in poverty reduction. The result of the research also show that microfinance borrowers increase their monthly income and expenditure on health, education and eatables. Study highlight significant impact of microfinance in eradicating poverty. There are still high potential markets that need microfinance but with the high interest rate by these microfinance institutions makes it difficult for people to borrow. It is recommended that by reducing interest rate microfinance institutions can reach the maximum number of borrowers; this will enable poor households to get rid from the web of poverty.