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Does micro-finance reach the poorest of the poor?

empirical evidence of programme outreach from rural Pakistan

Asad Kamran Ghalib


The ‘Microfinance Model’ is has been applied extensively on a global scale as a strategy for reducing poverty and promoting development. The ensuing results have transformed both the social and economic lives of households worldwide. While some economists deem the results to be indisputably affirmative, others have questioned the legitimacy and sanctity of the findings, and have even argued that in certain cases (gender empowerment, for instance) the impact has not been as promising as it has been portrayed.

This paper critically assesses how ‘deep down’ has microfinance been able to reach across the rural landscape in Pakistan. By drawing on first-hand, primary observations and by using empirical data from remote rural villages of Pakistan, this research attempts to provide evidence regarding depth of programme outreach. It attempts to ascertain if the service has been able to reach those who deserve and need it most: the poorest people of the society.

The study makes use of 1,132 primary household surveys conducted across the rural areas of the province of Punjab and captures a multitude of variables to portray the multidimensional nature of poverty. Both borrower (treatment) and non-borrower (control) households are interviewed, based on a randomly drawn sample. By employing factor analysis and the principal component analysis (PCA) model, each household is allocated a specific poverty score in relation to all other households in the sample interviewed. Once the poverty index is obtained, sampled households can be ranked in order of varying poverty levels. Comparisons are later made between borrower and non-borrower households. This enables formation of an opinion on the depth of poverty outreach of the microfinance institutions in the rural areas being surveyed.

The paper concludes with findings that the depth of poverty outreach is significantly low than what has been hitherto proclaimed by service providers. It also offers policy recommendations on lessons learnt to enhance depth (as opposed to breadth) of outreach to address the needs of the poorest of the poor across the rural areas and thus contribute meaningfully and effectively towards the ‘war against poverty’.

Publication Type(s)

Conference Paper

Ten Years of War Against Poverty Conference Papers

Conference: Ten Years of War Against Poverty


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