impact and growth of microfinance in pakistan.docx
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Syed Muhammad Qasim Microfinance in Pakistan: impact and growth
Rauf and Mehmood (2009) conducted a research on the growth strategy of microfinance in Pakistan and its impact on the performance of microfinance institutions. The objective of the research was to focus on growth strategies that were employed by this sector and how it affected the poverty levels in Pakistan. The theoretical model of six dimensions of outreach were used which were interlinked. These included the breadth of outreach, depth of outreach, scope of outreach, worth or value of financial service, cost of outreach or operational self-sufficiency and length of outreach. These were all linked with the microfinance institutions. Other indicators used for the research were efficiency and productivity variables. For these variables ratio analysis was done to study the performance of the microfinance institutions. Intensive growth strategy was seen as a result of this study as the number of branches increased from 362 to 1165 during the years 2004 to 2007. The outreach variables increased as can be seen in the tables included in the research and the main findings were that it was due to an increase in the number of borrowers.Saba Ahmed (2008) conducted research on microfinance in Pakistan and the governments policies in making it a success. The main objective of the research was to retrieve information from the microfinance providers in order for an improvement in the structure of this activity in Pakistan. This research was mainly secondary and data was collected from various banking organizations and various academic papers were also consulted for explanations. The organizations were mainly contacted through email. This study concluded that microfinance institutions are not within the proper reach of the people it is built for and the institutional structure needs to be improved. The sector needs to have good governance, be sustainable through better business prospects and commercial banks must play an important role in helping the microfinance sector. Montgomery, H. and Weiss, J. (2011) conducted a research on whether the microfinance industry provide in helping achieve millennium development goals which are related to monetary measures. They provide evidence from Pakistan through observing Khushali bank as their primary concern. The main reason behind the research is to study the impact of loans on the levels of income within urban and rural population. For this study consumption expenditures were looked upon for the impact of microfinance on households. There were three approaches used in this study; randomized study design, including sample of credit loans who have formed solidarity groups and the last approach is difference in difference approach. This study shows that the access to Khushali bank loans leads to an increase in the food expenditures. An increase in the number of loans also has improved the family dynamics. However overall this research states that Khushali banks increase in number of loans has not improved the situation of the people at the bottom however there is some evidence that in rural areas the millennium development goals are improving and poverty levels are reducing.
Montgomery (2006) carried out a research on the impact of microfinance lending by Khushali bank on the poverty levels within Pakistan. The purpose of this study was to look at the impact of microfinance sector development on the poverty levels in Pakistan. A single equation was made to estimate the impact of loans. Variables which were include consisted of household characteristics, Village variables, households that participated in the program, and participation in the microfinance program itself. Three alternative measures for participation were used for the program. The analysis therefore shows that participation in the khushali banks program has positive impact on the economic and social conditions of people and improves social welfare among the society.Sulaiman (2010) conducted a research on the microfinance challenges and opportunities in Pakistan. The purpose of this study was to look at the challenges it faces in terms of environment and regulations by the government and opportunities in terms of expansion in the future. Secondary data was collected through various sources to look at the microfinance sector in numerous areas. Also different sectors were distributed according to their contribution. Economic survey of Pakistan was one of the major sources for the statistical data that was extracted. The conclusion that can be based upon this research is that microfinance is a sector that is still growing in Pakistan. Government needs to play a vital role in order for the betterment of this sector and must eliminate threats to enhance this industry.Siddique and Gilal (2012) carried out a research on the perception towards microfinance in Pakistan. The objectives of this study was to ascertain the perception and realities of microfinance in Pakistan. Today at least 20 banks provide the services of microfinance in Pakistan under State Bank of Pakistan. The number of respondents in this research was divided into 80% male and 20% female. Non-probabilistic sampling approach was used and 200 respondents was the sample size. The questionnaires were distributed among the respondents and only 27 were unable to answer it. Demographic segmentation was done for the questionnaire. One conclusion that was extracted from the respondents was that they did not like microfinance because of higher interest rates. They wanted a better structure in the microfinance institutions and a more reliable system.
Kurosaki and Khan (2009) carried out a research on vulnerability of microfinance to strategic default and covariate shocks: evidence from Pakistan. The fundamental reason for this research is to study the behavior of borrowers for microfinance banks. The default behavior is the most important focus here. A dataset of 45000 installments was investigated from the period of 1998 to 2007 and the reasons behind default were. The hypothesis that was used helped to conclude that system before 2005 which was stricter was one of the main reasons in repayment of loans. The new system however showed a different behavior from the borrowers as they were not so strict. It also shows that tht MFIs became more cautious in giving away loans and reviewed the situation more carefully.
Noreen et.al. (2011) conducted a research on the impact of microfinance on poverty: a case in Pakistan. The main objective of this research was how microfinance improves conditions in a family which include education of children, housing, security of food, expenditure of households and assets owned by households. These variables will help to establish the poverty levels and differentiate them. The sample consisted of 384 respondents from 4 microfinance instituions where cluster sampling was used. Households were observed through cross-sectional design. New entrants as well as experienced persons were also interviewed. However in the end it could not be established that microfinance loans increased household incomes. The results also revaled a positive relationship between the first hypothesis. Microfinance did not lead an improvement in housing conditions. Also small loans did not increase the consumption of food. Household assets also remained the same.
Ahmed (2011) completed a research on the efficiency analysis of microfinance institutions in Pakistan. The primary objective of this research is too see whether the MFIs are sustainable and how can they be in the future. Also we need to see how efficient the microfinance institutions in helping out the poor are. The data has been focused on from 2003 to 2007 and it is taken from Pakistan Microfinance Network. The Data Envelopment Analysis (DEA) is used in methodology. It is a programming approach for the frontier investigation. It was therefore concluded that out of 12 microfinance banks investigated only 3 were on the efficiency frontier. Many banks have moved away from the frontier and many have come close to it. The microfinance institutions need to be profitable in order to be sustainable and efficient.
Ghalib, Malki and Imai (2011) carried out a research on the impact of microfinance and its role in easing poverty levels of households in Pakistan. The primary objective of this research was to study how microfinance effects poverty levels through different dimensions and measure the level of impact it has. 8 MFIs were looked upon for data gathering. The standard approach was applied with an equation which showed the treatment of effective incomes subtracted by outcomes. Cross sectional data was used. The conclusion regarding this study stated that the borrowers had better conditions as compared non borrowers. They were able to carry out their business activities more efficiently and effectively. Overall the borrowers were seen better off in 70% of indicators that were used in this study.