Impact of Micro-Credit on Livelihoods of Rural Poor in the Punjab, Pakistan

Rural poverty is a major socio-economic issue of many of the developing countries including Pakistan. Different strategies are being used to combat with rural poverty including disbursement of micro-credit by different state or non-state institutions in the country. In order to find out the impact of micro-credit on livelihoods of rural poor in the Punjab province of Pakistan, the present study was designed. Survey research design using mix method approach to data collection was used. Both probability (simple random) and non-probability sampling procedure was adopted for the selection of study objects. The total sample size of study was 150 (both male and female recipients of micro-credit). Descriptive (Frequency, %, mean, SD) and inferential statistics (multiple regression) was used for the interpretation of data through SPSS. It was concluded from the results that majority of the recipients of micro-credit was belong to young age category (mean age 36 Years) with low educational status. The educational level of rural women is very low compared to men. A large majority (78.0%) of the micro-credit recipients were female having low monthly income (119USD). Disbursement of micro-credit was one of the major strategies to cope with the issues of rural poverty. The average loan size as received by respondents was continuously increasing every year. In the research area illiteracy was on the top among other reasons of poverty with highest mean value (4.49/5.00). Majority of the respondents reported that micro-credit had significant impact in uplifting their livelihoods. It was suggested that micro-credit disbursement to the poor is not a sustainable solution to reduce poverty. The state should start other income generation activities in rural areas.

• Impact
• Micro-Credit
• Livelihoods
• Rural Poverty
• Pakistan

1. Introduction

Poverty is a sate having many dimensions which may be income based or non-income based. Different economists defined income base poverty in different ways. The comprehensive definition of poverty is that is the inability of a person to meet his/her daily requirements for health living [1]. In more simple words it is the state of deficiency in the overall comfort of an individual with minimum monitory resources [2]. Such individuals have no capacity to support themselves as well as their families for healthy living. The other dimension of poverty is non-income based. According to social scientists, non-income poverty is the lack of access to basic human, social, cultural and economic rights by an individual on individual or societal basis. In addition, poor participation by sections of society on equality basis is also termed as non-income based dimension of poverty [3]. All the individuals who are in state of income and non-income poverty are the deprived and marginalized masses of any society. Because both income and non-income nature of poverty has adverse impacts on their livelihoods [4].

Both income and non-income nature of poverty is present in every society and region since the creation of mankind and this universe in different shapes and modalities. Research studies on poverty showed that poverty is a rural phenomenon as about 75.0% of the total world’s poor people are living in rural areas [5]. Economists and social scientists proved that people who used to live in rural localities are more vulnerable to poverty and food insecurity due to the one or other reason [6] [7]. Out of the total poor people of the world, it is reported that about 176 Million chronic¹ poor people are residing in South Asia. Due to the poor performance of economic, social and human development indicators, such countries are referred to as fragile states. The major reason behind this high poverty rate in these countries is that, state departments are failed to deliver basic socio-economic services to all the people at their door-steps [8].

Like other countries of South Asian region, same fate of poverty also exists in Pakistan. According to Ali et al., (2010) poverty in rural areas was found to be double compared to urban areas. Keeping in view the multidimensional nature of poverty in Pakistan, the special focus and concern of economists and other development practitioners is on poverty reduction through sustainable growth in economy. Different state and non-state institutions are widely engaged in implementing poverty reduction strategies since many decades. This is very common perception around the globe that micro-credit serve as a powerful tool in poverty reduction. Specifically, in less developed countries extensive evidences are present to prove the role of micro-credit in poverty reduction [9].

With this perception, a number of social scientists and policy makers are engaging in designing strategies to smooth and efficient delivery of micro-credit to maximum number of poor people in the world. In Pakistan also, a number of state and non-state institutions and commercial banks are involved in delivery of micro-credit to the poor people in rural areas [10]. Many non-state institutions e.g. non-governmental organizations (NGOs), or non-profit organizations (NPOs) are involved in disbursement of micro-credit the poor people [11]. On international level, different researchers reported that micro-credit, if it is readily available for resource poor particularly for rural people on minimum or no interest rate will play significant role in rural poverty reduction [12]-[14] and many others). With this notion, the present study was designed to assess the impacts of micro-credit on livelihoods of rural poor with following research questions:

1. What are the description of socio-economic profile of respondents

2. In your opinion what are major causes of rural poverty and how it can be reduced?

3. What is the average size of micro-credit loan on annual basis?

4. What are the major impacts of micro-credit on the livelihoods of poor people?

Theoretical Framework

References

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