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Abstract
Poverty is a risk to harmony and effects in dismissal of human rights. Microfinance is a term which spread across the world as a solution to alleviate poverty. Through this approach thousands of low-income families have experienced better and lasting access to a variety of reasonable and inexpensive financial services provided through diverse sources. Borrowers usually utilize these funds for income generating activities and asset building. In order to assess this present study examined the role played by microfinance institutions in poverty alleviation that determines their role by identifying the relationship between microfinance and poverty alleviation. A qualitative approach has been used to intensely analyze the phenomenon; the study employs focus group methodology. Focus group used in this research study has been operated under participant observation method. In each city (Karachi and Lahore) in depth group interviews were accomplished in two separate sessions, including focus group with representatives of microfinance institutions. Two distinct focus group sessions were conducted to ensure the validity and reliability of the collected data. The results emphasize that microfinance largely remain successful instrument in Pakistan in alleviating poverty but there is a lot more to execute to expand the provision of microfinance making it an opportunity for new MFPs to come and serve the poor.
Keywords; Microfinance, Microfinance Institutions, Poverty alleviation, Performance of Microfinance Providers
1.Background and Literature
Microfinance institutions have existed for long in societies. But as a formal, rational and purposive organization (Meyer, 2010) its existence in Pakistan is three decades old. Microfinance Ordinance2001 was passed to give legitimacy to microfinance organizations to operate banking organizations. Though, in Pakistan, there are five statutes under which microfinance institutions (MFI) can be registered and managed, however, Microfinance Ordinance 2001 is the main legal framework which regulates microfinance banks (MFB).In Pakistan Microfinance institutions metamorphosed into banks, under isomorphic influence of government regulations to increase the outreach of microfinance institutions and improve sustainability as financial institutions. The Microfinance Ordinance 2001 and strategy documents like, "Expanding Microfinance Outreach" (EMO), and "Strategic Framework for Sustainable Microfinance Framework" of State Bank of Pakistan, (IFC, 2009), are the binding and guiding documents. The regulatory laws, however, constrained microfinance banks pledging security and securing foreign currency loans, thus prohibiting the supply of money to the newly...