Impacts of Price Ceilings in the UK Market
1.1 Background of the study:
This research is about the Impacts of Microfinance on Poverty Alleviation through Empowerment of Women. Microfinance by definition is ‘The provision of Credit/Loans and other basic Financial Services to the poor such as Savings, Insurance etc.’
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Poor as defined by the GOP are, ‘Those whose per capita monthly income falls below Rs. 909 at 2005 prices’. And in international terms poor are defined as, ‘Those living on daily income of below $2 are poor’.
The importance of this study relies on some facts that out of the 172 Million people here in Pakistan, 90 Million live in rural areas and have no sufficient employment opportunities other than self-employment. 22.3% of our total population or 35Million Pakistanis are still living below poverty line (ADB, 2009). Access to credit for the rural poor is typically limited to local money-lenders who can charge in excess of up to 350% per annum (PMN, 2005).
The poor among us just like the rich need a mix of funds to run their daily life activities, Purchase assets, Spend on Health, Education, Household, and protect themselves against uncertainties and mishaps. Thus it important to recognize that microfinance covers a wide range of services and it is not just confined to the provision of credit only.
According to Household Integrated Economic Survey (HIS, 2007-08) and more recently the Pakistan Social and Living Standards Measurement Survey (PSLSM, 2009), Those living on or above the poverty line can afford to buy themselves with Food and some Non-food items such as Shelter and Clothing that are necessary to sustain life. Those living below the poverty line cannot afford such or part of such items.
Women, form 51% of our total population and contribute equally to the workforce here in Pakistan but the conditions under which they have to work and support their house holds and execute their children education plans, provide them with health facilities, savings etc are so discriminatory and miserable that most of our women are still not aware of the fact that what potential opportunities they have and how well can they avail financial services from financial institutions including banks.
According to Maria and Tahir (2005) at I.L.O, All over the world women face inequities in different areas of their daily lives. Economic empowerment can serve as a way of lessening the discriminatory gap between men and women. Microfinance has great potential for empowering women. Moreover, this economic activity is increasingly targeted and used as tool for poverty alleviation.
The solution to both these problems, Poverty Alleviation and Empowerment of Women lies somewhere in Microfinance schemes that are tailored to specific group of people forming a community who can well avail the Microfinance facilities and help run their businesses, earn bread for their families and pursue a better future.
The Micro-Credit Summit Campaign presents encouraging figures and data on the rapid growth and expansion of micro-finance programmes all over the world; especially in developing countries. This rapid expansion is due to a general conviction among the international donor community that micro-finance has implicit empowerment potential.
While targeting the poorest of the poor, micro-finance programmes attract a large majority of women clients. Other micro-credit programmes have been established exclusively for women because overtime they have proved to be more successful in repaying loans.
Some authors question the extent to which micro-finance benefits women. They highlight cases in Bangladesh where micro-credit programmes have had negative consequences for women. However, most studies and publications show that Microfinance has a positive impact on the empowerment of women.
Today our reliance on Micro-Finance as a tool to alleviate poverty has increase to a greater extent. This is a core concern of our government to alleviate poverty. Different players such as NGO’s and Banks along with our government are contributing towards microfinance sector in a will to fight poverty. Among these institutions Rural Support Programs and some key Microfinance Banks are famous including Khushali Bank and a public sector commercial bank of Khyber Pukhtunkhwa named Bank of Khyber, which is considered specialized in Microfinance as well.
Outside our country, Banks such as Grameen Bank and Credit agencies such as BRAC are working in Microfinance in Bangladesh since the very inception of microfinance. Inspired by their good work, our government as well as the private sector has shown significant concern and has taken important steps in order to address the biggest and the most oppressed community of our population, the Women, which roughly forms 51% of our total population. The reason why to outreach women is not because they are just women but there is a fact that even among the poor, women are the poorest of the poor.
The MF schemes are already there, outreached to most part of our poor communities and especially women in rural and hard areas of our country. All we need to identify now are the Impacts of Microfinance as to how it actually achieved to alleviate poverty and empower the women.
1.2 Scheme of the Report:
This research report contains Five Chapters in all.
Starting with Chapter 1.1, the Introduction/ Background to the study it continues with the scheme of the report as Chapter 1.2 and then followed by the main Purpose/ Objectives of the study in Chapter 1.3.In Chapter 1.4 the methodology of this research is explained. In Chapter 1.5 and 1.6 the Significance and Limitations of the Study are also discussed, respectively.
Chapter 2 reviews the available literature on this research topic by different authors and journals. This is then trickled down to our core concern that is what impacts different modes and paradigms of microfinance have upon our Economic, Social, Political and Psychological conditions. It reviews different cases from different organizations that are currently involved in micro-lending.
Chapter 3 explains the Theoretical Framework developed during this study.
Chapter 4 analyses the results recorded via interview based questionnaire presented to a focused group women clients at three MFI’s and review of three MFI case studies and finally findings are discussed and recommendations for further research are developed.
Chapter 5, which is the final chapter of this research, concludes the topic.
1.3 Purpose/ Objectives of the Study:
The objective of this study was to identify the means through which Microfinance helps the poor and alleviate poverty, and how it helps the Women to cope up with poverty, Household problems, Children Education, Health problems and overall economic development of their family.
1.4 Methodology of the Study:
This is an exploratory/qualitative research but for the sake of explaining some concepts numerical figures are also used in tables and or graphs so as to illustrate the idea to its best, which makes this research quantitative to a minor extent as well.. The data was collected on the basis of both Primary and Secondary sources including a Questionnaire and information from the journals and different articles available over the internet. Also some specific Case Studies were taken up to observe the Impact of Micro-finance on Poverty Alleviation and Empowerment of Women. The subject institutions, chosen to represent different types of Micro-Finance Institutions and areas of geographical focus are Sarhad Rural Support Program (SRSP) which is the largest N.G.O in Khyber Pukhtunkhwa, Khushhali Bank Ltd. (KB) which is a public sector micro-finance institution and Bank of Khyber (BoK) which is a commercial bank with specialized microfinance department working as provincial public sector commercial bank in Khyber Pukhtunkhwa, Pakistan.
1.5 Significance of the Study:
This research covers part of the concept of Microfinance, that how it alleviates poverty by Providing Loans for Small and Medium businesses? How does Microfinance cope with poverty? How does Microfinance empower the women especially, by providing them with finance facilities so that they support their Household activities, Children’s education, Health maintenance, and overall Grooming of their family? This research emphasizes on the Impact of Microfinance on Poverty alleviation through empowerment of Women in Pakistan.
1.6 Limitations of the Study:
The research focuses mainly on the impacts of Microfinance such as Poverty Alleviation and Empowerment of Women as the Title says. It does not cover the in-depth study of modes and facilities that are part of Microfinance Concept itself such as Micro-insurance, Micro-savings, etc. If somewhere they are mentioned, they are mentioned with special reference and emphasis only. This research is qualitative in nature and we study here its impacts in general.
Chapter No: 2
Growing need for credit today is one of the consequences of average income levels getting down and down, commodity price inflation, individual expenditure and spending habits changing overtime. Not much surprisingly, the added ingredient to the recipe of this circle of credit and spending is poverty itself. The very need for credit begins and ends at Poverty. Here we have discussed some of the factors that help alleviate poverty through empowerment of Women, who are integral part of household development and overall grooming of the family. Also the reason for ‘Women’ as target subject of this research report is because out of every 10 Micro-Credit recipients across the globe, 8 are Women (DFID Annual Report on Pakistan, 2006)
Over the last few decades poverty has struck this nation as Plague once struck France in the 17th century. A year on year overall increase in poverty was measured at 13% since the year 1987 till 1999 alone, making it the worst enemy of our nation till date. (KASHF, 2005)
To help alleviate this problem several players joined hands in hands both from Public and Private sector here in Pakistan including NGO’s such as Agha Khan Development Network, Other NGO’s that later transformed into specialized Microfinance banks such as the First Microfinance Bank, Rural Support Programs at both National and Provincial levels. As well as some other specialized Microfinance banks including Bank of Khyber and First Women Bank.
It was because of the Microfinance schemes that helped reduce poverty in our nation by bringing 35% of Microfinance households UP-The poverty line which earlier were living below the poverty line. Also an impact study finding reveals an increase in overall expenditure of a typical micro-financed household by 27% as the income level improved. (KASHF, 2005)
Now coming back to our main concern as to how Microfinance Empowers Women to help alleviate poverty we first need to understand the words such as ‘Empowerment’, Its types, and its impacts in short, which will further be elaborated in the next chapters.
If we just break the word ‘Empowerment’ we extract that ‘Power’ in the word ‘Empowerment’ refers to Access to and Control over Material, Intellectual and Ideological Resources (Batliwala, 1994).
Hence by the word ‘Empowerment’, it is generally meant ‘The process involving change in an individual or a group’s life through which that individual or group takes control of their life. This control can be better living, easy access to resources, leadership, self-esteem, control over decision making, etc.
There are different kinds of Empowerment as being identified by studies overtime. It involves Economic empowerment, Social Empowerment, Political Empowerment and Psychological Empowerment (Friedmann, 1992).
When we have access to resources like Income, Food, Shelter, Markets and daily life decision making powers regarding financial matters, this is called Economic Empowerment. (Friedmann, 1992).
Social Empowerment is the access to External Resources involving Know-how information/ Knowledge, Skills, Expertise, Training and Development including training on Health/ Education issues. (Friedmann, 1992).
Political Empowerment involves the power that an individual has over his/her individual decision making regarding current or future plans. How much bargaining power he/she has at the household level? Whether he/she is in supervisory role or subordinating role? Whether sole bread earner or dependent? (Friedmann, 1992).
The last one, Psychological Empowerment involves an individual’s self-esteem, Confidence level, Leadership insight. (Friedmann, 1992).
‘Poor’ on the other hand are defined as, “Those people whose per capita income falls below Rs. 909 at 2005 Prices, or in other terms people who are living on or less than $2 a day are poor’ (GOP, 2005)
There are several categories or types of poor. But just for our study purposes lets include the full Economic Status distribution sequence and examine what Micro-financial institutions target and why?
The first category is Rich, who are defined as those families who has more than one bread earner, especially at least one individual working in a formal service or business. Those who have access to transport facilities at home and other machineries, they have cemented houses and have basic facilities like electricity, Water etc. (Zahid, 2006)
The second category is Well-to-do, which are defined as the ones performing less-paid jobs but having more than one income source. Most commonly their primary mean of transportation is Motorcycle (Zahid, 2006)
The third category is Poor, Who is a single bread earner supporting many dependents. Their primary mean of transportation is bicycle (Zahid, 2006).
The fourth category is Very Poor, who are working on daily wages basis, have no such regular income source and they have no personal transport facility (Zahid, 2006)
The fifth category is Destitute, who bear no income at all. They survive upon charities such as Zakat and perform occasional labour as well. They lack personal transport facility (Zahid, 2006)
Pakistan is faced with 33% of Destitute Poor, and 17% of Poor which collectively form 4.8 Million households in Pakistan. While the rest of 50% are Non-Poor i-e in the categories of either Well-to-do or Rich (UNDP, 2001)
Evidences from recent studies reveal that Microfinance as a tool to alleviate poverty has proven more useful incase of Women than Men (Chaudhry, 2007).
According to United Nations Capital Development Fund’s Special Unit on Microfinance, (SUM/UNCDF, 2001) 29 Microfinance institutions selected as microfinance impact assessment research subject institutions revealed that 60 percent of their clients were women. From within those 29 institutions, 6 focused entirely on women. The remaining 23 institutions were offering mix-gender programs which revealed that even there 52 percent of their target clients were women. It was also noticed that those programs offering just individual loans had lower number of women clients and those designed specially with incentives other than loan programs such as community training and development programs had higher number of women clients.
The only reason why women are mostly targeted by Micro-finance institutions is that they are Poorest of the poor. According to Human Development Report of United Nations Development Program (UNDP Human Development Report, 1995) 70 percent from among the 1.3 Billion Poor living across the globe are women. Whereas according to World Bank’s Gender statistics database women also have higher un-employment rate over men in all countries.
“Women Microfinance clients in Pakistan reported an increase of up-to 54% in their income after availing Micro-finance facilities, whereas Men reported and increase of 34% only which is 20% lesser than Women (Chaudhry, 2007)”.
This was just from among the many positive impacts that were revealed after assessing Micro-finance programs not only in Pakistan but similar results were observed worldwide. This however was achieved through carefully designed microfinance models/ paradigms. Not a single model is perfect, but the combination of different models proved well at different times and geographic locations. For instance Women were reported to have preferred group-lending procedures over individual lending, so as to avoid over-burdened risk of non-repayment i-e they were better off in repaying in groups while individually, also they preferred group lending as it involved incentives along with it such as different training and capacity building programs on Health care development, education, business enterprise development etc.
2.1 Models of Microfinance
Following are some of the models/ paradigms of Micro-finance that Microfinance Institutions (MFI’s) across the globe are following. Different MFI’s prefer different models but some may use multiple models at different times and need so as to reach out clients distinguished by different gender, social and economical needs. The basic aim of all these models is to maintain gender equity, however studies reveal that most of these models have proved well incase of lending to the socially and economically oppressed and depressed women.
2.1.1 Group Based Lending Model
Also known as the Grameen Model, is one of the widely used micro-lending model. It offers a group of people normally that of 4 to 8 people, a collateral free credit. First only selected members of that group are offered credit which is later on offered to the rest of the group members as well. The group deposits some of the percentage of the loan amount with the MFI just to ensure smooth repayments of the loan itself. Group lending is interesting because here all the members of a group are held accountable for one another’s re-payment of loan amount. Hence a peer pressure is built up among the group to repay the loan amount. Incase of default on behalf of a single member of that group, all members are held disqualified to avail future lending opportunity. The credit worthiness of each member within that group is assessed mutually by all other members of that group rather than the institution providing the loan.
2.1.2 Individual/ Personal Lending Model
This approach is followed by some financial institutions that are not specialized microfinance lenders but they do lend to the poor and high-risk clients at some low level of loans. Because of the risky nature of the clients, the lending institutions may ask for collateral along with other securities or most of the time just collateral is asked for.
2.1.3 Credit Unions Model
Credit Unions are bodies that are formed to support the poor members of this body, by the pooled savings fund that was earlier created by its members. These unions mostly work in rural areas where most of the time they are the sole providers of such funds but the problem with credit unions is that most of the time they lack sufficient deposits to support further lending as the amount of borrowing exceeds the amount of deposits.
2.1.4 Village Banks Model
This is a financial services model where the poor communities form their Credit/ Savings associations known as the Village Banks. This bank in turn offers loans without the need for any collateral in place. Funds are invested for mutual benefit purposes and hence it helps promote social solidarity among the community members. The repayment of borrowed funds from the village bank is usually received within 4-6 months. This is made possible by the help of creating peer pressure among the borrowing group members. That member of that group who has saved more is able to obtain higher amount of future loans.
After reviewing some general models of Microfinance and literature available on the impacts of microfinance on poverty alleviation through empowerment of women, let’s have a detailed study of how it actually happens and why to empower women in order to alleviate poverty? We have some interesting facts and figures ahead in the coming chapters.
Chapter No: 3
Poverty Alleviation through Empowerment of Women
Provision of Credit
Providing Access to Healthcare Facilities
Maintaining Human Rights/ Gender Equity
Providing Access to/ Have:
Financial Decision Making Powers
Providing Access to/ Have
Know-how Information/ Knowledge
T&D including Health related Training, Basic/ Technical/Vocational Education
Decision Making Power
Role/Contribution at Household Level
Enhancing Confidence Levels
Creating Leadership Insight
ANALYSIS OF RESEARCH FINDINGS
4.1 Research Findings
For research purposes I divided the research findings section into two parts. First I analyzed the evidence about microfinance operations of Microfinance operatives here in Peshawar and selected three key MFI’s from among the list of banks, NGO’s and other formal and informal credit associations.
4.1.1 Evidence from Case Studies
If we have a look at the table below (Table 1) we find that all the three MFI’s selected as part of our study had roughly the same average loan size and similar lending group was considered from among the different modes that they operated in.
Table 1. Key MFI’s operating in Khyber Pukhtunkhwa province
Name of Institution
Avg. Loan Amount (Rs.)
Applicant’s Age Limit (Years)
Sarhad Rural Support Program (SRSP)
Bank of Khyber (BoK)
Khushali Bank Ltd. (KB)
18-58 up to 65
Data Sources (Figures Re-organized by author)
Next, the loan amount available for clients slightly varied from institution to institution because of the different operating capacities of the three MFI’s but the re-payment period for all these three MFI’s was the same and even internationally 3-12 months is what is most commonly observed for a microfinance loan repayment schedule. Applicant’s age limits were also near the same. I selected the group lending method because I found it the most commonly used method by MFI’s not only in Pakistan but across the globe, which is also known as the Grameen Model. While reviewing the literature on this topic it proved to be one of the best practices that MFI’s across the world have adopted especially those which are targeting women. How better off it is? Got cleared while conducting this research and when results from the focused group interview questionnaire’s came in. Table 2 reveals some critical findings through interpretation of results gathered through the interview questionnaire.
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4.1.2 Evidences from the Questionnaire
The research questionnaire was distributed randomly to the focused group of clients at the three subject institutions (10 clients for each MFI were taken up for study). It was a 10-15 minutes questionnaire containing some closed end and some open ended questions, for some there were given multiple choices while for the others a Yes/No choice were given only. Also likert scale was used in some cases where the client had to express the degree of their agreement or disagreement with our statement. Then some open ended questions were asked where the client had to answer in their very own words. This was important in assessing the impacts of Microfinance upon their lifestyle which somehow was un-explainable in numeric terms.
Table 2. Microfinance For Women
Name of Institution
Number of Women Clients (out of 10)
Percentage out of Total Clients (Male+Female)
Number of Female Clients (Individual Borrowing)
Number of Female Clients (Group Borrowing)
Sarhad Rural Support Program (SRSP)
5 out of 10
Bank of Khyber (BoK)
2 out of 10
Khushali Bank Ltd. (KB)
3 out of 10
Average Women Clients 30%
7 out of 10 clients preferred group Borrowing
Table 2 reveals that on average 30% of the total Microfinance clients of all the three MFI’s selected for this research were women (which is significantly lower percentage as compared to women microfinance clients in our neighboring countries i-e Grameen Bank of Bangladesh has around 98% women clients but we have lesser microfinance because microfinance still is in grooming stage here in Pakistan so we are confident over this 30% figure as well to assess its future success.
Anyhow It is significant to note down here that out of 10 women clients 7 preferred group borrowing as their mode of finance. The reason being that it is believed to be more safer, less riskier, has collective responsibility clause, and off course the amount borrowed through this mode is larger than what an individual could have borrowed, and also because it had bright future prospects i-e the opportunity for a bigger future loan as well as some other incentives like the capacity building programs arranged by MFI’s for the groups participating in availing such loan facilities.
Now if we look at some other responses from the women clients who received micro-finance loans we observed that;
62% of the women clients were married and were in between the age limits of 25-40 years. 24% were under the age of 25 and the rest were over 40 years of age.
At 47%, majority clients had only education experience of 1-5 years, 20% had educational experience of 6-10 years and 10% had experience of more than 10 years. The rest of the 23% had no educational experience at all.
On average the respondents had 2-5 family members (53%), whereas 38% of respondents had less than two family members, which either reveals that they were unmarried or were not having any children at all. The rest of 9% had more than 5 family members and hence represented higher expense per household.
Majority had no basic facilities at home such as clean water and transport, most of them used public transport i-e they lie in category of Poor
Majority had no prior business experience
When the respondents were asked the question as to what facilities did the had before obtaining this loan, 75% of respondents replied that they had rented homes and they used to avail the public transport facility, and had no personal home/transport available. Rest of the respondents replied that they had rented homes but could not afford Medical expense, electricity charges, school fees and transportation expense. This reveals that most of these clients were in the categories of poor to well to do.
It was revealed that 80% of the clients had no earlier business experience; the rest of them had it. This means that microfinance had empowered these clients to not only start a new business but also it helped those who were already performing businesses on their on. The families with large number of members benefited from this the most as the members other than the client member herself also joined in and run the business equally in a supporting role, hence fully benefitting from the loan amount as well as the technical expertise that got developed as part of microfinance Training and development programs.
80% of the clients responded that they availed the facilities of MFI’s in order to pay for the startup cost of their businesses. Rest of the clients managed it through family and friends support as well as their own savings.
Statistics from this questionnaire revealed that around 85% of the loans offered to the clients were in the range of Rs. 10,000, which is enough to initiate a small business, but this is not sufficient to initiate a medium size business.
The interviewed clients favored the currently placed interest rates on microfinance loans and most of them agreed to our statement. (Averaged at 3)
Yet they confirmed that the procedure for obtaining the micro-loan was easier than obtaining a regular commercial loan. This proves our hypothesis true. (Averaged at 4)
8 out of 10 respondents revealed an increase in their income; also they revealed a positive change in savings.
Answers to the questions regarding standards of living improvement, increase in employment opportunities, revealed that all respondents strongly agreed to our statement that microfinance has significantly increased their ability to access to healthcare, access to education and help improve the financial position of their families.
Also the increase in overall income of the family helped empowered the women to take active role in the decision making process. 10 out of 10 respondents revealed agreement towards our statement.
Dear participant, I am a student of M.B.A Banking and Finance at the Institute of Management Sciences, Peshawar. I designed this questionnaire to find out the Impacts of Microfinance on Poverty Alleviation through Empowerment of Women, which was a requisite of completing our Masters Degree thesis report.
It is highly appreciated if you could take out some 10-15 minutes of your precious time and fill this two-page questionnaire. Your kind consideration is expected.
What is your gender?
What is your age?
Less than 25 years
Above 40 years
What is your education level?
Not at all
More than 10 years
What number of family members are you?
Less than 2
More than 5
What facilities did you have had at home before applying for this loan?
Do you have any prior business experience?
Source of Initial Capital for your business is?
Friends and Relatives
Loan from Microfinance Institution
The amount of loan that you received from the lender is Rs.?
Over 10 thousand
What type of borrowing do you prefer?
Do you think empowered now? How?
The following indicates the level of satisfaction of Microfinance borrowers after when they have received their loans indicated on a scale of 1-5, where 1 shows the level of high disagreement and 5 indicates level of high agreement. Please encircle the number that you feel is the best option as your answer.
Microfinance’s rate of interest is fine