Microfinancing in Pakistan: A Case Study of Local Support Organizations in Northern Areas

Abstract

Pakistan is one of the developing countries, where the majority of the population resides in rural areas with a high poverty rate. Microfinance in rural areas is considered an effective tool not only making the people financially strong but at the same time improving their standard of living. The current research investigates the impact of local NGOs on rural life in the northern areas of Pakistan.in this regard, a parametric approach, Structural equation Modelling (SME) was applied to analyze the impact of microfinance projects on welfare using a case of four microfinance NGOs. The data was collected from 566 respondents using a pre-designed questionnaire. The results show the welfare of the people increased in terms of income, consumption, empowerment, employment. The findings imply that the loan size should be increased so that the respondents’ would be able to save and acquire more assets. In addition, Ngo microfinance organizations initiate programs such as education and health awareness along with training on entrepreneurial skills before granting loans so that the microfinance loan can be utilized efficiently.