ROLE OF MICROFINANCE IN POVERTY REDUCTION

Abstract

Microfinance is considered to be a very effective tool in reduction of poverty because many people think that it is an inexpensive tool in reduction process. Microfinance has shown the considerable amount of diversity which is a very good sign in the emergence of any new concept for economic growth of the country. Microfinance can only be shows success in their processes if they have a very good skills and capability to deal and operate with different people, having different cultures and background. Microfinance has been proved to be effective at reaching the poor households. It shows the positive impact on poverty reduction as it relates to six out of seven Millennium Development Goals. It is suppose to be considered as those instruments which under the right circumstances fulfill the needs of a broad range of the population which includes all those middle and lower class people that were rejected from the provision of conventional loan. The statistics from the social media has shown the fact that approximately 86 % of the total population of our country lives below the poverty line, as prescribed by UNO.(According to the UNO Charter-those people who earn less than US$2.00 per day are below poverty line) Pakistan is an agriculture country on this earth, so by keeping in mind the agriculture sector we should know that our whole economy’s success is depend upon this sector. But due to the political, environmental, social and economical factors, production level of our country can’t reach to the required level. Every growth in agricultural sector leads to a prosperous growth in our economy. So by providing micro loans to the poor people who have their lands but not have enough money to make their lands fruitful would be more beneficial for everyone. In Pakistan, giving loans to the poor on a small scale is not a new concept but the term use for this i.e. Microfmance is best used after the initiative took by Mr.Younas of Bangladesh (owner of Grameen Bank). The role of microfinance in poverty reduction is considered to be very effective in a sense that the availability of small term loans can help the people in the reduction of poverty and hence help in increasing their purchasing power as a result economy starts growing which in turn also shows a growth in our economy.