Role of Microfinance in Poverty Alleviation: Evidence from Pakistan

This study has empirically measured the role of microfinance in poverty alleviation and has examined its impact on household poverty levels. The factors affecting household poverty and living standard have been investigated with innovative econometric techniques, such as the binary logit model and ordered logit model, using Stata software. The empirical analysis of this study is based on new data. The data is collected through a household survey method from the rural and urban areas of district Lodhran of Pakistan. A questionnaire was developed to collect primary data covering household loan amounts, household assets, and household expenditures. The questionnaires were distributed among 220 respondents. We selected a total of 19 variables: eleven variables to analyze the factors responsible for household poverty and eight variables to measure the household living standard. The high value of Living standard shows a high living standard, and the low value shows a lower living standard. The empirical evidence shows that the variables such as gender, married status, chronicle diseases, the purpose of loans, number of loans taken, amount of loan, Lives Stock, Monthly savings, and the total number of household members are found to impact poverty significantly. In contrast, the impact of transport facilities, years of schooling, and land ownership was found insignificant. While measuring the poverty level, we followed the World Bank poverty line, which is $ 1.25 (Rs.3750) per capita per adult monthly income and expenditure. The data shows that 137 (62.3 percent) households live below the poverty line, while 83 families live above the poverty line. We find that 169 homes (76.8 percent of the total sample) have good living standards while 20 households (9.1 percent) have high living standards, whereas 31 households (14.1 percent), have deficient living standards.