Javed Ghulam Hussain, Samia Mahmood

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Transcript of Javed Ghulam Hussain, Samia Mahmood

2012 Cambridge Business & Economics Conference ISBN : 9780974211428

Impact of Microfinance Loan on Poverty Reduction amongst Female Entrepreneurship in Pakistan

Javed Ghulam Hussain

Birmingham City University, City North Campus Franchise Street, Perry Barr, Birmingham, B42 2SU, UK Email: [email protected]

Samia Mahmood

Birmingham City University, City North Campus Franchise Street, Perry Barr, Birmingham, B42 2SU, UK Email: [email protected] Email: [email protected]

Track: Economics and Finance Cambridge Business and Economics Conference

June 27-28, 2012 Cambridge, UK


2012 Cambridge Business & Economics Conference ISBN : 9780974211428

Impact of Microfinance Loan on Poverty Reduction amongst Female Entrepreneurship in Pakistan

ABSTRACT: The purpose of this paper is to examine the impact of microfinance loan on poverty reduction for female entrepreneurs as perceived by fund providers and experienced by aspiring female entrepreneurs in a developing country context. This study is based on an empirical investigation of 123 semi structured questionnaires and case study of 10 female entrepreneurs who secured funds for their enterprises. The study is exploratory and broadly focused. Emergent empirical results explores the impact of access to microfinance on poverty reduction of women by establishing microenterprise and using case study approach to assess the attributes of female entrepreneurs client and examines what may constitute success or failure in enterprise and household context. The research findings suggest entrepreneurial attributes and characteristics are critical for the success for an enterprise in general and the improvement in household of women in particular. The study contributes to the body of literature by attempting to understand and analyse the nature of micro clients success indicators, outcomes such as ability of individual to break out of poverty, improvement in family health, educational engagement of children and enhanced skills such as product knowledge, peer mentoring and business networks which contribute towards the success.

INTRODUCTIONJune 27-28, 2012 Cambridge, UK


2012 Cambridge Business & Economics Conference ISBN : 9780974211428

The analysis of statistics by Minnitie et al., (2005) suggests womens economic activity is central in promoting and enhancing growth prospects of world economies. Given such recognition it is important for all, but more specifically emerging economies to offer conducive economic and financial environment for females to engage in self employment. It is recognised that poverty is a complex inter linked and complicated phenomenon that cannot be considered or measured in terms of monetary value. According to United Nation Development Program UNDP Annual Report (2008) lack of access to essential resources goes beyond financial hardship to affect peoples health, education, security and opportunities for political participation. Poverty is traditionally viewed as lack of income, assets and the resources but recent studies recognise that it includes issues related to dignity and autonomy (Cagatay, 1998). Weiss, et al., (2003) distinguish the various groups of poor in order to understand degree and range of measure of poverty. Weiss divide poor into two groups, one that are long term or chronic poor and other that are transitory poor, those who temporarily fall into poverty as a result of the adverse shock. The Chronic poor are further divided into groups of destitute those who are either so physically or socially disadvantaged that without welfare support they will always remain in poverty and non destitute the larger group who are poor because of their lack of assets or opportunities. The non destitute group may be distinguished by depth of poverty with those significantly below the poverty line termed core poor and transitory poor in order to develop strategic policies directed at specific cause (Weiss, et al., 2003). Female poverty is an extremely important issue in the study of poverty alleviation due to size of the population and the critical role they hold to up skill and empower future generations. Poverty is viewed as a process in which instead of focusing on what poor lack, the focus is on what assets they own and resources they can access. Assessing poverty is a challenge and often qualitativeJune 27-28, 2012 Cambridge, UK


2012 Cambridge Business & Economics Conference ISBN : 9780974211428

approaches are used to identify participants own criteria to develop strategies for poverty solutions (Cagatay, 1998). This approach to poverty (Cagatay, 1998) has far reaching implications for analyzing the general nature of poverty as well as the relationship between gender inequalities and overall poverty levels. Attempt to frame poverty and its systems continue to evolve but the most accepted approach is one that is offered by UNDP that helps to see the cause of poverty not only its symptoms. The UNDP measurement of human poverty focuses on capabilities such as clean water, health services and level of literacy. Such an approach attempts to reconcile capability approach with the absolute and relative poverty. The concept of human poverty is helpful in clarifying the relationship between gender inequality and poverty, as it focuses on gender differences in deprivation of education, health, life expectancy and socially constructed constraints on the choices of various groups such as women or lower castes (Cagatay, 1998). Poor people face trade-offs between different dimensions of poverty, however women encounter many more because of gender inequalities in distribution of income, access to credit, control over property or earned income and gender biases in labour market and social exclusion in variety of economic and political institutions (Cagatay, 1998); these factors are more prevalent in emerging economies and to a lesser extent in developed economies. Lucy et.al., (2008), in her study in Bangladesh reported that all citizens of the country suffer from poverty but women and children bear most of the poverty burden as women continue to face discrimination in the area of health, nutrition, access to education, employment and political participation. Women at large and more specifically in emerging economies are not only at greater risk of chronic poverty but also vulnerable to transient poverty due to familial, personal or social or economic crises, macroeconomic policies, political and ethnic conflicts or health related crises. Women are also time poor (time committed to raising family) and much of their work is economically unrecognisedJune 27-28, 2012 Cambridge, UK


2012 Cambridge Business & Economics Conference ISBN : 9780974211428

since it is unpaid, yet such an activity is essential for the future well being and enhancement of social care and familys empowerment. Nevertheless, female are robust and adopt different strategies to deal with adversities but there is a need for formulating macroeconomic policies to eradicate poverty amongst women; it is extremely important issue to be left to market forces. To gain an insight into the link between poverty and economic growth, Morrison et al., (2007) develops a framework to examine the link between poverty reduction and economic growth. According to Morrison, a given level of male earnings leads to improvements in womens productivity and earnings and children wellbeing which results in poverty reduction and economic growth both simultaneously and in future growth. On the other hand increase in female earnings stimulates short term growth and reduces current poverty and stimulates long term growth and reduces future poverty through higher consumption expenditures and higher savings respectively, an exit map observed with families exiting poverty threshold. Moreover increased female earnings lead to higher bargaining power of women in the household that directly promotes child well being and educational access to education. Economically active women have positive correlation with the economic development. It is reported that a value chain program that target poor women of Pakistan benefits more than 50 percent of all participants from elevated status in the household due to their greater economic contribution. Women engagement in enterprise also leads to broader empowerment on a number of levels; participation in community groups, changing family relationships, and engagement with the larger society (Jones, et al., 2006). To capitalise and harness women efforts, the development programs explicitly inculcate women participation to achieve the goal of economic success. More specifically access to credit is essential (Cagatay, 1998), to enable women to gain a foothold on economic ladder to help them to uplift their families well being.June 27-28, 2012 Cambridge, UK


2012 Cambridge Business & Economics Conference ISBN : 9780974211428

CONCEPTUAL AND CONTEXTUAL ISSUES The poverty is a major challenge faced by most of the developing world and in some cases in pockets of developed countries too, this calls for strategies and development programs which may alleviate poverty and promote self-reliance. To achieve this objective microfinance has potential to make significant contribution towards reduction of poverty (Mawa, 2008). This optimism about microfinance is reflected in various empirical studies. Morris and Barnes, (2005) studied three microfinance programs in Uganda and he found reduction in financial vulnerability through diversification of income source and accumulation of assets. Positive impact of the microfinance program in Uganda includes addition of new products and services, improved or expanded enterprise activities and markets, reduced cost of inventory purchases and