ASSESSING MICROCREDIT EFFECT ON POVERTY ALLEVIATION AND WOMEN'S EMPOWERMENT: EMPIRICAL EVIDENCE OF PAKISTAN

Abstract

This study examines the impact of microcredit on poverty reduction and women's empowerment in Pakistan. Despite global efforts to alleviate poverty, it remains a pervasive issue, particularly in developing countries. Microcredit, recognized by the United Nations as a potent tool for poverty alleviation, has been implemented in Pakistan since 1976, specifically targeting women through group lending models. This approach leverages social collateral, reducing credit risks and enhancing financial inclusion. The study uses quantitative data collected via a Likert-scale questionnaire from 182 women entrepreneurs to assess the effects of microcredit on their economic and social status. Findings indicate that microcredit significantly enhances women's empowerment by increasing their financial independence, social standing, and household decision-making power. Additionally, microcredit contributes to poverty reduction, though its impact varies based on the context and implementation specifics. The study highlights the importance of integrating supplementary services such as business training and financial literacy programs to maximize the benefits of microcredit. Social and family traditions play a crucial role in shaping the outcomes of microcredit initiatives, suggesting the need for culturally sensitive approaches. The results suggest that while microcredit is effective in empowering women and reducing poverty, it should be part of broader economic development strategies. Policymakers and practitioners are encouraged to design microcredit schemes that incorporate social collateral and provide comprehensive support services. Future research should explore the long-term impacts of microcredit across different cultural and economic settings to better understand its potential and limitations.