Role of Microfinance Institutions in Poverty Alleviation among Rural Households in Punjab, Pakistan

Abstract

Microfinance institutions (MFIs) have become a significant instrument in poverty alleviation in developing nations because they offer financial services to poor households that are not part of the formal banking institutions. Poverty continues to be a factor in Pakistan, especially in rural areas of Punjab like Dera Ghazi Khan (DG Khan) because of the unavailability of credit, low productivity of agricultural activities, and unavailability of livelihoods. In this study, the researcher examines the impact of MFIs in reducing poverty among rural families in DG Khan District. Based on a mixed-method approach, the study will discuss the role of microcredit, micro-saving, and micro-insurance in affecting household income, consumption, asset accumulation, and empowerment of women. The research incorporates in-text citations as a means of illustrating the available academic controversy and problems in microfinance. Results indicate that MFIs have positive impacts on poverty reduction, but issues like excessive interest, low outreach and misuse of loans undermine its effect. The study offers policy implications to policy makers and development practitioners in search of more viable poverty alleviation interventions in the rural Punjab.