Role of micro credit in poverty alleviation
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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 study
Inequality 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 credit
Target 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 Correlation
Correlation 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 References
This 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.
0
10
20
30
40
50
60
Age
Series1 19 50 59 54 18
20 yrs or below
21-30 31-40 41-50Above 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 LintelsStale
chapattiRice 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
Tra
inin
g an
ded
ucat
ion
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 researchers
According 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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