Rural Credit Accessibility: The Impact Of Microcredit Dispensation On Economic Welfare And Women Empowerment In Pakistan

Microcredit has gained worldwide acceptance in recent years as a flexible instrument to increase people’s(specifically the poor rural households)access to economic resources,which is considered as an efficient way to attain poverty reduction and other social development.Since its starter in Bangladesh in the 70 s,microcredit has been well documented to have social consequences for instance poverty reduction and empowering the poor women by providing them opportunities to access microfinance.Microcredit was introduced into Pakistan in the mid-2000 s,targeting to assist credit access by agrarians and alleviate rural poverty in Pakistan.However,the impacts of microcredit on Pakistan rural households’ livelihoods are not well documented.Also,despite the efforts made by the Pakistani government to support and popularize the enactment of microcredit,the accessibility to formal credits as well as microcredit by the rural household’s remnants insufficient.This study assesses the effects of microcredit on rural household economic welfare(such as income and consumption)in addition women empowerment in rural Pakistan.In addition,it inspects the determinants influencing the accessibility of microcredit by rural households in Pakistan.An empirical analysis utilizes logit model,with empirical data collected through interviewing 600 households,including both non-borrower and borrower households,a survey conducted between January 2017 and March 2017 in Punjab Province of Pakistan.A total of13 household-level factors are defined as the determinant of households’ access to microcredit,including household size,income,education level and others.Also,this research effort to empirically assess the effect of microcredit on household economic welfare consequences for example income and consumption in rural Pakistan.The assessment is based on the difference-in-difference method which is a progressively popular technique of tackling the selection bias issue in measuring the influences of microcredit.And also gender discernment is an obstinate problem faced by women all over the world.Microcredit is known as an economic development instrument for those poor of access to financial services,mainly females.Though,the literature delivers conflicting evidence and displays that women empowerment may not,or may only be moderately achieved through microcredit,especially in Muslim societies.This research assesses the impact of microcredit expansion on rural women in Pakistan.An empirical analysis utilizes logit model,with empirical data collected through interviewing 168 households,including both non-borrower and borrower households.Both primary and secondary data are utilized in the empirical evaluates:primary data are gathered through a household survey using well-structured questionnaire,and secondary data are gotten from the Zarai Taraqiati Bank Limited(ZTBL),the largest microcredit provider in Pakistan.Our empirical outcomes favor the full belief in the literature that involvement in microcredit program helps improve rural households’ economic welfare such as income and consumption.The outcomes also expose that microcredit has a significant effect on5 different dimensions of women empowerment ranging from economic security(i.e.,control of financial resources)to awareness of social/legal issues(e.g.,rights to protest against domestic abuse,minimum legal marriage age,etc.).Furthermore,a total of thirteen household-related factors(e.g.,family size,household income)are identified as main factors influencing rural households’ accessibility to microcredit.Despite the positive results on how microcredit has improved the rural households’ lives,the outcomes show that the enormous majority of the program participants are non-poor,which casts some reservations on the social prospective(such as poverty alleviation)of Pakistan’s microcredit programs.From the results of this study,we determine that microcredit is a combating poverty instrument.Microcredit helps rural households to have access to resources,to vary their income earning patterns,escalate risk-bearing ability and overall increases the economic welfare and improvement of the households.In addition,households should be reinvigorated to raise capital requirements(e.g.,generate investment opportunities in on/off agricultural activities)to increase their demand for microcredit,which can enhance their access to microcredit.Not merely in Pakistan but in other developing countries it can be employed to assist poor and small rural households.Also,microcredit institutions such as ZTBL(Zarai Taraqiati Bank Limited)should expand their loaning schemes and collateral free products to suit the diversified needs of the rural population.It is therefore suggested that governments and Policymakers in Pakistan should reassess the role of the informal financial sector in providing loans in rural areas and formulate a new policy for the development of informal finance.For example,rather than trying to eliminate informal funding,it would be more appropriate to strengthen the links between the formal and informal financial sectors in Pakistan.The better link between these two areas will allow the sector to overcome its weaknesses,using the strengths of the other.An example of this may be that banks use local knowledge and advocacy for informal creditors,while informal lenders can benefit from the high ability of conventional lenders to mobilize resources and access large networks throughout the region.Therefore,policymakers should be encouraged to review the program planning and re-design loan products by putting more emphasis on explicitly targeting women.This is because women traditionally have less access to economic resources,including credit,and confront restrictions unique to their gender.Reforms on microcredit programs in Pakistan should pay more attention to women’s needs and their financial capability in repaying loans.Moreover,credit delivery should be combined with non-financial services within the programs,such as training on cash flow and risk management and building up social networks,which seem to be absent in the Pakistani microcredit programs but are crucial for women’s integration in the social development.As a result,the strengthening of formal and informal sectoral associations contributes to increased lending and the overall effectiveness of the financial system,and consequently,accelerates the development of Pakistan’s rural economy.