Social Impacts of Microfinance Institutions in Pakistan

Microfinance is not a new development. It is a practice to provide small amount of loans. These loans create a spark in the lives of poor people. There are different views regarding impact of microfinance on borrowers. Microfinance is considered as one of the powerful tools to reduce poverty and it has a positive impact on the social and financial standing of the borrowers. However sometimes these views are contradictory and are totally opposite. This study aims to investigate the impact of micro-credit on social indicators of the borrowers of microfinance institutions. The primary objective of the study is to explore the impact of micro-credit on the lives of the borrowers, and whether the borrowers are able to pull themselves out of poverty and high interest rates. Regression analysis and T-test are used to measure the impact of microfinance and to make comparisons between borrowers and non-borrowers. Primary data were collected from a sample of two hundred households from district Kasur of Punjab Pakistan. Four major MFIs were selected for this purpose as a sample including a public sector microfinance bank of Pakistan. Analysis shows us mixed results regarding impact of microfinance. In some cases, it has higher significant impact on social indicators of borrower households and vice versa.