Microfinancing for Poverty Reduction: An Empirical Study of Rural Areas of Tehsil Gujrat-Pakistan

Abstract

Micro finance has achieved an everlasting fame in all over the world by producing considerable evidence of poverty
eradication. It provides financial services to those people, who have low incomes, minimal assets and don’t have
collateral to borrow a credit from commercial banks. The aim of the microfinance is to remove poverty by
empowering poor and the unbanked with a little amount of credit. Present study is conducted to find out the impact
of micro credit by Punjab Rural Support Programme (PRSP) in the rural areas of Tehsile Gujrat. A sample of 316
borrowers was randomly selected. Sample unit was the borrower who had completely repaid all the loan
installments one month before from the day of survey. Survey technique was used and face to face interviews were
conducted to collect the relevant information. Descriptive statistics was used to analyze the characteristics of the
borrowers while for econometric analysis, Multiple Linear Regression Model (MLRM) was used to know the impact
of micro credit. The results of econometric analysis show that 1% increase in credit will bring 79% increase in the
income of the borrowers. Education has also positive impact on income of the beneficiaries. MLRM analysis shows
that increase in 1 year/ (1 level) of education will increase in income by 26.8% of the borrowers while family size is
found insignificant. The study not only reveals the impact of micro financing but also gives some suggestions/policy
implications for the betterment of micro credit schemes.
Keywords: Multiple linear regression model (MLRM), Micro financing, Poverty, Punjab rural support Programme
(PRSP).