ADDRESSING POVERTY THROUGH MICROFINANCE: DOES IT WORK?

Year 2018, Volume: 7 Issue: 1, 114 - 123, 30.03.2018

İshtiaq Ahmad , Rizwan Ahmed Satti

https://doi.org/10.17261/Pressacademia.2018.800

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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