Role of Microfinance on Poverty Reduction

in Case of Pakistan

By

Humail qazi

Roll No. ECO 16-02

Supervisor: MUHAMMAD SIDDIQUE

PROFESSOR IN ECONOMICS DEPARTMENT GPGC N.O 1 ABBOTTABAD

DEPARTMENT OF ECONOMICS

GOVERNMENT POST GRADUATE COLLEGE No.1 ABBOTTABAD

SESSION 2016-2020

i
 Role of Microfinance on poverty reduction
in Case of Pakistan

BY

Humail Qazi

BS Economics

(Roll No. Eco 16-02)

Supervisor:

Submitted to Abbottabad University for Partial Fulfillment of the Requirement

for the Degree of BS Economics

SESSION 2016-2020

ii
In the name of allah, the most merciful and the

Most beneficent

iii
 Dedication

I dedicate this research to my beloved teacher Prof. Muhammad Siddiqui who is

being so kind and cooperative and guided me to achieve my goal of higher education,
my loving Mom and Dad, whose affections, love, encouragement, and prayers of the
day and night make me able to achieve such success and honor.

iv
 Impact of Microfinance on poverty reduction
in Case of Pakistan

(Acceptance by the Viva Voce Committee)

Accepted by the Faculty of Department of Economics, Abbottabad University in

partial fulfillment of the requirement for the BS in Economics

Viva Voce Committee

Supervisor………………………………...

External Examiner………………………..

Internal Examiner…………………………

Head, Department of Economics……………………………….

Date: ....………………………..

v
 ABSTRACT
The purpose of my study is to empirically investigate the role of microfinance on poverty
reduction for Pakistan during the period 1991 to 2019. ARDL technique is applied for
estimation. The result of the study suggests the negative relationship between microfinance
advances and household income on poverty. An outcome of ECM term is negative and
statistically significant. It shows -1.28 speed of adjustment in one year and converges to
equilibrium. The overall results concluded the existence of both long run and short run
relationship between the explanatory variable.

Keywords; Poverty, Microfinance, Poverty reduction, Household income, Living standard,

Microfinance Debt, and WDI

vi
 Declaration
I, HUMAIL QAZI D/O MUHAMMAD IQBAL Roll No ECO-16-02 student of BS
Economics at Abbottabad University of Science and Technology, do hereby solemnly declare
that present research work entitled “Role of microfinance on poverty reduction in Case of
Pakistan” submitted by me in partial fulfillment of BS degree in Economics is my original
work and it has not been submitted earlier and shall not in future be submitted by me for
obtaining any degree from this or other university or institution.

Signature ……………………………….

Date …………………………………….

ACKNOWLEDGEMENT

vii
First, of all thanks to Almighty ALLAH who enabled me to do research and giving
me the strength and ability to accomplish this work. I revere the patronage and moral
support extended with love, by my loving parents whose financial support and
passionate encouragement made it possible for me to complete this project. I submit
my heartiest gratitude to my respected Prof. Muhammad Siddiqui, for his sincere
guidance and help in completing this thesis. I am also very thankful to Prof.
Muhammad Siddiqui HOD of Economics Department GPGC No. 1 Abbottabad, Prof
Mumtaz Haider, Prof. Irfanullah Shah, Prof. Masjid, Prof. Waseem, Prof. Luqman
Khalil, and Prof. Syed Ali Raza for being my teacher in Economics and their precious
guidance. Their wonderful teaching and exposition of Economics concepts motivated
me towards the study of Economics. I express my heartiest gratitude to my loving and
caring Parents my peerless brothers, Friends, and most importantly Prof: Muhammad
Siddiqui for their love, guidance, and encouragement for me.

viii
 TABLE OF CONTENTS

Chapter Contents Page

Sub-title Page i
In The Name of ALLAH iii
Dedication iv
Acceptance Letter v
Abstract vi
Declaration vii
Acknowledgment viii
Table of content ix
List of table xi
List of figure xii
List of Abbreviations xiii
Forwarding Sheet xiv
Certificate xv
Chapter-1- Introduction
1.1 Defining Poverty 01
1.2 Microfinance.9 02
1.3 Microfinance in Pakistan 03
1.4 Problem statement 04
1.5 Significance of the Study 04
1.6 Limitation 04

1.7 05
Objectives
05
Hypothesis of the study
1.8

1.9 Organization of study

Chapter-2- Review of Literature

Introduction 06

Chapter-3- Methodology
3.1 Introduction 13
3.2 Theoretical framework 13
3.3 Model of Study 14
3.4 Econometrics Tests 14
3.4,1 Descriptive Statistics 14

3.4.2 Augmented Dickey Fuller test 15

ix
 3.4.3 ARDL bound test 16

3.4.4 Vector Error Correction Model 16

3.5.1 Poverty 16

3.5.2 Headcount Index 16

3.5.3 Household Income 17

3.5.4 Microfinance 17

3.6 Variable of study 18

Chapter-4- Data analysis

4.1 Descriptive Statistics 19

4.2 Serial Correlation LM test 19

4.3 Unit root test 20
4.4 ARDL bound test 20
4.5 Long Run ARDL 21
4.6 ARDL ECM 21
4.7 21
Heteroskedasticity test

Chapter-5- Conclusion and Recommendation

5.1 Conclusion 23

5.2 Recommendation 23

References 24

LIST OF TABLES

S.No Tables name Pages

3.1 Description of variables 17

4.1 Descriptive statistics 20
4.2 Serial Correlation LM test 21
4.3 Unit root test 22
4.4 ARDL bound test 23

x
4.5 Long Run ARDL 24
4.6 ARDL ECM 25
4.7 Heteroskedasticity Test 25

xi
 LIST OF FIGURES

S.No Name of figures Pages

1.1 Stability Test 22

xii
 LIST OF ABBREVIATIONS

ADF Augmented Dickey Fuller

POV Poverty

ARDL Autoregressive Distributed Lag

ECM Error Correction Mechanism

WDI World Development Indicators

WB World Bank

SGH Self Help Group

GDP Gross Domestic Poduct

LM Langrangian multiplier

xiii
 FORWARDING SHEET

It is certified that the thesis entitled “Role of microfinance on poverty reduction in

Case of Pakistan”, submitted by Humail Qazi; ROLLNO ECO-16-02 in the partial
Fulfilment of BS degree in ECONOMICS has been completed under my supervision.

I am satisfied with the quality of the student’s research work.

Date: __________________ Signature: _____________________

Name: MUHAMMAD SIDDIQUE
Professor in department of economics

Certificate

xiv
I, Prof. Muhammad Siddiqui, Department of Economics, Government Post
Graduate College No. 1 Abbottabad, Supervisor of Humail Qazi , BS Economics
Roll No. ECO-16-02 at Government Post Graduate College No.1 Abbottabad certify
that research thesis entitled “Role of Microfinance on Poverty Reduction Case of
Pakistan” is submitted as partial fulfilment of BS (HON) degree in the discipline of
Economics is an original work of the student except where otherwise acknowledged in
the text, has not been submitted or published earlier for obtaining any degree from this
or any other university or institution. The thesis is complete in all respect and ready
for evaluation by an external subject’s expert.

Prof. Muhammad Siddiqui

Department of Economics

Government Post Graduate

College No.1 Abbottabad

Date ……………………………… Signature…………………………………

xv
 CHAPTER 1
INTRODUCTION
Poverty is one of the main problems in developing countries like Pakistan. It is considered the
most distressing economic and social issue since the birth of human civilization (Cheema and
Parkash 2018). Millions of poor, vulnerable non-poor, and unbanked households want
financial services. They seek a diverse range of services including loans, savings, insurance,
and facilities for sending and receiving remittances. The proper financial intermediaries like
commercial banks usually were less beneficial for these households because at the first their
business models are generally unsuitable for managing a microfinance business,
characterized by high-volume, low-value transactions. Secondly, conventional lending is
offered by them based on collateral. In developing countries, a large number of people do not
have access to credit which is perhaps the main cause of poverty. In developing countries, a
large number of people do not have access to credit which is perhaps the main cause of
poverty. Many reasons behind that are the inability to provide collateral and high processing.
Usually, the formal financial intermediaries like commercial banks generally do not serve
poor people, because they don’t meet the required eligibility criteria like collateral, etc. Thus,
in most countries, poor people don’t have access to formal financial services (Littlefield,
Murduch, and Hashemi, 2003).

Combating poverty is a moral, social, economic, and political imperative for all nations. Any
concerted effort to address poverty will have multiple positive effects and collateral benefits.
Most of the developing countries of the world are making efforts for poverty reduction. These
efforts to fight poverty have led to the emergence of microfinance. This is an innovation
which commenced in Bangladesh intending to reduce poverty through offering poor women
small loans, before spreading to other developing nations like India, Malaysia, and later on to
Pakistan (Lønborg & Rasmussen, 2014). To improve the living standards of the poor, the
microfinance sector has been flourishing at a very rapid rate leading to the embracing of the
ideology by many developing nations in an effort of increasing the social status of their
population.

1.1 Defining Poverty

The roots of poverty are spread across the globe. Poverty has been defined as a situation
where a population or a section of the population can meet only its bare subsistence, the
essentials of food, clothing, and shelter, to maintain a minimum standard of living (Balogun,
1999). Poverty is a world problem that afflicts particularly the developing countries. It is
considered the most distressing economic and social issue since the birth of human
civilization. Poverty affects individuals, as well as society, adversely as it can be said that
poverty is the mother of all human rights violations. Englama and Bamidele (1997)
summarized the definition of poverty, in both absolute and relative terms as a state where an
individual is not able to cater adequately for his/her basic needs of food, clothing, and shelter,

1
meet social and economic obligations; lacks gainful employment, skills, assets and self-
esteem; and has limited access to social and economic infrastructures. According to
Muhammad Younas, the pioneer of Grameen Bank, Bangladesh, said that poverty exists
when someone is jobless, illiterate, homeless, or has a lack of capital and insufficient food.
Furthermore, there are numerous indicators of poverty, consisting of low-income,
homelessness, unawareness, helplessness, short-life expectancy, hunger, less production,
unemployment, poor infrastructure, high maternal mortality rate, powerlessness, poor social
services like poor health, non-education, poor financial services and lack of clean drinking
water [ACOSS (2010)]

According to the most recent estimates, in 2015, 10 percent of the world’s population or 734
million people lived on less than $1.90 a day. That’s down from nearly 36 percent or 1.9
billion people in 1990. Poverty is the most persuasive challenge confronted by Pakistan.
Pakistan’s population currently estimated at approximately 200.96 million in 2018 and
growing at an existing rate of 2.03 percent per year, making the challenge of poverty
reduction more intricate. No doubt the population growth rate has slightly declined from the
2015 growth rate to 2.06 percent per year but there is a need to adopt a two-pronged remedy.
First controlling the population growth rate and second taking measures to reduce poverty.
The Economic Survey 2018 revealed Pakistan’s percentage of people living below the
poverty line has fallen to 24.3 percent in 2015-16 from 50.4 percent in 2005-06. Poverty has
been higher in rural areas of Pakistan than urban areas i.e. Balochistan has the highest rural
poverty rate, with over 62 percent of its rural population living below the poverty line. The
gap between rural and urban poverty is the widest in Sindh at almost 30 percent. While the
urban-rural gap in Punjab and Khyber Pakhtunkhwa was 13 and 15 percentage points,
respectively. Microfinance is becoming the most thriving option to eradicate the country’s
most severe challenge of poverty alleviation

1.2 Microfinance
Microfinance was first trumpeted as a way to unleash the productive capacities of poor
people dependent on self-employment (e.g., Hulme and Mosley 1996). The impact of
microfinance on poverty alleviation has become a topic of intense debate in recent academic
and policy literature. Originally touted as a means for poor people to escape poverty.
Microfinance has emerged as a very noble substitute for the conventional credit and a very
effective and powerful tool for reducing poverty among those people who are economically
active but are financially constrained and vulnerable (Morduch and Haley, 2002).
Microfinance aims to bring financial services to poor people by providing access to small-
scale financial services, primary savings, credit, and insurance to people involved in small or
micro business activities such as farming, fishing, herding, or micro-enterprises producing,
recycling, repairing, or selling goods (Lalitha, 2008). In the new area microfinance is
considered to be a powerful tool for reducing poverty and many governments have adopted
the policy of Grameen bank, which is the milestone of all the microfinance that is being
initiated in the whole world today. In the past three decades, the popularity of microfinance
has been increased as a good strategy for alleviating poverty (De Goey, 2012).

2
Microfinance is not a new development; the concept was first developed by Professor
Muhammad Younas who first initiated the extension of microcredit at the village level for
fighting against poverty during a 1974 famine in his homeland country Bangladesh. He
revealed that very small loans could make a significant difference in a poor person’s ability to
survive. He established the Grameen Bank to provide loans to poor Bangladeshi. According
to the Grameen Bank June 2011 report, it has 8.37 million borrowers, 97 percent of whom are
women. The Grameen Bank provides services in 81,379 villages, covering more than 97
percent of the total villages in Bangladesh. Today it is retained by the rural poor to whom it
has provided the microfinance services. Borrowers of the bank own 90% of its shares, while
the remaining 10% is owned by the government. The Grameen Bank is a model Micro
Financial Institution in the world.

1.3 Microfinance in Pakistan

Pakistan has also adopted microfinance as a way of reducing poverty. The microfinance
industry of Pakistan has progressed well over the past decade driven under a conducive
policy environment of the Government of Pakistan and the regulatory & supervisory
framework of the central bank. The Government of Pakistan and the central bank (State Bank
of Pakistan) is encouraging and supporting commercial microfinance while promoting private
sector participation and institutional diversity. The State Bank of Pakistan has devised a
Strategic Framework for Sustainable Microfinance in Pakistan 2010-15 that provides a road
map for the development of microfinance in the country. It promotes market-based financial
services to meet the diverse needs of the poor and low-income segments. In response to this
evolving regulatory environment, the microfinance sector has reached a level of 5.2 million
borrowers in 2017. But still, there is a lot of room for improvement. The microfinance
institutions need to stretch their operations and impact span across all the four provinces of
the country, Jammu and Kashmir and the Federally Administered Tribal Areas especially, in
Khyber Pakhtunkhwa province

Microfinance aims to provide the poor with access to financial services as well as an
opportunity for them to build their financial capacity and ability to grow to financial self-
sufficiency. Now due to the importance and expansion of microfinance services, it becomes a
real industry and a sub-sector of the financial sector of most of the underdeveloped countries.
In Pakistan microfinance sector is regulated by the State Bank of Pakistan under
Microfinance ordinance 2001. The major problems of Pakistan like other developing
countries are poverty and unemployment. It is globally accepted that microcredit helps the
financially marginalized by providing them with the necessary capital to start a business and
work toward financial independence. The microfinance sector emerged in Pakistan with a
delay of more than two decades (as compared to its other South Asian neighbors, Bangladesh
and India), the sector today is growing tremendously. The Government of Pakistan and the
State Bank of Pakistan are fully dedicated to the growth and development of the
Microfinance Sector on a sound and sustainable basis. Over the past few decades,
microfinance has evolved into a global movement, gaining traction in developing countries
like Pakistan. It has grown rapidly over the past few years, going from 2.4 million borrowers
in 2013 to 6.9 million active borrowers by the end of 2018, thereby expanding, on average,

3
by 24 percent over the past five years. Outreach has grown significantly, with the number of
people served by microfinance providers reaching nearly 140 million and the industry itself
becoming more sustainable, efficient, and responsible.
1.4 Problem statement
Poverty is one of the main problems in developing countries like Pakistan. It is considered the
most distressing economic and social issue since the birth of human civilization. Therefore,
poverty alleviation has been one of the leading objectives of developing countries and the
international organizations Microfinance plays an important role in eradicating poverty in the
opinion of its proponents. It is considered an important strategy for achieving the Millennium
Development Goals (Hossain 1998).
The novelty of this research work is to access the impact of microfinance on poverty
alleviation and household income of borrowing households.

1.5 Significance of the Study

Microfinance is important because it provides resources and access to capital to the
financially underserved, such as those who are unable to get checking accounts, lines of
credit, or loans from traditional banks. Without microfinance, these groups may have to resort
to using loans or payday advances with extremely high-interest rates or even borrow money
from family and friends. Microfinance helps them invest in their businesses, and as a result,
invest in themselves.

1.6 Limitation
While considering the limitations of the small sample size of this study, it is suggested to the
upcoming researcher to increase the sample size, and also, judge the contribution of
commercial banks along with the microfinance institutions to reduce poverty in rural areas.
1.7 Objectives
The study focuses on the following objectives:

 To analyze the impact of microfinance on poverty reduction.

 To analyze and assess the impact of microfinance on household income.

1.8 Hypothesis of the study

Ho: there is no significant relationship between microfinance on poverty reduction.

Ho: there is no significant relationship between household income and poverty reduction.

1.9 Organization of study

This thesis reports the detailed research work in five chapters.

4
Chapter 1 presents the general introduction, problem statement, significance, limitation, and
objectives of the study. Chapter 2 summarizes the review of published research papers related
to our topic. Chapter 3 comprises of research methodology, model specification, collection of
data, and statistical tools used in research. In chapter 4 data is processed and analyzed to
present the answer to our thesis question. Chapter 5 present the conclusion of our study based
on the results and findings of our thesis.

5
 CHAPTER 2

LITERATURE REVIEW
Kar (2014) study the role of microfinance in West Bengal. He recognized microfinance as an
effective tool to reduce poverty by providing financial services to those who do not have
access selected five districts and one block from each district has been selected by Random
Sampling. From each block, the largest Self Help Group (SHG) of the year 2011-12 has been
chosen. 80 participants and 20 non-participants respondents have been selected on a first
come first serve basis. The tools like sampling method, case study, mean, standard deviation,
multiple bar diagram, Pearson Chi-square test, multiple regression analysis, and ANOVA has
been used in the analysis of primary data. The sample survey showed that participants have
increased their household income level after joining the SHG program in comparison to their
before joining the SHG program. The value of household assets like TV, sewing machine,
cell phone, cycle, etc. have also increased after joining the microfinance program. After
joining the microfinance program food habit has also has been changed in terms of better
quality and quantity. In all the sample districts it has been proved that on increase in income
all those variables have a positive influence. Therefore, it can be said that the test is
statistically significant.

Cheema and Parkash (2014) discussed the role of microfinance in poverty alleviation in rural
areas of district Sargodha, Pakistan. The study calculated the headcount ratio and analyzed
the impact of microfinance issued by the Punjab Rural Support Programme (PRSP), using the
Multiple Ordinary Least Squares (OLS) regression in rural areas of district Sargodha,
Pakistan. The results depict that in pre-microfinance activities the headcount ratio was 56.7
percent, but after receiving the microfinance it reduced to 14.1 percent. The results of OLS
regression showed that microfinance plays an important role in poverty reduction and that
poverty is inversely related to the number of earners and the level of education; whereas it is
positively associated with the household size. At the policy level, it is suggested that
microfinance should be provided to poor households at the least interest rate. The government
should also manage maximum education and job opportunities, especially for the poor class.
It should also focus on family planning awareness to control households’ size, especially
among the poor.

García-Perez et al., (2016) conducted a sustainability level perspective survey to investigate

the contributions of microfinance sectorial scholarly research to sustainability, through a
systematic literature review using content analysis method, contextualizing the scientific
production and studying its terminology according to the EESG criteria and under Global
Reporting Initiative framework, and finally, to identify research gaps and to propose future
research paths.

Wook et al., (2019) examined the impact of microfinance on poverty alleviation in Pakistan
using district-level panel data. They conducted a fixed effect panel regressions to show a
statistically significant positive impact of microfinance on household income, ownership of
household assets, education, and expenditure. These results suggested that the development

6
of microfinance is an efficient tool for both welfare improvement and poverty alleviation in
Pakistan.

Ali and Alam (2010) provided an overview of the role and performance of microcredit in
Pakistan. The major objective of the study is to show the microfinance sector performance
and the impact of microcredit on the different poverty levels. This study is based on both
quantitative and qualitative methods to answer the thesis questions. The result of the study
was that microcredit helps in the poverty alleviation of different categories of poor people
and has positive effects on their living standards.

Hiatt and Woodworth (2006) researched in Central America to assess the impacts of village
banking on indigenous families. The investigation’s objective was to observe what impact
village banking may have on poverty. To accomplish the goal researcher measured the
socioeconomic and financial status of three groups: New Clients, Current Clients, and Ex-
Clients. The research team created a field survey instrument that obtained three types of
measures: socioeconomic data, daily per capita expenditure (DPCE), and daily minimum
wage equivalent (DMWE). The data indicated that some groups differed in the DPCE and
DMWE measurements. The daily per capita expenditure scores showed that the New Client
spending mean was $.94 a day, the Current Client mean was $1.28, and the Ex-Client
spending mean was $1.01 a day. The researcher conducted a least significant difference
comparison and found that Current Clients were significantly different from New Clients, but
Ex-Clients were not significantly different from either the New or Current Clients. This
article provided observational evidence on the important role that poverty lending can play in
international development. Accordingly, these small loans seem to positively affect poverty
by creating entrepreneurship and greater self-reliance among the poor.

Mahjabeen (2008) examined the welfare and distributional implications of microfinance

institutions (MFIs) in Bangladesh in a general equilibrium framework. The objective of the
study was to build a social welfare function and evaluate the impact of MFIs on the economy.
To examine the welfare and distributional implications of MFIs in Bangladesh researcher
compared the welfare, income, consumption, and utility of households under the basic model
(without the MFIs) and the extended model (with the MFIs). The results depicted that MFIs
generate employment opportunities. Computational findings showed that the provision of
financial services to the poor enables the Bangladesh economy to reduce the income
inequality and also depicted that the profits of commercial banks increased by 50% and the
MFIs earned positive profits. . Finally paper concluded that microfinance is indeed an
effective development strategy and government can use it as a way to enhance the standard of
living of the poor and achieve millennium development goals.

Okpara (2010) focused on the identification of critical factors that cause poverty in Nigeria
and the investigation of the extent to which microfinance institutions have helped in the
alleviation of poverty. To identify the critical factors, the researcher adopts the data on
reasons for poverty generated by the National Bureau of Statistics and employed the method
of factor analysis. To investigate the contribution made by the microfinance institutions in
poverty reduction, the researcher uses the method of regression analysis on a quadratic

7
equation model which is found to be most appropriate in explaining the variations between
the two variables. Also, the microfinance – poverty trend is presented for analysis.
Researchers revealed that a persistent increase in microfinance credit leads to a drastic
reduction of poverty. Thus, an increase in microfinance credit currently reduces poverty in
Nigeria.

Shirazi et at., (2009) observed the impact of Pakistan Poverty Alleviation Fund (PPAF)
microcredit on poverty alleviation of the borrower. For this purpose, the data collected in
Gallup (2005) has been used for conducting a counterfactual ‘Combined approach’ to study
the impact of microcredit on the poverty status of borrowers. The results indicated that
microcredit had reduced the overall poverty level by 3.07 percentage points (from 6.61 % to
3.54 %) and the borrowers have shifted to higher income groups during the reported period.
The results showed that the overall impact of microcredit on the borrower has been positive.

Aslam (2014) highlighted the role of Islamic Microfinance Institutions (MFI) to alleviate
poverty in Pakistan, its impacts, people's satisfaction level and assess the future of it in
Pakistan. An Empirical approach has been adopted due to a lack of knowledge to clients
about products, technical terms, and lack of time. The questionnaire was used as a tool for
data collection. The qualitative data was quantified and the chi-square test was applied to test
the association of attributes by a 5% level of significance. The analysis concluded that
Islamic microfinance playing an important role to improve the living standard, per capita
income, awareness level (Educational level), ethical values, profitability, sustainability,
infrastructure position, employment level in the society, helping to control the inflation and
unequal distribution of wealth. The study showed that Islamic MFI’s try their level best to
follow sheria but they need more focus on sheria related policies and procedures. Non-profit
products should use to develop infrastructure like hospitals, schools, mosques, streets and
water projects, etc.

Arun (2016) explained that microfinance institutions are playing important role in poverty
reduction in Karachi. The researcher highlighted various aspects of microfinance
banks/institutions and their impact on poverty reduction. Graphical analysis is used to
interpret the primary data while SPSS is used as a software to run the regression to interpret
the results between the dependent variable (real per capita income) and independent variables
(the real value of disbursement and real value of savings). The result revealed that the
relationship between loan amount disbursed and per capita income is positive whereas the
relationship between the value of savings and per capita income is negative as per
calculation. The findings suggested that microfinance institutions are playing a positive role
in poverty alleviation.

Rauf and Mehmood (2009) observed the growth strategy adopted by the microfinance sector
and its impact on microfinance institutions in Pakistan. The objective of this paper is to
examine firstly the growth pattern of the microfinance sector and secondly its impact on the
performance of microfinance institutions. The study is based on the theoretical model of six
dimensions of outreach i.e. Breath of outreach, Depth of outreach, Scope of outreach, Worth
of financial service, Cost of outreach, and Length of outreach. The ratio analysis approach is

8
used to assess the growth pattern and its impact on the performance of the microfinance
sector in light of the indicators of performance. The study showed that the microfinance
sector adopted an extensive growth strategy, yet the challenge of increasing the breadth,
depth, and scope of outreach at lower cost remained high, moreover, the reason for the weak
financial position of the sector is the inappropriate and costly growth strategy of over-
expansion which adversely affected the cost and productivity of the sector.

Nouman et. Al., (2010) provided an overview of the availability of microfinance and its
impact on economic growth in the rural areas of Khyber Pakhtunkhwa, Pakistan. An opinion
survey of the locals of different rural areas of Khyber Pakhtunkhwa has been conducted using
the schedule method. A sample size of 100 people has been selected from the randomly
selected 35 villages of Khyber Pakhtunkhwa. Descriptive statistics for center and dispersion
have been used for analysis. Findings suggested that there is a huge gap between the amount
of microfinance needed and the amount of microfinance that is available in the rural areas of
Khyber Pakhtunkhwa. Moreover, the available microfinance facilities are not generating
sufficient economic activities.

Akram and Imtiaz (2011) conducted a study to assess the contribution of microfinance in
raising the living standard of low-income people of Pakistan. The data was collected through
questionnaires and was examined by applying a descriptive research design. The study
concluded that microfinance positively impacts the level of income. Furthermore, their results
showed that 85.40% of the respondents replied that their income level has improved after
receiving microfinance facilities and enhance their living status.

Ahmad and Naveed (2004) conducted a study in Pakistan to assess the function of
microfinance in dropping rural poverty. To identify the association of microfinance with
income, asset formation, crop production, saving, and farm expenses, correlation analysis was
used. Their study concluded a positive relationship between microfinance and the above-
identified variables. Furthermore, their result stated that microfinance supports poor people
effectively and also increases the status of living in rural areas.

Morduch and Haley (2002) conducted a study to determine the impact of microfinance on
poverty reduction using microcredit, family size, assets, and education as independent
variables and income of households as the dependent variable. The study concluded the
positive impact of microfinance on poverty reduction.

Chavan and Ramakumar (2002) examined the role of NGO-led micro-credit programs and
institutions that provided credit for poverty alleviation in India. The objective was to judge
the performance of these programs and institutions based on a set of four indicators in
comparison with the state-led credit-based poverty alleviation programs and institutions, such
as the IRDP and RRBs in India. The researcher adopted a comparative approach for
analyzing the performance of these micro-credit programs and the state-led programs and
institutions in India. The study showed that NGO-led micro-credit programs and institutions
given their small scale of operation have been successful in targeting and generating profits.

9
Nabahat (2014) focused on the study of micro-credit, given to the poor women to help them
to initiate business, to increase their income. The main objectives of the study were to
determine the impact of microfinance on the self-confidence and decision making power of
women in the study area. For this purpose a sample of 235 women who had taken credit from
microfinance institutions. Information regarding demography and other variables was
collected through a structured questionnaire. Different statistical instruments i.e. descriptive
analyses, bar charts, bivariate and multivariate analyses were employed to present the
information scientifically and to build up the relationship between the various explanatory
variables and dependent variables. The analysis revealed that the self-confidence of women
has been improved considerably. It is suggested that the process of available credit should be
made easier and outreach of the microfinance sector should be expanded to other far-flung
areas of the country.

Khandker (2005) examined the effects of microfinance on poverty reduction at both the
participant and the aggregate levels using panel data from Bangladesh. Panel data analysis
has been used to estimate the effects on poverty using an alternative estimation technique and
also helps estimate the impacts of past and current borrowing. Finally, results suggested that
access to microfinance contributes to poverty reduction, especially for female participants,
and overall poverty reduction at the village level.

Qureshi et al., (2012) provided an overview of Microfinance and poverty alleviation at

D.I.Khan district KPK. This study is based on both quantitative and qualitative
methodologies to find out the feasible solution to this research question: what are
improvements achieved in the reduction of poverty in the fields of income, employment,
education, communication, health care, children’s education, and housing, etc. Stratified
random sampling techniques were used to get a total of 96 respondents. Data were collected
through close-ended questionnaires, semi-structured interviews, observations, and
documentary reviews. Data analysis was based on descriptive statistics using various
statistical tools like regression, correlation, t-test, and ANOVA with the help of tables. The
Study findings showed that microfinance helps in poverty alleviation of different categories
of poor people and has a positive significant impact on poverty reduction.

Shah et al., (2019) examined the effect of microfinance as a poverty reduction in terms of
social indicators in the rural areas of northern Khyber Pakhtunkhwa, Pakistan. The Paper
aims to check whether the established NGOs in the concern areas have been successful in
bringing social change in the life of the beneficiaries. For analysis, the structural equation
model is applied to a sample of 440 collected through a structured questionnaire. Results
showed that microfinance had a negative impact on the health and education of the
beneficiaries. The research indicated that more funds and priority should be given to the
education and health sector because they have equal importance as compared to the other
economic indicators.

Waheed (2009) attempted to evaluate the income improvement of rural borrowers of the
Punjab Rural Support Programme (PRSP) in Pakistan. He used Primary and secondary data
for that study and interviewed 68 households. The data were analyzed using regression and

10
correlation analysis. The results indicated that micro-credit helps to reduce poverty and
improve income and the general standard of life. Findings suggested micro-credit
organizations need to focus on the number of loans, customize and geographically target new
loan products and discourage misdirected use of microcredit so that the income of the poor
may improve.

Mahmood et al., (2014) discussed the impact of microfinance loans on poverty reduction
amongst women entrepreneurs in Pakistan. The objective of the study was to investigate the
optimal loan size to attain the objectives of women entrepreneurs and poverty reduction in
this country. The quantitative analysis, using SPSS software package, was designed to
analyze the impact of microfinance on poverty reduction by examining increases in income,
family health, and education. The data analysis was carried out using binary logistic
regression. Emergent results show that access to finance was important for female
entrepreneurs and helps them realize their potential as entrepreneurs. An optimal, poverty
reduction, microfinance size has been identified. A range of entrepreneurial characteristics
was found to be critical to the success of women-led enterprises in general and poverty
reduction amongst their families in particular.

11
 CHAPTER 3
METHODOLOGY
3.1 Introduction
This chapter provides a theoretical framework, model of the study, description of variable
and econometric techniques are discussed in this chapter.

3.2 Theoretical framework

Philosophies of microfinance institutions are based on certain theories, which were either
prevalent in the world when microfinance developed or was given by some of the researchers
and practitioners of microfinance. Microfinance with a prime objective of helping poor
people come out of poverty has to have a strong justification for its existence in a capitalistic
economy. It is stated that microfinance follows the main doctrines of neoliberalism, which is
directing all economic activity to the private sector (Batman & Chang, 2008). The models of
microfinance were built on two basic theories, both related to the prevailing economic system
i.e. capitalism. The first one is Economic Theory, which is a hardcore capitalistic approach
and the second is the Psychological Theory, which also finds its existence in the capitalistic
system of economy. A continuation of Psychological Theory is a new upcoming idea given
by Akhuwat, a microfinance institution of Pakistan, The Theory of Communal Viability

The Economic Theory is based on the basic capitalism given by Adam Smith in the
eighteenth century where Smith stated that the main source of wealth creation is self-interest.
Smith (1776) stated, “It is not from the benevolence of the butcher, the brewer, or the baker,
that we expect our dinner, but from their regard to their self-interest”; so no economic activity
including microfinance is possible until there is some self-interest. To bring microfinance
into a capitalistic economy the Economic Theory uses the Infant Industry argument, which is
based on protectionism; policies, and principles made to protect newly formed organizations
and employees of these organizations by either regulating or restricting trade with foreign.

Microfinance institutions are also such organizations and need time to establish their regular
sources of income these may also be allowed to operate as infant industry and enjoy some
relaxations in the initial phase of operations. These relaxations may be related to cheaper
funds, easy installments, and other subsidies by the government. Newly formed industries are
smaller in size and do not have economies of scale and so cannot compete with the larger
industries and therefore need to be given protection in the initial stage of development
(Melitz, 2005). This argument when applied to the microfinance industry results in giving
subsidies and relaxation to the microfinance industry to help grow, stand, and compete with
the other economically viable industries (Chang, 2003). Remenyi (2000) emphasized the
importance of abilities of managers of MFIs to make it successful; nevertheless, it is also true
that very few MFIs are successful in terms of being cost-effective and profit-making; most of
the MFIs spent their cost and efforts to scrutinize the borrowers in terms of their repayment
capability and recovery of loans; the success of borrower’s business is not a prime concern.

12
3.3 Model of Study
The study is based on a model in which poverty is a dependent variable other explanatory
variables are household income and microfinance advances. Following Shabri and Majid
(2008), we propose the following model to establish the relationship between microfinance
institutions’ credits, household income, and poverty;

The below model used could be expressed symbolically as follow

Pov = β1 + β2 HHI+ β3 MF advances + €

Where

Pov = Poverty

HHI = Household income

MF advances = Microfinance advances

B1 = Intercept

B2 and B3 = Coefficient

3.4 Econometrics Tests

Different methods are applied for the estimation of the relationship between variables.
Different econometrics method is given below.

3.4.1 Descriptive Statistics

Descriptive statistics are used to describe the basic features of the data in a study. They
provide simple summaries about the sample and the measures. Descriptive statistics are
typically distinguished from inferential statistics. With descriptive statistics, you are simply
describing what is or what the data shows. Descriptive statistics help us to simplify large
amounts of data sensibly. Each descriptive statistic reduces lots of data into a simpler
summary. Descriptive statistics involves the following measures

 Mean is the average value of the series, obtained by adding up the series and dividing
by the number of observations.
 Median is the middle value (or an average of the two middle values) of the series
when the values are ordered from the smallest to the largest. The median is a robust
measure of the center of the distribution that is less sensitive to outliers than the mean.
 Max and min are the maximum and minimum values of the series in the current
sample.
 Std. Dev. (standard deviation) is a measure of dispersion or spread in the series.
 Std. Dev. (standard deviation) is a measure of dispersion or spread in the series. The
standard deviation is given by:

13
 where is the number of observations in the current sample and is the mean of the
series.
 Skewness is a measure of the asymmetry of the distribution of the series around its
mean. Skewness is computed as:

1 ❑
S = ∑❑
N ❑
Where σ
^ is an estimator for the standard deviation that is based on the biased
estimator for the variance. The skewness of asymmetric distribution, such as the
normal distribution, is zero. Positive skewness means that the distribution has a long
right tail and negative skewness implies that the distribution has a long left tail.
 Kurtosis measures the peakedness or flatness of the distribution of the series. Kurtosis
is computed as:

N
1 y i− ý
K= ∑
N i=1 (σ^ )
Where σ^ is again based on the biased estimator for the variance. The kurtosis of the
normal distribution is 3. If the kurtosis exceeds 3, the distribution is peaked
(leptokurtic) relative to the normal; if the kurtosis is less than 3, the distribution is flat
(platykurtic) relative to the normal.
 Jarque-Bera is a test statistic for testing whether the series is normally distributed. The
test statistic measures the difference of the skewness and kurtosis of the series with
those from the normal distribution. The statistic is computed as:

2
N 2 ( K −3 )
Jarque-Bera =
6
S+ (4 )
where S is the skewness, and K is the kurtosis.

3.4.2 Augmented Dickey-Fuller test

The Augmented Dickey-Fuller Test (ADF) is a unit root test for stationarity. Unit roots can
cause unpredictable results in your time series analysis. Stationary is a very important factor
in time series. The time-series data will be stationary if its mean, variance, standard deviation,

14
and covariance are constant time none varying. If data is not stationary then our regression
will be spurious. The ADF test can handle more complex models than the Dickey-Fuller test,
and it is also more powerful. That said, it should be used with caution because—like most
unit root tests—it has a relatively high Type I The hypotheses for the test:

 The null hypothesis for this test is that there is a unit root.
 The alternate hypothesis differs slightly according to which equation you’re using.
The basic alternate is that the time series is a stationary (or trend-stationary) error rate.

3.4.3 ARDL bound test

ARDL bounds testing approach is a cointegration method developed by Pesaran et al. (2001)
to test the presence of the long-run relationship between the variables. This procedure, a
relatively new method, has many advantages over the classical cointegration tests. Firstly, the
approach is used irrespective of whether the series is I(0) or I(1). Secondly, the unrestricted
error correction model (UECM) can be derived from the ARDL bounds testing through a
simple linear transformation. This model has both short and long-run dynamics. Thirdly, the
empirical results show that the approach is superior and provides consistent results for a small
sample.

3.4.4 Vector Error Correction Model

An error correction model belongs to a category of multiple time series models most
commonly used for data where the underlying variables have a long-run stochastic trend also
known as cointegration. ECMs are a theoretically-driven approach useful for estimating both
short-term and long-term effects of one-time series on another. The term error-correction
relates to the fact that last-periods deviation from a long-run equilibrium the error influences
its short-run dynamics. Thus ECMs directly estimate the speed at which a dependent variable
returns to equilibrium after a change in other variables. Error Correction mechanism is used
to find out how many years the impact of short-run shock left and how much it affects. ECM
values lie between 0-1.

3.5 Description of Research Variables

3.5.1 Poverty
This study uses the headcount ratio to measure poverty in Pakistan. The Headcount poverty
measurement also referred to as the “Headcount index” is the proportion of the population
that is considered poor. In other words, the number of people comes under the poverty line
officially

3.5.2 Headcount Index

The headcount ratio is a proportion of the poor population divided by the total population.

The formula is:

15
 M
HCR =
N

where M = No. of poor population and N = Total population. Its estimation is simple and the
understanding is easy; therefore, it is most widely utilized in the literature.

3.5.3 Household Income

While describing different ‘makers of change’ researcher strongly recommend the household
income measured by two factors: changes in the amount of income earned by all household
members from all IGAs (income generating activities) and changes in the amount of income
earned by the household from the IGA in which microfinance has been invested (Sebstad et
al. 1995). There is awe-inspiring evidence to validate that households that participate in
microfinance programs enjoy an increase in household income (Murdoch and Haley, 2002).
They also benefit from consumption smoothing and the ability to sustain gains overtime
(Khandker, 1998). The significant contribution of microfinance is its ability to raise the living
standard of poor people.

3.5.4 Microfinance
Microfinance plays an effective role in alleviating poverty according to its proponents. It is
considered an important approach for reaching the Millennium Development Goals. This
study is designed to explore the question: “Does Microfinance play its role to alleviate
poverty?" The evidence from the literature often presents microfinance as a glimmer of hope
in the struggle of poverty alleviation. The participation in microfinance programs
indisputably causes benefits for poor borrowers’ families in several ways, for example, rising
income, improved levels of health care, increased education expenditures, the better quality
of nutrition. On the other hand, there is also opposite evidence in relevant literature
condemning the microfinance with the arguments of not targeting the poorest segment of the
poor, financially unsustainable for institutions, and causing a hefty debt for the poor. The
proponents of microfinance argue that the benefits of microfinance outweigh the costs
(Shahina Aslam 2016).

3.6 Variable of study

Table 3.1

Variable Symbol Proxy Source Time period

Poverty headcount ratio

Poverty Pov at the national poverty Jamal Haroon 1991-2019
line 2008
Households and NPISHs
Final consumption

16
Household HHI expenditure (% of WDI 1991-2019
income GDP)
Pakistan
Microfinance total debt microfinance
Microfinanc MF (PKR billion) network and 1996-2019
e advances advances Pakistan poverty
reduction
strategy paper

17
 CHAPTER 4
DATA ANALYSIS
This section comprises the results of descriptive statistics, unit root, and ARDL technique.

Table 4.1: Descriptive statistics

POV MF advances HHI
 Mean 32.65690 25.58996 77.08478
 Median 32.37000 19.82000 77.64553
 Maximum 38.68000 113.8450 83.83353
 Minimum 26.64000 0.080000 68.33706
 Jarque-Bera 2.655985 10.09892 1.462256
 Probability 0.265009 0.006413 0.481366
 Observations 29 24 29

Table 4.1 shows the complete data set consists of annual observations. Table 4.1 exhibits that the
average poverty (POV) headcount ratio is 32.65. The average microfinance advances (MF advances)
are 25.58 billion. The average household income (HHI) is 77.08 (% of GDP). Maximum, as well as
minimum values of all variables, are positive i.e GDP(26.64- 38.68), MF advances (0.08- 113.84),
HHI (68.33-83.83). Jarque-Bera test shows that the residual of MF advances is not normally
distributed while all other variables are normally distributed.

Table 4.2 Serial Correlation

Breusch-Godfrey Serial Correlation LM Test:
F-statistic 1.73475   Prob. F(2,16) 0.208
Obs*R-Squared 4.276844   Prob. Chi-Square (2) 0.1178

Results are based on the statistical package E-view 10 student version

Table 4.2 shows the results of the LM test of autocorrelation. Breusch-Godfrey serial
correlation LM test is used for autocorrelation of the model. The p-value is greater than the
5% level of significance we accept the null hypothesis that there is no autocorrelation.

18
Table 4.3 Unit root test
ADF TEST Conclusion
Variables T P- Integrated
    1% 5% 10%
Statistics values Order
Intercep
-1.212 0.654  -3.689 -2.971 -2.625  
t
Level Both -3.236 0.097 -4.323 -3.580 -3.225  
None 1.148 0.931  -2.650 -1.953 -1.609  
POVERTY Intercep
-6.781  0.000 -3.699* -2.976 -2.627 I(1) 
t
First ---------- ----------
Both ----------   -----------  
Difference - -
---------- ----------
None ----------   -----------  
- -
Intercep
4.303 1.000  -3.752 -2.998 -2.638  
t
Level Both 1.637 1.000  -4.416 -3.622 -3.248  
None 6 1.000  -2.669 -1.956 -1.608  
MF Intercep
Advances -2 0.284  -3.769 -3.004 -2.642  
t
First
Both -3.259 0.099  -4.44 -3.632 -3.25*** I(1)
Difference
---------- ----------
None -----------   -----------  
- -
Intercep
-1.173 0.670  -3.699 -2.976 -2.627  
t
Level Both -4.495  0.006 -4.323* -3.58 -3.225 I(0)
---------- ----------
None -----------   ----------  
- -
HHI Intercep ---------- ----------
-----------   -----------  
t - -
First ---------- ----------
Both -----------   -----------  
Difference - -
---------- ----------
None -----------   -----------  
- -
Results are based on the statistical package E-view 10 student version

*shows 1%(Level of significance), ** shows 5%(Level of significance),*** shows 10%

(Level of significance)

Before applying the ARDL approach, unit root of all series is tested. Table 4.3 presents the result of
ADF at the level and first difference. According to the results of ADF, POV and MFadvances are
stationary at the first difference at 1% and 10% significance level respectively. Whereas HHI
stationary at a level at a 1% significance level .

Table 4.4: F-Bounds Test

Test Statistic Value Significance I(0) I(1)
F-statistic 12.0301 10% 2.63 3.35
K 2 5% 3.1 3.87

19
     2.50% 3.55 4.38
    1% 4.13 b

Results are based on the statistical package E-view 10 student version

Having achieved stationarity of the series variables, co-integration tests were conducted to ascertain
the nature of the long-run relationship among the study variables based on the series data. Table 4.4
shows the results of the Bound F – test for Co-integration. The calculated F-statistics is 12.03014
which is higher than the upper bound and lower bound at 10% and 5% level of significance. This
implies that cointegration is a presence among variables.

Table 4.5: Long Run ARDL

Long Run ARDL (1,1,3)
Variable Coefficient Std. Error t-Statistic Prob.   
MFadvances -0.141585 0.048881 -2.896541 0.0111
HHI -0.226549 0.161124 -1.406058 0.1801
Results are based on the statistical package E-view 10 student version

Table 4.5 shows the long-run impact of the independent variable on poverty reduction.
Outcomes reveal that MF advances and household income are negatively related to poverty
for a longer period of time. The coefficient MF advances indicate that microfinance has a
significant and negative impact on poverty. A 1% increase in microfinance advance will
reduce poverty by 0.41%. Household income has a negative but insignificant impact on
poverty.

Table 4.6 ARDL ECM

Short-run ARDL Model (1,1,3)
Variable Coefficient Std. t-Statistic Prob.   
D(MFadvances) -0.141585 0.03269 -4.33179 0.0006
D(HHI) -0.226549 0.12092 -1.87349 0.0806
D(HHI_(-1)) -1.350693 0.2094 -6.45029 0.0000
D(HHI_(-2)) -0.920514 0.18175 -5.06484 0.0001
CointEq(-1)* -1.282678 0.1688 -7.59899 0.0000
Results are based on the statistical package E-view 10 student version

Table 4.6 shows the outcomes of the ECM term are equal to -1.28. This suggested that the
speed of adjustment is -1.28 and convergent to equilibrium. Outcomes also show
microfinance and household income are negatively related to poverty in a short time period.

Table 4.7 Heteroskedasticity Test

Heteroskedasticity test: Breusch-Pagan-Godfrey
0.7846 0.573
F-Statistic 8   Prob. F(5,18) 9
4.2950 0.507
Obs*R-Squared 3   Prob. Chi-Square (5) 8
Results are based on the statistical package E-view 10 student version

20
Table 4.7 shows the test for heteroscedasticity

Hypothesis for heteroscedasticity

H0 = Variance of residual is constant

H1= Variance of residual is not constant

Results reported that there is no heteroscedasticity because the p-value is greater than the 5% level of
significance so we accept the null hypothesis.

Stability test
15

10

-5

-10

-15
2002 2004 2006 2008 2010 2012 2014 2016 2018

CUSUM 5% Significance

Figure 4.1: Stability Test

We have tested selected ARDL using the cumulative sum of selective of recursive residuals
(CUSUM) presented by Brown et al, (1975). CUSUM plot shown in figure 1, since plot
remains within critical bound at a 5% level of significance. We conclude that the model is
structurally stable.

21
 CHAPTER 5
CONCLUSION AND RECOMMENDATIONS
5.1 Conclusion
The current study empirically investigated the relationship between microfinance and poverty
for Pakistan during the period 1991 to 2019. ADF test is applied to estimate the stationary of
variables and consequences found that some variables are stationary at I(0) and some
stationary at I(1). The study applied the ARDL technique for estimation of long period and
short period impact of the explanatory variable on a dependent variable

Outcomes of the bound test confirm that there exist long-run cointegration among variables.
Results of the ARDL technique suggest a negative relationship between microfinance and
household income on poverty. ECM shows -1.28 speed of adjustment in one year and
converges to equilibrium. Outcomes also reveal that microfinance and household income
have a negative impact on poverty in a short period of time.

5.2 Recommendations
 Pakistan is an Islamic country and most of the poor avoid getting benefits from
traditional microfinance programs. They avoid products & services offered by these
MFIs as clients will need to pay interest on their borrowed amount whereas interest is
prohibited in Islam. It is therefore recommended the government should take steps for
the initiation of the microfinance program based on Islamic principles.
 Microfinance has a negative impact on poverty so MFIs should also extend
microfinance services to low-income workers of government servants as they also
want to improve their income by availing additional opportunities. The default risk in
such cases is very minimum, as such type of clients has regular cash inflow and they
able to pay their loan amount along with interest
 Household income has a negative impact on poverty, so the government should take
the step to make effective policies to control poverty, provides job opportunities, and
the basic necessities to the poor population.
 The government should pay special attention to education, especially for poor and
rural areas.
 The government should take strict measures against defaulter clients. The government
should formulate strict laws to deal with such types of clients who get the loan but not
pay it within the scheduled period.

22
References
CHEEMA, A. R., & PARKASH, R. ROLE OF MICROFINANCE IN POVERTY
ALLEVIATION IN RURAL AREAS OF DISTRICT SARGODHA, PAKISTAN.

Hermes, N., & Lensink, R. (2007). The empirics of microfinance: what do we know?. The
Economic Journal, 117(517), F1-F10.

Lønborg, J. H., & Rasmussen, O. D. (2014). Can microfinance reach the poorest: evidence
from a community-managed microfinance intervention. World Development, 64, 460-472.

Balogun, E. D. (1999). Analyzing poverty: Concepts and methods. Central Bank of Nigeria
Bullion, 23(4), 11-16.

ACOSS (2010) Poverty and its causes, Poverty report, Australian Council for Social
Services

Englama, A., & Bamidele, A. (1997). Measurement issues in poverty in Selected Papers from
the Nigerian Economic Society's Annual Conference.

Lalitha, N. (2008). Readings in microfinance. Dominant.

Hulme, D., & Mosley, P. (1996). Finance against poverty (Vol. 2). Psychology Press.

Littlefield, E., Morduch, J., & Hashemi, S. (2003). Is microfinance an effective strategy to
reach the millennium development goals?. Focus note, 24(2003), 1-11.

Morduch, J., & Haley, B. (2002). Analysis of the effects of microfinance on poverty
reduction. New York: NYU Wagner Working Paper, 1014.

de Goey, H. (2012). The social impact of microfinance: what changes in well-being are
perceived by women group borrowers after obtaining a group loan?: A participatory rural
appraisal in Dar es Salaam Region, Tanzania.

Hossain, M., & Diaz, C. P. (1997). Reaching the poor with effective microcredit: evaluation
of a Grameen Bank replication in the Philippines. Philippine Sociological Review, 45(1/4),
89-121.

https://www.thebalance.com/what-is-microfinance-and-how-does-it-work-4165939

Kar, A. (2014). A critical study on the role of microfinance in poverty alleviation in West
Bengal.

CHEEMA, A. R., & PARKASH, R. (2018) ROLE OF MICROFINANCE IN POVERTY

ALLEVIATION IN RURAL AREAS OF DISTRICT SARGODHA, PAKISTAN.

23
García-Pérez, I., Muñoz-Torres, M. J., & Fernández-Izquierdo, M. Á. (2017). Microfinance
literature: A sustainability level perspective survey. Journal of Cleaner Production, 142,
3382-3395.

Sohn, W., & Ume, L. (2019). The Impact of Microfinance on Poverty Alleviation: The Case
of Pakistan. Journal of Asian Development, 5(3), 16-36.

A. Ali and M. A. Alam, "Role and performance of microcredit in Pakistan," ed, 2010.

S. R. Hiatt and W. P. Woodworth, "Alleviating poverty through microfinance: Village

banking outcomes in Central America," The Social Science Journal, vol. 43, pp. 471-477,
2006.

R. Mahjabeen, "Microfinancing in Bangladesh: Impact on households, consumption, and

welfare," Journal of Policy Modeling, vol. 30, pp. 1083-1092, 2008.

G. C. Okpara, "Microfinance banks and poverty alleviation in Nigeria," Journal of

Sustainable development in Africa, vol. 12, pp. 177-191, 2010.

N. S. Shirazi and A. U. Khan, "Role of Pakistan poverty alleviation fund's microcredit in

poverty alleviation: a case of Pakistan," Pakistan Economic and Social Review, pp. 215-228,
2009.

M. Naveed Aslam, "Role of Islamic microfinance in poverty alleviation in Pakistan: An

empirical approach," International Journal of Academic Research in Accounting, Finance,
and Management Sciences, vol. 4, 2014.

M. Obaidullah, "Role of Microfinance in Poverty alleviation," The Islamic Research and

Teaching Institute (IRTI)2008.

S. A. Rauf and T. Mahmood, "Growth and performance of microfinance in Pakistan,"

Pakistan economic and social review, pp. 99-122, 2009.

M. Nouman and F. Khan, "Availability of Microfinance & Its Impact on Economic Growth:
A Case Study of Rural Areas of Khyber Pakhtunkhwa," Nouman, Muhammad, Availability
of Microfinance & Its Impact on Economic Growth: A Case Study of Rural Areas of Khyber
Pakhtunkhwa (July 1, 2010), 2010.

M. Akram and I. Hussain, "The role of microfinance in uplifting income level: A study of
district Okara-Pakistan," Interdisciplinary journal of contemporary research in business, vol.
2, pp. 83-94, 2011.

S. Ahmad, M. S. Naveed, and A. Ghafoor, "Role of microfinance in alleviating rural poverty:

A case study of Khushhali Bank Program in Rahim Yar Khan [Pakistan]," International
Journal of Agriculture and Biology (Pakistan), 2004.

J. Morduch and B. Haley, "Analysis of the effects of microfinance on poverty reduction,"

New York: NYU Wagner Working Paper, vol. 1014, 2002.

24
Majid, M. S. A. (2008). Does financial development matter for economic growth in
Malaysia? An ARDL bound testing approach. Journal of Economic Cooperation, 29(1), 61-
82.

P. Chavan and R. Ramakumar, "Micro-credit and rural poverty: An analysis of empirical

evidence," Economic and Political Weekly, pp. 955-965, 2002.

S. Nabahat, "IMPACT OF MICROFINANCE ON WOMEN EMPOWERMENT: A CASE

STUDY OF SELECTED DISTRICTS OF KHYBER PAKHTUNKHWA," UNIVERSITY
OF PESHAWAR, 2014.

S. R. Khandker, "Microfinance and poverty: Evidence using panel data from Bangladesh,"
The world bank economic review, vol. 19, pp. 263-286, 2005.

M. I. Qureshi, M. A. Saleem, M. Shah, Z. Abbas, A. W. Qasuria, and U. R. Saadat, "Ensuring

the role and impact: reaching the poorest while alleviating the poverty by microfinance in
Dera Ismail Khan KPK Pakistan," Developing Country Studies, vol. 2, pp. 38-44, 2012.

D. S. U. M. SHAH, D. A. U. M. SHAH, and S. A. A. SHAH, "Examining The Social Impact

of Microfinance on Poverty Reduction," 2019.

S. Waheed, "Does rural micro-credit improve the well-being of borrowers in Punjab

(Pakistan)?," Pakistan economic and social review, pp. 31-47, 2009.

S. Mahmood, J. Hussain, and H. Z. Matlay, "Optimal microfinance loan size and poverty
reduction amongst female entrepreneurs in Pakistan," Journal of Small Business and
Enterprise Development, 2014.

Aslam, S. (2016). The Microfinance Paradigm: Poverty Alleviation and Economic

Empowerment (A Case Study of Bahawalpur Division) (Doctoral dissertation, Islamia
University, Bahawalpur).

Gray, B., Sebstad, J., Cohen, M., & Stack, K. (2009). Can financial education change
behavior? Lessons from Bolivia and Sri Lanka. Global Financial Education Program’s
Financial Education Outcome Assessment.

Sebstad, J., Neill, C., Barnes, C., & Chen, G. (1995). Assessing the impacts of
microenterprise interventions: a framework for analysis. Management Systems International.

Morduch, J., & Haley, B. (2002). Analysis of the effects of microfinance on poverty
reduction. New York: NYU Wagner Working Paper, 1014.

Pitt, M. M., & Khandker, S. R. (1998). The impact of group-based credit programs on poor
households in Bangladesh: Does the gender of participants matter?. Journal of political
economy, 106(5), 958-996.

25
Pathak, H. P., & Gyawali, M. (2010). Role of microfinance in employment generation: A
case study of microfinance program of Paschimanchal Grameen Bikash Bank. Journal of
Nepalese Business Studies, 7(1), 31-38.

Bateman, M., & Chang, H. J. (2009). The microfinance illusion. Available at SSRN 2385174.

Melitz, M. J. (2005). When and how should infant industries be protected?. Journal of
International Economics, 66(1), 177-196.

Chang, H. J. (2003). Kicking away the ladder: Infant industry promotion in historical
perspective. Oxford Development Studies, 31(1), 21-32.

Remenyi, J. (2000). Is there a state-of-the-art in Microfinance? Microfinance Poverty from

Poverty Alleviation: Case Studies from Asia and Pacific, 25-61.

26