IMPACT OF MICROFINANCE ON

RAISING THE STANDARD OF LIVING

OF THE PEOPLE OF D.I. KHAN
DISTRICT
INTRODUCTION
The standard of living of a large number of people in the developing countries is in a bad state.
Pakistan is one among such nations. The people are deprived of various necessities which form
an essential part of human well-being. This poor condition of people is strongly related to the
economy of the country as well.
The main focus of this research paper is to find out whether micro financing can aid in raising
the living standards of people belonging to the lower strata of the society or not. Here, the lower
strata refer to the people who do not have proper access to some basic essentials for living a
healthy and prosperous life. The essentials dealt with in this article are education, healthcare and
finance.
The author of this paper has conducted his research in the district of Dera.Ismail. Khan, often
referred to as D.I.Khan, located in Pakistan. Many inhabitants of this city are engaged in
agriculture and it is a major source of income for the poor people. However, due to low earning
generated from agriculture, these farmers are not able to procure high-end technology for
improving farming methods. This underprivileged population is also not able to take up
government service. One reason for this is low-level education or no education at all and another
reason is the constraint on the number of people that the government can absorb. After analyzing
these two alternatives, it becomes quite clear that the lower class people are needed to be given a
third alternative so that they can have a regular and appropriate source of income. This third
alternative is provided by MICROFINANCE. Microfinance is a banking service wherein people
with low or no income are provided financial services with the aim of making them self-reliant.
This is a method of upgrading the low income class people, thereby reviving their quality of life.

In this direction, the Government of Pakistan has undertaken this method of microfinance to
tackle the issue of unemployment and unequal distribution of income among the people. This is
also needed to be done in order to enhance the national economy and upgrade development of
the country.
Hence, this paper would help us to understand the impact of microfinance on raising the standard
of living of the poor people of D.I district.

LITERATURE REVIEW
In order to proceed with the research, extensive literature review has been done by the
researcher. Some great works of renowned authors and thinkers, such as Plato, Michael S. Barr,
have been studied to gain a basic understanding of microfinance, standard of living and such
other terms related to this research project. Marks (1981) and Plato (1983) have given their
views on standard of living. Michael S. Barrs views related to microfinance have also been
quoted in this research paper. Also, empirical evidences in relation to the impact of microfinance
have been found in various papers such as Parker and Nagarajan (2000), Khandker and Farooque
(2001), Pit and Khandker (2003), Quach et al (2003). These works have found that beneficiaries
of microfinance have increased their expenditures, especially in health treatment and education.

METHODOLOGICAL FRAME WORK

The population that has been considered for this study comprises of poor people who lack access
to proper health and educational facilities for their families. The people belong to the Dera Ismail
Khans district of Pakhtoon khawa province (Pakistan). Since the population of the study area is
very large it was impossible for the researchers to consider every member of the population.
Therefore the study was confined to selected members of the population bases on time and cost
constraints i.e. 50 using stratified sampling method to give maximum chance to all kinds of
respondents.
For the purpose of collecting data a structured questionnaire was prepared with most of the
questions of the closed form which was filled by the selected respondents. In order to avoid the

risk of a weak response the researchers themselves delivered the questionnaire to the respondents
and got them back duly filled by them.
Primary data collected during the course of this study was subjected to statistical analysis by
using SPSS (Statistical Package for Social Sciences) version 11. Regression analysis was used to
determine cause and effect of all the variables used in the model to the dependent variables
Living Standard.

MODELING CHARACTERISTICS OF RESPONDENTS

The General Linear Model is a statistical linear model. It is commonly estimated using least
square method and has become one of the most widely used analytic techniques in social
sciences. Most of the statistics that are used in social sciences are based on linear models. Most
important application of least squares is data fitting, which means trying to fit a straight line to
the data collected.
Ordinary least square is used to predict a function that relates dependent variable (Y) to one or
more independent variables (x1, x2, x3xN). It uses a linear function that can be expressed as
Y = a + bXi + ei
Where a is Constant
b is Slope of line
Xi represents Independent variables
ei is the error term

Thus in the present case, the regression model can be formulated as:Effect of Micro finance on living standard (Y) = a + bX1 (Education) + X2 (health facilities)

+ X3 (Financial Situation) + ei (Error)

DATA ANALYSIS AND INTERPRETATION

The results from the data give us the demographic information of the respondents and statistical
analysis of the information collected from them. This is followed by the analysis of our findings.

DEMOGRAPHIC INFORMATION OF THE RESPONDENTS

The information collected gives the gender allocation of the respondents. It points out that 83.5%
of the respondents were Male and 16.5% were Female. The greater share of the respondents was
male which points to the fact that the maximum beneficiaries of micro finance are male since we
had chosen the inhabitants arbitrarily without any bias. The reasons of financial institutions to
mark men are the gender bias that is prevalent in their society. This is also the root cause of
poverty, slower economic growth, weaker supremacy and the inferior standard of living of
women.
In terms of age, 65.1% of the respondents were in the age group of 16 to 40 years, 24.8% were
15-30 years of age and remaining 10.1% were 41 years and above. The respondents have also
been classified in terms of their educational experience. This shows the effect it has on the way
in which they live their daily lives and manage their households and business. From the survey
we realize that many of the respondents had at least basic primary education. 21% of the people
are illiterate, 46.8% have received primary level education, and 21.1% have studied up till
secondary level and 11% above secondary. The study also shows that 39.4% of the respondents
had up to 3 members in their family, which shows that respondents were either unmarried or did
not have any children. 53.2% had up to 6 members and rest of the 7.3 % had more than 6
members. The purpose behind finding the number of members in the families is that it has a large

effect on the expenses of the particular families. The analysis also gives us the information about
the business experience of the people selected as respondents. 81.7% of the respondents had no
experience before joining the financial institutions and the rest of the 18.3% had prior business
experience. By this analysis, it can be said that financial institutions are indeed proving to be of
immense assistance to the poor people in setting up a business as well as developing already
existing ventures. Also, more than 50% of the respondents belong to large families. Therefore, it
is concluded that microfinance by financial institutions are of great help for a large number of
people, as when they provide business prospect to large families, the other member are equally
benefitted.
Descriptive analysis reveals the means of the variables in the regression analysis. Means for all
independent variables are at the mid-point of the 5-points satisfaction scale. Hence, it interprets
positive perceptions of people towards these independent variables i.e. access to education,
access to health care and financial situation.
The regression model is statistically significant (F=26.290; significant at 100%).

CONCLUSION
To sum up, it may be noticed from the overall analysis that there is a significant impact of
microfinance activities on raising the living standard of the people. A strong relationship was
found between dependent variables and independent variables. A collective impact of
independent variables was found to be 100% significant at F = 26.290. Individual impact on
education, health and financial situation was found to be significant below 5% level. It means
that one can help a poor person to stand on his own and this can not only bring about a revolution
in their lives but also in the society. The dream of healthy and educated society with no
discrimination and no bias can be achieved through simple thought.