Economic Impact of Micro Finance on Borrowers: Evidence from Punjab, Pakistan

Abstract

The purpose of this study is to investigate the economic impact of microfinance institutions on borrower households in particular the impacts of small amount of loans in a high inflationary economy like Pakistan. The study is based on primary data and comprises of a sample of two hundred households including borrowers of microfinance institutions and non-borrowers who are eligible to be a client of MFIs. Binary logistic and least square regression is used to find the impact of microfinance on different economic indicators of the borrowers. Logistic regression results indicate positive and significant impact of microfinance on income of the borrower, while the least square regression presents somewhat different results about the impact of microfinance on assets of the borrower households. Independent sample T-test was used to measure the significant difference between clients and non-clients. We found that the economic position of the borrower households of microfinance institutions is better than the non-borrowers.

Keywords: economic impact of microfinance, Pakistan, poverty, microcredit

JEL Classification: I30, I38, I39