Microfinance: Our Way (1)

TARGETING AND SOCIO-ECONOMIC IMPACT OF MICROFINANCE: A CASE STUDY OF
PAKISTAN1
Nasim Shah Shirazi, Senior Economist, Islamic Research and Training Institute, Islamic Development
Bank. nasimss@yahoo.com, nasimss@isdb.org

ABSTRACT
An attempt has been made to quantify the targeting of the microfinance and its economic impact on the borrowers. The study has
employed the Difference of the Difference Approach to find the net effect of microfinance by employing data collected by
Pakistan Poverty Alleviation Fund. The study found that about 30 percent of the borrowers were poor, while 70 percent of the
borrowers were non-poor. The impact on the poverty status was found to be marginal. The income of the poor borrowers hardly
could grow by 2 percent during the study period. However, the consumption of the poor borrowers increased by 10 percent,
which indicates that poor primarily borrow for smoothing their consumption. A significant net effect of microfinance on the
consumption (6.71 percent) and income ( about 6 percent) of non-poor borrowers has been found. Results show that poor nonborrowers
were better off in terms of change in most of their assets compared to the poor borrowers. However, the net effect of
microfinance on households durables of the non-poor borrowers was marginal’ while the net effect of microfinance on few
household durable items like fan, bicycle and sewing machine , of the poor borrowers was found to be positive. Compared to the
poor borrowers, the majority of the poor non-borrowers reported no change in their livestock. Similarly, some poor borrowers
reported positive changes in their livestock as compared to poor non borrowers during the study period, which shows positive net
impact of microcredit on the livestock of the poor borrowers. Expenditures on social and other miscellaneous items were found to
be very small.

Key Words: Microfinance, targeting of microfinance, Pakistan Poverty Alleviation Fund, Socio-economic
Impact, Microfinance and the poor