Microcredit and Poverty Alleviation in Pakistan

Using microcredit to reduce poverty
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This study analyzes how microcredit helped to reduce poverty in District Jhelum, Punjab, Pakistan.

Poverty remains a problem for Pakistan, with about 22% of the population living below the poverty line. Microcredit programs have emerged as a vital tool to address the issue, by giving people the chance to earn a livelihood, helping them to live with self-esteem, and reducing their financial exploitation. The study used interviews for data collection and a multiple regression model in two phases to test the impact of microcredit on people’s incomes and the impact of income on poverty status. Study results reveal that:

  • In the first phase, income was dependent on microcredit along with other variables;
  • In the second phase, income had a negative impact on poverty, implying that microcredit is an important tool for improving and increasing people’s living standards.

The paper presents recommendations to decrease poverty levels in the country. They highlight the need for easy availability of the proper amount of credit and the need for technical assistance and training to agricultural borrowers.