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

1. 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

2. 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

3. 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

4. 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.

5. 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

6. 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

7. 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

8. 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.

9. 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

10. 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

11. 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.

12. 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

13. 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

14. 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

15. 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.

16. 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.

17. CHAPTER: 2 PRELIMINARY DETAILS

18. 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

19. 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

20. 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).

21. 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

22. 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).

23. 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).

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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.

32. 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

33. 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

34. 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.

35. 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

36. H1: Savings plays an important role in poverty reduction
CHAPTER: 3 RESEARCH DESIGN

37. 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

38. 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.

39. 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,

40. 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

41. 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.

42. 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.

43. 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

44. 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?

45. 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

46. 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

47. 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

48. 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

49. 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

50. 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

51. 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

52. 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

53. 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.

54. 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.

55. 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?

56. 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

57. 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

58. 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.

59. 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.

60. 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.

61. 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.

62. 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.

63. 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.

64. 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

65. 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.

66. 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.

67. 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.