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: javed.hussain@bcu.ac.uk
Samia Mahmood
Birmingham City University, City North Campus Franchise Street, Perry Barr, Birmingham, B42 2SU, UK Email: samiamahmood1@yahoo.com Email: samia.mahmood@mail.bcu.ac.uk
Track: Economics and Finance Cambridge Business and Economics Conference
June 27-28, 2012 Cambridge, UK
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.
INTRODUCTION
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 qualitative
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 unrecognised
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.
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 increase in sales volume. Many scholars refer to Bangladesh as an example to illustrate the positive results linked with improved access to finance through microfinance, however, it is noted that the presence of microfinance in Bangladesh remain limited to a few regions. For instance Pitt and Khandker, (1998) study three group based programs in Bangladesh and found an increase in annual consumption expenditures. They reported the increase of every 18 taka for every 100 taka borrowed by women and 11 taka for every 100 taka borrowed by men. Chemin, (2008) reported that the participants of microfinance programs in Bangladesh have 3% more income for expenditure than the similar non participants. Moreover, he found positive impact of microfinance on supply of labour and both for male and female school enrolment. Another study on Bangladesh microcredit program argued that the impact of microcredit is short lived. The improvement associated with micro credit are associated with lower objective and subjective poverty with strong impact of it on poverty for about six years, thereafter the resulting benefit level off (Chowdhury, et al, 2005). Khandker, (2005) using panel data from Bangladesh indicate that microfinance
June 27-28, 2012 Cambridge, UK 6
contributes to annual poverty reduction for more than half of the 3 percentage for microfinance program participants. The benefits of microfinance spill over to wider community through local income growth that leads to increase expenditure that reduces the average village poverty level by 1 percentage point each year in program areas. Critiques of microfinance, through research have shown that poverty is not reduced by microfinance it just burdened the poor with additional debt. Coleman, (1999) conducted his study on credit program of Northeast Thailand and concluded that there is insignificant impact of credit program on physical assets, savings, production, sales, productive expenses, labour time and the expenditures on health care and education. In later study by Coleman, (2006), he refines the methodology used in the previous study and concluded that credit programs are bias in favour of better off and tend to be skewed towards wealthier than the poor. He found that the impact of the program is positive on household welfare of the richer committee members than rank-and-file members of microfinance institution. Similarly Duong and Izumida, (2002) conducted a study on rural development finance in Vietnam, they also concluded that banks are rationing the credit on the basis of reputation, collateral of the household and the amount of credit applied. The studies on microfinance are criticized for the methodologies employed to investigate the impact of microfinance on poverty. Such as the work of Pitt and Khandker, (1998) is criticized on the ground that low land holding constraint of less than half an acre was not strictly enforced in the sample (Weiss, et al, 2003). Morduch, (1998) reworked on it by simple comparisons that takes into account the bias not controlled in previous work. But he found no impact of microfinance program on consumption or increase in educational enrolment of children. However Pitt, (1999) on reexamination of the work reconfirms the earlier positive findings in Pitt and Khandker, (1998). Chemin, (2008) criticized that Pitt and Khandker, (1998) overestimate the results by not enforcing
the eligibility criteria of land holding for borrowing and Morduch, (1998) underestimate the results as he did not account for non-random program placement. Similarly the results of the study by Coleman, (1999) appears highly questionable on the ground that after months of village bank membership there is no impact on the income or asset variables (Weiss, et al, 2003). From this discourse it is found that empirical evidence on the impact of microfinance on poverty not only differs in their conclusions showing mixed results in different countries but also casts doubt on the ground of biases caused by different statistical techniques used. The conflicting results suggests further research on issue of microfinance to gain an in-depth insight of its impact on poverty reduction will lead to higher level confidence of the impact microfinance for poverty reduction measures. On the other hand Hermes and Lensink, (2007) argued that although microfinance has a positive impact on economic development, it has not reached the poorest of the poor. Microfinance is a good method to fight poverty but there is a need to target poorest borrowers first. The microfinance institutions have to make distinction between marginally poor and very poor (Sengupta and Aubuchon, 2008). As Weiss.et al., (2003) pointed out that the microfinance loan officers and members of borrowers in group lending may exclude the very poor from borrowing because of high risk of bad credit. Chemin, (2008) also in his study concluded that microfinance is not targeting the poorest. A research on seven Micro Finance Institutions (MFIs) in four countries that are Bolivia, Bangladesh, Uganda, and the Philippines, to compare clients of MFIs with non-clients, concluded that most clients come from moderately poor and vulnerable non-poor households, with some clients from extreme-poor households also participating; programs that explicitly target poorer segments of the population generally have a greater percentage of clients from extreme-poor
households; and destitute households are outside the reach of microfinance programs (Helms, 2006). Helms, (2006) indicated that microfinance is serving limited number of clients and many potential clients remained unserved; he points out a different view as Microcredit is not appropriate for the destitute and hungry who have no reliable income or means of repayment. In many cases, small grants, infrastructure improvements, employment and training programs, and other nonfinancial services may be more appropriate for destitute people. Mosley and Rock, (2004), from their study of six African microfinance institutions, suggested that the advantage of microfinance is that it
reaches vulnerable, non-poor, the working poor or entrepreneurial poor. Microfinance operations benefits the extreme poor indirectly through labour market as poor people enter into labour market as employees of microfinance clients, and human capital as increased expenditures on education and health extend to poor through intra-household and inter-generational effects and social capital externalities (enhancement of social capital for the clients extends to poor through extension of credit groups to include poor and through stabilisation of village income) than by direct lending. Microfinance is often criticized on the grounds that it is administration is costly due to high transaction and information cost and that is why most of the Microfinance programs depend on donor subsidies. Most importantly there are few rigorously tested empirical research studies on poverty reduction effect of micro-credit (Hermes and Lensink, 2007). Therefore, there is still room for research in area of microfinance to find out its effect on poverty alleviation. More specifically, it would be beneficial to investigate microfinance impact in a specific region from the direct interaction with the borrowers and lenders of such program to identify the real impact of it on poverty reduction in that country and towards this end this research.
Use of Microcredit to reduce poverty and enhance economic growth appears to have gained recognition in developed and emerging economies. For example, State Bank of Pakistan Quarterly report, (2005) offered its own model to evaluate performance of Microfinance providers. Microfinance is considered an effective tool to fight poverty through enabling individuals to engage in self employment. Microfinance institutions tend to target women as poorest segment of the society which helps to enhance the women empowerment. The logic of the proposed approach is that female participation in the economy leads to improvement in gender equality and has a positive impact on the status of women within family decision making that enhances social status of women that leads to lower birth rate and increase the family wellbeing. The studies above and the ensuing debate have provided insight into the role of Microfinance institutions to alleviate poverty. These studies have contrasted benefits with challenges and considered the wider social dynamics which emerge when access to finance is offered to females. In the context of Pakistan, 6th most populated country in the world, 169.9m and 23% of its
population living below the poverty line that is $1.25 a day is a challenge for policy makers within country and donors too. Up till 2005-06 the efforts to reduce poverty were having some positive impact but the world economic and political crises have negated improvement in poverty reduction (Economic Survey of Pakistan, 2009-10) and these findings are corroborated by Multidimensional Poverty Index (MPI)i 2010 indicators. However, poverty amongst women remains a cause for concern for government and international community at large. 55.5% women are living below poverty line (United Nations Human Poverty Index, 1995 cited in Goheer, 1999, p.2) and they experience greater barriers to break out from poverty trap due to market inefficiencies which are compounded with social, religious and cultural norms. To break this cycle of poverty microfinance is often considered to be an effective strategy to enable poor and vulnerable females, the most
marginalised sections of the population, to engage with economic activity. This study attempts to examine how Microfinance institutions impact on the well being of females and what are the factors contributing towards the success of women engaged with MFIs? RESEARCH METHODOLOGY In an attempt to answer above questions and to determine the impact of microfinance for female borrowers this exploratory study was carried out using a structured questionnaire by a female researcher herself to overcome cultural and gender sensitivities. The questionnaire was designed to gather information both qualitative and quantitative by writing a range and variety of questions close ended, rank order, open ended and multiple questions to ascertain full range of experiences and let the responses to be triangulated. In total 123 useable questionnaires were collected which were completed by the women entrepreneurs who used microfinance facility. The quantitative analysis using SPSS was conducted to analyse the impact of microfinance on poverty reduction by examining increase in income, family health and education; the analysis used binary logistic regression. Furthermore the open ended response to question were recorded and analysed using the inductive analysis. To explore in detail the connection of microfinance and poverty reduction with enterprise development, qualitative study approach was carried out by interviewing 10 women to gain in-depth understanding. These 10 women either lived below or were just above the poverty line. The geographic scope of this study was limited to participants from mainly four districts of the Punjab region of Pakistan. Punjab being relatively effluent region where female is more likely to engage in self employment. There are some limitations inherent in this research study. Firstly, it is a static study that captures certain aspect of reality at a particular time of the survey (see Johnson and Loveman, 1995) which may pollute experiences of the participants hence respondents may have over or under stated certain responses. Secondly, it is possible that some respondents did not
give their true opinion when responding to questions; this could have been due to issue of trust or their reluctant to disclose their true experiences with an outsider. Therefore, caution must be exercised in generalising the emergent results of this study as it always the case with all case studies. FINDINGS Quantitative Analysis After careful examination of literature the three main research questions to be tested were formulated in form of hypothesis: H1. The increase in amount of microfinance loan used in enterprise development by women leads to an increase in income of the family H2. The increase the amount of microfinance loan leads to increase in expenditures on childrens education H3. Higher amount of microfinance loan leads to better health and nutrition of the family. There are wide range of definitions for entrepreneurs but for the purpose of this research the definition of woman entrepreneur is that who takes risk to start a new income generating activity (new enterprise) or invest in already establish income generating activity (old enterprise). The poverty is made up of many factors such as income, consumption, asset, health and education. But in quantitative research only income, health and education of the family is considered. It is worth noting that the microcredit is disbursed only to one woman in a family and only those women are studied in this research who themselves used this money to set-up a microenterprise. However, the
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impact of microfinance is analysed on the basis of income, health and education of the family instead because women is considered to be benefiting the family with the productive use of loan (Morrison et al., 2007). The model The equation for simple liner regression from the equation of straight line is: (1)
Where
is the Y intercept and is the coefficient and X is the independent variable and
is a
residual term. The logistic regression is the, prediction of the probability of Y occurring given known values of Xs (Field, 2009). The logistic model equation with base of natural logarithms, the probability of Y occurring, e the is:
regression coefficient of variable
The dependent variables increase in income/family health/children education after microfinance loan is taken as binary variables where income / health / education increase takes value of 1 and the value is 0 for no increase after microfinance. Therefore the unobserved variable Y in case of binary logistic regression is:
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The independent variable for all the three hypotheses is the amount of microfinance loan with three categories. All have the control variables of age, education, number of children of the women understudy, family system and household head. The two more control variables number of years of business experience and newly established or old enterprise with the use of microfinance facilityare included in case of dependent variable increase in income due to enterprise development factors. The variable of control on decision to spend money on family health by women is included in case of dependent variables of family health. The table -1 shows the dependent and independent variables and their respective statistics.
To check whether the predictors are not highly correlated the multicollinearity test is run between the independent variables. The values of tolerance not less than 0.1 and VIF not greater than 10 show that there is no problem of collinearity between the predictors. Increase in income after microfinance In the preliminary analysis the chi square test for independence explores the relationship between two dependent variable increases in income with independent variable Amount of microfinance. The result of Pearson Chi square 2 = 12.62ii, test is significant which indicates that there is relationship between levels of loan amount and increase in income after microfinance. To check whether the results will be same with number of control variables in the model, we run binary logistic regression using SPSS (Table 2).
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Binary logistic regression is run to assess the impact of amount of microfinance loan on the likelihood that respondents reports that their income in the household increase. The model contained eight independent variables (amount of loan, age, education, number of children, household head, family system, business experience of women and enterprise developed by women). The full model containing all predictors are statistically significant 2 (8, N=114) =
28.92, p < .01, indicating that the model is able to distinguish between the women with or without the increase of income after microfinance. The model as a whole explained between 22.4 % (Cox & Snell R square), 34.4% (Nagelkerke R square) of the variance in increase in income, and correctly classified in 79.8% of cases. The Table 2 shows that only two independent variables of age and amount of loan made a statistically significant contribution in the model. The amount of loan predictor indicate that women taking medium loan amount of Rs.15001- Rs.25000 (104.6 174.4)iii are 4 times (odd ratio of 4.703) more likely to report the increase in income of household than those who are taking loan of less amount ranging Rs. 5000- Rs.15000 ( 34.9 - 104.6), controlling for all other factors in the model. However the women taking loan of high amount of Rs.25001- Rs.35000 ( 174.4 - 244.1) and more shows insignificant improvement in their results. The likelihood of women to have increase income after microfinance, increases with the increase in the amount of loan, but have no contribution in the model with higher amount of microfinance loan than Rs 25000 (174.4). The odd ratio of .22 for age is less than 1, indicating that women aged more than 40 years are .22 times less likely to report increase in income as compared to women aged 18-39 years, controlling all the factors in the model (Pallant, 2007; pp.177-178). Increase in children education after microfinance In the preliminary analysis the chi square test for independence explores the relationship between two dependent variable increases in children education with independent variable Amount of
microfinance. The result of Chi square 2 = 8.430 iv, test is significant which indicates that there is relationship between loan amount and increase in childrens education after microfinance. To check whether the results will be same with number of control variables in the model, we run binary logistic regression in SPSS (Table 3).
Binary logistic regression is run to assess the impact of amount of microfinance loan on the likelihood that respondents reports that their childrens education increase. The model contained six independent variables (amount of loan, age, education, number of children, household head and family system). The full model containing all predictors is statistically significant 2 (6, N=117) = 28.70, p < .01, indicating that the model is able to distinguish between the women with or without the increase of childrens education after microfinance. The model as a whole explained between 21.8% (Cox & Snell R square), 29.1% (Nagelkerke R square) of the variance in increase in childrens education, and correctly classified in 69.2% of cases. Table 3 shows that four independent variables: number of children, household head, family system and amount of loan made a statistically significant contribution in the model. The loan predictor indicates that women taking medium amount of loan are 4 times (odd ratio of 4.412, p<.01) and women taking high loan amount are 5 times (odd ratio 5.050, p<.05) more likely to report the increase in childrens education than those who are taking low loan amount, whilst controlling for all other factors in the model. The women living with their family in joint system are 3 times (odd ratio of 2.994, p<.05) more likely to report increase in childrens education than those who are living as nuclear family, controlling for all other factors in the model. Interestingly if household head is husband then it is (odd ratio of 1.474, p<.01) more likely that there is increase in childrens education than if the
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household head was a woman, however if household head is any one other person then there is no probability of increase in childrens education. The likelihood of increase in childrens education is significant at p<.05 when there is 1- 4 numbers of children (odd ratio 1.296) than if there is no children, controlling for all other factors in the model. However with the increase in number of children from 5 the probability became insignificant means five or with more than five children there is no significant increase in the probability of childrens education after microfinance.
Increase in family health after microfinance In the preliminary analysis, the reported chi square test for independence explores the relationship between two dependent variable increases in family health with independent variable Amount of microfinance. The result of Chi square 2 = .971, test is insignificant which indicates that there is no relationship between loan amount and increase in family health after microfinance. To check whether the results will be same with number of control variables in the model, we run binary logistic regression using SPSS (Table 4).
Binary logistic regression is run to assess the impact of amount of microfinance loan on the likelihood that respondents reports that their childrens education increase. The model contained seven independent variables (amount of loan, age, education, number of children, household head, family system and control on decision to spend money on family health by woman after microfinance). The full model containing all predictors is statistically significant 2 (7, N=117) =20.14, p < .05, indicating that the model is able to distinguish between the women with or without
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the increase in family health after microfinance. The model as a whole explained between 15.8% (Cox & Snell R square), 22.2% (Nagelkerke R square) of the variance in increase in family health, and correctly classified in 75.2% of cases. The Table 4 shows that two independent variables, number of children and control on decision to spend money on family health by woman after microfinance, made a statistically significant contribution in the model. The main independent variable, the amount of microfinance loan is insignificant and hence confirms the result of chi square test of independence. The number of children predictor indicates that women having children between 1-4 are 9 times (odd ratio of 9.316, p<.01) and women having 5 or more children are 14 times (odd ratio 14.027, p<.01) more likely to report the increase in family health than those who have no children, controlling for all other factors in the model. Similarly womens control on family health expenditures after microfinance predictor indicated that woman with control is 3 times (odd ratio 3.684, p<.01) more significant than woman who has no control, controlling for all other factors in the model. Qualitative Analysis For the study of poverty reduction and entrepreneurial success this paper divides the poverty with entrepreneurship into three phases. The first phase is the failure phase with limited vision due to poverty clouds, as depicted in figure 1. The women were in this phase before accessing the microfinance facility and entrepreneurship opportunities. The second phase is improvement, resulting from empowerment and enterprise that provides a broader vision due to access to finance and achieving some of the attributes of entrepreneurial skills. The women whether starting new business or running an existing family business moves toward this phase when they use microfinance loan in their business. The microfinance institutions provide finance, trainings, product knowledge and help them in establishing business networks and peer mentoring facilities
which ultimately propels the women towards the success phase. Three Phases are shown in figure 1.
The qualitative study used 10 case studies of the women who are either living below poverty line or just above the poverty line to investigate impact of microfinance on their well being. The sample of 10 women was drawn from 4 districts in Punjab, the largest state of Pakistan. The semi structured interviews were conducted in the local language to find out women income before microfinance, number of family members, education, business type, business experience, membership of MFI, training, business networks, peer monitoring, product knowledge, budgeting and finance, and better health and childrens education after microfinance which were inductively analysed. Microfinance and reduction in poverty In the sample of these ten women, all lived below the poverty line of 1.25 per day before microfinance and hence experienced extreme poverty, in seven cases they fell under the category of as core poor (significantly below poverty line). After obtaining loan from MFI and investing it in their enterprise their income, assets, expenditure, health, education and political participation significantly changed positively. The figure 2 shows that after access to microfinance for the enterprise the general condition of the women has improved. Their income, expenditure, income, health and childrens education improved; these results validate results reported using the quantitative results above. The results show that all the women are in the Phase 1 of failure before taking microfinance and graduated to phase 2 after access to microfinance suggesting improvement.
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The figure 2 shows that 20% of the women moved from phase 2 to phase 3, a change brought about due to increase in all six factors, leading to poverty reduction that is estimated through income, expenditures, assets, health, children education and political participation.
Microfinance and entrepreneurship In the sample, these women were educated, at most, up to GCSE level and had family size in the range of 2-12 persons, including children. With large families and few resources, they managed to establish an enterprise or invested in already established enterprise through accessing microfinance loan, either as a sole proprietor or as partner with their husbands. These micro enterprises mostly had either retail outlet, sale of clothes, electronic items, blankets and food items or very limited level of production by manufacturing carpets, wooden decoration pieces, car mates, hosiery. And a few were involved in livestock and services business like stitching and sewing of cloths. These womens business related experience ranged from one year to more than 10 years and all were members of microfinance institution for six month to 6 years. The figure 3 shows that 50% of the women avail training facilities, established business networks and have product knowledge offered by microfinance. 80% of them had benefited from peer mentoring because of the group lending technique of microfinance, where women have to attend a monthly meeting to qualify for a loan.
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The results reported and the discussion above has illustrated that women in the sample have enjoyed significant enhancement in the quality of their life after accessing microfinance. This is evidenced from the fact that 30% of the women moved from Phase 2 to 3 because access to finance offered greater entrepreneurial opportunities of training, business networks, peer mentoring, product knowledge and budgeting and finance that enabled 20% of the women to move into Phase 3 of success where they experienced significant poverty reduction and greater opportunities to enhance their entrepreneurial skills to break out of poverty cycle. DISCUSSION AND CONCLUSION A general conclusion that emerges from this research study is that access to finance is important for females to unlock them from the shackles of poverty to realise their full potentials. The statistical reported results derived using quantitative analysis suggests that all three variables: income, education and health are significant and have a high correlation with access to finance. A closer examination of results suggest that an increase in income of the family is positively correlated
with the size of loan up to a point but this relationship does not holds when the size of loan reached a certain size; in this study we observe loans below ( 174.4 - 244.1) significantly enhanced well being of women as all stated variables were significant but within this range and above, similar improvement was not experienced, suggesting there may be an optimal loan size which MFIs should offer. Thus the relationship between increase in income and increase in amount of loan has inverted U shaped. Therefore the result of H1 is not conclusive; this may be due to use of loan amount at high level for any other purpose instead of productive use in the enterprise. These results have implications for microfinance organisations themselves, donors and policy makers at large. The logistic regression results show that with the increase in amount of loan, there is probability of increase in children education, therefore we accept H2 at p<.01 at medium level of loan amount and
at p<.05 at high level of loan amount. The third Hypothesis is rejected as there is no probability of increase in family health with the increase in amount of loan. The qualitative analysis reported in Figure 4, shows microfinance loans have positive impact on poverty reduction. Access to finance leads to an increase in income, product knowledge, especially when this is supported with peer mentoring for the new members of microfinance institutions, especially for new members who borrow in the range of (34.9 - 70). The increase in product knowledge and peer mentoring help to reduce information asymmetry and the regular monthly meetings and repayments help to build bonds, create a sense of belonging, learning relating to business practices and in instilling business discipline. Furthermore, there is a positive correlation with the size of loan and political participation which is measured using the right to vote in election by women. Business engagement requires national identity cards (NIC) in Pakistan, something women in poor segment of population do not feel the need to have one but when they take loan from Microfinance institutions they are required to have NIC that unintended benefit of loan is the acquisition of NIC, something MFIs assist women to complete forms and lodge the application. Being on the voter list brings greater interaction with political parties which gives women greater awareness and improves their social networking and flow of information. Reported results indicate this lead to 50% increase in political participation. This figure has further potential further rise if all MFIs only accepted the womens own NIC instead of their husbands or fathers.
There is excessive focus amongst MFIs to support start-ups who may have potential to become independent earners. Results of this study suggest there is logic in supporting established enterprise or newly developed enterprise in phase II as they serve dual role, enabling others to learn from their
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experiences, networking themselves with others and drawing upon training opportunities and access to larger amount of loan, thereby effectively performing the role of a mentor. Therefore experienced women entrepreneurs have a positive attitude towards enterprise initiatives and the derive to succeed that serves as a pull factor for all the participants thereby ensuring the MFIs have a desired positive impact on poverty reduction amongst females. REFERENCES Cagatay, N (1998).Gender and Poverty. Social development and poverty elimination division working paper series no.5. New York: UNDP. Accessed May 31, 2009, [Available at: http://www.iknowpolitics.org/files/Gender%20and%20Poverty.pdf] Chemin, M. (2008). The benefits and costs of microfinance: evidence from Bangladesh. Journal of Development Studies, 44(4), 463484. Chowdhury, M. J. A., Ghosh, D. and Wright, R. E., (2005). The impact of micro-credit on poverty: evidence from Bangladesh. Progress in Development Studies, 5(4) 298309. Coleman, B. E. (1999). The impact of group lending in Northeast Thailand. Journal of Development Economics, 60, 105141. Coleman, B. E. (2006). Microfinance in Northeast Thailand: who benefits and how much? World Development, 34(9), 16121638. Duong, P. B. and Izumida, Y. (2002). Rural development finance in Vietnam: A micro econometric analysis of household surveys. World Development, 30(2), 319335.
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Economic Survey of Pakistan (2009-2010). Accessed February 13, 2011, [Available at: http://www.finance.gov.pk/survey_0910.html] Field, A. (2005). Discovering statistics using SPSS: (and sex, drugs and rock 'n' roll). London, SAGE. Goheer, N. (1999). Micro Finance; A prescription for poverty and plight of women in rural Pakistan, accessed February 25, 2012, [Available at http://www.microfinancegateway.org/gm/document1.9.24268/18775_pak_microfinance_nabeel_goheer.pdf] Helms, B. (2006). Access for All: Building Inclusive Financial Systems. Washington: The World Bank, accessed August 15, 2009. [available at http://www.cgap.org/gm/document1.9.2715/Book_AccessforAll.pdf] Hermes, N. and Lensink, R. (2007). Impact of microfinance: a critical survey. Economic and Political Weekly, 10 Feb., pp 462-465. Accessed May 4, 2009, [Available at: http://www.epw.org.in/epw/uploads/articles/10249.pdf] Johnson, S. and Loveman, G. (1995), Starting over an Eastern Europe: Entrepreneurship and Economic Renewal, Harvard Business School Press, Cambridge, MA. Jones, L., Snelgrove, A. and Muckosy, P. (2006). The double-X factor: harnessing female human capital for economic growth. International Journal of Emerging Market, 1(4), 291304.
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Khandker, S. R. (2005). Microfinance and poverty: Evidence using panel data from Bangladesh. The World Bank Economic Review, 19(2), 263-286. Lucy, D.M., Ghosh, J. and Kujawa,E., (2008). Empowering women's leadership: a case study of Bangladeshi microcredit business. S.A.M. Advanced Management Journal.Cincinnati, 73(4), 31-50. Mawa, B. (2008). Impact of microfinance: towards achieving poverty alleviation? Pakistan Journal of Social Sciences, 5(9), 876-882. Minnite, M., Arenius, P. And Langowitz, N. (2005). GEM 2004 report on women and entrepreneurship, in Hay, M. (Ed.), Global Entrepreneurship Monitor, Babson College and London Business School, Babson Park, MA and London Morduch, J. (1998). Does Microfinance Really Help the Poor? New Evidence from Flagship Programs in Bangladesh. Working paper, Princeton University. Morris, G. and Barnes, C. (2005). An assessment of the impact of microfinance: a case study from Uganda. Journal of Microfinance, 7(1), 39-54 Morrison, A., Raju, D. and Sinha,N. (2007). Gender equality, poverty and economic growth. Policy Research Working Paper no. 4349. The World Bank, accessed June 6, 2009, [Available at: http://wwwwds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2007/09/11/0001 58349_20070911132056/Rendered/PDF/wps4349.pdf]
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Mosley, P. and Rock, J. (2004). Microfinance, labour markets and poverty in Africa: A study of six institutions. Journal of International Development, 16, 467-500. Pallant, J. (2007). SPSS survival manual: a step by step guide to data analysis using SPSS version 15, Maidenhead: Open University Press. Pitt, M. (1999). Reply to Jonathan Morduchs Does microfinance really help the poor? New evidence from flagship programs in Bangladesh. Department of Economics. Brown University, accessed August 9, 2009, [available at :http://www.pstc.brown.edu/~mp/reply.pdf] Pitt, M.M.and Khandker, S.R. (1998). The impact of group-based credit programs on poor households in Bangladesh: does the gender of participants matter? Journal of Political Economy, 106(5), 958-996. Sengupta, R. and Aubuchon, C. (2008). The Microfinance revolution: an overview. Federal Reserve Bank of St. Louis Review, Jan/ Feb 2008, 9-30. accessed April 28, 2009, [Available at: http://research.stlouisfed.org/publications/review/08/01/Sengupta.pdf]. State Bank of Pakistan, (2005). Role of microcredit in poverty alleviation. First Quarterly Report for 2004-2005, Special Section 2. Karachi: State Bank of Pakistan. 105-116 United Nation Development Programme, Annual Report. (2008). Capacity Development: Empowering People and Institutions. New York: United Nations Development Programme. 24-27
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Weiss, J., Montgomery, H. and Kurmanalieva, E. (2003). Microfinance and poverty reduction in Asia. In: J.Weiss, (Ed.), 2005. Poverty Targeting in Asia. Cheltenham UK: Edwards Elgar Publishing. Ch.7.
Table 1: Dependent and Independent variables Statistics

Variables Age of Women (in years) 18-39 40- more than 40 Education of Women No education, school education, college/University/profession education Number of Children No children, 1-4 children, 5 and more Family system Nuclear Joint Household Head Women Husband Both / Any other Business experience of Women Less than 1 year- 2 years 3-5 years 6-10 and more years Enterprise developed by Women existing enterprise newly established enterprise Control on decision relating to spend money on family health and nutrition after microfinance no yes Amount of microfinance loan (amount in Rupees) 5000 15000-low June 27-28, 2012 Cambridge, UK Percentage 66% 33% 53% 40% 7% 14% 50% 36% 58% 42% 26% 44% 30% 23% 28% 49% 84% 16%
48% 52% 48%
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2012 Cambridge Business & Economics Conference ISBN : 9780974211428 15001-25000-medium 25001-35000 and more-high Increase in income after microfinance (0,1) Increase in childrens education after microfinance (0,1) Increase in family health and nutrition after microfinance (0,1) 34% 18% (24%, 76%) (45%, 55%) (33%, 66%)
Table 2: Logistic regression estimation of increase in income of the family

Increase in income after microfinance Constant Amount of loan 5000 - 15000 15001-25000 25001-35000 and more Age 18-39 years More than 40 Education No education School education College/Uni. education Children No children, 1-4 children, 5 and more Household Head Women Husband Both / Any other Family system Nuclear Joint Business experience of Women June 27-28, 2012 Cambridge, UK Coef. B 1.937 1.548* 20.937 -1.479* -.215 -.856 -.766 -.368 -1.249 -.093 .106 Std err Sig. p .248 .024 .998 Odds ratio Exp B 6.935 4.703 1.227 .000 18.022 95% CI for odd ratio (B) Lower Upper
1.676 .685 8558.061
.717
.039
.228
.056
0.928
.596 1.222
.876 .614
.807 .425
.251 .039
2.595 4.660
1.215 1.326
.397 .077
.465 .692
.043 .051
5.033 9.317
.772 .884
.105 .916
.287 .911
.063 .161
1.301 5.149
.574
.854
1.112
.361
3.426
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2012 Cambridge Business & Economics Conference ISBN : 9780974211428 Less than 1 year- 2 years 3-5 years 6-10 and more years .130 .705 .708 .686 .854 .304 1.139 2.024 .284 .528 4.565 7.768
Enterprise developed by Women Existing enterprise Newly established enterprise .274 .719 .703 1.315 .321 5.384 Notes: - indicates the reference category; number of obs. = 114; R2 = .93 (Hosmer&Lemeshow), .22 (Cox & Snell), .34 (Nagelkerke); Model 2= 28.92, p < .01; * p<.05
Table 3: Logistic regression estimation of increase in childrens education

Increase in childrens education after microfinance Constant Amount of loan 5000 - 15000 15001-25000 25001-35000 and more Age 18-39 years More than 40 Education No education School education College/Uni. education Children No children, 1-4 children, 5 and more Household Head Women Husband Both / Any other Family system June 27-28, 2012 Cambridge, UK Coef. B -3.696 1.484** 1.619* -.123 .437 .383 1.912* 1.766 1.481** .788 Std err Sig. p .001 .005 .016 Odds ratio Exp B .025 4.412 5.050 1.577 1.344 12.340 18.973 95% CI for odd ratio (B) Lower Upper
1.143 .525 .675
.533
.818
.885
.311
2.515
.516 1.066
.397 .719
1.548 1.466
.563 .182
4.255 11.847
.844 .916
.023 .054
6.770 5.848
1.296 .971
35.377 35.215
.558 .624
.008 .207
4.397 2.200
1.474 .647
13.118 7.479
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2012 Cambridge Business & Economics Conference ISBN : 9780974211428 Nuclear Joint 1.096** .473 .020 2.994 1.185 7.563 Notes: - indicates the reference category; number of obs. = 117; R2 = .78 (Hosmer&Lemeshow), .22 (Cox & Snell), .29 (Nagelkerke); Model 2= 28.70 p < .01; * p<.05, **p<.01
Table 4: Logistic regression estimation of increase in family health

Increase in family health after microfinance Constant Amount of loan 5000 - 15000 15001-25000 25001-35000 and more Age 18-39 years More than 40 Education No education School education College/Uni. education Children No children, 1-4 children, 5 and more Household Head Women Husband Both / Any other Family system Nuclear Joint Increase in Womens health after microfinance June 27-28, 2012 Cambridge, UK Coef. B -2.063 .346 -.282 .009 -.215 -.856 2.232** 2.641** -.323 .282 .361 Std err Sig. p .071 .517 .679 Odds ratio Exp B .127 1.413 .758 .496 .203 4.023 2.823 95% CI for odd ratio (B) Lower Upper
1.144 .534 .671
.583
.987
1.009
.322
3.165
.596 1.222
.876 .614
.807 .425
.251 .039
2.595 4.660
.840 .961
.008 .006
9.316 14.027
1.797 2.133
48.292 92.226
.595 .677
.587 .677
.724 1.326
.226 .352
2.324 4.997
.479
.451
1.435
.561
3.670
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2012 Cambridge Business & Economics Conference ISBN : 9780974211428 No Yes 1.304** .490 .008 3.684 1.411 9.620 Notes: - indicates the reference category; number of obs. = 117; R2 = .47 (Hosmer&Lemeshow), .16 (Cox & Snell), .22 (Nagelkerke); Model 2= 20.14, p < .05; ** p<.01
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2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Figure 1: Phases of poverty reduction with entrepreneurship

1st Phase: Failure Vision is limited due to poverty clouds Poverty limits the entrepreneurial and prospects ideas 2nd Phase: Improvement Start to have broader vision and learned from experience Client education: Product knowledge Training from MFI Budgeting and marketing 3rd Phase: Success Clear vision of entrepreneurial ideas Poverty reduction by entrepreneurship
Limited Vision Poverty clouds Broad vision Poverty clouds start to lift up Clear vision
Poverty reduction and success
Impact: Good ideas are not fully exploited or conceived
Impact: Better health Better childrens education All 10 cases after microfinance
Impact: Financial Inclusion
Immediate need of shelter All 10 cases before microfinance
Business Networks Increase in household income 20% of the cases mean two women
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Figure 2: Impact of microfinance on poverty reduction
Figure 3: Impact of microfinance on entrepreneurship attributes
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Figure 4: Impact of increase in amount of microfinance on poverty reduction and entrepreneurship attributes
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http://www.ophi.org.uk/wp-content/uploads/OPHI-MPI-Brief.pdf n=120, p=.002, Cramer V=.324 (effect size medium=.30) Exchange rate from http://www.xe.com/ucc/ dated on 22-02-2012 n=120, p=.015, Cramer V=.265 (effect size small=.01 and medium=.30)
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2012 Cambridge Business & Economics Conference ISBN : 9780974211428

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