ADDRESSING POVERTY THROUGH MICROFINANCE: DOES IT WORK?

Abstract

Purpose- For the couple of decades microfinance has remained nucleus of developing nations to combat poverty. This paper aims to examine whether microfinance succeeded to reduce poverty? In this study poverty has been taken as analogous to ‘extreme poverty’.    

Methodology- Influence of microfinance in poverty eradication is investigated by comparing clients in first loan cycle with the clients of higher loan cycles. The data was analyzed in two ways; firstly, simple and straight forward descriptive analysis with simple univariate technique  and secondly, empirical analysis is made by using binary logit model.   

Findings- It is found that intermediation of microfinance did not only raise the income of borrowers but also lifted their spending over the loan cycles. The study also explores that over the successive loan cycles, possession of household durable item, spending on education, respond to the shocks and health status also improved. Clients in higher loan cycles managed to improve their social status.

Conclusion-  Almost every examined poverty indicator indicates positive impact of microfinance on poverty eradication. However, various colors of poverty in the society do not allow us to cultimate the effectiveness of microfinance in poverty eradication.  

Keywords

• Business,gilgit,microfinance,poverty eradication,saving and consumption

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