Socio-Economic Assessment of Macro Finance in Alleviating Rural Poverty: A Case Study of Mirpurkhas District in Sindh

Abstract

The one of the key elements in the uplift of socioeconomic conditions of low income and poor people is the provision of financial services to them. Low income and poor people require small financial services to boost their business and improve production and sales. Microfinance has ability to address their constraint of short capital and access to financial services. Microfinance is the provision of small financial services including credit, savings and insurance to low income and poor people and assumed as a major strategy to reduce poverty in Pakistan. Microfinance enhances the business growth of micro and small businessmen and play vital role in generating income and asset of rural households. Government of Pakistan has made lots of efforts to promote microfinance and alleviate poverty in the country. In the last decade the microfinance industry in Pakistan got immense growth and various stakeholders are operating in this sector with the motive of providing financial services to low income and poor people. The micro loans provided by Microfinance Providers in rural areas are believed to play important role in the securing livelihood of rural people and alleviate rural poverty by increasing income and asset of rural household. This study examines, whether the provision of microfinance in rural households has a positive contribution in the socioeconomic uplift of rural people and if so, up to what extent the microfinance is beneficial. In order to analyze the role of microfinance in poverty alleviation and measure the benefits of it to low income and poor people in Sindh province of Pakistan, this study selected Mirpurkhas district as a case study. The study was conducted in selected villages of the Mirpurkhas district on microfinance beneficiaries. There were three major Microfinance Providers (MFPs) were included in the analysis and study sample was drawn from the clients of Khushhalibank Limited (KBL), First Microfinance Bank (FMFB) and National Rural Support Program (NRSP). The analysis includes 350 microfinance beneficiaries of Mirpurkhas. The study also examined the role of microfinance in rural businesses of rural poor in Sindh, by knowing the extent of access of credit over farm and XXII non-farm activities and correlated the provision of microfinance with poverty alleviation and socioeconomic characteristics among the participants in the study area. The findings of the study show that despite of poor infrastructure MFPs have made successful access to remote areas where very limited life facilities available to the population. Microfinance Institutions (MFIs) have maximized their access to poor people through group lending philosophy. There are very favorable lending policies for poor people that attract rural population to microfinance institutions and they are better alternate of the local money lenders who usually charge higher interest rates as compared to the microfinance industry. Microfinance has provided access to credit and other financial services to low income and poor people on a sustainable basis. Microfinance Providers generally offer three types of services to their clients in rural areas. These are small loans, smaller savings, and micro insurance. In rural areas, small farmers, landless tenants and micro entrepreneurs are the target market of microfinance and have got microfinance services from different MFPs. This research study provides empirical evidence of positive significant relationship between microfinance and rural businesses of agriculture, livestock and micro enterprises. The rural poor get their livelihood from the agriculture and related activities. The agriculture and livestock farming are major rural businesses in the rural areas. This study has found a significant relationship with microfinance and socioeconomic conditions of rural poor in the study area. It is found in a study that microfinance has a positive significant relationship with household income and assets. The annual net income of microfinance clients was noted higher. The employment opportunities for rural poor have been increased due to microfinance services in the area and microfinance clients have employed more persons in their business due to microfinance services. Microfinance have provided an opportunity for rural women to get credit and other services from MFIs and make decisions to invest in rural businesses of livestock and home based enterprises. MFPs in study area focus on rural women to provide micro credit and other microfinance services as compared to other commercial banks and XXIII institutions. The women have got confidence and awareness about basic banking concepts of account opening and to deal other smaller transactions. This study provided the empirical evidence of relationship of microfinance with poverty as the significant impact was observed on the income of the poorest participants in a study sample whose income was below the 1.25 dollars per day. This research has analyzed the contribution of microfinance in the socioeconomic uplift of rural households in the remote areas of Mirpurkhas district and revealed the positive role in the increasing income and assets of household. The study has paved the way for future studies from different aspects and enlarged the scope of microfinance research in Pakistan.