In this paper we evaluated the impact of microcredit on women empowerment and role of microfinance institutions (MFI’s). It has been observed roughly 60% subscriber of micro finance institutions are women in the world. There are three reasons to provide the microcredit to women, strengthen their capacity and agency, reducing poverty and abolishing the gender disparity. Empowering women’s is a process of change by which individual or group gain the power to take control over households. Microcredit leads to increase the access of women’s over resources, self confidence, respect and participation in decision making both policy making and implementation level. This study particularly focuses on Pakistan’s micro finance institutions (MFI’S) and women empowerment. Microcredit has been taken as a basic tool to empower the women’s in third world countries. This can be used to demolish the inequalities and discrimination. Microcredit is a best tool to achieve the Millennium Development Goals (MDG’s) by 2015. It directly affected on Poverty Reduction Strategy Paper (PRSP) of country. Without empowering women’s and offering microcredit one cannot defeat the poverty, hunger, education and health related issues. We have concluded three different studies from urban and rural population in different areas of country. Two of them have same results and one study has had different results specifically empowering the women’s. Two studies confirmed that microcredit has no significance impact on women empowerment especially in urban areas but other study reported some change regarding women empowerment. No doubt, microcredit schemes are facilitating women’s and household to become empowered and eradicate the poverty. On contrary, microcredit also has negative impact on women’s indigenous life.
Key Words. Impact, Microcredit, Empowerment, Women, Pakistan.
Women empowerment growth has been observed an increasingly as this is core aspect of the poverty reduction strategy. The term women empowerment has become most popular in the field of development since 1980 (Batiwala, 1994). Empowerment refers to the control over resources and ideology (Ibid). The process of women empowerment should change the patriarchal relations and though necessarily leads to change the men’s typical control over women (Batiwala, 1994). In current situation rural women’s are suffering more as compared with semi urban or urban women because mostly are not educated. Consequently, if they have knowledge of microcredit and its effects then absolutely they will take benefit from this facility and can also build their children’s empowered. Women empowerment is as necessary as country development is because “Healthy Mothers Build Healthy Nations”.
Microcredit Summit Campaign, 2001 reported, 14.2 million of the world poorest women have access to the financial services through particular Microfinance Institutions (MFI’s), banks, Non Governmental organizations (NGO’s) and other informal financial resources. They are nearly 74% of the 19.3 million of the world’s poorest people and are served through these financial institutions (Susu. C and Lisa. K. 2002). Microcredit can overcome the poverty and hunger and other core goals of Millennium Development Goals (MDG’s) especially in the global south. Sunatar and Ziyodullo, 2008, described the impact of microcredit on all MDG’s. According to their study, certainly the microcredit covers the MDG’s and also helpful to achieve the goals in the urban as well as in the remote areas.
Microcredit has been defined as commercial and developmental tools, which actually serve the microcredit entrepreneurs and its credit range is from $50 – $5000 (Anna. O, 2002). Microcredit is playing a pivotal role in the roots of Pakistan’s developmental rural projects. Since 1947, Pakistan came to exist and inherited the vulnerable poverty. Women also took this burden equally because they are almost 50% of total population (FBS-2009). The actors of this segment presumed that with the microcredit facilitation, poverty can be downsized up to 33% in the whole country (Haroon. J, 2008). Microcredit has been considered as the latest solution for poverty elevation. Microcredit has become an important factor in creating the self reliant, creative activities and engaging the women in economically and productive activities (Haroon, J. 2008).
Currently, there are 3000 estimated financial institutions are operating in the developing countries. These institutions have helped many countries to reduce poverty and put them on the way of success. And this is only happened through the small credit facility to the poor’s of the country particularly women. Many institutions from them are providing the credit without collateral and at very tiny interest rate and very easy terms and conditions (Asif.J. M.Luqman, Ahmed.S. Ahmed. A, 2006). Numerous Micro Finance Institutions (MFI’s) are working in Pakistan and are being operated by the public as well as private sector. Several rural support programmes are running under the Government of Pakistan (GoP). All MFI’s felt empowering women through microcredit resulting real good change to boost the economy and livelihood household.
I will explain the concerned detail about the microcredit institutions and its impact on women empowerment in next chapters along with the name of financial institutions and their field of expertise and targeted people. We can see the impact at the general people in the geographically specified located areas where these institutions are executing their activities. I will also analyze the research study of different authors in the field of above mentioned topic with impact assessment analysis of microcredit. MDG’s are strongly interlinked with the microcredit and its impact is fruitful on overall goals of Millennium Development. Moreover, this study will assess the linkage between Poverty Reduction Strategy Papers (PRSP) and MDG’s.
Micro Finance Institutions (MFI’s) in Pakistan
Many developing countries executed their activities in microcredit sector after seeing the result of initiative by the Nobel Prize winner Muhammad Younas’s Grameen Bank of Bangladesh. The growth in the field of Microcredit and its positive effects on livelihood of household reveal the success of its operations. Microfinance industry has been encouraged in Pakistan after the promulgation of Microfinance Ordinance, 2001. As a result of this ordinance the First Microfinance Bank has been established in Pakistan. Before this ordinance some NGO’s and government sponsored rural support programmes were operating their activities. There is numerous microfinance institutions are working in Pakistan from public as well as private sectors. Both are serving in the field of microcredit and focusing the rural and remote areas. The list of these institutions is mentioned as under.
2.1 Public Micro Finance Institutions (MFI’s)
Pakistan Poverty Alleviation Fund (PPAF)
National Rural Support Programme (NRSP)
Punjab Rural Support Programme (PRSP)
Sindh Rural Support Programme (SRSP)
Balochistan Rural Support Programme (BRSP)
Thar Rural Support Programme (TRSP)
Orangi Pilot Project, Karachi (OPP)
Khushhali Bank (KB)
First Microfinance Bank (FMB)
First Women Development Bank (FWDB)
Benazir Income Support Programme (BISP)
Zari Tariaqati Bank Limited (former Agriculture Development Bank) (ZTBL)
Small and Medium Enterprises Bank (SMEB)
Small and Medium Enterprises Development Authority (SMEDA)
Other Public Financial Banks
The above mentioned programmes and banks are running under the government and particularly focusing on the development of rural areas and mitigating poverty. Many of them are working for women empowerment through microcredit schemes on easy loans on the basis of social collateral. Group financing is the best approach to offer loan to poor and encouraging women especially in the remote rural areas. It has been accepted in the modern world that empowering women through microcredit, microfinance and enterprises development is much effective to overcome the poverty and enhance the women’s life standard (Malik and Luqman, 2005). It has also been reported that microcredit plays a vital role to reduce the vulnerability of the poor, through asset creation, income and consumption smoothing, provision of emergency assistance and empowering and emboldening women by giving them control over assets and increased self-esteem and knowledge (Zaman, 2001, citied in 2005). Women’s are observed more dedicated to their family and can handle the whole family within minimum resources. They are running many cottage industries through microcredit and it has a fruitful effect on the whole family because this income is considered as an additional cash income. It has a quite different effect on the welfare of the children and women, depending in whether the recipient of that income is male of female (Ellis, 2000). If women’s are running any small business by their own then they are not accountable to their husbands. Hence, they use to save that income and spent it on the welfare of family members particularly children’s when it requires for health, education, food and clothing.
Some of above mentioned public financial institutions have collaboration with NGO’s and other organizations in private sector. They are carrying out their activities through these organizations i.e. Khushhali Bank is not particular gender specialised programme in rural areas but they are working with third party organization, Family Planning Association of Pakistan (FPAP) (Salman, A. 2008). Khushhali bank is specifically focusing on Millennium Development Goals (MDG’s) and we will further look the situation in coming chapter.
2.2 Private Micro Finance Institutions (MFI’s)
Agha Khan Rural Support Programme (AKRSP)
Community Support Concern (CSC)
Centre for Women Cooperative Development (CWCD)
Private Financial Banks
Private financial institutions have a pivotal role to enhance the livelihood of rural households as well as urban slums. The services by private sector have started been since 1980 by the Agha Khan Rural Support Programme (ARKSP). Initially, AKRSP’s focus was in Northern areas and Chitral but after some time they started their activities at urban slums of Karachi. Rural Support Programme (RSP’s) has started their operations after inspiring by the AKRSP success. The basic purpose of these organizations was to provide the subsidized credit to poor people and carrying efforts to achieve their poverty reduction strategy (Shahnaz, A.R and Tahir, Mehmood, 2009). Mostly financial institutions are executing their activities in Punjab province. Many of them have focus on the women empowerment and enhancing their livelihood through soft microcredit schemes particularly in the rural areas. But some of them are working with urban slums as well and those organizations have very good results in terms of enhancement in life standard. Some organizations are offering credit only small farmers to enhance the agriculture production and their livelihood as well. But after reviewing the literature, it has been observed couple of NGO’s are specifically working on women empowerment through microcredit to enhance their cottage industry or small enterprises.
Although the efforts are being performed in this sector specially women empowerment and increasing the livelihood is not enough. But with these small efforts, we can overcome the household issues and problems regarding their livelihood. KASHF foundation is the leading NGO in the microcredit concerning women empowerment in private sector (Salman, A. 2008). KASHF major projects are running in the Punjab province. The main purpose of microcredit for women is to utilize the human capital and increase their income up to certain level. Consequently their social moral, economic situation of household will be increased. The general hypothesis is that women are more likely than men to spend cash resources under their jurisdiction on basic household needs (Kabeer, 1998). This shows women are performing triple role in the society i) Re-productive role, ii) Productive Role, iii) and community role but are too efficient in business and day to day expenses. These NGO’s are offering microcredit in the field of agriculture, livestock and cottage industry. The example of Gambia in 1980 depicts the women income was enhanced by promoting irrigation, high yielding varieties of rice traditionally regarded in that country as a crop under female control (Ellis, 2000). Keeping this view in mind many NGO’s has start serving the women through microcredit to increase their livelihood KASHF foundation is one of them. KASHF is now considered as one of the leading NGO’s offering microfinance in the rural as well as urban areas of Pakistan.
Relationship between Micro Finance Institutions (MFI’s) and Millennium Development Goals (MDG’s)
Microfinance is contributing directly or indirectly to the Millennium Development Goals (MDGS’s). The United Nations (UN) and other member states have committed to attain the all MDG’s along with to eradicate the extreme poverty by 2015 (Setboonsarng and Parpiev, 2008). Microcredit has significant role to achieve all MDG’s, it can also be observed through the small cash credit and its impact on the household.
The aim of this study is to assess the impact of microcredit from both sector i.e. public and private on poverty eradication, health, education and women empowerment. The writer will discuss all MDG’s individually in relation to micro finance.
3.1 Eradicate Poverty and Hunger (MDG 1)
Microfinance facility contributing directly to mitigating the poverty by improving the income of poor people. The microcredit client’s of Bank Rakyat Indonesia (BRI) income has been increased by 112 % (Panjaitan, D. et al. 1999 cited in 2008). Furthermore, this income was enough to bear their expenditures. According to World Bank in 1998, the 48% families who have access to the microcredit from Grameen Bank rose above the poverty line (Setboonsarng and Parpiev, 2008). Those families who borrowed loan from MFI’s have significant change in the nutrition and calories per day (Salman, A. 2008).
3.2 Universal Primary Education (MDG 2)
Many studies resulted that MFI client’s children are more intelligent and regular in school attendance than non borrowers. Viet Nam microfinance programme reported, 97 % of borrowers’ daughters attended school with 73% of non borrowers’ daughters (UNICEF, 1996 cited in 2008). This shows that microcredit client’s children are more intelligent and regular in their studies and it is fulfilling the MDG’s requirement.
3.3 Gender Equality and Women Empowerment (MDG 3)
Many microfinance programmes are particularly focusing on women empowerment over often financial responsibilities and providing them direct control over other resources. According to Hashemi et al, 1996, reported that the power of clients of microcredit programme has been increased through membership, suggestions and influence. Furthermore, involvement in a credit schemes had potential to empower the rural women (Malik and Luqman, 2005). The MFI’s client’s has arranged a rally for democracy in Russian during Russian election. The client’s of MFI’s in India organized many time rallies for increase in wage rates, female worker rights and some legal changes (Littlefield et al, 2003 cited in 2005).
3.4 Children’s Health, Maternal Health and Diseases (MDG 4, 5, 6)
Microfinance Institutions client’s are claiming that they have better nutrition, luxury living condition and have better access to preventive health care as compared with non-borrowers of microcredit. NRSP reported that in Pakistan, more than 72% of clients are satisfied with the services which are really helpful for the health related issues (Haroon, J. 2008). Furthermore, Panjaitan, D. et al. 1999 reported that the 93 % of Indonesian MFI client’s ate three meals in a day and they are secure from the diseases. Many Microfinance Institutions are providing the basic health care information to their clients and arranging the seminar regarding this issue (Setboonsarng and Parpiev, 2008). It has also been observed that many MFI clients have got the health insurance from the insurance companies (Ibid). The awareness of family planning activities among the clients of MFI’s has been increased than non clients (Schuler et al, 1994 cited in 2008).
3.4 Environmental Sustainability (MDG 7)
There is evidence that increase in income leads to improvements of house, water and sanitations issues, this leads to better health. Many MFI programmes are providing loans specifically for tube-well and toilets (Setboonsarng and Parpiev, 2008). Many Micro Financial Institutions are providing loan for infrastructure i.e. drainage, toilets and paved roads. It is necessary to mentioned here, one Thai MFI realize the effect of artificial fertilizer for agriculture production, that is why they are providing loan for organic agriculture production and environment sustainability (Ibid). This endeavour to finance activities regarding the organic production has encouraging effect on environment.
3.5 Develop a Global Partnership for Development (MDG 8)
Since, the MFI’s providing services to the poor to develop their microenterprises and this is also referring to the MDG goal. Microcredit is helping the poor to produce the commodities and sell them into the markets. These products could be sold in the export market and microfinance enhances global partnership for development (Setboonsarng and Parpiev, 2008).
Poverty Reduction Strategy Papers (PRSP) in relation with MDG’s.
The Structural Adjustment Programme is initiated by World Bank (WB) and International Monetary Fund (IMF) for developing countries to boost their economies and more productive.
The World Bank and its sister organization, the International Monetary Fund (IMF) created at Bretton Woods New Hampshire in 1944. Now both are called Bretton Wood Institutions (BWIs). Poverty Reduction Strategy Paper (PRSP) came to exist due to the failure of Structural Adjustment Programmes¹ (SAP). PRSP has been launched by the Bretton Wood Institutions² (BWI’s) in 1999 for the alleviation of the poverty until 2015. This paper is very comprehensive, enthusiastic for the debt scheduling and increase the international development aid. In 1999 the World Bank realizes that fight against poverty is the main and central concern. The formulation of Poverty Reduction Strategy Paper is based on the
rescheduling the debt for the Highly Indebted Poor Countries (HIPC). After the approval of this paper by the board of World Bank and International Monetary Fund (IMF), it opens the doors for the debt rescheduling and for the new agreements with the countries from Asia, Africa, Latin America and East and Central Asia.
4.1 Core Principles of the PRSP Approach
The Principles at the root of the Poverty Reduction Strategy Paper (PRSP) are follows:
Country Driven The Poverty Reduction Strategy Paper must be formulated by the host country with the collaboration of the Civil Societies Organizations (CSOs) as well as private sector.
Result Oriented: The Poverty Reduction Strategy Paper should focus on the results of the policy implementation not to making policies.
Comprehensive: During the preparation of the PRSP the country has to see the all roles of the poverty because it has multi roles and not only sees the economic growth.
Partnership Oriented: The country should be considering the external factors, especially reciprocal with the multinational donors, direct linked with the government and Parliament, local and foreign Civil Societies Organizations (CSO).
Long-Term: It must be sought that the poverty cannot be eradicated with the short term planning; there must be a long term and comprehensive strategy.
In my opinion there are six core principles of the PRSP approach and we cannot alleviate poverty by 50 % without relating them to the Millennium Development Goals. Without PRSP the chances of meeting the targets of the MDGs by 2015 will be too short. At the event of United Nation Millennium Summit, September, 2000, the world leaders agreed for these above mentioned eight Millennium Development Goals to achieve the target by 2015 (Kenneth, Hermele, 2005).
Ministry of Finance, Pakistan formulated the PRSP with the collaboration of all line ministries, provincial and local government. They also arranged discussion with all stakeholders, Parliamentarians, Civil Societies, non-governmental organizations and other bilateral and multilateral donors (PRSP, Pakistan, 2003). The framework for poverty alleviation based on four main objects (i) accelerating economic growth while maintaining the macroeconomic stability (ii) improving governance (iii) investing in human capital and (iv) targeting the poor and vulnerable (Ibid). We can assess the validity of the PRSP, impact of policy and evaluation of poverty reduction strategies by seeing the strategies of Public and Private sector to eradicate the poverty and role of Micro Finance Institutions (MFI’s).
Measuring Women Empowerment through Empirical studies.
The UNDP Human Development Report of 1995 introduced two additional guides: Gender related Development Index (GDI) and Gender Empowerment Measure (GEM). The first index GDI measures the imbalance between men and women in terms of access to the basic needs. GEM scrutinizes the women power over political and economic posts (Ranjula, 2007). The UNDP index evaluates the women empowerment through acquiring the seats in parliamentary assemblies, high qualified administrative posts, quota in supervisory posts and high technical posts. UNDP found a strong relation between its gender empowerment measure and gender related indices and it’s Human Development Index as well (Ibid).
5.1 Empirical Study of National Rural Support Programme (NRSP) and its results.
A research study had held in Rawla Kot district of Azad Jammu and Kashmir by the National Rural Support Programme (NRSP). NRSP is a Micro Finance Institution (MFI) which is running under the Government of Pakistan (GoP). NRSP started his activities after inspiring by the Agha Khan Rural Support Programme (AKRSP). NRSP launched his micro-credit schemes for females in 1991 (Jaffri, 1999 cited in 2006). NRSP is using microcredit as core objective for poverty alleviation and generation of income at small scale for the development of rural poor. NRSP offers microcredit specifically for rural women to improve their social and economic condition in the community.
The study evaluates the social-economic conditions of the households in rural areas after receiving microcredit from NRSP. The credit was distributed through Community Organizations (CO’s). The Community Organizations working under the supervision of NRSP have given the credit to the 100 respondents (women) which were selected by the CO’s randomly (Asif.J. M.Luqman, Ahmed.S. Ahmed. A, 2006). The CO’s workers collected the data and analyzed by using the statistical technique SPSS (Statistical Package for Social Sciences) to depict the results and conclusions. However result came in respect of microcredit on the basis of empirical research data.
The result of this study shows that 48% respondents had have information about microcredit and NRSP from their friends while 32% taken information from the staff of CO’s. Similarly, 12% get to know from the seminar and 8% taken this information from their relatives. The result describes that friends are playing the most efficient role in information dissemination. On the contrary, the question had been asked from the respondents, what is the impact of microcredit on your social life and livelihood. As a result, respondents replied, about 72 % agreed “to some extent” the microcredit fulfilled their purpose. About 78% women respondents replied their income has been increased up “to some extent”. The result of this empirical study shows microcredit is economically served as a better tool for empowerment (Asif.J. M.Luqman, Ahmed.S. Ahmed. A, 2006). According to the empirical result, subsequently the women borrowers are satisfied with the microcredit schemes of NRSP and some are willing to borrow the credit in future. Some of them agreed that microcredit for small business has positive impact on their agency. They have little power over decisions particularly within the house i.e. schooling of children, clothing and health related issues. Majority of the borrowers receive the credit for agriculture related business i.e. livestock, poultry, fishery and small business cottage industry i.e. embroidery.
5.2 Empirical Study of KASHF Foundation and its results.
The second study had been carried out by the NGO named KASHF Foundation, Lahore. KASHF is a non-profit NGO, MFI which started its operations in Lahore district of Punjab in 1996. KASHF mission statement is to “provide quality and cost effective microfinance services to low income households, especially women in order to enhance their economic role and decision making capacity”. KASHF is providing four types of loan to its clients; 1) general loan 2) emergency loan which is allowed if credit committee take responsibility for repayment 3) loan for repair and maintenance of home but it has been offered for honest and consistent clients 4) the last is business loan. In fact, general loan is the most famous loan which is allowed for one year at flat interest rate of 20 % (Salman, A. 2008).
KASHF Foundation is following the Grameen Bank group lending scheme. The branch officer of KASHF has to find women in any area where they want to execute their operations. This is prerequisites for establishing a ‘centre’. A ‘centre’ is defined a group of 25 women of that area and then they divided them into sub groups having 5 women each group. The basic purpose of this group is collective responsibility for repayment of loan. Furthermore, each group has a leader and one secretary. These two additional posts made the group of seven women and these two women are responsible for whole process (credit rules) and repayment schedule. Moreover, according to Loan officers (LO’s) the basic requirement for loan is National Identity Card without collateral except social collateral. Many other women could be inspired by neighbourhood groups. The credit committee looks for women who have some other sources of income and family income whether it is sound and their reputation in neighbourhood as well.
This study was carried out in North-eastern region of Lahore district and collected primary data from 275 households. The targeted population based on the women residents or urban slums of Aziz Bhatti Town and Shalamar Town, particularly who are registered with KASHF Foundation. The basic criterion for the group clients is who have completed at least one cycle of credit with this MFI. The researcher mentioned that Lahore district is most saturated area for microcredit after assessing the activities of MFI’s.
The next step was to design informative questionnaires which cover all aspects of women empowerment and microcredit impact. This empirical research study questionnaire was developed under the guidelines of Living Standards and Measurement Surveys (LSMS) by Grosh and Glewwe, 2002. The questionnaire was developed by the researcher and then translated into Urdu with the help of language professional.
Fig. 5.2.1. Perceived Benefits of Microcredit
Source: Evaluating the Impact of Microcredit on Women’s Empowerment in Pakistan, 2008.
Fig, 5.2.1 depict in response to the question “what they gain from the participating programme”. 39 % of programme participants replied that they had become more economically independent and empowered. This success also enhance their decision making power. This independence is related to the economic empowerment and domestic empowerment as well over households. In this regard, the researcher designed five questions to evaluate the impact of microcredit on empowerment which are mentioned as under:
5.2.2 Hypothesis to evaluate the women empowerment
Child Related Decisions
Health Related Decisions
Social Mobility Decisions
Resource Allocation Decisions
The empirical results shows that microcredit involvement in the urban slums of Lahore district of Punjab, Pakistan has no significance impact on women empowerment within household specifically on broad range of decisions over child health and health related issues as well as economic and social mobility issues. The author asserted about his research study that this is first econometric impact assessment of microcredit on women’s empowerment in Pakistan (Salman, A. 2008). The results demonstrated microcredit has no significance impact on women empowerment in urban slums of Lahore district. But it has some positive impact specifically in small household issues. These decisions related to purchase of home appliances, house repair/ sale of purchase. In fact, these decisions are falls under the power of male only especially in male dominant society. It has also been observed through empirical data, those women’s who are dealing with microcredit and running their own small businesses have better agency over their husbands. And those women’s have well reputation in the society.
Furthermore, the author discussed about implications for policy makers and future researchers. He did not found the significant results of microcredit impact on women’s in different aspects of intra-household decisions. However, slightly difference has been observed in the context of urban client’s status. He also shared very important information about the microcredit client’s about 50% of Punjab province of Pakistan are living in suburbs of Lahore district. In this regard, the donor agencies and policy makers have to offer the subsidized microcredit and should focus on less empowered women’s of less urbanized area. Then they can get the desirable results with more focusing rural women’s empowerment.
Another study had been carried out to explore the impact of microfinance in Pakistan in relation with assessment of Income and Expenditure of Household, Child education and Women Empowerment. This study will analyze the impact with a relatively sample size of about 3400 respondents (borrowers and non-borrowers) from six large microfinance institutions of Pakistan (Haroon. Jamal, 2008). The best option for this impact assessment study is to collect the baseline studies and panel data is recommended to assess the intervention of microcredit and its impact.
The author selected the MFI’s on the basis of selection criterion. They have at least three year experience to serve in the microcredit field and also have three year strong plan. They must have 2000 active borrowers and also have annual audit report from accredited audit firms. The list of these MFI is mentioned as under:
Orangi Charitable Trust (OCT), activates in the urban sindh and focusing on poverty as well as economic development and individual lending programmes.
Sindh Agriculture and Forestry Coordination Organization (SAFCO), focusing on poverty alleviation, rural development and income earning activates
KASHF Foundation, Punjab, Lahore, focusing on urban, peri-urban population, particularly women empowerment, poverty alleviation and economic security.
National Rural Support Programme (NRSP), largest rural support programmes in all provinces of country, operations in different economic development but e