Targeting and socio-economic impact of microfinance: A case study of Pakistan

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
non-borrowers 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.