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Role of micro credit in poverty alleviation
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Role of micro credit in poverty alleviation

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Executive Summary ...

Executive Summary


The study tries to look at the impact of micro credit on the lives of the poor people. There are different views on micro credit as a powerful development tool regarding its success in developing the lives of the poor and some times these views are contradictory. However poverty is a global issue; it is a problem that even the wealthiest nation is facing. In this scenario country like Pakistan is facing a great challenge to alleviate or reduce poverty because poverty is becoming cause of many problems like suicides, illiteracy, unemployment, diseases like depression, stress etc. In order to control these diseases first we have to control poverty. At government level and also at international level many strategies are made every day to control poverty. But now Dr. Younis gave a formula of micro credit that successfully worked in Bangladesh and is now replicated all over the world and also in Pakistan so; the purpose of the study was to observe that what role micro credit plays in Pakistan in poverty alleviation.
The study was conducted in four urban slum areas of Rawal pindi and Islamabad that are Muslim Colony, Dhok Kala Khan, Tehmaspabad and Shakrial. Those people are targeted who have taken micro credit so that the comparison of living standard before and after use of micro credit can be made and hence it can be seen that, if there is any improvement in their living standard after using micro credit or not. The study was based on questionnaires which were distributed after translating it into Urdu so that respondents can easily understand it and fill it accordingly. Sample for this survey was 200 with 50 respondents per area. The dependent variable taken in this study is poverty reduction where as independent variable is micro credit and moderating variable is political environment.
Some of the factors that show poverty reduction are Training and education, clean water and hygienic environment, nutrition and adequate food, accommodation, income and savings.
Overall we can say that training and education, clean water and hygienic environment, nutrition and adequate food, accommodation, income and savings are important factors of poverty reduction. Because when a person has training and education he can improve his living standard, if a person has clean drinking water and adequate food he will be healthy and can earn in a better way for his family, if his accommodation is better and enough for family members and strong enough for natural disasters he can live in a better way. And obviously if his earning is good and enough for family he can also provide recreational activities to his children and can also afford uncertain expenses such as sudden guest etc and can also do savings for future, then all these things points towards a good life, a life with a good living standard and a life above poverty line. So; all above mentioned factors plays an important role in poverty reduction.
From data analysis it is concluded that the micro credit program is effective in giving un employed people employment such as taxi driver, shop keeper etc and to meet short term needs such as return debt taken from some one else, paying fee, operation, treatment of disease etc. Mostly borrowers of Muslim colony, Dhok Kala Khan, Shakrial and Tehmaspabad have used micro credit to purchase taxi, sewing machine and opening small shop and improving accommodation.
But micro credit system is not the perfect one; it is not a replacement for jobs that are not there and skills that do not exist. Important thing is to make them financially stable, to bring them out of the poverty line and to make them able to sustain their position and improve living condition instead of returning back to the poverty line. It can be done in this way that micro credit institutions can make contract with driving centers that can giving training to those people who don’t know driving on half rate, contracts with boutiques can be made, contracts wit

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    Role of micro credit in poverty alleviation Role of micro credit in poverty alleviation Document Transcript

    • ROLE OF MICRO CREDIT IN POVERTY ALLEVIATION Amina Mushtaq Submitted in partial fulfillment of the requirement for the degree of Master of Business Administration at National University of Modern Languages Islamabad, Pakistan 2008
    • ACKNOWLEDGEMENT I gratefully acknowledge the contribution of the residents of Muslim Colony, Dhok Kala Khan, Tehmaspabad and Shakrial who warmly provided me the opportunity to know about their lives. I am thankful to my supervisor Madam Fareeha for her constant encouragement and supervision. Executive Summary
    • The study tries to look at the impact of micro credit on the lives of the poor people. There are different views on micro credit as a powerful development tool regarding its success in developing the lives of the poor and some times these views are contradictory. However poverty is a global issue; it is a problem that even the wealthiest nation is facing. In this scenario country like Pakistan is facing a great challenge to alleviate or reduce poverty because poverty is becoming cause of many problems like suicides, illiteracy, unemployment, diseases like depression, stress etc. In order to control these diseases first we have to control poverty. At government level and also at international level many strategies are made every day to control poverty. But now Dr. Younis gave a formula of micro credit that successfu worked in Bangladesh lly and is now replicated all over the world and also in Pakistan so; the purpose of the study was to observe that what role micro credit plays in Pakistan in poverty al eviation. l The study was conducted in four urban slum areas of Rawal pindi and Islamabad that are Muslim Colony, Dhok Kala Khan, Tehmaspabad and Shakrial. Those people are targeted who have taken micro credit so that the comparison of living standard before and after use of micro credit can be made and hence it can be seen that, if there is any improvement in their living standard after using micro credit or not. The study was based on questionnaires which were distributed after translating it into Urdu so that respondents can easily understand it and fill it accordingly. Sample for this survey was 200 with 50 respondents per area. The dependent variable taken in th study is poverty is reduction where as independent variable is micro credit and moderating variable is political environment. Some of the factors that show poverty reduction are Training and education, clean water and hygienic environment, nutrition and adequate food, accommodation, income and savings. Overall we can say that training and education, clean water and hygienic environment, nutrition and adequate food, accommodation, income and savings are important factors of poverty reduction. Because when a person has training and education he can improve his living standard, if a person has clean drinking water and adequate food he will be healthy and can earn in a better way for his family, if his accommodation is better and enough for family members and strong enough for natural disasters he can live in a better way. And obviously if his earning is good and enough for family he can also provide recreational activities to his children and can also afford uncertain expenses
    • such as sudden guest etc and can also do savings for future, then all these things points towards a good life, a life with a good living standard and a life above poverty line. So; all above mentioned factors plays an important role in poverty reduction. From data analysis it is concluded that the micro credit program is effective in giving un employed people employment such as taxi driver, shop keeper etc and to meet short term needs such as return debt taken from some one else, paying fee, operation, treatment of disease etc. Mostly borrowers of Muslim colony, Dhok Kala Khan, Shakrial and Tehmaspabad have used micro credit to purchase taxi, sewing machine and opening small shop and improving accommodation. But micro credit system is not the perfect one; it is not a replacement for jobs that are not there and skills that do not exist. Important thing is to make them financially stable, to bring them out of the poverty line and to make them able to sustain their position and improve living condition instead of returning back to the poverty line. It can be done in this way that micro credit institutions can make contract with driving centers that can giving training to those people who don’t know driving on half rate, contracts with boutiques can be made, contracts with BATA and Unilever can be made. In those areas where BATA do not have outlet, a person can take micro credit purchase BATA shoes and can sell them in his area. Similar contract can be made with Unilever.
    • CHAPTER: 1 INTRODUCTION 1.1 Role of micro credit in poverty alleviation Micro credit Programs extend small loans to very poor people for self employment projects that generate income for their survival, allowing them to care for themselves and their families. Developed over the past twenty years, micro credit is now considered as one of the most effective tools that we used to
    • fight poverty. It is not charity, but investment, and to understand it we need to look at poverty in the world today. Poverty is a global issue. Despite changes in development paradigms in the last half of the 20th century, the promise to bring wellbeing to all human being remained unfulfilled. As it stands, more than 100 million children of primary school age have never stepped inside a class room, about 29000 children die each day from largely preventable malnutrition and disease and more than 1.2 billion people in the world are struggling to survive at the margin of human existence “on under a dollar a day”. Poverty is the problem for all the countries irrespective of their level of development. It can be observed in many forms. It has both income and non income dimensions. It may be a lack of income or resources, a lack of coping capacity, a lack of basic human capabilities, a lack of institutional defenses or in extreme cases a lack of all of these. In a wider sense, it may be a combination of economic, social and political deprivations. In consideration of poverty line, people in each country can broadly be divided into two categories namely poor and non poor. The non poor are living above and the poor are living below the poverty line. The poor may be divided into destitute (Bottom 10 percent below the poverty line), extreme poor (those in the bottom 10 to 50 percentile of households below the poverty line), and moderate poor (those top 50 percent of households living below the poverty line are moderate poor). A further category of vulnerable non poor may also be recognized who may slip into category of poor anytime. The tool that is being used today in order to alleviate poverty is micro finance. The main purpose of microfinance is to break the vicious circle of ‘low income low investment-low profit’ by inserting capital from outside into the economic life of poor people. According to Adam Smith “Money, says the proverb, makes money. When you have got a little, it is often easy to get more and the great difficulty is to get the little” (Adam Smith, 1937, 93). Microfinance provides “the little” money where even there is total absence of capital or profit as living is based on subsistence only. Thus microfinance seeks to improve the condition of the poor by raising income and profit, thereby making people free from poverty and improving living standard. Its key feature is bringing the bank (money/capital) to the poor where traditional banking system does the opposite and involves a lot of bureaucratic complications and hidden costs like travel cost and sometimes bribing the bank
    • officials. Local moneylenders charge a very high 10 to 20 percent per month, depending on the seasonal condition and region. First started as an experimental project by Dr. Muhammad Yunus in a village named Jobra, near Chittagong University (where he was a professor of economics), in the late 1970s, the idea now grown all over the world. The micro credit program was first initiated in 1976 with the promise of providing credit to poor people without collateral, alleviating poverty and unleashing human creativity and endeavor of poor people. Professor Yunus wanted to see poverty in the museum in future. In his speech at the micro-credit summit in Washington D.C. in 1997, he compared his dream to eradicate poverty completely from this world with the dream of people to fly 100 years ago. He mentioned that Wright brothers in 1903, in their first successful attempt, could stay in the air only 12 seconds and fly only 120 feet. But, only after 65 years of the first successful attempt of Wright brothers, people in this world are able to go to moon and can also successfully able to come back in this world. Professor Yunus compared his dream, complete eradication of poverty from this world, with the Wright brothers’ attempt to fly and the following success in flying and aviation. He mentioned that he would also be able to go to his moon, Poverty free world, in 55 years time through the micro credit program (Yunus, 1997). In current overview it has been able to gain huge popularity, both in number of clients and organizations using microfinance, and in rate of loan return. Where the traditional banks did not considered the poor as loan worthy because of the uncertainty of their returning ability, Grameen Bank (the largest micro credit organization of Bangladesh and joint winner of the Nobel Peace Prize) has claimed around 99% returning rate. It is interesting to note that the main borrowers of this money are women and this is a policy decided by the Bank. Women are regarded as more trustworthy and able to deal with money more skillfully than men and this in turn has lead to their empowerment. The high rates of loan return have helped microfinance organizations like the Grameen Bank to become self-reliant (not depending on the donors any more) and bring a lot of people out from the national poverty level (Yunus, 2006). In Pakistan poverty has many dimensions. The poor in Pakistan have not only low income but they also lack access to basic needs such as education, health, clean drinking water and proper sanitation. The latter undermines and limits their capabilities, limits their opportunities to secure employment, results in
    • their social exclusion and exposes them to exogenous shocks. Then the vicious cycle of poverty is accentuated when government structures exclude the most vulnerable from the decision making process. In an era where poverty and unemployment have been growing, globally and in Pakistan in particular, perhaps due to the policies and programs, which collectively define globalization, public and non-governmental processes have set upon themselves the task of reducing poverty and enhancing employment and the quality of life of the poor. Currently in Pakistan, a variety of institutions ranging from NGOs to private and government sponsored rural support programs are delivering microfinance services to the poor. Two Commercial banks i.e. First Women Bank and Bank of Khyber are also providing lines of credit for the microfinance sector. In Pakistan, the poor usually acquire loans from informal sources. Lack of income and resources force them to take loans to meet basic necessities of life and the hurdle of collateral leave them at the mercy of the informal avenues. It is recognized that people living in poverty are innately capable of working their way out of poverty with dignity, and can demonstrate creative potentials to improve their situation when an enabling environment and the right opportunity exists. It has been noted that in many countries of the world, micro-credit Programs, provide access to small capitals to people living in poverty (Ahmed, 2000). 1.2Broad Problem area The greatest challenge that developing countries like Pakistan is facing is POVERTY. Majority of population in Pakistan is living below poverty line. This poverty is becoming cause of several problems like suicides, crimes, depression etc in order to control these problems poverty has to be controlled, for this purpose many strategies at government level and international level are made every day. Purpose of this study is basically to see how micro credit customers believe that micro credit has changed their live In Pakistan many s. micro credit institutions are providing micro credit facilities. So; in this paper I tried to see how micro credit institutions are affecting consumer’s living standard.
    • 1.3 Problem Statement Problem statement is also often referredto, is a clear, precise and succinct statement of the question or issue that is to be investigated with the goal of finding an answer or solution. Here in this study problem statement is: Impact of micro credit on poverty alleviation 1.4 Research Objective The main purpose of the study is to understand the success rate, and the social and economical change created by micro finance among the poor. I found that the issue may be approached from two different angles. Firstly from the clients’ perspective, that is how the poor people involved with micro credit judge the impact of it in their lives and what their understanding of development gained by it is. It can also be approached from the perspectives of the organizations working with micro credit, how they see the impact of micro credit on these people’s lives and how they look at their achievement. My objective here is to understand the situation of the client’s perspective, how they perceive micro credit and how micro credit is changing their lives. With this I also tried to observe the outreach, success and sustainability of micro credit program for the poor. I put my emphasis on this approach to know the situation from the perspective of the poor people because I think the solution should come from those people whose lives are to be changed. They are the one who can and should show how they want to change their lives and what problems should be solved in order to achieve development. 1.5 Motivation for the study Inequality is increasing around the world while the world appears to come closer due to phenomenon of globalization. Even the wealthiest nation has the largest gap between rich and poor. In such scenario countries like Pakistan is facing a great challenge in the form of poverty because by the time gap between rich and poor is increasing day by day. Majority of population of Pakistan is
    • living at poverty line or below poverty line. According to a survey about five million households in the country are living below poverty line. This poverty is also becoming cause of many problems that are prevailing in our society such as crimes, suicides, illiteracy, unemployment and diseases like depression, anxiety, stress and many more. In order to control these problems, first poverty should be controlled. At government level, many strategies are made every day, world bank and International monetary fund is also working for this purpose but now Dr. Younis gave such a wonderful idea to alleviate poverty that really works in Bangladesh, and is now working all over the world i-e Micro Credit. So; I decided to study what is the Role of Micro Credit in Poverty Alleviation. 1.6 Significance of the study Study results would be useful  In policy formulation and decision making in respect of government micro credit.  To Government departments implementing micro credit programs.  Contribute to existing body of literature and form a basis for further research. 1.7 Transmission Mechanism of Micro credit to Poverty Alleviation Target poorest segment of Increase in Rise in income level Micro credit employment society Better nutrition Increase in training and education Improvement in accommodation
    • Increase in savings Improvement in living standard Increase in consumption of goods and services Aggregate demand increases Increase in investment and employment opportunities Aggregate supply increases Economy grows and poverty declines 1.8 Type of Investigation There are three types of investigations  Casual  Correlation  Group references 1.8.1 Casual Casual way is that in which researcher wants to delineate the cause of one or more problems. 1.8.2 Correlation Correlation is that way in which researcher is interested in delineating the important variables associated with the problem.
    • This study “Role of micro credit in poverty alleviation” is correlational study. 1.8.3 Group References This method includes ranks smaller, greater. 1.9 Extent of Researcher interference with the study The extent of interference by the researcher with the normal flow of work at the workplace has a direct bearing on whether the study undertaken is casual or correlational. A correlational study is conducted in the natural environment of the work place with minimum interference by the researcher with the normal flow of work. Though there is some disruption to the normal flow of work in the system as the researcher administers questionnaires at the work place, the researcher’s interference in the routine functioning of the system is minimal as compared to that caused during causal st dies. u This study is correlational study because my interference in respondents’ routine life was less as I just asked them to fill questionnaire. 1.10 Hall marks of scientific study This study is scientific study as it possess eight hallmarks or eight main distinguishing characteristics explained below 1) Purposiveness 2) Rigor 3) Testability 4) Replicability 5) Precision and confidence 6) Objectivity 7) Generalizabilty 8) Parsimony 1.10.1 Purposiveness
    • Purposiveness basically means that study should have definite aim and purpose. Here in this study purpose is to study the Role of micro credit in poverty alleviation. 1.10.2 Rigor Rigor means that the study should have a good theoretical base and a sound methodological design. This study also has a sound theoretical frame work. Variables taken in this study are explained below  The dependent variable in this study is Poverty reduction.  Independent variable in this case is Micro Credit.  The moderating variable has a contingent effect on the independent and dependent variables relationship. In this study environment is a Moderating Variable. Environment is taken in a sense that it covers Political environment, it means that what are the government strategies to reduce poverty and to improve living standard of its people. What are the banks policies to reduce poverty, what is the interest rate? What are the conditions on which bank is lending loan to people, are conditions acceptable by people, are conditions affordable by people? 1.10.3 Testability Collected data is statistically analyzed by using percentage, frequency, range, mean and standard deviation. Hypothesis formed are then statistically tested to come to know whether hypothesis is accepted or rejected. 1.10.4 Replicability Replicability means that research conducted on this topic with these variables should give same results again and again. In discussion part it is shown that results of this research is mostly same as research on this topic conducted in other areas having same variables, similar problems, similar culture and similar
    • economic position such as Bangladesh and also in other parts of Pakistan such as in northern areas. If further research on this topic is conducted within Pakistan having same variables results would be similar. 1.10.5 Precision and Confidence Precision refers to the closeness of the findings to quot;realityquot; based on a sample. In other words, precision reflects the degree of accuracy or exactitude of the results on the basis of the sample. Confidence refers to the probability that our estimations are correct. 1.10.6 Objectivity The conclusion drawn through the interpretation of the results of data analysis is objective. It is based on the facts of the findings derived from actual data and not on own subjective or emotional value. 1.10.7 Generalizabilty The results of this study can be applied in any other area of Pakistan. The suggestions to make micro credit more effective can be applied not only in Pakistan but also abroad. 1.10.8 Parsimony Results of this study are simply explained and there is no ambiguity or confusion in results. Simple language is used and results are explained clearly. 1.11 Hypothetico-deductive method
    • Hypothetico-deductive method is used to study the Role of micro credit in poverty alleviation. This method has seven steps: 1) Observation 2) Preliminary information gathering 3) Theory formulation 4) Hypothesizing 5) Further scientific data collection 6) Data analysis 7) Deduction 1.11.1 Observation Observation is the first step in which researcher observes the problem or issue. I observed the issue of Role of micro credit in poverty alleviation. 1.11.2 Preliminary information gathering I used questionnaire to gather data from those people who have experienced micro credit or are experiencing micro credit and questions regarding their living standard before and after micro credit is asked so that an effective comparison can be made of their living standard before and after use of micro credit. 1.11.3 Theory formulation Theoretical frame work is then formulated in which dependent, independent and moderating variables are taken. 1.11.4 Hypothesizing From the theorized network of associations among the variables certain hypothesis are formulated.
    • 1.11.5 Further scientific data collection In order to analyze Role of micro credit in poverty alleviation data of customers using micro credit is required but not only after use of micro credit, data before use of micro credit is also needed for making comparison. 1.11.6 Data analysis Collected data is then analyzed using Statistical Package for Social Sciences (SPSS) and graphs are made on MS EXCEL. Statistical tools are applied using percentage, frequency, mean, range and standard deviation. 1.11.7 Deduction Deduction is the process of arriving at conclusion by interpreting the meaning of the results of the data analysis.
    • CHAPTER: 2 PRELIMINARY DETAILS
    • This chapter provides an overview of the theoretical background that provides the premise of the study. Concepts of poverty, micro credit, objectives of micro credit, impact of micro credit , poverty in Pakistan, phenomenon of poverty, faces of poverty, ways to measure the impact of micro credit on income and consumptions, Theoretical frame work, variables (Dependent variable, Independent variable and Moderating variable), Hypothesis development and Hypothesis statements. 2.1 Literature Review In Pakistan poverty has many dimensions. The poor in Pakistan have not only low income but they also lack access to basic needs such as education, health, clean drinking water and proper sanitation. The latter undermines and limits their capabilities and their opportunities to secure employment, results in their social exclusion and exposes them to exogenous shocks. Then the vicious cycle of poverty is accentuated when government structures exclude the most vulnerable from the decision making process. Poverty in Pakistan was reported at 31.8%, which comprises of 22.39% urban and 38.65% rural population in the country, which is based on average calories intake of 2350 calories per adult per day that was equal to Rs. 670 per month in 1998-99, and in 2000-01 moved up to Rs. 748 per month (Economic Survey ,2002-03). The phenomenon of poverty was felt and observed more during the decade of 1990s, as the overall growth slowed down. While the slowed economic growth contributed to poverty, the “trickle down effect” once thought to improve living
    • conditions, did not reach the lowest level owing largely to lack of accessibility of institutions, unjust and non-poor policies (Waheed, 2001). The major objectives of micro credit schemes are: (1) to stop exploitation of the poor caused by expensive informal credit; (2) to provide small loans to poor people at relatively lower cost as compared to accessible informal loans; (3) to finance economically and socially viable projects those cannot be financed otherwise; (4) to empower women within households as decision makers and in society through active economic participation; (5) to create maximum employment opportunities; (6) to create self sufficient and self-employed people and the most importantly; and (7) to reduce poverty, accelerate growth and improve the living standards on sustainable basis (First Quarterly Report for FY05 on Role of micro credit in poverty alleviation). Poverty has many faces, changing from place to place and across time, and has been described in many ways. Most often, poverty is a situation, people want to escape. So poverty is a call to action for the poor and the wealthy alike a call to change the world so that many more may have enough to eat, adequate shelter, access to education and health, protection from violence, and a voice in what happens in their communities. Poverty amid plenty is the world’s greatest challenge. And it has been recognized that successful development requires a comprehensive, multifaceted, and properly integrated mandate. The study accepts the now established view of poverty as encompassing not only low income and consumption but also low achievement in social (education, health, nutrition), political (voice, empowerment), and other sectors of human development (Faheem Jehangir Khan). Khandker (2000) considers savings as an indicator and finds that this factor has an influence on eradicating poverty. He argues that credit programs do stimulate savings because micro credit borrowers make mandatory savings every week, which they are entitled to withdraw at the end of their membership. In addition, he finds micro credit program has a positive impact in generating not only voluntary savings but also additional savings among the borrowers. Apart from savings, it can be argued that there are other factors that may contribute towards eradication of such poverty. For example, income and accumulation of assets of
    • the household may be considered as additional causal factors. It is likely that with the introduction of micro credit programs, borrowers may have better income, better savings and more assets. In this backdrop, it is necessary to analyze how these micro credit programs can influence income, savings and assets for the borrowers. World Bank (Micro credit Summit, 1997) classified the micro credit program in Bangladesh as one of the most effective anti-poverty tools for the poorest. The program extends small loans to unemployed poor people that are not bankable. These individuals lack collateral, stable employment and therefore cannot meet even the most minimum qualifications to gain access to formal credit. The dynamics of social, economic, political, cultural and environmental forces contrive in a manner that it separates the rich from the poor, strong from the weak, haves from the have-nots and favor those in a better position. The chemistry of sociology and the social factors like class, gender, ethnicity, caste, religion, age, etc., play an important role in determining the access to and control over resources for various groups of people in a given society. It is these relationships among people, their social structures and institutional settings, and their access to, and commands over resource base (physical, human, intellectual and social) and the policy framework that promote (or hinder) development. These factors are all the more relevant in the case of women who carry the double burden of gender and poverty (Subrahmanyam, 2000). About 1.3 billion extremely poor people struggle to live on less than $1 a day. They are trapped in poverty so severe, that they cannot adequately feed, clothe, or shelter themselves or their families. Steady jobs and income elude the very poor. To get by, many people have to create and run their own tiny businesses or small handicraft manufacturing in the unregulated, quot;informalquot; sector. They might sell produce at the market, or shine shoes, weave mats, or bake bread. Micro-enterprises may be small, but their cumulative impact is huge: depending on the country, micro-enterprises employ an estimated 30-80 percent of the working population (Charmes, 1992).
    • Some studies find micro credit a very successful and effective way of reaching development goals, while other acknowledge issues such as women lacking control over capital, creation of dependency for the loans and services, not reaching the poorest of the poor (Thente, 2003). Besides, rural political economy of Bangladesh consists of class relation expressed through patron client hierarchies, with poor landowner’s sharecroppers and landless labors being class clients tied individually to patrons who might be landowners, moneylenders and employers, usually in combination (Wood, 1994). The limitations of the formal financial sector and the informal financial sector in providing financial services, especially credit, encouraged the micro-credit program to evolve. The micro-credit program was initiated with the objective of providing poor people with credit without collateral. The harmony among group members, the strict discipline in providing credit and collecting repayments, and supervision of borrower’s activities in the micro-credit system replaced the provision of collateral, which is very important in receiving credit from the formal financial sector institutions. Professor Yunus called the process of substituting the provision of collateral with group harmony and other aspects of micro-credit as ‘freeing of credit from the bondage of collateral (Yunus, 1997). Micro credit is an enabling, empowering, and bottoms-up tool to poverty alleviation that has provided considerable economic and non-economic externalities to low-income households in developing countries. But there has been a gradual apprehension that micro credit alone is not enough. Micro credit is not a replacement for jobs that are not there, markets that are inaccessible, or education and skills that do not exist. Micro credit is indeed an essential ingredient in the development process, but not the only ingredient (Faheem Jehangir Khan). Credit creates opportunities for self-employment rather than waiting for employment to be created. It liberates both poor and women from the clutches of poverty. It brings the poor into the income stream. Given the access to credit under an appropriate institutional structure and arrangement, one can do
    • whatever one does best and earn money for it. One can overcome poverty. One can become the architect of one's destiny and the agent of change not only for one's family but also for the society (H. I. Latifee Grameen Trust). It is known that poor people live in a high risk and vulnerable conditions. Their ability to take advantage of opportunities that will lead to increase their income or economic status, to protect themselves against risks of crises, and to cope with these when they occur is very important. Reduction of poverty is partly a process of increasing income and economic stability which enables fulfillment of basic needs and access to different kinds of services. This may also be understood in the form of developing a range of assets that will reduce the vulnerability of the poor to physical, economic and social shocks. These assets may be defined as financial (income size, regularity and security, savings, loans or gifts), human (skills and knowledge, ability to work, good health, self- esteem, bargaining power, autonomy and control over decisions), physical (housing, land, productive and nonproductive possessions etc.) and social (networks, group and centre membership, trust based relationship, freedom from violence and wider access to society and social institutions (H. I. Latifee, Grameen Trust). There are several good reasons for giving loans exclusively to women. First of all, the Grameen Bank aims to provide loans for .the poorest of the poor. As women are among the most disadvantaged in Bangladeshi society, the poorest of the poor are often women. Secondly, loans given to women seem to bring more benefit to the family than loans given to men. Women tend to use the income generated by the loans to promote their children. Welfare rather than for radios, motorcycles, gambling and tobacco, which is often the case with loans given to men. Finally, women have proven better credit risks than men have. They are less mobile and socially more vulnerable than men, and therefore easier to apply pressure to. A married woman finds it difficult to leave home and defaulting on a loan could damage her reputation seriously in the village. Therefore, female borrowers go to great lengths to ensure repayment of the loans (Rahman, 1999).
    • Today, the world faces the major challenge of reducing poverty. Of the world’s six billion people, 2.8 billion live on less than 2 dollar a day and 1.2 billion live on less than 1 dollar a day. Of these 1.2 billion, 500 million live in South Asia. General Assembly of the United Nations has recognized the positive impact of micro credit in poverty reduction. Microfinance impact studies have demonstrated that:  . Micro finance helps poor households meet basic needs and protects them against risks.  . The use of financial services by low-income households leads to improvements in household economic welfare and enterprise stability and growth.  . By supporting women’s economic participation, microfinance empowers women, thereby promoting gender-equity and improving household well being.  . The level of impact relates to the length of time clients have had access to financial services. (First Quarterly Report for FY05 on Role of Micro credit in Poverty Alleviation). A sustainable micro credit system in the country is vital for the long term development of micro credit mechanism and to provide credit to the poverty hit poor people, especially women in Pakistan (Roshaneh Zafar, Founder president of Kashf foundation). A hefty sum of one trillion rupees is required to eliminate poverty from the country. Ten million houses holds in Pakistan needed micro credit support and one trillion rupees are required to meet the credit requirements of the deserving people in the country who do not have access to small credit and living in extreme poverty conditions. Out of 10 million house holds at present only 7% of them have got micro credit. Charity and micro credit could not go together and a viable micro credit system is the only sustainable option to reduce poverty and to extend credit to the money less country men (Roshaneh Zafar, Founder president of Kashf foundation).
    • Micro credit banking should be kicked off on commercial basis. All the human beings, including the poorest, are endowed with endless potential and with the provision of financial support the poor people too can perform better and become respectable members of the society (Roshaneh Zafar, Founder president of Kashf foundation). In the market for micro, finance has undergone a rapid shift in the country. There has been a marked increase in the number and the typology of players, particularly in terms of the entry of four new micro finance banks. However, despite this new development, scale continues to be a major challenge for the market. An analysis of the Punjab market has revealed that the total number of potential house holds that can access micro finance is about 5.6 million, with 1.6 million in the urban areas and four million in the rural areas. At the same time, the overall market penetration in the Punjab is 12%, implying that 88% of the market is still untapped (Roshaneh Zafar, Founder president of Kashf foundation). Micro finance has important economic and social value thus the institutionalization and development of SMEs and micro finance sector in Pakistan is an urgent need of the hour which can lead towards job creation, enhancement of competitiveness and exports while pushing the overall economic growth. Micro finance related financial services and access can make a stepping stone towards uplifting including the borrowers and beneficiaries middle and lower middle classes of the society for who accesses to institutional credit was very limited previously. However, in Pakistan, this economic phenomenon is at initial stage which needs to be implemented by extending their network following the socio-economic ground realities of our rural and urban society (Erum Zaidi). Pakistan has to look at micro credit as it is successfully implemented in other parts of the world. It then has to create a regulatory environment that will support and promote micro credit operations. In many countries these operate outside the banking controls regime and are not restricted in setting up entities that enable successful operations. There are of course legal changes. In many cases social collateral (a gathering of a group of people who know each other
    • and thus provide surety of the lending by the micro credit entity) or Group lending may not be legally recognized. In certain cases even the micro finance entity may not be in accordance with prevailing rules. Therefore the regulatory environment has to provide for this growth (Erum Zaidi). The Pakistan Living Standard Measurement Survey (PSLM) conducted during 2004-05 shows a sharp decline in poverty incidence as suggested by falling Head Count Ratio (HCR). The data indicates that the number of poor (i-e; people having income below the poverty line of Rs 878.64 per adult per month) has shrunk by 12 million. Region wise data indicates that the decline in rural poverty more profound (12.5 million people) that the urban decline (9.8 million).Pakistan’s performance in reducing poverty compares well with the MDG that has envisaged a 50% reduction in the poverty by 2015 in accordance with which the poverty reduction strategy paper (PRSP) has targeted to reduce the poverty level to 28% by FY06(Erum Zaidi). The majority of our population is referred to as a group living on disadvantages. Comparing the economic conditions of the past years the inflation rate of Pakistan is growing rapidly. Growing inflation has also become one of the biggest trends in the society of Pakistan and it is affecting nothing but the lower class of Pakistani society. The rich are growing richer and on the other side the poor are becoming poorer. If we look at the basic needs of the people of Pakistan, what we expect from them is, “food, clothing and shelter” or we can form different perceptions of their basic needs “job, education and utilities”. The proportion of their three basic needs with their three basic perceived needs is crucial not only for the poverty alleviation but also for rising standard of living and economic stability (Erum Zaidi). The aim of microfinance according to (Otero, 1999) is not just about providing capital to the poor to combat poverty on an individual level, it also has a role at an institutional level. It seeks to create institutions that deliver financial services to the poor, who are continuously ignored by the formal banking sector. (Littlefield and Rosenberg, 2004) states that the poor are generally excluded from the financial services sector ofthe economy so micro financing Institutions have emerged to address this market failure. By addressing this gap in the
    • market in a financially sustainable manner, an micro financing institution can become part of the formal financial system of a country and so can access capital markets to fund their lending portfolios, allowing them to dramatically increase the number of poor people they can reach (Otero, 1999). (Wright, 2000) states that much of the skepticism of micro financing institutions stems from the argument that microfinance projects “fail to reach the poorest, generally have a limited effect on income…drive women into greater dependence on their husbands and fail to provide additional services desperately needed by the poor”. In addition, Wright says that many development practitioners not only find microfinance inadequate, but that it actually diverts funding from “more pressing or important interventions” such as health and education. As argued by (Navajas et al, 2000), there is a danger that microfinance may siphon funds from other projects that might help the poor more. They state that governments and donors should know whether the poor gain more from microfinance, than from more health care or food aid for example. Therefore, there is a need for all involved in microfinance and development to ascertain what exactly has been the impact of microfinance in combating poverty. (Mayoux, 2001) states that while microfinance has much potential the main effects on poverty have been: _ Credit making a significant contribution to increasing incomes of the better- off poor, including women, _ Microfinance services contribute to the smoothing out of peaks and troughs in income and expenditure thereby enabling the poor to cope with unpredictable shocks and emergencies. (Hulme and Mosley ,1996) show that when loans are associated with an increase in assets, when borrowers are encouraged to invest in low-risk income generating activities and when the very poor are encouraged to save; the vulnerability of the very poor is reduced and their poverty si uation improves. t (Johnson and Rogaly, 1997) also refer to examples whereby savings and credit schemes were able to meet the needs of the very poor. They state that
    • microfinance specialists are beginning to view improvements in economic security, rather than income promotion, as the first step in poverty reduction as this reduces beneficiaries’ overall vulnerability. (Chowdhury, Mosley and Simanowitz ,2004) argue that if microfinance is to fulfill its social objectives of bringing financial services to the poor it is important to know the extent to which its wider impacts contribute to poverty reduction. In the following sections I will examine the findings from wider assessments of microfinance interventions at a household and community level, to show what learning can be gained when impact assessments have a broad scope of analysis. (Littlefield, Murdoch and Hashemi, 2003) state that one of the first things that poor people do with new income from micro enterprise activities is to invest in their children’s education. Studies show that children of microfinance clients are more likely to go to school and stay longer in school than for children of non- clients. Again, in their study of FOCCAS, client households were found to be investing more in education than non client households. Similar findings were seen for projects in Zimbabwe, India, Honduras and Bangladesh. (Chowdhury and Bhuiya, 2004) assessed impact of BRAC’s poverty alleviation program from a “human well-being” perspective in a program in Bangladesh where they examined seven dimensions of ‘human-well being’. The project included the provision of microfinance and training of clients on human and legal rights .They noted that the project led to better child survival rates, higher nutritional status, improvement in the basic level of education, and increased networking in the community. Children of BRAC clients suffered from far less protein-energy malnutrition than children of non members, and the educational performance of BRAC member’s children was also higher than that of children in non BRAC households. BRAC member households spent significantly more on consumption of food items than poor non-members did and per capita calorie intake was also significantly higher. However, (Johnson, 2004) states that having women as key participants in microfinance projects do not automatically lead to empowerment; sometimes
    • negative impacts can be witnessed. She refers to increased workloads, increased domestic violence and abuse. This leads her to ask a crucial question of whether targeting women is just an efficient way of getting credit into the household, since women are more likely than men to be available in the home, attend meetings, be manageable by field staff and take repayment more seriously, even if they do not invest or control the loan themselves? Or on the other hand, if such targeting is fully justified on the grounds of enhancing gender equity. She claims the answer is probably somewhere between the two alternatives. She argues that micro financing institutions must analyze both the positive and negative impacts their interventions are having on women, and that micro financing Institutions need to work with men to help pave the way for a change in attitudes to women’s enhanced contribution to the household. The impact of microfinance on poverty alleviation is a keenly debated issue as we have seen and it is generally accepted that it is not a silver bullet, it has not lived up in general to its expectation (Hulme and Mosley, 1996). However, when implemented and managed carefully, and when services are designed to meet the needs of clients, microfinance has had positive impacts, not just on clients, but on their families and on the wider community. There is however a need for greater assessment of these wider impacts if the true value of microfinance to development is to be understood (Zohir and Matin, 2004). Considerable debate remains about the effectiveness of microfinance as a tool for directly reducing poverty, and about the characteristics of the people it benefits (Chowdhury, Mosley and Simanowitz, 2004). It is notoriously difficult to measure the impact of microfinance programs on poverty. This is so she argues, because money is fungible and therefore it is difficult to isolate credit impact, but also because the definition of ‘poverty’, how it is measured and who constitute the ‘poor’ “are fiercely contested issues” . Carney (1998) defines a livelihood as comprising “the capabilities, assets (including both material and social resources) and activities required for a means of living.” Chambers (1997) states that livelihood security is “basic to well-being” and that security “refers to secure rights and reliable access to resources, food, income and basic services. It includes tangible and intangible
    • assets to offset risk, ease shocks and meet contingencies.” Lindenberg (2002) defines livelihood security as “a family’s or community’s ability to maintain and improve its income, assets and social well-being from year to year.” Concern also state that livelihood security is more than just economic well- being as they define livelihood security as “the adequate and sustainable access to and control over resources, both material and social, to enable households to achieve their rights without undermining the natural resource base” (Concern, 2003). Livelihood security therefore, like poverty, is not just about income, but includes tangible and intangible assets, and social well being. (Johnson and Rogaly, 1997) state that “NGOs aiming for poverty reduction need to assess the impact of their services on user’s livelihoods.” They argue that in addressing the question of the impact of microfinance, NGOs must go beyond analyzing quantitative data detailing the numbers of users, and volumes and size of loans disbursed, to understanding how their projects are impacting on clients’ livelihoods. They state that the provision of microfinance can give poor people “the means to protect their livelihoods against shocks as well as to build up and diversify their livelihood activities”. Therefore when analyzing the impact of microfinance the overall impact of the microfinance services on the livelihoods of the poor needs to be taken into consideration. A livelihood security approach according to Concern (2003) aims for a holistic analysis and understanding of the root causes of poverty and how people cope with poverty. They identify livelihood shocks such as natural disasters and drought, the social, political and economic context, and people’s livelihood resources such as education and local infrastructure as factors affecting people’s livelihood security .Therefore, when analyzing the impact microfinance is having on livelihood security, as is the objective of this dissertation, a holistic analysis of people’s livelihood security must be conducted, rather than just focusing on the material/economic impact microfinance is having on the livelihoods of the poor. Health and education are two key areas of non-financial impact of microfinance at a household level. Wright (2000) states that from the little research that has been conducted on the impact of microfinance interventions on health and
    • education, nutritional indicators seem to improve where micro financing institutions have been working. The Research on the Grameen Bank shows that members are statistically more likely to use contraceptives than non-members thereby impacting on family size. Littlefield, Murdoch and Hashemi (2003) also acknowledge the sparse specific evidence of the impact of microfinance on health but where studies have been conducted they conclude, “house holds of microfinance clients appear to have better nutrition, health practices and health education than comparable non-client households”. Among the examples they give is of FOCCAS, a Ugandan micro financing institution whose clients were given health care instructions on breastfeeding and family planning. They were seen to have much better health care practices than non-clients, with 95% of clients engaged in improved health and nutrition practices for their children, as opposed to 72% for non-clients (Littlefield, Murdoch and Hashemi, 2003). Littlefield, Murdoch and Hashemi (2003) state that access to micro financing institutions can empower women to become more confident, more assertive, more likely to take part in family and community decisions and better able to confront gender inequities. However, they also state that just because women are clients of micro financing Institutions does not mean they will automatically become empowered. Hulme and Mosley (1996) also make this point when they refer to the “naivety of the belief that every loan made to a woman contributes to the strengthening of the economic and social position of women”. However, with careful planning and design women’s position in the household and community can indeed be improved. According to Littlefield, Murdoch and Hashemi (2003), the Women’s Empowerment Program in Nepal found that 68% of its members were making decisions on buying and selling property, sending their daughters to school and planning their family, all decisions that in the past were made by husbands. (Zohir and Matin ,2004) state that many micro financing institution loans are used for agricultural production, trading, processing and transport, resulting in an increase in the use of agricultural inputs and increased output of agricultural production. This leads to enhanced employment opportunities in these sectors for the wider community and a reduction in the prices of such produce due to increased supply. They also state that trading activities financed by micro
    • financing institutions can help to establish new marketing links and increase the income of traders, and this can lead to reduced migration due to increased employment opportunities and increased income (Zohir and Matin, 2004). From a social perspective, they state that reduced migration increases family cohesion and greatly contributes towards improving child upbringing. (Zohir and Matin ,2004) state that the interaction within micro financing institution groups can create co-operation and trust that not only facilitates the microfinance activities, but also contributes benefits beyond the service provided, such as a greater sense of community, trust and reliance on the group in times of crisis. These networks can lay the foundations for other social capital developments in the community. They state that examples of cultural impacts of social intermediation that affect the greater community could be a change in attitude of society towards the acceptable age of women’s marriage, domestic violence, dowry, etc. From the above literature we can conclude that micro credit is an effective tool for poverty alleviation but the important thing is that only giving credit is not enough, micro credit is not a replacement for jobs that are not there and skills that do not exist. Important thing is to make them financially stable, to bring them out of the poverty line and to make them able to sustain their position and improve living condition instead of returning back to the poverty line. 2.2 Theoretical Frame Work After conducting surveys, completing a literature review and defining problem statement, one is ready to develop a theoretical frame work. A theoretical frame work is a conceptual model of how one theorizes or makes logical senses of the relationships among the several factors that have been identified as important to the problem. After theoretical frame work I developed hypothesis to examine whether the theory formulated is valid or not. The hypothesis relationships can therefore be tested through appropriate statistical analysis.
    • 2.3 Variables A variable is anything that can take on differing or varying values. The values can differ at various times for the same object or person, or at the same time for different objects or persons. 2.3.1 Dependent Variable The dependent variable is the variable of primary interest to the researcher. The researcher’s goal is to understand and describe the dependent variable, or to explain its variability, or predict it. In my study dependent variable is Poverty reduction. 2.3.2 Independent Variable An independent variable is one that influences the dependent variable in either positive or negative way. That is, when the independent variable is present, the dependent variable is also present, and with each unit of increase in the independent variable, there is an increase or decrease in the dependent variable also. In other words, the variance in the dependent variable is accounted for by the independent variable. In this case independent variable is Micro Credit. 2.3.3 Moderating Variable The moderating variable is one that has a contingent effect on the independent and dependent variables relationship. That is, the presence of a variable (moderating variable) modifies the original relationship between independent and the dependent variables. I have taken environment as a Moderating Variable. Environment is taken in a sense that it covers Political environment, it means that what are the government strategies to reduce poverty and to improve living standard of its people. What are the banks policies to reduce poverty, what is the
    • interest rate? What are the conditions on which bank is lending loan to people, are conditions acceptable by people, are conditions affordable by people? 2.4 Schematic diagram for the theoretical frame work MICRO CREDIT POVERTY REDUCTION Independent variable Dependent variable POLITICAL ENVIRONMENT Moderating variable
    • Here micro credit is taken as an independent variable and poverty reduction as a dependent variable. When micro credit increases poverty decreases so; poverty reduction is dependent on micro credit. Previous researches conducted on this topic “Role of micro credit in poverty alleviation” shows that micro credit is an effective tool in poverty alleviation. “Micro-credit is known as an effective tool for poverty alleviation. In poor countries like Pakistan greater attention has been paid to poverty alleviation through micro-credit, especially in the last decade. The successful use of the micro credit is considered as a victory for the disadvantaged segments.” (Poverty alleviation through micro credit Zahid Shahab Ahmed, Pakistan Some of the factors that show poverty reduction are Training and education, clean water and hygienic environment, Nutrition and adequate food, Accommodation, Income and savings. 2.5 Problem Statement Problem statement is also often referredto, is a clear, precise and succinct statement of the question or issue that is to be investigated with the goal of finding an answer or solution. Here in this study problem statement is: Impact of micro credit on poverty alleviation 2.6 Hypothesis development Hypothesis can be defined as logically conjectured relationship between two or more variables expressed in the formof a testable statement.
    • Once the researcher identifies the important variables in a situation and establishes the relationships among them through logical reasoning in the theoretical frame work, now is a time to test whether the relationships that have been theorized do in fact hold true. By testing these relationships scientifically through appropriate statistical analysis researcher is able to obtain reliable information on what kind of relationship exist among the variables operating in the problem situation. The results of these tests offer some clues as to what could be changed in the situation to solve the problem. Formulating such testable statements is called hypothesis development. 2.7 Hypothesis Statements There are different formats of hypothesis statements such as if-then, directional and non directional, null and alternate. I have used Directional Hypothesis. It shows positive/negative relationship between two variables. H0: Training and education does not play any role in poverty reduction H1: Training and education plays an important role in poverty reducti n o H0: Clean water and hygienic environment has no impact on poverty reduction H1: Clean water and hygienic environment has an impact on poverty reduction H0: Nutrition and adequate food is not an important player of poverty reduction H1: Nutrition and adequate food is an important player of poverty reduction H0: Accommodation has no concern with poverty reduction H1: Accommodation has an important concern with poverty reduction H0: Income does not play an important role in poverty reducton i H1: Income plays an important role in poverty reducton i H0: Savings does not play an important role in poverty reduction
    • H1: Savings plays an important role in poverty reduction CHAPTER: 3 RESEARCH DESIGN
    • This chapter provides perspective on the research design used to investigate the research problem with specific reference to the Survey design, Study setting, Unit of analysis, Type of research, Selecting location, Data collection method, and Statistical techniques (Percentage, Frequency, Mean, Standard deviation, Range). 3.1 Survey design Basically I am analyzing the role of micro credit in poverty alleviation. Micro credit is known as an effective tool for poverty alleviation. In poor countries like Pakistan greater attention has been paid to poverty alleviation through micro credit, especially in the last decade. Many micro credit institutions are working in Pakistan for poverty alleviation but still we can see that gap between poor and rich is increasing every day. Rich is becoming richer and richer and poor is becoming poorer and poorer. So; I compared living standard of poor people living in four urban slum areas of Rawal pindi and Islamabad (Muslim Colony, Dhok Kala Khan, Tehmaspabad and Shakrial) before and after utilization of the credit in order to analyze the role of micro credit in poverty alleviation. The sample size for this survey is 200 with 50 respondents per area. The study was based on questionnaires which were distributed after translating it into Urdu so that respondents can easily understand it and fill it accordingly. The dependent variable is Poverty reduction where as independent variable is micro credit. And moderating variable is Environment. Environment is taken in a sense that it covers Political environment, it means that what are the government strategies to reduce poverty and to improve living standard of its people. What are the banks policies to reduce poverty, what is the interest rate? What are the conditions on which bank is lending loan to people, are conditions acceptable by people, are conditions affordable by people? 3.2 Study setting
    • Study setting can be contrived and non contrived. This study is non contrived. When research is conducted in natural environment where work proceeds normally it is non contrived setting. During this study my interference was less in respondent’s routine life. 3.3 Unit of analysis The unit of analysis refers to the level of aggregation of the data collected during the subsequent data analysis stage. As my problem statement is Impact of micro credit on poverty alleviation So; I required data from those individuals who have experienced or experiencing micro credit. In this way it can be observed that what impact micro credit has on their living standard. What was their living standard before utilization of micro credit and after micro credit? So; here in this study unit of analysis is Individual. 3.4 Type of Research Research can be undertaken for two different purposes. One is to solve a current problem, demanding a timely solution. For example, a particular product may not be selling well and the manager might want to find the reasons for this in order to take corrective action. Such research is called Applied Research. The other research that I conducted in this study is Basic research. It is to generate a body of knowledge by trying to comprehend how certain problems that occur in organizations can be solved. Later on the knowledge gained by the findings of basic research can be applied to solve problems. 3.5 Selecting location This study was conducted in two cities of Pakistan i.e. Rawal pindi and Islamabad. In both cities the study targeted four urban slum areas i.e. Muslim Colony, Dhok Kala Khan, Tehmaspabad and Shakrial.
    • 3.6 Data collection method I used Questionnaire as a data collection tool. Questionnaire allows the researcher to gather structured information from a large number of individuals. The analysis of questionnaire is easy due to the structured information in it. To get more relevant data I translated questionnaire into Urdu through In page and then I distributed them to respondents so that they can easily understand questions. Because if I asked them question in Urdu and they answer me I will not be sure that they perceived my question in exactly that way in which I am asking. So; to overcome this problem I found it better to translate questionnaire into Urdu so that every one can easily read it, understand it and answer it accordingly. Population consists of the totality of the observations with which researcher is concerned. Where as a Sample is a subset of a population. Population in this study consisted of people of Muslim Colony, Dhok Kala Khan, Tehmaspabad and Shakrial who have taken micro credit and sample was of 200 with 50 respondents per area. Response rate was 100%. I have used Purposive sampling which is type of Non probability sampling in which the elements in the population do not have any probability attached to their being chosen as sample subjects. Purposive sampling confines to specific type of people who can provide the desired information, either because they are the ones who have it, or confirm to some criteria set by the researcher. As I selected those people who are using micro credit or have used micro credit. Purposive sampling is of two types’ judgment sampling and quota sampling. I have used judgment sampling. This sampling involves the choice of subjects who are most advantageously placed or in the best position to provide the information required. Because those people are experiencing micro credit or have experienced micro credit so they can better tell what impact micro credit has or had on their living standard. Better comparison can be made of their living standard before and after utilization of micro credit. The responses were tabulated and expressed in terms of percentage and frequencies. Thus the collected data were analyzed statistically using mean,
    • Standard deviation and Range with the help of Statistical Package for Social Sciences (SPSS) and graphs were made on MS Excel. 3.7 Statistical techniques 3.7.1 Percentage A percentage is a special type of proportion where the ratio is multiplied by a constant, 100, so that the ratio is expressed per100. 3.7.2 Frequency The rate at which something happens or is repeated is called frequency. 3.7.3 Mean In statistics, the mean is the mathematical average of a set of numbers. The average is calculated by adding up two or more scores and dividing the total by the number of scores. Consider the following number set: 2, 4, 6, 9, and 12. The average is calculated in the following manner: 2 + 4 + 6 + 9 + 12 = 33 / 5 = 6.6. So the average of the number set is 6.6. 3.7.4 Standard deviation Standard deviation is a measure of the dispersion of outcomes around the mean (or expected value), used to measure total risk. It is the square root of the variance. 3.7.5 Range
    • The Range R is defined as the difference between the extreme values, i-e the difference between the largest and the smallest values in the data. Symbolically, the range is given by the relation. R=xm – xo Where xm stands for the largest value and xo denotes the smallest one. In a frequency distribution, the range is equal to the difference between the upper boundary of the highest class and the lower boundary of the lowest class.
    • CHAPTER: 4 DATA ANALYSIS This chapter presents the most salient findings based on the empirical analysis and provides an overview of the research findings obtained based on the statistics for the measuring instruments which were utilized. Descriptive statistics, Interpretations, Graphical representations of respondent's demographics characteristics, patterns of micro credit utilization, Graphical representation of factors showing poverty reduction, Interpretation, comparison of results with other researchers.
    • Statistical analysis is done using software Statistical Package for Social Sciences (SPSS) and graphs were made on MS EXCEL. 4.1 Descriptive statistics Frequency( #) Percentage (%) Gender Male 130 65 Female 70 35 Age 20 yrs or below 19 9.5 21-30 yrs 50 25 31-40 yrs 59 29.5 41-50 yrs 54 27 Above 50 yrs 18 9 Education Master 30 15 Bachelor 35 17.5 Intermediate 41 20.5 Matriculation 32 16 Under matric 31 15.5 Illiterate 31 15.5 Marital status Single 147 73.5 Married 53 26.5 No. of children 0 67 33.5 1-2 57 28.5 3-4 55 27.5 5 or more 20 10 Occupation None/ surviving on zakat, 12 6 charity and occasional labor Driver 25 12.5 Sweeper 29 14.5 Labor 65 32.5 Peon 10 5 School teacher 44 22 Other 15 7.5 Do you have any
    • experience with micro credit? Yes 155 77.5 No 45 22.5 If Yes, how long you been using it? Less than 6 months 5 3.2 6 months 12 7.7 1 year 41 26 More than 1 year 97 62.5 What is the total amount of micro credit you have taken so far? 2000 1 0.6 4000 26 16.7 6000 11 7.0 other 117 75 What did you do with the money? Open shop or purchased 63 40.6 taxi, rickshaw, sewing machine Improve housing condition 50 32.2 Invest in children education 23 14.8 Other 35 22.5 Will you take more credit after paying the current due? Yes 101 65 No 54 34.8 Are you satisfied with the government policies of granting loan? Yes 71 45.8 No 84 54 Are you satisfied with the bank policies?
    • Yes 57 36 No 98 63 Are you satisfied with the interest rate you have to pay? Yes 42 27 No 113 73 Have you ever had any problem in paying the weekly payment? Yes 106 68 No 49 31 Does the money you borrow from micro finance bank cover your needs or do you have to borrow from someone else? Covers 71 45.8 Not covers 84 54 Do you think this system is perfect or it should be improved? Perfect 44 28.3 Need improvement 111 71.6 Do you think this system is according to your demand? Yes 57 36.7 No 98 63.2 Do you have clean drinking water and hygienic environment? Yes 52 33 No 103 66 Do most of diseases you
    • people bear are because of unclean water and unhygienic environment? Yes 132 85 No 23 14 Is clean water and hygienic environment always available to you? Yes 35 22 No 120 77 Do you have proper sanitation system? Yes 55 35 No 99 63 Do you have to face water shortage? Yes 122 78 No 33 21 Is drinking water available to you at home or you had to bring it from some other area? Available at home 51 33 Not available at home 104 67 Do you have your own house, or it is rented? Own 71 45 Rented 84 54 Is your house enough for family members? Enough 65 42 Not enough 90 58 What type of house it is? Mud house 63 40 Stone house 92 59 Is your house strong enough to bear
    • thunderstorm or any other kind of natural disaster? Strong enough 92 59 Not enough 63 40 Does your house have basic necessities such as bed, chair, and electricity? Yes 140 90 No 15 9.6 Do you have enough rooms, or you all live in one room? Enough 43 27 One 112 72 Is your income enough for family members? Enough 44 28 Not enough 111 71 Is your income enough to bear any uncertain expenses (sudden guest, child gets ill, breakage of any property (house) due to thunderstorm, earth quake etc)? Enough 45 29 Not enough 110 71 Are you the only earner of the family? Yes 90 58 No 65 42 What is your total family income? 2000 5 3.2 4000 42 27
    • 6000 28 18 Other 80 51 Is your income enough to bear recreational activities for children? Yes 44 28 No 110 71 Do you want some other sources of income? Yes 132 85 No 23 14.8 Do you encourage savings? Yes 146 94 No 9 5.8 Are you able to save, or it is difficult for you? Able 44 28 Difficult 111 71 Do you have savings for rainy days and any natural disaster? Yes 53 34 No 102 65 How much part of income do you save? 5% 32 20 10% 18 11.6 15% 11 7.0 None 94 60 What is the objective of your savings? To meet any uncertain crisis 62 40 in future For future use, if you have 42 27 nothing left with you For children welfare 32 20
    • Other 26 16 Do you want to invest your savings in any form of business (rickshaw, taxi, shop etc)? Yes 99 63 No 56 36 Have you involved in any kind of training (Auto workshop etc) or education program? Yes 63 40 No 92 59 Do you feel that by training or education you can improve your living standard? Yes 81 52 No 74 47 Do you think training or education is expense or asset? Expense 81 52 Asset 74 47 Have any of your children getting any kind of training or education? Yes 88 56 No 67 43 Do you think training or education is a way to solve your problems? Yes 117 75 No 38 24.5 If opportunity of free
    • education and training is provided to you, will you avail it? Yes 124 80 No 31 20 Do you have enough food every day? Yes 81 52.2 No 74 47.7 Do you feel difficult to manage food expenses? Yes 107 69 No 48 31 What is your daily average expense on food? 100 39 25 150 42 27 200 39 25 Other 35 22.5 Is there any day you live without food? Yes 82 53 No 73 47 Have you ever felt uncertain about whether I will get next time meal or not? Yes 87 56 No 68 43.8 What do you mostly eat? Fresh chapatti 108 70 Meat 95 61 Lintels 68 43.8 Stale chapatti 47 30.3 Rice 99 63.8 Other 13 8.3 How do you see the difference in your life
    • after you started using micro credit? Improve accommodation 90 58 Clean water and hygienic 3 1.9 environment Increase income 29 18.7 Increase savings 14 9.0 Adequate food 8 5.1 Training and education 27 17.4 Other 11 7.0 4.2 Interpretation The results for the various facets of the questionnaire to determine the Role of micro credit in poverty alleviation are outlined in above table. Results indicate that majority [(N=130) (65%)] of the borrowers are male. Most of borrowers [(N=59) (29.5%)] belongs from 31-40age group. Majority [(N=41) (20.5%)] are intermediate. Major part of the population [(N=147) (73.5%)] is single. Those who are married, their large population [(N=67) (33.5%)] has zero children. mostly people are laborers [(N=65) (32.5%)].total sample size was 200 out of which 155 (77.5%) has an experience of taking micro credit. and [(N=97) (62.5%)] has an experience since more than 1 year. [(N=117) (75%)] has taken credit more than 6000. [(N=63) (40.6)] has opened shop, purchased taxi, rickshaw or sewing machine. [(N=101) (65%)] is planning to take more credit after paying the current due. But [(N=84) (54%)] is not satisfied with government policies of granting the loan and [(N=98) (63%)] is not satisfied with the bank policies. Similarly [(N=113) (73%)] is not satisfied with the interest rate they have to pay. [(N= 106) (68%)] faces problem with the weekly/monthly payments. And [(N=84) (54%)] says that the money they borrow from micro finance bank does not covers their all needs. And [(N=111) (71.6%)] says this system is not perfect for poverty reduction it needs improvements. Similarly [(N=98) (63.2%)] says this system is not according to their demand. It has also been found that [(N=182) (117.1%)] micro credit beneficiaries had improvement in their living standard after utilizing the micro credit. Rests of 18 claims that before micro credit they used to sleep hungry but they were relaxed as they did not have to return any credit. But after taking micro credit they have
    • tension of repayment credit, sometimes they have less earning and they have tension that their earning is less then from where they can return credit. And also those people who have purchased any taxi or rickshaw and they are worried about it that what they will do if it is stolen. So; micro credit makes their life full of tension according to them. As the factors that show poverty reduction in this study are training and education, clean water and hygienic environment, nutrition and adequate food, accommodation, income and savings. And we can see from the above table that [(N=90)(58%)] see improvement in accommodation after taking micro credit.[(N=29)(18.7%)] see betterment in income.[(N=27)(17.4%)] gets training and education after taking micro credit.[(N=14)(9%)] see increase in savings after utilizing micro credit. [(N= 11) (7%)] uses this credit to make payments taken from other people, marriages, purchasing land etc. [(N= 8) (5.1%)] says they get adequate food after using micro credit. and only [(N=3) (1.9%)] says they get clean water and hygienic environment after using micro credit. 4.3 Graphical representation of respondent’s demographic characteristics
    • Gender 200 100 0 Male Female Series1 130 70 As highlighted by above figure, the majority of the respondents in the sample are males, with 65 (N=130) of the respondents being male and 35% (N=70) of the respondents being female. Age 60 50 40 30 20 10 0 20 yrs or Above 50 21-30 31-40 41-50 below yrs Series1 19 50 59 54 18 As illustrated by above figure, 59 respondents (29.5%) fall into the age group 31-40 years. 54 respondents (27%) fall into the age group 41-50 years and 50 respondents (25%) fall into the age group 21-30 years. 19 respondents (9.5%) fell into the age 20 years or below. The fewest respondents (18; 9%) fall into the age group above 50 years.
    • Education 60 40 20 0 Mast Bach Inter Matri Unde Illiter Series1 30 35 41 32 31 31 Above Figure 3.6 highlights the educational level of the sample. It can be noted that 30 (15%) are masters. 35 (17.5%) holds bachelor degree. 41 (20.5%) are intermediate, 32 (16%) are matic. 31 (15.5%) are under matric and 31 (15.5%) are illiterate. Marital status 200 100 0 Single married Series1 147 53 Above figure depicts the marital status of respondents. According to figure 147 (73.5%) respondents are single and 53 (26.5%) respondents are married.
    • No. of children 100 50 0 zero one-two three- five or Series1 67 57 55 20 From the above figure it is clear that 67 respondents (33.5%) have no children, 57 respondents (28.5%) have 1-2 children, 55 respondents (27.5%) have 3-4 children and 20 (10%) have 5 or more children. Occupation 100 50 0 Non driv Swe lab peo Sch Oth Series1 12 25 29 65 10 44 15 It is clear from above figure that 12 (6%) have no occupation, they survive on zakat, charity and occasional labor. 25 (12.5%) were driver, 29 (14.5%) were sweeper, 65 (32.5%) were labor, 10 (5%) were peon, 44 (22%) were school teacher and 15 (7.5%) belongs from other professions such as clerk, accountant, computer operator etc. 4.4 Pattern of micro credit utilization (n=200) Training and education program Mean + SD Range Have you involved in any kind of training or 77.5+ 20.5 29 education?
    • Do you feel that by training and education living 77.5+4.94 7 standard can be improved? What do you think training or education is expense or 77.5+4.94 7 asset? Have any of your children is getting any kind of 77.5+14.84 21 training or education? Do you think training or education is a way to solve 77.5+55.86 79 your problems? If opportunity of free education or training is provided 77.5+65.7 93 to you, will you avail it? Clean water and hygienic environment Do you have clean drinking water and hygienic 77.5+36 51 environment? Do most of diseases you people bear are because of 77.5+77 109 unclean water and unhygienic environment? Is clean water and hygienic environment always 77.5+60 85 available to you? Do you have proper sanitation system? 77+31 44 Do you have to face water shortage? 77.5+62.9 89 Is drinking water available to you at home or you had 77.5+37.4 53 to bring it from some other area? Nutrition/adequate Food Do you have enough food every day? 77.5+4.9 7 Do you feel difficult to manage food expenses? 77.5+41 59 What is your daily average expense on food? 38.7+2.87 7 Is there any day you live without food? 77.5+6.3 9 Have you ever felt uncertain about whether I will get 77.5+13.4 19 next time meal or not? What do you mostly eat? 71.6+36.5 95 Accommodation Do you have your own home, or it is rented? 77.5+9.1 13 Is your house enough for family members? 77.5+17.6 25 What type of house it is? 77.5+20.5 29 Is your house strong enough to bear thunderstorm or 77.5+20.5 29 any other kind of natural disaster? Does your house have basic necessities such as bed, 77.5+88 125 chair and electricity? Do you have enough rooms, or you all live in one 77.5+48.7 69 room? Income
    • Is your income enough for family members? 77.5+47.3 67 Is your income enough to bear any uncertain 77.5+45.9 65 expenses? Are you the only earner of the family? 77.5+17.6 25 What is your total family income? 38.7+31.4 75 Is your income enough to bear recreational activities 77+46.6 66 for children? Do you want some other sources of income? 77.5+77 109 Savings Do you encourage savings? 77.5+96.8 137 Are you able to save, or it is difficult for you? 77.5+ 47.3 67 Do you have savings for rainy days? 77.5+ 34.6 49 How much part of income do you save? 38.7+ 37.8 83 What is the objective of your savings? 40.5+ 15.7 36 Do you want to invest your savings in any form of 77.5+ 30.4 43 business? How do you see the difference in your life after micro 26+29.7 87 credit utilization? 4.5 Graphical representation of factors showing poverty reduction Training and education program Have you involved in any kind of the training? 100 80 60 40 20 0 Yes No Series1 63 92
    • From above figure we can see that 63 respondents 40.6% were involved in training and 92 respondents 59.3% were not involved in any kind of training or education program. That training in which 63 respondents were involved was related to Auto workshop, mobile repairing etc. Do you feel that by training or education you can improve your living standard? 85 80 75 70 Yes No Series1 81 74 From the above figure it is clear that 81 respondents (52.2%) think that through training or education they can improve their living standard. And 74 respondents (47.7%) say that training or education cannot improve their living standard. Do you think training or education is an expense or an asset? 85 80 75 70 Expense Asset Series1 81 74 From above figure we can see that 81 respondents (52.2%) think that training or education is an expense and 74 respondents (47.7%) says that training or education is an asset.
    • Have any of your children getting any kind of training or education? 100 50 0 Yes No Series1 88 67 88 respondents (56.7%) are giving training and education to their children and 67 respondents (43.2%) are not giving training and education to their children. Do you think training or education is a way to solve your problems? 150 100 50 0 Yes No Series1 117 38 Above figure depicts that 117 respondents (75%) thinks that training or education is a way to solve your problems. and 38 respondents (24%) don’t think that training or education is a way to solve problems.
    • If opportunity of free education and training is provided to you, will you avail it? 150 100 50 0 Yes No Series1 124 31 We can see from above figure that 124 respondents (80%) say that if opportunity of free education and training is given to them they will avail it. Nutrition and adequate food Do you have enough food every day? 85 80 75 70 Yes No Series1 81 74 It is clear from the above figure that 81 respondents (52.2%) have enough food every day and 74 respondents (47.7%) don’t have enough food every day.
    • What is your average daily expense on food? 42 40 38 36 34 32 30 100 150 200 Other Series1 39 42 39 35 We can see that 39 respondents (25%) have 100 daily average expenses on food, 42 respondents (27%) have 150 daily average expenses on food, 39 respondents (25%) have 200 daily average expenses on food and 35 respondents (22.5%) have other expenses such as 250 etc. Is there any day you live without food? 85 80 75 70 65 Yes No Series1 82 73 82 respondents (53%) live without food some times, and 73 respondents (47%) have not faced such situation of living without food.
    • Do you feel difficult to manage food expenses? 150 100 50 0 Yes No Series1 107 48 Above figure depicts that 107 respondents (69%) feel difficult to manage food expenses and 48 respondents (31%) don’t feel it difficult. Have you ever felt uncertain about whether i will get next time meal or not? 100 50 0 Yes No Series1 87 68 87 respondents (56%) are uncertain about whether they will get next time meal or not and 68 respondents (43.8%) are not uncertain about whether they will get next time meal or not.
    • What do you mostly eat? 150 100 50 0 Fresh Stale Meat Lintels Rice Other chapatti chapatti Series1 108 95 68 47 99 13 Large number of respondents 108 (70%) eat fresh chapatti, 99 respondents (64%) eat rice, 95 respondents (61%) eat meat, 68 respondents (44%) eat lintels, 47 respondents (30%) eat stale chapatti and 13 respondents (8%) eat other things such as vegetables. Clean water and hygienic environment Do you have clean drinking water and hygienic environment? 150 100 50 0 Yes No Series1 52 103 Only 52 respondents (33.5%) have clean drinking water and hygienic environment and 103 respondents (66.4%) don’t have clean drinking water and hygienic environment.
    • Do most of the diseases you people bear are beacuse of unclean water and unhygienic environment? 150 100 50 0 Yes No Series1 132 23 A huge part of the sample 132 respondents (85%) thinks that most of the diseases they people bear are just because of unclean water and unhygienic environment and only 23 respondents (15%) thinks that unclean water and unhygienic environment has no concern with their diseases. Is clean water and hygienic environment always available to you? 150 100 50 0 Yes No Series1 35 120 35 respondents (22.5%) say they have clear water and hygienic environment always available to them but a major part of sample 120 respondents (77.4%) don’t have clean water and hygienic environment always availab to them. le
    • Do you have proper sanitation system? 100 80 60 40 20 0 Yes No Series1 55 99 Above figure depicts that 55 respondents (35%) have proper sanitation system but 99 respondents (64.8%) don’t have proper sanitation system. Do you have to face water shortage? 150 100 50 0 Yes No Series1 122 33 A large part of sample 122 respondents (78.7%) face water shortage and only 33 respondents (21.2%) don’t face it.
    • Is drinking water available to you at home or you had to bring it from some other area? 150 100 50 0 Available at home Not available at home Series1 51 104 Only 51 respondents (33%) have drinking water available at home and 104 respondents (67%) respondents have to bring it from other places. Accommodation Do you have your own house, or it is rented? 85 80 75 70 65 60 Own Rented Series1 71 84 71 respondents (46%) have own house and 84 respondents (54%) are living in rent houses.
    • Is your house enough for family members? 100 80 60 40 20 0 Enough Not enough Series1 65 90 For 65 respondents (42%) their house is enough for their family members and for 90 respondents (58%) their house is not enough for their family members. What type of house it is? 100 80 60 40 20 0 Mud house Stone house Series1 63 92 63 respondents (40.6%) live in mud house and 92 respondents (59.3%) live in stone house.
    • Is your house strong enough to bear thunderstorm or any other natural disaster? 100 50 0 Strong enough Not enough Series1 92 63 92 respondents (59.3%) have strong enough houses to bear natural disasters and 63 respondents (40.6%) don’t have such strong houses. Does your house have basic necessitities? 150 100 50 0 Yes No Series1 140 15 140 respondents (90%) have basic necessities such as electricity, bed, chair and only few respondents 15 (10%) don’t have these facilities.
    • Do you have enough rooms or you all live in one room? 150 100 50 0 Enough One Series1 43 112 Only 43 respondents (27.7%) have enough rooms for their family and 112 respondents (72.2%) live in one room. Income Is your income enough for family members? 150 100 50 0 Enough Not enough Series1 44 111 Only 44 respondents (28%) have enough income for their family and large number of respondents 111 (71.6%) don’t have enough income for their family.
    • Is your income enough to bear any uncertain expenses? 150 100 50 0 Enough Not enough Series1 45 110 Only 45 respondents (29%) have enough income to bear any uncertain expenses such as sudden guest, child gets ill, breakage of any property such as house due to thunderstorm, earthquake etc. and 110 respondents (70.9%) don’t have enough income to bear such type of uncertain expenses. Are you the only earner of the family? 100 80 60 40 20 0 Yes No Series1 90 65 90 respondents (58%) are the only earner of their family and 65 respondents (41.9%) are not the only earner, their children are also working (boys are working in auto workshops, girls are working in houses), women are working in houses, in schools.
    • What is your total family income? 80 60 40 20 0 2000 4000 6000 Other Series1 5 42 28 80 5 respondents (3.2%) have only 2000 income, 42 respondents (27%) have 4000 income, 28 respondents (18%) have 6000 income, and 80 respondents (51.6%) have income more than 6000. Is your income enough to bear recreational activities for children? 150 100 50 0 Yes No Series1 44 110 Only 44 respondents (28.3%) have enough income to bear recreational activities for children and 110 respondents (70.9%) don’t have enough income to bear recreational activities for children.
    • Do you want some other source of income? 150 100 50 0 Yes No Series1 132 23 A large number of people 132 (85%) want other sources of income and only 23 respondents (14.8%) don’t want other sources of income. Savings Do you encourge savings? 150 100 50 0 Yes No Series1 146 9 A large number of people 146 respondents (94%) encourage savings and only 9 respondents (5.8%) don’t encourage it.
    • Are you able to save or it is difficult for you? 150 100 50 0 Able Difficult Series1 44 111 Only 44 respondents (28.3%) feels that they are able to save and 111 respondents (71.6%) feels saving as a difficult task for them. Do you have savings for rainy days and any natural disaster? 150 100 50 0 Yes No Series1 53 102 Only 53 respondents (34%) have savings for rainy days and any natural disaster and 102 respondents (65.8%) don’t have any savings for rainy days.
    • How much part of income do you save? 100 80 60 40 20 0 5% 10% 15% None Series1 32 18 11 94 A large number of respondents 94 (60.6%) have no savings , 32 respondents (20.6%) have only 5% savings, 18 respondents ( 11.6%) have only 10% savings and 11 respondents (7%) have 15% savings. What is the objective of your savings? 80 60 40 20 0 To For For Other meet future children Series1 62 42 32 26 62 respondents (40%) claim that they do savings to meet any uncertain crisis in future. 42 respondents (27%) do savings for future use; if they are left with nothing, 32 respondents ( 20.6%) do savings for children welfare, 26 respondents do savings for other purposes such as Hajj, marriages, etc.
    • Do you want to invest your savings in any form of business? 100 80 60 40 20 0 Yes No Series1 99 56 99 respondents (63.8%) want to invest their savings in any form of business such as rickshaw, taxi; shop etc. and 56 respondents (36%) don’t want to invest their savings in any kind of business. How do you see the difference in your life after utilizing micro credit? S1 Increase Adequate food Increase Training and accommodatio Other environment and hygienic savings Clean water income education Improve n 4.6 Interpretation We can see from above figure that 90 respondents (58%) see improvement in their accommodation, 29 respondents (18.7%) see increase in their income, 27 respondents (17.4%) see improvement in training and education, 14 respondents (9%) see increase in savings, 11 respondents (7%) see improvement in their life in a way that they utilize micro credit to pay their debt, to start business, marriage, treatment of disease, operations. 8 respondents (5.1%) say that they get adequate food after micro credit
    • utilization. and only 3 respondents (1.9%) see that they get clean water and hygienic environment after micro credit utilization. As we can see from above data analysis that after micro credit utilization 63 respondents were engaged in training program which is 40% of the total sample which is less than those 92 respondents which is 59.3% of total sample taking micro credit which are not engaged in training and education program. But it is a good sign that 81 respondents which is 52.2% of total sample using micro credit thinks that through training or education they can improve their living standard but still they consider it as an expense for them not an asset. which is more than 74 respondents which is 47.7% of those people who do not think so that training or education is a way to improve living standard and 74 (47.7%) think it as an asset. also it is a positive sign that 88 respondents which is 56% of total sample taking micro credit is giving their children training or education which is more then 67 people which is 43% of total sample who are not giving their children training or education.124 people(80%) who are ready to get training or education if they get an opportunity to get free training or education. This ratio is more than only 31 people (20%) who are not willing to get it.117 people (75%) consider training or education a way to solve problems on other hand only 38 people (24.5%) don’t think it a way to solve problems. So; from above description it can be concluded that H1: Training and education plays an important role in poverty reducti n. o This hypothesis is proved. Now; 103 respondents (66%) don’t have clean water and hygienic environment. Only 52 respondents have it which is 33.5% of total sample taking micro credit.132 respondents (85%) thinks that most of the diseases they bear are just because of unclean water and unhygienic environment. 120 respondents (77%) don’t have clean water and hygienic environment available to them. 99 respondents (63.8%) don’t have proper sanitation system.122 respondents face water shortage. 104 respondents (67%) don’t have drinking water available at home, they have to bring it from some other place. So; from above discussion it is clear that H1 : Clean water and hygienic environment has an impact on poverty reducti n. o This hypothesis is proved. If we see towards nutrition and adequate food We see that 81 people out of 155 (52.2%) have enough food every day. but 107 respondents (69%) feels difficult to manage food expenses.82 people (52.9%) experiences such days where they live
    • without food.87 people (56%) feel uncertain about whether they will get next time meal or not. Its a good sign that 108 people (69.6%) used to eat fresh chapatti and 99 people (63.8%) eat rice, 95 people (61%) used to eat meat.68 people (43.8%) used to eat lintels, 47 people (30%) eat stale chapatti and 13 people (8.3%) eat vegetables. It is a good sign that majority of the people have a good diet but the problem is that this is not on regular basis as explained above 52.9% people live wi hout food often. t From the above description it can be concluded that H1: Nutrition and adequate food is an important player of poverty reduction. So; H1 is accepted. Now; we see that 84 people ( 54%) live in rented houses, 90 people (58%) claims that their house is not enough for their family members, it is a good sign that 92 respondents (59.3%) live in stone house and their house is strong enough to bear thunderstorms or any other kind of natural disasters and 63 people (40.6%) live in mud house and their house is not strong enough to bear thunderstorms or any other kind of natural disaster.140 people (90%) have basic necessities in their house such as electricity, bed, chair. But unfortunately 112 people (72%) live in one room house. From above discussion it can be concluded that H1: Accommodation has an important concern with poverty reduction. So; H1 is accepted. If we look at income we see that 111 people ( 71.6%) claims that their income is not enough for family members and 110 people (70.9%) claim that their income is not enough to bear any uncertain expenses such as sudden guest, child gets ill, breakage of any property such as house due to thunderstorm, earth quake etc, and also they cannot afford recreational activities for their children.90 people (58%) are the only earner of their family.132 people ( 85%) want some other source of income. So; we can conclude from above discussion that H1: Income plays an important role in poverty reducton. i This hypothesis is proved. Last factor of poverty reduction in my study is Savings. 146 people (94%) encourage savings but 111 people (71.6%) feels difficult to do saving and 102 people (65%) don’t have any savings for rainy days. So; we can say that H1: Savings plays an important role in poverty reduction. So; this hypothesis is accepted.
    • Overall we can say that Training and education, clean water and hygienic environment, Nutrition and adequate food, accommodation, Income and Savings are important factors of poverty reduction. Because when a person has training and education he can improve his living standard, training can be of any type; auto workshop, mobile repairing etc he can earn in better way, if a person has clean drinking water and adequate food he will be safe from various diseases, he will be healthy and can work in a better way, if his accommodation is better and enough for family members and strong enough from natural disasters he can live in better way. and obviously if his earning is good and enough for family, he can also provide recreational activities to his children and can also afford uncertain expenses such as sudden guest etc and can also do savings for future then all these things point towards a good life, life with a good living standard and a life above poverty line. So; all above mentioned factors plays an important role in poverty reduction. 4.7 Comparison of results with other researchers According to Zahid Shahab Ahmed (Pakistan) POVERTY ALLEVIATION THROUGH MICRO CREDIT Value of significance shows (Table: 11) that there is a significant association between respondents’ age and their economic status after utilizing the micro-credit. Also it has been found that micro credit beneficiaries from all the age groups had improvement to their economic status after utilizing the micro-credit. There is also a significant association between respondents’ total number of family members and their economic status after utilizing the micro credit. It has been found that the beneficiaries with smaller family size had significant increase to their economic status after utilizing credit as compared to those having greater family size. This could be due to less economic pressure on the smaller families. There is also a significant association between respondents’ monthly household income and their economic status after utilizing the micro credit. Further, it has been found that respondents’ with greater monthly household income had better economic status after utilizing the credit, as compared to those with lesser monthly household income. Table: 11
    • Associations According to Mohammad Jahangir Alam Chowdhury THE ROLE OF MICRO- CREDIT IN ALLEVIATION OF POVERTY: A STUDY OF THE GRAMEEN BANK IN BANGLADESH shows better results in favour of program households in terms of school attendance of 6 to 13 years old children compared to that of comparison households, but the chi-square value does not reject the null hypothesis on school attendance of 6 to 13 years old children. Therefore, there is no significant difference between the program households and the comparison households in terms of ‘school attendance of 6 to 13 years old children in the household’. The t-test result rejects the null hypothesis on ‘yearly educational expenditure’ i.e. there is a significant difference between the program households and comparison households in terms of ‘yearly educational expenditure’. It means that micro-credit increases entitlement of program households on education through increasing capability to spend more on education of children. The chi-square result rejects the null hypothesis on ‘households reporting sick children’. The rejection of the null hypothesis means that there is a significant difference between the program households and the comparison households in terms of fewer than five sick children. The sickness of an under five child indicates the malnutrition of that child and it also indicates lack of enough capability of the parents of that child to provide required nutritious food to the child. The rejection of the null hypothesis on ‘under 5 sick children’ indicates that program households have higher capabilities to provide required nutritious food to their under 5 children. The t- Associations Economic status after micro credit utilization Chi-square d.f. Significance Gamma Age 12.470 6 0.050 -0.449 Family size 8.157 3 0.043 0.102 Total income 11.990 3 0.007 0.620 after credit utilization test result rejects the null hypothesis on yearly household medical expenditure, i.e. there is a significant difference between the program
    • households and comparison households in terms of yearly household medical expenditure. This result reveals that program households spend significantly higher amount of money on health and medical purposes than that of comparison households. There is a significant difference between the program households and comparison households in terms of the immediate last medical advice taken by the households during the immediate last sickness of a member of the household as the chi-square rejects the null hypothesis. This means that program households have more ability to pay fees of a qualified private practitioner and also have more ability to purchase medicine. Therefore, the rejection of null hypotheses on fewer than five sick children, the average yearly medical expenditure of households and the immediate last medical advice indicates that micro-credit increases entitlement of program households on health through increasing the capabilities of program households to spend more on health. The impacts of micro-credit on shelter have been assessed through comparison of different indicators related to shelter of program households with those of comparison households. For analyzing the shelter status of program households and comparison households, four indicators related to shelter have been used. These four indicators are (a) the average total area of living space, (b) housing condition (roof), (c) housing condition (side-wall) and (d) the average value of dwelling houses. It shows that a program household (00.76% of program households) and a comparison household (00.78% of comparison households) have a permanent roof. 71.32% of program households and 77.10% of comparison households have a roof of tin. 8.53% of program households and 2.29% of comparison households have a roof of partially tin and partially leave. 19.37% of program households have a roof of leaves only. On the other hand, 19.85% of comparison households have a roof of leaves only. It shows the condition of side-walls of dwelling houses. It shows that program households have better status in terms of the condition of side-walls than that of comparison households. While 15.50% of program households have permanent side-walls, the percentage share decrease to 6.11% for comparison households has permanent side-walls. From the perspective of side-walls of tin, 4.65% of program households and 2.29% of comparison households have this type of side-walls, i.e. tin. It also shows that 13.95% of program households and 18.32% of comparison households have side-walls of bamboo fence, 3.88% of program households and 5.34% of comparison households have side-walls of leaves, and 67.94% of program households and 62.02% of comparison households have side-walls of mud. It shows the present market value of dwelling houses of households. The average value of the dwelling houses of program
    • households and comparison households are Taka 36298 and Taka 21950 respectively. The average value of dwelling houses of program households is 65% higher than the value of the comparison households. It shows that t-test result rejects the null hypotheses on the average total area of living space of households and the average value of dwelling houses. The chi square value rejects the null hypothesis on the condition of side-walls of dwelling houses of households. Therefore, the rejection of null hypotheses means that program households have significantly higher average area of living space, higher average value of dwelling houses and better condition of side walls of dwelling houses than that of comparison households. It indicates program households have higher entitlement on shelter compared to comparison households. It shows the weekly food consumption expenditure of households. The average ‘weekly food consumption expenditure’ of program households is Taka 858.58 and the average ‘weekly food consumption expenditure’ of comparison households is Taka 588.85. The average ‘weekly food consumption expenditure’ of program households is 46% percent higher than the average ‘weekly food consumption expenditure’ of comparison households. It shows the availability of food of program households and comparison households. The program households can arrange enough food for the members of the household on an average 11.58 months of a year. On the other hand households can arrange food for the members of the household on an average 9.31 months of a year. These two averages demonstrate that food is more available in program households than comparison households. The co-efficient of variation of ‘availability of food in months’ of program households and comparison households are 0.13 and 0.26 respectively. It shows the distribution of ‘availability of food in months’ of households. The distribution also shows better distribution for program households. While 62.60% of comparison households have food deficit, only 10.86% of program households have food deficit. It shows that the t test value rejects the null hypothesis on ‘weekly food consumption expenditure’ and ‘food availability of households’. According to Adeolu B. Ayanwale and Taiwo Alimi MICRO FINANCING AS A POVERTY ALLEVIATION MEASURE Results of the salient socioeconomic characteristics of the respondents are presented in Table 1 below. Most (48.44 percent) of the respondents fall in the age range 41-50 years, while about 70 percent fall between 31 and 50 years of age. The recipients are relatively young and in their productively active years. The gender distribution is almost equal since a simple random sample
    • produces an almost equal number of male and female. Thus we can assert that FADU loan scheme is gender sensitive. Most of the respondents (39.0 percent) have a family size of between 5 and 8 people, with the average family size of 10 people. The average number of years spent in formal institution is three and a half years. Most of the respondents (34.37 percent) completed their secondary school education, while only (14.06 percent) had no formal education. Furthermore most (32.81 percent) of the respondents have less than 10 years of farming experience. The implications of these socio-economic characteristics are that “the FADU beneficiaries are educated, young and have an average family size of 10. The fact that they are educated means they will be able to keep farm record, since education enables farmers to keep production and farm records and therefore boosts farm output. FADU encourages her beneficiaries to save. Table 2 shows the savings patterns of the respondents. Most (32.81 percent) of the respondents save between N1000 and 2000 per annum, altogether about 60 percent of the respondents saves between N11000 and N30000 per annum. The average amount of savings is N27, 530.00 which was about 68 percent of the mean amount of loan requested, which was N40, 250.00. Table 1: Socio-economic characteristics of respondents Variable Frequency % age Mean Age (years) 5 3.05 21-30 36 21.95 31-40 79 48.17 41-50 41 25 51-60 3 1.83 >60 164 100 Total 46.28 Sex Male 89 54.27 Female 75 45.73 Total 164 Family size 4 Jan 10 6.1 8 May 64 39.02 12 Sept 54 32.93 13-16 26 15.85
    • > 17 10 6.1 Total 100 10 Education level No formal 23 14.02 education Primary school 36 15.85 completed Primary school 8 4.88 not completed Secondary 56 34.15 school completed Secondary 18 10.98 school not completed Territory 23 14.02 Total 164 100 3.52 Source: Analysis of Field Survey Data (2002) Table 2: Resource availability of the respondents Variable Frequency % age Mean Savings None 23 14.02 < 10,000 53 32.32 Nov-00 21-3000 44 26.83 31-4000 8 4.88 41-5000 10 6.1 46.28 >50,000 13 7.93 Total 164 Amount of 27530.0 loan requested < 30,000 75 45.73 31-60,000 75 45.73 > 60,000 14 8.54 Total 164
    • Amount of loan 40245 granted < 10,000 46 28.04 10,000-20,000 16 9.76 21,000-30,000 75 45.73 31,000-40,000 19 11.59 > 40,000 8 4.88 Total 164 38,000 Most (45.90 percent) of the respondents have between N21000 and N30000 granted to them as loan out of the amount requested. Since the beneficiaries are compelled to save to obtain credit line, both the lender and the borrower will benefit for the scheme, being stakeholders they will ensure a success of the venture. The average amount of loan granted N38, 000 is 94.44 percent of the average amount of loan requested. FADU loans are short time loans that are repayable within one production season, where most (65.57 percent) of the loan obtained is repayable between 4 to 6 months. Table 3: Loan repayment time Repayment time Frequency Percentage (Months) 4-6-Apr 108 65.85 7-9 Jul 46 28.05 10-12 Oct 10 6.10 Total 164 100 Table 4 shows the various forms of assistance given by FADU to her loan beneficiaries. These forms of assistance encourage monitoring and enable the NGO to assess the repayment ability of the borrower on time with a view to intervene at critical periods to prevent default. The FADU takes special interest in monitoring the loan utilization and
    • repayment as reported by most (31.10 percent) of the respondents. Training and evaluation of the funded project was also a very important form of assistance as reported by 23.17 percent of the beneficiaries each. The reported forms of assistance may be responsible for the success of the FADU loan scheme. The specific forms of assistance may need to be noted by other bodies involved in micro credit delivery to enhance their effectiveness and possible efficiency. Table 4: FADU’s assistance to farmers after Loan Form of Frequency Percentage Assistance Monitoring and 38 23.17 training Monitoring loan 51 31.10 repayment and utilization Evaluation 38 23.17 process Technical 6 3.66 assistance Distribution of 21 12.80 requested farm needs None 10 6.10 Total 164 100.00 Table 5 shows the breakdown of the socioeconomic characteristics of the respondents by gender. From the table, it could be observed that the women beneficiaries are
    • younger in age 29 years compared with 35 years for men, have more years a formal education 3.72 years compared with 3.34 years for men. The women have less years of farming experience 14.28 years while men had 22.94 years of experience. Furthermore, women have lower number of children (about two) while men had about three children on the average. In terms of access to productive resources, more women purchase land than men, although more men obtain land by lease, rent and gifts than the women. In other words access to land by women is more by outright purchase than any other means; women have restricted access to land as a productive venture, except they want to purchase it outright which is costlier. Women seem to have less family size (about eleven) than men (about twelve), maybe because men are prone to polygamy and as a consequence have more children. Women have more hoes and cutlass (7.92) than men (5.50) on the average, and, men make use of tractors more than women. This may be because women have smaller farm size than men, hence may not need the service of tractors. Women obtained more loans (N36900.00 from FADU, and N25840 from Cooperatives) on the average than men (N32500 from FADU and N25000 form Cooperatives). Although men have more of their loan request granted (61.13 percent) than women’s (57.90 percent), women obtain more loan (N24660) than men (N23310) absolutely. The World Bank had prescribed a threshold income of $1.00 per day as poverty line. Results of the study showed that men reported a mean income of $751.76, while female reported an income of $326.72. These figures are above the World Bank’s minimum threshold income of $1.00 per day. This is encouraging given the reported widespread prevalence of poverty in the country. The amount of savings also reported translated to about $220.24 per annum which is an indication of the success of the FADU’s savings mobilization effort. The amount of income obtained by the FADU beneficiaries also indicated an improvement when compared with the reported national average income level of N3, 770. Obtained in 1997 (CBN 1999). Furthermore, the threshold income of FADU’s potential beneficiaries was put at $260 per annum. If we compare the average annual income obtained by the beneficiaries the mean annual income obtained $721.76 by men and $326.72 by women to the national average income we can safely assert that the welfare of beneficiaries has improved.
    • Table 5: Gender analysis of FADU beneficiaries Male Female Characteristics Mean T ratio Gender 89 75 Age (years) 48.69 43.38 2.905* Educational 3.34 3.72 -0.918 level Farming 22.94 14.28 3.330* Experience (YRS) Rent land 8.315 0.235 Purchase land 15.89 60 -2.792 Lease 19 10 1.069 Gift 1.83 1.72 0.998 Family size 11.75 10.5 0.26 No. of children 2.32 1.71 1.803* Hoes 4.46 5.48 -1.456* Cutlass 5.50 7.92 -1.710* Tractor 1.37 1.17 1.779 Amount spent 2263.64 2065.52 0.671 on food Amount spent 6152 3850 0.677 on children education Amount of loan 25 25.84 3.856* obtained cooperative from N’000 Amount of loan 32.50 36.9 2.005* obtained from FADU Income 93.97 40.84 3.013* obtained from
    • operations Loan requested 38.13 42.59 -0.731 N’000 Loan granted 23.31 24.66 -0.348 N’000 Amount of 1.44 1.74 1.230 contribution N’000 Amount put in 0.59 0.943 -0.935 cooperative N’000 Total Savings 35.88 17.45 2.775* According to Sayeed Al Russel A SOCIAL AND FINANCIAL ASSESSMENT OF MICROFINANCE FOR THE EXTREME POOR- A CASE STUDY FROM BANGLADESH .It can be concluded from the data that micro credit has brought some positive changes in the life of these people, mostly in terms of food consumption and other expenditure. It has given more ‘options’ to the extreme poor people's lives and they are trying to adapt with these options and changes to use them successfully in developing their living condition. I think the most important change has occurred by creating awareness in various sectors of their lives and these changes are related directly or indirectly with micro credit. Almost all the children are attending primary school and people are more serious about their education. Similar development can also be seen in health sector like drinking water from tube well, using sanitary latrine, vaccination of children etc. These changes have occurred not only by creating awareness by the development organizations but also for their various supports and facilities provided in these sectors. However, it can not be said that Micro credit has created similar development in financial condition of all the people. Except the four families who have permanent income during the whole year, others still have not been able to make stable financial base from where they can start for gradual development. There was mention of two families who left the village for being unable to pay the loan. Though Micro credit has smoothed living expense and food consumption it has not been able to create a stable financial security. From this perspective it can be said that micro credit has failed to serve its main purpose for these people. Moreover, many claimed that there situation has deteriorated since they started taking micro credit. They
    • are now suffering from chronic debt and have to remain worried all the time about weekly installment People are using micro credit to pay loan from the traditional money lenders and at the same time they are also taking loan from the local traditional money lenders to pay installment of the micro credit. It was found that about sixty percent of the households are in debt to the local money lenders. This has created a circle among the clients, micro credit NGOs, and the local money lenders. The clients have developed a loan dependent living pattern. Many clients asserted that they do not want to take micro credit unless they fall in problem and they will try not to take any credit after repaying the existing loan. However, it was also found that some households take credit just as soon as they have enough primary savings (which makes them eligible for taking loan) without making any prior plan to use the moneyfor income generation. The distinct nature of the poverty of the extreme poor people is their vulnerable condition and insecurity in life. Villagers said that they used to starve when they did not have any money to buy food, now they are using micro credit to face these situations. From this point their life has become less vulnerable to hunger or disease but they have become trapped in loan. As most of these extremely poor families have no regular permanent income or savings and live from day to day basis it is not easy for them to use micro credit in the desired way. Very often they fall in difficult situations like illness and food shortage when it becomes priority to solve these problems any how. They have to take micro credit or sell the investment of micro credit (rickshaw, cattle etc.) to meet the needs in these situations. All the households have faced such situations from which it was very hard for them to recover. In case if their micro credit investment (like rickshaw or cattle) gets stolen or dies they have to suffer a lot to recover from the loss. “For them the loss of a chicken is like the loss of a cow to a farmer” an NGO worker asserted. Besides the lack of permanent income source there is also lack of skill in using capital successfully. It has to be kept in mind that these people are living as agricultural laborer for a long time and they have long established living pattern. With this they also have a cultural and psychological construction about their life and ambition. The biggest problem of their life is hunger and they are worried more about today than tomorrow. They try to use any kind of opportunity to meet these problems first. Besides, changing from the life of a wage laborer to a self employed entrepreneur requires ambition and skill. Especially the management of the credit has to be learnt and it requires time to do that. While trying to learn it is easy to make mistakes and suffer the consequences for the
    • people who are not oriented with such kind of practices. Thus micro credit, a powerful tool of development, can bring the opposite of the desired result. CHAPTER: 5 CONCLUSION
    • In this section the prominent findings of the research will be discussed, conclusion of this study, some recommendations for making micro credit more effective and useful for poverty alleviation and limitations of the study. 5.1 Conclusion I have tried to assess the role of micro credit in poverty alleviation through the comparison of living standard of borrowers before and after use of micro credit. From data analysis it is concluded that the micro credit program is effective in giving unemployed people employment such as taxi driver, shop keeper etc , and to meet short term needs such as return debt taken from some one else, paying fee, operation, treatment of disease etc. Mostly borrowers of Muslim colony, Dhok Kala Khan, Shakrial and Tehmaspabad have used micro credit to purchase taxi, sewing machine and opening small shop and improving accommodation.
    • But I would say that although micro credit is working well for poverty reduction but still it is not the only way on which we can depend. This method also needs improvement which I have explained in previous chapter. Reasons for improvement in this system are: micro credit is creating people tenser then they were before. Most of the taxi drivers claim that “Before micro credit we slept without meal but we were not tense about returning credit, or about this thing that we have no place to park taxi inside house, we park it outside and we are worried that what will happen if any of its mirror is broken as children used to play outside, what will happen if someone steal it? These questions can’t make us sleep all night” As Dr. Younis said that best customers for micro credit is females I agree with it because females mostly used to sew cloths for their family and earn for them, it also gives them empowerment and they are also good in management so they better manage to earn such amount from which they return credit and also keep some money for their daily use. On other hand some of the males used to spend some of the amount on their drugs, purchase TV which is just a one time investment. Still further research is needed in this area and I think it would be a good research question that whether the poverty alleviation through micro credit in Pakistan is on sustainable basis or is it a temporary phenomenon? 5.2 Recommendations to make micro credit more effective and useful in poverty alleviation Poverty reduction is not only the task of the Government and the whole society, but it is first of all the responsibility of the poor themselves to develop the capacity to escape from poverty. Although it is the responsibility of government to help eliminate social and economic constraints and barriers in order to eliminate hunger and reduce poverty, the outcome will be weak if the poor themselves do not actively strive to improve their living conditions. Poverty reduction must be seen as the mission of poor people and poor communities themselves; because it is their own self help efforts to escape from
    • poverty that is the driving force and necessary condition for attaining the goal of poverty elimination in all countries. The State will support the poor to enable them to learn how to escape from poverty and avoid falling back into poverty when risks befall them. Apart from providing direct material support to the poor, providing them with guidance on how to produce and do business and how to develop their economic activities, given their particular conditions and circumstances, is the very condition for rapid and sustainable achievement of poverty reduction. Although micro credit is a good concept but Micro finance institutes in Pakistan are making people more dependent then independent. People know that when they will need money they can take it from micro credit institutions easily and will return amount back on small interest. People of Pakistan are like that; If you walked down the street and gave every passerby rupees hundred, many would just spend it right away or gamble it rather than managing it and trying to make it grow .I would say that purpose of micro credit institution should be to make people independent not dependent, to make them able to set any source of income for their family. Poverty reduction objectives should be consistent and visionary: the goal should be to not only improve the living standards of the people, but also to create opportunities and a legal foundation for improving the Poor’s intellectual level and sense of law compliance to enable their participation in the economic, political and social life of the nation. State policies and mechanisms should not only focus on fighting against poverty but also on preventing the falling back again into poverty. First of all micro credit institutions should brief clients that what can be the best use of this credit. For example in Muslim Colony, Dhok Kala Khan, Tehmaspabad and Shakrial clients can keep cows and sell its milk, hens and can sell its eggs, open shops, sew cloths and drive taxi, rickshaw. Micro credit system can be improved in such a way (for above mentioned areas and can be implemented in other areas as well) that micro credit institutions can do a contract with companies like BATA and Unilever. Suppose micro credit institution do a contract with BATA. Micro credit institution gives credit to their client he then purchase BATA sandals and sell them in his area. This method will be beneficial for both company and client.
    • With Unilever a contract can be made that a person takes credit from micro credit institutions and purchase sachets of soap, toothpaste and shampoo of Unilever and sell them in his area. For female Clients micro credit institutions can make a contract with boutiques and clients can take credit from micro credit institutions purchase a sewing machine and can sew cloths for boutiques and can earn income for their family. Through this they can earn enough to return credit. Micro credit institutions should hire training managers or they should do partnership with those institutions that will be core staff, equipped with basic knowledge and qualified to brief people and their duty will be to train customers with fewer fees for the purpose they are taking credit. In one specific area for example Dhok Kala Khan mostly trend is to take taxi. So; in this area micro credit institution should hire training managers (expert in driving) or they can do partnership with driving centers who will train them drive. Otherwise credit will be of no use. Let’s say customer is taking money to purchase a taxi but he doesn’t know driving then there is no use of that credit. First he has to learn how to drive by paying heavy fee to driving centre but through micro credit trainers he will learn driving in less than half fee. Other important issue is Monitoring. Micro credit institutions should have a proper monitoring system. Such a system has to be made in which a proper record has to be prepared that for what purpose credit is taken it is used for that purpose or not. If not then why it is not used for that purpose? For which purpose it is used then? If it used for one time investment only such as motor bike, radio, television then restrict them and make a condition that credit will be only given for income generating purpose. This amount cannot be used for any other purpose. For this purpose certificate should be signed that “I will use this amount for this purpose” and at the time when the customer is returning loan he has to show its receipt which will prove that credit is used for the purpose it is taken. Micro credit can also play an important role in poverty alleviation in the form of community. For example there are two houses. They collectively take loan and distribute duties. Let’s say they purchase hen and decides to sell eggs. Now, one house takes responsibility of marketing and other house takes responsibility of selling. And they share profit and collectively return loan.
    • Beggars are also major part of Pakistan’s population which is totally ignored to become an effective part of the society. Micro credit institutions should also recruit beggars as their customers and turn them into a sales force. They can offer small interest free loans of about $12 which beggars can use to purchase “cookies or toys” which can be sold. The loan can be paid back at anytime. In this way micro credit institution can play an important role in poverty alleviation and making people able to earn for their family. 5.3 Limitations of the study One of the limitations of my study is that I was not able to spend more time among the community. It was not possible for a number of reasons. Such as it will not seem ‘normal’ to the community to live among them in order to get to know about their condition, to overcome this problem I tried to make such questionnaire which will be easy for them to read, understand and fill it. That is why I translated questionnaire into Urdu which everyone among them can read and understand. But I think it would have been better if I could spend more time.
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