Exploring the Impact of Microfinance in Pakistan

Much of the impetus behind the large and increasing support from national governments, Non Governmental Organizations (NGOs) and donor agencies for microfinance, hinges on the assumption that its economic and social impacts are significant. However, this needs to be examined more closely. This study evaluates the impact of microfinance programs on income, expenditure, child education and women empowerment. An econometric analysis is carried out to examine the impact with a relatively sizeable sample of about 3,400 respondents (borrowers and nonborrowers) from six large microfinance institutions of Pakistan. Empirical results suggest that microfinance intervention possibly helps in smoothing consumptions and, to some extent, generating income. The results also confirm an upper hand of matured borrowers in terms of child school enrollment as the impact coefficients are positive and significant. The econometrical results regarding women empowerment are mixed, contradictory and in many cases, unexpected. It can be argued, therefore that microfinance interventions do not seem to have a significant positive impact on the different aspects of women empowerment.