18% Microfinance Funds Provided by Financial Institutions For Enterpreneurs

THE EMPERICAL ANALYSIS OF MICROFINANCE
FUNDS PROVIDED BY FINANCIAL

INSTITUTIONS FOR ENTERPRENEURS: FI’s
HYDERABAD CASE STUDY
A RESEARCH REPORT
By
SHUMAILA PATOLI (2K15/MBAH/100)
in partial fulfillment for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
INSTITUTE OF BUSINESS ADMINISTRATION

(IBA), UNIVERSITY OF SINDH, JAMSHORO.
ALLAMA I.I.QAZI Campus.
SUPERVISOR: HOUNOURABLE TEACHER SAMIUDDIN SHAIKH
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ACKNOWLEGDEMENTS
We pay our genuinely sincerest, heartfelt and ingenuous utterances to Almighty Allah, Who gave
us the huge strength to complete this research work in a profound learning and knowledge
seeking environment and helped us on every single step towards the aim of completion of this
thesis research work.
For which, we extend our profound and abstruse gratitude to our supervisor Sir Samiuddin
Shaikh under whose guidance and full support we were truly able to complete this thesis project
successfully. Incontestably, we are highly thankful to our supervisor for his inspiring guidance
throughout and his gentle attitude without which this thesis could not have been successfully
done by us.
However, we would also like to extend our sincere gratitude’s to the rest of our reverent teachers
who always have been and though will be the beacon for us till end.
We are also especially thankful to our parents for their unmitigated support and encouragement
throughout our university studies for the prosperous completion of our master’s journey.
Finally, we would thank to all the other people who ever helped us from time to time to
accomplish and achieve victorious success for our thesis project.
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CERTIFICATE
This is to clarify here that thesis entitled THE EMPERICAL ANALYSIS OF MICROFINANCE
FUND PROVIDED BY FINANCIAL INSTITUTIONS FOR ENTERPRENEURS: FI’s
HYDERABAD CASE STUDY is submitted by:
SHUMAILA PATOLI (2K15/MBAH/100)
in Institute of Business Administration, University of Sindh, Jamshoro, as particularly a

homicide record of the work done by them under my supervision. The overall contents of this
thesis as full or in parts, has not been yet submitted to any other institutes or university for the
award of any degree or the diploma programs.
Signature of Supervisor: Internal Examiner: External Examiner:
____________________ ___________________ __________________
Director of Department: Dean of Department:
___________________________ ___________________________
Dated:
___________________
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Declaration By Candidate
Hereby, we declare that this research thesis work is done by us and is not submitted yet at any
of the other institutes. Sir, we also undertake that we haven’t received outside assistance of
any kind or haven’t even involved the external contribution, so if incase involved we ourselves
will acknowledge in written formats to authorities otherwise we will be liable for the
cancelation of this research thesis work and thereby the degree that will be awarded to us for
and on its completion.
Tick the following:
We have had received outside assistance involving other supervisor’s contribution…….Yes No
I have acknowledged by submitting written statement (If Yes)……………………………Yes No
Name and Roll #. Signature
SHUMAILA PATOLI (2K15/MBAH/100) _______________
Dated:
_______________
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EXECUTIVE SUMMARY
Microfinance funds provided by financial institutions have significant impact on entrepreneurs.

This report is basically based on the advances and lending facilities of financial institutions to
entrepreneurs. For this purpose the data has been collected from a number of randomly selected
respondents of different micro financial institutes and banks through personally visiting,
interviewing, discussing and surveying and secondly by literature review from different authors
articles. Banks include First Micro Finance Bank, Apna bank, Tamer Bank, Mobilink Micro
Finance and whereas institutes include National Rural Support Program. The key variables of the
study include Micro Finance Institutions-Credit Facilities being an independent variable and
Terms and conditions, encouragement, savings, approaching and economical condition to
entrepreneurs being dependent variables. For analysis of the data, SPSS software is used. The
results show that all variables have somehow significant impact on each other for which they
have some positive relationship between them. Results found are accurate and shows how it has
positive effect on each variables but a bit of them are varied which is due to some of
diversification in a few results because of selecting different Micro Finance Institutions and their
different practices and management policies.
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Table of Contents
ACKNOWLEGDEMENTS...............................................................................................................................2
CERTIFICATE................................................................................................................................................3
DECLARATION..............................................................................................................................................................4
EXECUTIVE SUMMARY................................................................................................................................5
CHAPTER NO 1:........................................................................................................................................................9
INTRODUCTION.......................................................................................................................................................9
1.1. Introduction of the Study:...................................................................................................................................9
1.2. Concept Of Microfinance:..............................................................................................................................9
1.3. Microfinance Regulation and Taxation..................................................................................................10
1.3.1. SBP’s 2001 Ordinance For Microfinance Institution’s.....................................................................10
1.3.1.1. Preliminary..........................................................................................................................................10
1.3.1.2. Establishment of Winding Up...........................................................................................................10
1.3.1.3 Liscencing............................................................................................Error! Bookmark not defined.
1.3.1.4 Regulations and Supervision............................................................Error! Bookmark not defined.
1.3.1.3 Miscelaneous......................................................................................Error! Bookmark not defined.
1.3.2 Other Microfinance Institutions.........................................................Error! Bookmark not defined.
1.4. The Evolution of Microfinance................................................................Error! Bookmark not defined.1
1.4.1. Other Microfinance Institutions......................................................Error! Bookmark not defined.2
1.5. Govt: and Private sector Roles in boosting Funds..................................Error! Bookmark not defined.
1.6. List of Govt: and Private Microfinance Schemes..................................Error! Bookmark not defined.3
1.7. Research Objectives..................................................................................Error! Bookmark not defined.4
1.8. Background of the Problem:....................................................................Error! Bookmark not defined.4
1.9. Statement of Problem:................................................................................................................... 14
1.10. Scope of Research Study:.......................................................................Error! Bookmark not defined.5
1.11. Purpose of Study:....................................................................................Error! Bookmark not defined.5
1.12. Limitations................................................................................................Error! Bookmark not defined.5
CHAPTER No. 2.......................................................................................................................................................17
LITERATURE REVIEW.....................................................................................Error! Bookmark not defined.7
CHAPTER No. 3...................................................................................................Error! Bookmark not defined.5
METHODOLOGY................................................................................................Error! Bookmark not defined.5
3.1 Research Methodology..............................................................................Error! Bookmark not defined.5
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3.2. Procedure.....................................................................................................................................255
3.3. Sample and Sampling Methods...............................................................Error! Bookmark not defined.5
3.4. Statistical Tools...........................................................................................Error! Bookmark not defined.6
3.5. Application Software....................................................................................................................266
3.6. Research Hypothesis.................................................................................Error! Bookmark not defined.6
3.7. 6 Key Variables...........................................................................................Error! Bookmark not defined.7
3.8. Conceptual Framework.............................................................................Error! Bookmark not defined.8
CHAPTER No. 4.....................................................................................................................................269
DATA ANALYSIS AND INTERPRETATION.....................................................................................299
4.1 Content and face validity.............................................................................Error! Bookmark not defined.
4.1.1 Frequency Tables..................................................................................Error! Bookmark not defined.
4.1.2 Analysis:..................................................................................................Error! Bookmark not defined.
4.1.3 Graphs................................................................................................Error! Bookmark not defined.30
4.1.4 Interpretation....................................................................................Error! Bookmark not defined.30
4.2 Regression analysis.......................................................................................Error! Bookmark not defined.
4.3 ANOVA Table.................................................................................................Error! Bookmark not defined.
4.4 Table coefficients..........................................................................................Error! Bookmark not defined.
CHAPTER No. 5...................................................................................................Error! Bookmark not defined.9
DISCUSSIONS AND CONCLUSION....................................................................Error! Bookmark not defined.9
BIBLIOGRAPHY...........................................................................................................................................................63
QUESTIONNARE.......................................................................................................Error! Bookmark not defined.
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CHAPTER# 1
INTRODUCTION
1.1. INTRODUCTION OF STUDY:

Microfinance funding’s a well-organized financial approach being disparaging "to support higher
credit investment levels and accent advancement".
Same as, Proclamations of Pakistan’s microfinance industry has been regulated to encourage a
tiered composition whereby the extent of control & direction is emphatically associated with the
budgetary course acknowledged to an Micro finance program in terms of approach to
distinguished sources of capitals (private investment, public deposits) and diversified business
channels and financial services (deposits, advances, remittances). Thus, Micro Finance Bank’s
which are recognized to provide the complete ambit of financial service (including remittances
and deposits) have the sheath-like regulatory essentials comparative to the non-deposit earning of
Micro finance programs. Directors also make a demonstration for the finite requirements of non-
bank Micro finance programs hinged on the allowance stated to those corporations seeming to
amplify their capital sources and lines of their business, to graduate into a more complex
budgetary and regulatory allowance across SBP’s accredited transmutations systems.
However many scholars perceive that it would be notional if the investment interest amount on
credit loans were lower, no one propound it as a specific concern. Thus, it may be that such
investment interest rates could be increased abundantly to cope up with the increased value allied
with credit lending to those with comparatively considerable possibility of defaulting, at the
same time still being subservient to the evidently so high rates of gain on unrealized investment
on every possible chance.
1.2. The Concept of Microfinance:

The abstract idea of microfinance and microcredit has stretched the whole world on every side as
a number of observance at it as the major indicator & tool in providing investment sustainability
to the less-developed one’s or poor with an objective of diminishing insolvency and convincing
development that encloses the poor communities. Muhammad Younus formally introduced
microfinance in the 1970s in Bangladesh city as an uncertified proposal that aimed to lower
poverty and beggary, existed at that time in the country. Grameen Bank is the one of the
strategies of Dr. Muhammad Younus, is an Economics professor of Bengal, who got
disheartened with eradiating the textbook world of economic models and moved out as a straight
instrument of development to approaching usage of finance by providing loans that were
dwarfish. Muhammad Yunus is also a well known originator of social tycoons the only
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unalloyed intuitions of social startup entrepreneurs constitutes on the historical ocassions that
shape the economy in a favorable environment. The main focus was issuing small loans i.e.; ($5–
$100) and the populations that were main target were the drained Bangladesh citizens sustaining
in distant & remote rural places (Robert, 2006 Robet H., S. III. (2006). Many researches have
been done to analyze the influence of microfinance. These researches predominantly focus on
three intrinsic areas.
The foremost looks at the influential analysis of microfinance on the poor living beings and those
in requisite of financial assistance, and the socio-economic determinacy of microfinance and
microcredit programs. Do microfinancial services in real means decrease the poverty and act as
major aid to the poor? Many research studies have undeniable unmethodical and divergent
results as outcomes and conclusions. Koenraad (2002 Koenraad, V. (2002). General view of
accustomed and new approaches towards influential assessment. Retrieved from document on a
microfinance reassuring organization, Europe based, notified some important conclusions of a
few of the major findings of enhancing effect as intensifying the tribal economy and aggravated
economic chances that could be availed.
Research of major studies by Sabstad and Chen (1996) from 32 conclusions of research on micro
firms & enterprise services and predominantly finance (some used a professed-experimental
perusal model), based on around 41 programs of all 24 Asian countries, Latin America and also
Africa with surveillance elaborated to economic safety of households, enterprises stabilities and
developments, and individual authority over capital raised sound positive modifications.
1.3. MICROFINANCE REGULATIONS AND TAXATION:

Main regulations by governing bodies of Pakistan are defined below
1.3.1.SBP’s Microfinance Institutions Ordinance 2001 (As amended

st
up to 1 July 2007):
The Ordinance that regulates the foundation, business performances of microfinance institutions
and Though it is profitable to encourage those performances for providing organizational,
financial and infrastructural aid and comforts to poor persons, particularly the women of that
class, for alleviating poverty and enhancing social welfare and economic rights by community
building; and so as the President is well pleased with existing position which provide it requisite
to take instant action; Therefore in relation with constitutions the President of the Islamic
commonwealth of Pakistan is pleased to make and promulgate the law with following
Ordinance:
1.3.1.1. PART I – PRELIMINARY:
The constitutions this part is comprised of short tittles, necessary definitions, and applications of
other different laws.
1.3.1.2. PART II - ESTABLISHMENT AND WINDING UP:

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It involves the rules regarding restrictions on advancement and regulating operations,
organizations names their functions and authoritative powers, the area’s where their main
operations will take place accordingly and the prohibitions imposed by SBP which they just
had to follow.
1.3.1.3. PART III – LICENSING:

This portion of ordinance includes the Summarized data of existing and new microfinance
institutions and their suspension & cancellation of licensing laws.
1.3.1.4. PART IV - REGULATION AND SUPERVISION:

The information regarding the institutions management and accounts and audit that could be
conducted by SBP at any time as a surprise check/visits. The accounts of the institutions should
fairly show the all details of their returns, liquidity and returns on which not maintaining
properly could lead such organizations to explanations on various investigations and inspections.
1.3.1.5. PART V – MISCELLANEOUS:

This last part of ordinance involves the penalties that could be imposed as charge on different
institutions for not following and non-disclosure of documented evidences for various purposes,
as per the instructions issued by the State bank of Pakistan.
1.3.2.Other Microfinance Institutions:

Whereas, other institutions like TIDP (Thar Institute Development program) & NRSP (National
Rural Support Program) undertook that they never and in true means do not follow any of the
SBP’s instructions regarding microfinance lending to any individual, they have been instructed
always by the head offices of their own, whomever they provide loan they simply ask their
management of head offices for whether to lend capital as microfinance to any individual and
even group or not.
1.4. THE EVOLUTION OF MICROFINANCE:

While Dr. Younus was striving in the mid 1970’s to show beyond doubt what was to happen to
Grameen Bank, thousands of miles apart in Venezuela and Brazil, amid other Latin American
countries, a student proffer movement was reinforcing their social hapenning organization
ACCION’s International11, entrenched in the early 1960’s. In beginning Grameen experiments
coexist with ACCION’s very first loans stated out to Brazilian entrepreneurs in 1970’s mid.
Though, it is not generally known whether there had been somewhat any connection between the
two concurrent pioneers. In 1989, ACCION in cooperation with Bolivian businessmen began
PRODEM - a non-profit corporation in Bolivia which was provided on conditions of small loans
to micro-organizations & enterprises. PRODEM in 1992 whirl off its microfinance strategy and
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constructed the first of all commercial bank in Latin America pursuing in microfinance,
BancoSol12.
Both Grameen model and BancoSol present two non-identical microfinance models with exactly
the same essence. However the Grameen model emphasis on the poverty mitigating and social
development side of microfinance, the Latin American model that’s characterized by BancoSol,
mix together the social goals and targets with financial sector enhancement, financial markets
amalgamation and commercialization. In 1997, BancoSol was the very first MFI to supply/offer
the dividends to its shareholders. Relative full peak growth of the Latin American financial
sector has apparently played a significant role in that aspect. In terms of international vogue, the
Latin American approach appeared to be conquering as MF in all over the world sectors,
moreover prodded by the dominant benefactors that stimulate the “financial systems and Ways”
which lead towards MF13. Around over the last sixty years of subsistence, Pakistan has explored
with many public and private dynamisms focused at diversifying the “frontiers of finance” and
providing access of sub standards to financial facilitation & services. International microfinance
strategy provided the encouragement as well as financial affluence (mainly donor funding) to
these attainments. In other instances, financial support for enormous scale industrialization was
such an ease with the expediation that the related advantage will spill down to the masses. The
emerging segment provides a summary of the essential progress related with the field roots for
finance approaches in Pakistan.
1.4.1. IN PAKISTAN:
The microfinance campaign in Pakistan escort a distinctive transformative evolutionary path
over the last decennium. The proceeding paragraphs prosecute around three development aspect
of the sector. Each aspect portrays approach of new institutional manifestations and structures in
the Pakistani microfinance sector. Source: SBP Presentation in a conference on “Microfinance in
Pakistan - Innovating & Mainstreaming” December 2004, Islamabad. The adjacent diagram
shows some of the highlights of this 30 year old history.
1.5. GOVERNMENT AND PRIVATE SECTOR ROLES IN

BOOSTING MICROFINANCE FUNDS:
The Government has intensified the need to develop endurable MFIs that can help to vindicate
risk as a valuable instrument to protect against any fickleness. Government’s overall
implemented policies to this sector as well as other sector’s has continued to encourage private &
public partnerships. The Government of Pakistan has also reorganized manifold Development of
Financial Institutions (DFIs), closed the Federal Bank of persuadable and whereas Agricultural
Development Bank has been restructured and re-launched as the Zarai Taraqiati Bank limited.
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For Future betterment & progress, however, is considerably imperiled by the sector's high
relying on subsidized funds to cover the imposed costs and maintain the functioning. To make
certain the supportability of the industry, Pakistani MFIs should raise on their unusually modest
cost set-up and focus on re-pricing their products and services to boost their financial income &
returns & become self-standing.
1.6. LIST OF GOVERNMENT AND PRIVATE MICRO

FINANCE SCHEMES:
 In recent years the list of the government offered schemes
 Small Business Finance Corporation(SBFC)
 Youth Investment Promotion Society (YIPS)
 Self-Employment Scheme (SES)
 Zarai Taraqiati Bank (ZTBL)
 Yellow Cab Scheme
 Pakistani Microfinance Network (PMN)
 Aga Khan Rural Support Program (AKRSP)
 Orangi Pilot Project (OPP).
 Rural Support Programs (RSPs)
 Orangi Charitable Trust (OCT)
 Sarhad Rural Support Program (SRSP)
 Baluchistan Rural Support Program (BRSP).
 Punjab Rural Support Program (PRSP)
 National Rural Support Program (NRSP)
 Urban Poverty Alleviation Program (UPAP)
 Network Leasing Corporation (NLCL)
 Pakistan’s Poverty Alleviation Fund (PPAF)
 Orix Leasing Pakistan (OLP)
 The Microfinance Bank (MFB)
 Habib Bank Limited
 The Bank of Khyber (BOK)
 Swiss Agency for Development Cooperation’s (SDC)
 First Women Bank (FWBL),
 Asian Development Bank (ADB)
 Barani Area Development Program (BADP)
 Malakand Area Development Project (MRDP)
 IFAD funded Dir Area Support Program (DASP)
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1.7. Research objectives:
1) To identify different Micro Finance Institutions in Hyderabad.
2) To identify main roles of Micro Finance Institutions.
3) Analyze terms and condition on which these Micro Finance Institutions provide funding
to the startup.
4) To evaluate how entrepreneurs are encouraged for funding.
5) To explore contribution of Micro Finance Institutions in GDP.
6) To identify developmental & social goals of Micro Finance Institutions.
1.8. Background of the Problem:

Banking sector in Pakistan is considered as a back bone of financial sector. Whatever the policies
are announced by State Bank of Pakistan, directly impacts this sector, but not all institutes follow
these. However, the consequences are ultimately always passed on to the end users of such
financial products. Whether the entrepreneurs avail or not, it directly affects the credit lending &
over all economical and financial industry. Previously many researches have been conducted to
identify the relationship between credit lending & its impact economically and on entrepreneurs
themselves. All the previous researches were based on either covering the one particular aspect
of study or mix of multiple aspects but not whole. None of the researches that we people have
gone through, has been found comprised of whole aspects and its direct impact as a whole in
microfinance or credit lending industry. Therefore, this research helps out to fulfill the gap which
is still left and examine the actual impact of credit lending by the institutes as a whole on
entrepreneurs.
1.8.1. Statement of Problem:

To find the influence of credit lending by different microfinance institutions to entrepreneurs and
the way that microcredit has impact on the entrepreneurial development and does this
microcredit provided, facilitates them anyway?
According with the institutes point of views during survey, from the year these micro financing
strategies have been announced in Pakistan, year-by-year and with the passage of time they have
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seen the drastic changes in increasing the awareness in people to avail these microcredits for
their families growth and developments which eventually results in economic growth as well.
Whereas, these institutes who offer these dwarfish loans also generate their revenues by lending
and which is one of the major element which helps them to increase their earning and a moderate
profitability somehow. This study would ensure how the entrepreneurs and Country economics
get affected when an entrepreneur avails any of the offered microcredits.
1.9. SCOPE OF RESEARCH STUDY:

This research is conducted to fulfill the mandatory requirement of MBA degree; hence, the scope
of this research is primarily limited to academic purpose. This study has been conducted to
examine the impact of microfinance institutions credit lending. This is the research study
conducted by us which would give the review on performance and impact of microfinance with
respect to micro funding. The main objective of doing this research is to explore the relationship
of Microfinance institutes and their different microcredit loan offering.
1.10. PURPOSE OF STUDY:

The purpose of this study is to explore & analyze the relationship between microfinance
institutes and banks and their credit lending impact on general public’s living lifestyles &
business expansions. The relation between these two would provide the clear picture of their
performance level and efficiency in credit lending. Furthermore, it would help the government to
understand how much it’s helpful for the economic situation of the country and its impact on
microfinance lenders and its revenues.
As no any previous research has been conducted on the empirical analysis of microfinance fund that
are provided by financial institutions for entrepreneurs in Hyderabad city, so the aim is to conduct
the research in this particular area.
1.11. LIMITATIONS:
The aim of this research was to incorporate different Micro financial banks and institutes to
understand the impact of microfinance on the living lifestyles of individuals and groups and even
the rules and regulations by SBP on their performances and functions to its full extent. In this
study the microfinance institutes are taken on the basis of either data availability which limited
the scope of the research. Whereas, the banks chosen on the basis of their Branch network have
reliably shortages of staff due to which were unable to acquire more of data through filled
questionnaires.
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Though this research topic is much more diversified; so this topic can be viewed by the reader
through different aspects. The other aspects that I have gone through while completing this
research were like in our women’s are always less encouraged or whether suppressed for
starting up of their own business for which they could get full fledge support in this era through
microfinance institutes and banks so as we can’t mainly focus particularly on any of its specific
sides in Hyderabad city.
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CHAPTER# 2
LITERATURE REVIEW
Entrepreneurial competencies consist of those that are stranded in components that are deeply rooted in surroundings of a
person's (qualities, individuality, attitudes, social responsibility and self‐representation) in addition those that be capable of being
acquired at work or during training as well as education that includes skills, information and experience said by Man and Lau
2005.
In a review of the literature, Jennings and Cash ,2006 communicate that there is a rock-hard base
of observed researches representing that for the majority part male and female business owners
do differ in some fundamental ways with respect to their:
 Societal and human resources

 Enthusiasm
 goals and achievement criterion
 growth orientations;
 strategic choices; and
 Utilization of financial capital.
While, this was suggested by Bird in 1995 that entrepreneurial competencies are definite as
fundamental distinctiveness at the same time particular understanding, motives, qualities, self
metaphors, societal responsibility and expertise that result in business enterprise beginning,
endurance and/or development. Menetal in 2002 said entrepreneurial competencies are the
entirety capability of the entrepreneur to carry out a job role effectively.
According to Barney, 1991, Grant, 1991, the resource‐based presumption of the company, the worth formation
procedure of company is exactingly interrelated to the ability of executives in obtaining and building assets. In
review by Fuller‐Love, 2006; Johnson and Winterton, 1999; Walker and Webster, 2006 there is a consent that
entrepreneurial competencies are conceded by persons, who start and make over their businesses along with a
widespread acknowledgment to facilitate the collection of expertise and competencies essential to run a undersized
company are quality wise in addition with quantity is unlike those that are needed in bigger organizations. Hunt and
Meech mentions in 1991 that at least in fraction for the reason that in an entrepreneurial perspect the center of
attention is is the individual.
Most researchers agree that executive and entrepreneurial competencies are multidimensional
constructs. In their overview of the competencies literature, Smith and Morse , 2005 examine
that there are two wide themes in management expertise.
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1. Serviceable expertise such as promotion and economics
2. Organizational expertise, like the talent associated to arranging and encouraging,

individual expertise and guidance.
The overindulgence liquidity is featuring to a kind of lending exhaustion from which most public
sectors seem to be going through unfavorable conditions. The circumstances are so inconsistent
that a number of banks are stated to be even less encouraging undersized depositors from move
toward them, at hand are a great quantity of absolutely bankable venture which are starving for
funding. The real reasons fundamental to the lending fatigue are flawed public money owing
strategy and the 'stay safe' way of thinking of public sector bankers.
Shahid Hasan Siddiqui Vol. 61, No. 4 ,October 2008 government claimed that Pakistan's
financial system has witnessed substantial improvement throughout the last years. The financial
division particularly have been termed as the largest accomplishment account in Pakistan. A
number of bank officers have in addition believed that the presentation of the financial sector in
Pakistan is the greatest in the state. Throughout the last few years, the full amount of expansion
rate of Pakistan's financial system in actual conditions is forty seven per cent which is somewhat
less than seven percent per annum, which is relatively better but this is only half of the story. We
have to observe the disintegrate of this development in actual conditions.
The agriculture sector has grown by 18.6 per cent in seven years. The population growth has
been fifteen percent in the last seven years which means there is hardly any growth in the
agriculture sector on which sixty seven per cent of our country’s population depends. The growth
in the monetary sector and the insurance sector is one hundred twenty percent and this is growth
of one hundred twenty per cent that has contribute to the regular expansion rate of less than
seven per cent as well.
Micro-finance loans contribute towards mitigation of poverty as well as plummeting the rate of
nonemployment. The allotment of lower preference toward micro-finance, as a result, not
understood. It is moreover excruciating to observe that banks, mainly banks with considerable
foreign stake, knowing entirely fine that business inconsistency as well as the present account
deficit were increasing.
M. Hasan-uz-Zaman, Islam and Business Ethics ,Institute of Islamic Banking and Insurance,
2003. Also banks have been allowing advance at discounted rates of interest in favor of export
purposes but in a number of cases, these loans have been misutilized and banks have been
unsuccessful to check diversion of these resources. The SBP in its 2014-15 Annual Report
compromise availability of concessional investment on exports is in addition an encouragement
to over demand the importance of exports so at the same time as to achieve greater funds at
subsidized rates which be capable of investing in further higher return opportunity such as real
estate, share market or also the national savings. Shahid Hasan Siddiqui, 'Fifty years of
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commercial banking in Pakistan', Pakistan Perspectives , December 1997. micro-finance loans
contribute towards mitigation of poverty and dropping the rate of nonemployment. The allotment
of low preferance to micro-finance is, for that reason, not understood. It is also hurting to watch
that banks and mainly banks with noteworthy foreign stake and knowing completely well that
business deficit and the present account deficit were increasing.
One of the most important functions of commencing sufficiently high paid-up capital necessities
is to make sure that holder of the entity have an sufficient stake in the institution to practically
supervise functions. A supplementary intention is to make sure that future extension can be
funded through own resources to a certain extent that relying on depositors’ finances. Higher
investment amounts are introduced in order to hold back opportunistic attitude of investors of
institutions, to stay away from unjustified risks.
Thus, adequate investment makes the incentives of owners companionable with those of
depositors. Having stated the reasons fundamental paid up capital necessities, it is also
significant to note that where these requirements exist, they are lesser than those for commercial
banks for the reason that the microfinance portfolio is not rigorously concentrated in a few large
loans that is to say credit risk is lower.
Originally there were 3 threads of indigenous finance in the history of finance. (a) Chit funds, (b)
moneylenders (c) merchant bankers. The micro finance sector not having a strong and
sustainable institution which is capable to accomplish the scope obligatory to cause important
impact. It is mostly because of the reason micro-finance is considered as a social service rather
than a financial service as the institutes extending micro finance loans do not separate them from
social service and work.
The Micro Finance Institutes also require financial know-how and have workforce from different
back grounds. This reason also contributes to the fact that Micro Finance Institutes and the
consumer fail to accomplish sustainability as Micro Finance Institutes focus on providing the
immediate support rather than take bigger picture and present long term access to financial
services, even when enormous funds are injected in the sector, three major insurance packages
were introduced to facilitate the undersized income borrowers; crop insurance and micro-
insurance, foreign business travel insurance, Since October 2007. The purpose was promotion of
the micro-insurance in the state, establishment of a regulatory framework, and provide the
employees specialized training .
State Bank of Pakistan believes micro-insurance will enhance the market dissemination of the
insurance sector from 0.67 percent of GDP to even more than 3 percent of GDP in the next
coming years. Micro- insurance is a fresh new concept in Pakistan, on the other hand, it widen
most rapidly. Main Micro Finance Institutes like Kashf, made it obligatory for their customers to
acquire credit-life insurance. This is connected to the loan in case of a deadly misfortune or death
of the customer so the burden of debt does not fall on family. The products are in-house designed
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to decrease loan risks at Kashf,. These insurance products serve up as a dual purpose, as this
reduces the credit risk associated with customer’s death dramatically firstly , as it pays of the
outstanding credit amount and it also protects the customers to some extent secondly, but still not
too great. Pakistan has mature money markets but they are comparatively narrow and shallow
compared to other money infrastructures in the state.
Microfinance supplier face a insufficiency of finances and funding resources and the available
sources are not stable. Only inadequate amount of medium-to-long run financial support is
available that too is subject to State Bank of Pakistan’s regulations. Commercial banks lend to
microfinance providers reluctantly as Micro Finance Institutes are not profitable, lack sufficient
expertise to handle finances and do not hold long track records. Finally, the Micro Finance
Institutes failed to generate sufficient money to generate their financial statements, spend in full
return giving projects or service debt. The basic cause was the loan pricing. As loans were
observed as more of a social product, providers did not price them according to their costs
relatively subsidize the loans for the customers.
Amer Saleem Khan & Stefan Platteau explains that collateral have to strive in order to resolve
the information irregularity that troubles and decrease the costs in favor of any lender. Banks
acquire objective and physical collateral because they understand that their access to information
regarding the borrower’s business and associated cash flows is restricted and limited so strict
borrower checking bring about costs.
On the other hand, Shirazi, 2012 explains that the lender remain assured that in case of borrower
fails to make payments, the value of collateral that is independent of the economic condition of
borrower which can be liquidated to cover up the default risk. However this risk coverage do not
apply in case of microfinance where the deprived cannot be able to present collateral. In this case
he lender has to rely on his estimations of the past repayment behaviour and future cash flow of
borrower to evaluate debt capacity as well as the capability and willingness to pay back loans.
Saleem and Zaman ,2011 says in their research that no one can better judge of financial behavior
of a potential borrower more than his family member, neighbour or a friend. This is mainly
helpful when his social circle itself is eventually a set of potential borrowers. Those prospective
borrowers give cross assurances taking accountability collectively as well as individually for the
reimbursement of their group members or fellow. Consequently social association when united
in guaranteeing loan mutually contracts it provides social collateral. This situation is to some
extent parallel to the several and joint liability clause in a contract of partnership.
Noreen, Zaheer, Imran and Saif, 2011explain that a strongest relationship is found between
living standard and microfinance in terms of access to better health, better education, care
facilities and better financial economical position. On the other hand, it is also observed that in
Pakistan microfinance has no important impact of microfinance on household assets conditions.
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A small number of authors have concluded that microfinance institutions in Pakistan are not
accomplishing the objectives of poverty mitigation and presented services are inadequate to
facilitate the poor to get rid of poverty.
Noreen et al. 2011 for instance concluded that microfinance in Pakistan has no significant
impact on assets conditions, housing and patterns of expenditures on households. Similarly, Ali
2007 observed that more than fifty percent of microfinance were misutilized and for that reason
have unimportant impact headed for poverty easing in the region.
Furthermore Ahmad, 2008 suggest that overall microfinance institutions shares in formal money
and financial sector in the country is low and are not capable to focus on their objectives on
improving the quality of living of the poor.
In Pakistan, very limited studies have examined its impact on entrepreneurship and majority of
them have stated positive impact on micro-enterprises, consumption, income, education, assets
condition and health of the poor. Similarly, Montgomery 2006 indicated that the credit program
of the Khushali Bank have helped the poor to enhance profits and sales of their micro-
enterprises, grant better education, enhance their income and better healthcare services. For
instance, Parpiev and Setboonsarng 2008, used Propensity Score Matching Methods to measure
micro-finance program and examine that the programs are having a significant positive impact
on livestock and agriculture production.
Wright, 1999, improvement in income level is said to be an essential indicator of poverty

mitigation and generally studies have examined the impact of microcredit on income level.
Although earnings are not the only way of getting relieve of poverty and there is a difference
between income improvement and poverty reduction. Income improvement temporarily can
decrease poverty but after expenditures the individual may again become poor, for that reason
micro-finance programs should have long term effects on poverty.
Therefore, the impact of microfinance should not be assessed on only income but also on other
important poverty indicators such as health care, nutrition status, expenditures, education,
empowerment and assets condition etc said by Chowdhury, Wright & Ghosh 2005
N. A. Mujumdar Nov. 21 - Dec. 4, 2008, The surplus liquidity is attributable to a kind of lending
fatigue from which most public sector banks seems to be suffering. The situation is so absurd
that some banks are also reported to be discouraging small depositors from reaching to them ,
there are a large number of absolutely bankable projects which are short of funding and finance.
The real reasons underlying the this are two that are the 'play safe' public sector bankers mind-set
and debt policy of unsound public,
Initially most of the studies examined development of microcredit by developing alternative

measures of overreach and reimbursement of loans. Such an approach is based on the estimation
that if overreach in case of number of borrowers was growing and loan repayments were made
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by the borrowers then microcredit sector was successfully performing refered by Khandker,
2009.
Schreiner, 2002 obseved most of the intitutions all adopted this approach of repeating
borrowers, increasing overreach and loan pay back was meant to be successful growth of
microfinance. Such an approach have limitations that it assess wideness of outreach as the only
characteristic of performance and difficult to understand other dimensions that indicate the
scope, depth, worth and economic health of the sector
A case and impact studies approach was adopted later in 1980s, this approach was even biased as
generally the most successful case studies were given and loans repayment was still used as the
major indicator of efficiency of an individual institution or collectively the overall sector. Those
studies underestimate costs and overestimate the benefits which portray the right picture of the
real conditions of poverty, Adams 1988.
More recently there is a transformation in the measurement of performance of the microcredit

sector. The new and extensively used technique is focused on a variety of levels of financial,
economic sustainability and aspects of performance indicators. It is argued that financial and
economic sustainability is essential for opportunity cost in the absence of microcredit institutions
may be high observed by Ledgerwood, 1998.
Khandker, 1998; Morduch, 1999 argue that the social objective of microfinance would be
undermined if microfinance is not support financially. Although transaction involving
commercial and the social objective of microfinance is broadly debated, it is pretty obvious that
the trade off can be decreased by adopting a development strategy which highlight improvement,
productivity and efficiency. Intensive development strategy of microfinance sector can ensure
the long term sustainability and also be cost effective for the sector, Craig and Cheryl, 2006.
Schreiner, 2002 explains that by giving two inputs of human resource and financial sources. The
major objective of a microfinance institution is to grant a certain level of financial services at
lowest cost and highest efficiency of the presented human resource. It also suggests that each
aspect of overreach is reliant on the other aspects of outreach. Out of the many aspects of
outreach mentioned, the first four indicators of outreach offers a good rough calculation of the
level and model of development in terms of depth, breadth, worth and scope of outreach of an
institution. The left over two dimensions of outreach engage cost and length of outreach, i.e. the
financial and economical performance, productivity and efficiency of a microfinance institution.
Farrington, 2000 in practice, most microfinance institutions adopt the policy of charging interest
and high price for their product to cover up cost incompetence and fail to get better their
financial and operational self-sufficiency
Brand and Gerschick, 2000 gives the ratio analysis approach used to review the growth pattern
and its effects on performance of the microfinance sector in the light of the indicators of
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performance. In this way the growth performance, pattern and sustainability matter of the overall
microfinance sector, its three groups and the top few leading institutions in the sector are
assessed. The analysis was based on Pakistan microfinance network and State Bank of Pakistan
data sources. Earlier to this time period data was sketchy and deficient which cannot be used for
trustworthy estimates and significant comparisons.
RAUF and TAHIR explains performance and growth of Microfinance Pakistan Economic and
Social Review shows the collective overall growth of women borrowers was slowed down from
ninety percent to forty seven percent between 2005-07 and the overall collective ratio of women
borrowers to full amount of borrowers is low also. The research reports data about strength of
outreach, it is visible that women borrowers are half of the total borrowers relative to 85 percent
women borrowers stated in South Asia PMN (2005). Among the three groups microfinance
institutions have shown much depth and 88 percent of their customers are women, however
Kashf was a leading institution working exclusively for women borrowers during 2003-04, it has
more recently made a persistent decline in the share of women borrowers. Micro Finance Banks
recorded the least market share in extending funding to the poor women and compared to
Khushhali Bank, First Micro Finance Bank has been more responsive to the needs of the women
borrowers. Furthermore it is observed that most of the microfinance providers are consent rated
geographically in the large urban areas and the allocation of services are irregular among rural
and urban areas. Rural/Urban outreach reveals that collectively overall outreach of the three
groups of microfinance enlarged in urban areas.
Pakistan Microfinance Network annual reports Chaudry, M. Ali and I. Muhammad, therefore
issue of tradeoff between sustainability and outreach could have been minimized if the sector had
fruitfully raised its productivity and efficiency, for which the sector needs to rely on thorough
utilization of their existing capacities in order to enhance outreach to a larger extent of
prospective borrowers. Dependence on costly extensive development strategy is probably to
unfavorably impact the future development of the sector.
Microfinance today is no longer limited to the granting of micro-credit to the poor but also the
provision of a range of financial products to all those excluded from the traditional or formal
financial system. One of the major axes of creation to help structure the financial support to
offset the relative weakness in equity. Distinguished conventional loans granted by commercial
banks, microcredit, even if different from a microcredit institution to another and from one
country to another, have common features. Generally, any microcredit is a loan of small amount,
short repayment period, granted to a poor, often a woman, who has no material guarantees to
mount an income generating activity. Cracknell 2000 shows that the financial institution has
shown that microcredit following the best practices can operate on the basis of granting short
time.
As part of studies on the access to financing, Blanchflower (2004) notes that the likelihood of
being independent is greater in men. This is confirmed by the results of the Group of Mutual
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Mutual (GEM) (Reynolds et al. 2002) that show that men are twice as involved in business
creation process than women. However, other studies question this idea of positive
discrimination. Indeed, Baydas et al. (1994) showed that in Ecuador, women suffer more
rationing problems micro-credit as men. Buvinic and Berger (1990) respectively shown in Peru
and Bangladesh, micro-entrepreneurs use less microcredit as their male counterparts. The
reasons for these differences do not reflect that women are less entrepreneurial than men. Indeed,
as the Bonnetier highlights (2005), it seems that women want as much as men start a business but
only a fraction of these women is ready to take the plunge. According Morduch (1999a) and
Mosley (2001), women represent 94% and 60% of the customers portfolio Gramenn Bank and
Banco Sol, two of the largest micro finance institutions in the world. Brandsma and Burjorjee
(2004) revealed that 60% of customers of member microfinance institutions. Women are
therefore considered by the micro finance institutionss as more serious, fair and credible than
men (Brau and Woller (2004). These mixed results suggest that gender has an influence on the
use of funding, but this influence can both be positive than negative. The assumption about
gender criterion has an effect on the granting of funds by the local development associations.
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CHAPTER# 3
RESEARCH METHODOLOGY
3.1. Research Methodology:
This chapter mainly focuses on the methodology and procedure used for this research study to
find out actually the major and empirical research problems so as along with the results and their
conclusions. The primary aim of conducting this research is to ascertain or find out the impact of
microfinance lending by different institutes and banking sector i.e. namely mentioned in
chapter#1. In order to achieve the objective of the study, quantitative research methodology is
used and primary data is taken as tool for this research through questionnaire Survey from
different micro financing institutes and banks to conduct this research study.
3.2. Procedure:
This research is comprised on total three stages. The very first stage involves selection of the
significant topic and industry. Second stage emphasis on gathering the primary data, through
questionnaire survey of different institutes, organizing the acquired data, literature review and
selection of the appropriate tools for conducting this study. The third stage includes analyzing
and interpreting the data of the applied software tests with the chosen variables and hypothesis
and those followed by drawing the conclusion and recommendations on the basis of findings of
the study.
3.3. Sample and Sampling Methods:
In order to properly interpret and analyze the impact of microfinance institutions on

entrepreneurs, researchers have used primary data along with secondary data. The source of
collecting primary data is the questionnaire survey by personally visiting the institutes and
randomly interviewed questions just for guaranteeing and satisfaction that the acquired data is
appropriate.
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The main concern of this study is to examine the growth Advances of entrepreneurs in relation
to the credit lending of Micro Financing Banks and Institutions. This study incorporates four
private sector commercial banks and one micro financing institute. Banks and institutes have
been selected on the basis of various considering parameters that includes wide branch network
in Hyderabad, and Number of staff in branches to assure the acquiring of sampling data. The
research is being conducted and based solely on the primary data and relevant literature review
gathered and its availability on the topic.
3.4. Statistical tool:

Statistical Packages for Social Sciences (SPSS) is used for analyzing the data and also to find
each variable, methodically descriptive statistics instruments are used to analyze the data. In
descriptive, regression, histogram charts and frequency tables are used, as we have used these
statistical tools in order to properly examine and determine the relation between both chosen
dependent and independent variables.
3.4.1. Unit of Analysis:

The unit of analysis are the employees working in Micro-finance institutes and banks of
Hyderabad city.
3.5. Application Software:

Statistical packages for social sciences (SPSS) and MS-Excel is used to organize gathered data
and tested it on software to find the accurate results for research.
3.6. Research Hypothesis:

Hypothesis for research is given below;
H1: There is significant impact of Suitability and flexibility of terms and conditions for
entrepreneurs.
H2: There is significant impact of MFI’s credit lending activities in entrepreneurial activities
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H3: There is significant impact of MFI’s in properly approaching through introducing various
programs, to entrepreneurs.
H4: There is significant impact of MFI’s in enhancing growth or helping the country
economically by making it stable.
H5: There is significant impact of contribution of MFI’s for development of societal and
the social goals.
3.7. 6 Key Variables:
Dependent Variables: MFI’s Applied Terms and conditions, entrepreneurial encouragement,

savings for betterment, impact on economic condition and social betterment are key independent
variables with relation to entrepreneurs as in whole.
Independent Variables: Independent variable is Micro Financial Institution’s-credit lending

facilities.
VARIABLES ABBREVIATIONS MEASUREMENT

DEPENDENT VARIABLES
Applied Terms Applied Terms and This is considered as an Asset for bank, also
and Conditions conditions based on the rules and regulations issued by
SBP in form of ordinances. It comprises on
personal loans, cash credits, tenor, repayment
methods and availing procedures along with
requirements.
Encouragement Encouragement This defines in which way it enhances the

individual and family lifestyles and whether is
capable of spreading positive words of mouth
within society to others or not.
Savings for Savings This defines that, Are they able to save or
betterment generate some profits or revenues from their
respective works to further enhance or expand
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their businesses.
Impact on Country’s economy It shows the study of effect on Inflation of the
Economic country and other Government subsidies on the
condition basis of acquired data from various MFI’s.
Social Social Betterment Society is able to flourish and it causes

Betterment awareness where mainly the needy and skilled
people reside.
INDEPENDENT VARIABLES
1-Micro MFI’s-Credit Lending This is the rate which is determined by SBP on
Finance-Credit Facilities quarterly basis to control the money supply in
lending an economy. This is taken as a benchmark for
facilities interbank lending and borrowing.
3.8. Conceptual Framework

Figure 1 conceptual framework.
Dependent Variables Independent Variable
Applied Terms and Conditions
Encouragement
MFI’s-Credit Facilities
Savings for Betterment
Social betterment
Impact on Economic Condition
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CHAPTER No. 4
DATA ANALYSIS AND INTERPRETATION
First, the analysis and interpretation of data for this research is based on a particular sample of
randomly met 150 peoples during questionnaire survey and the below interpreted data shows the
total number of respondents and mean statistic showing the average distribution. Standard
deviation and the curve of histogram charts shows that how much the data is skewed whether
right or on left side from the mean. Skewness shows the normality of data. Skewness values in
below table are to determine the relation between the chosen dependent and independent
variables for this research. Values in below table are for each variable because below each and
every question contributing in study is finely interpreted, which falls within the range so we can
say the data is normal, correctly entered and it is eventually not violating the normality of data.
4.1 Content and Face Validity:

The questionnaire was validated by selecting various constructs and ideas from a few research
articles. An internal validity using face validity and content validity was conducted and after the
useful suggestions of the researchers it was then again modified, after which the questions were
re-shaped in likert-scale form. Content validity was conducted by our supervisor who has
validated this questionnaire after examining the questionnaire and after modification suggested,
then it was then used for the final data collection.
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Q#1: Microfinance institutions & their different loan offerings, fill a needed
gap within the financial services providing industry
Cumulative
Frequency Percent Valid Percent Percent
Valid Strongly Disagree 3 2.0 2.0 2.0

Disagree 1 .7 .7 2.7
Neutral 24 16.0 16.0 18.7
Agree 61 40.7 40.7 59.3
Strongly Agree 61 40.7 40.7 100.0
Total 150 100.0 100.0
Total number of respondents were 150 so most of the respondents as shown in Frequency table
are agreed or whether strongly agreed so it means mostly admit that MFI’s fill the needed gap
within the services industry. Similarly the distribution of numeric data Shown in the histogram is
more like rightly skewed. So the interpreted data can be defined as Normal.
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Q#2: Do you agree that your institutions provide a reliable source of financial
support and assistance compared to other sources available for financing
Cumulative

Agree 93 62.0 62.0 64.0
Strongly agree 54 36.0 36.0 100.0
Total 150 100.0 100.0
Total number of respondents were 150 so most of the respondents shown in Frequency table are
agreed so it means most of them that their Institutes provides reliable sources for financial
support and assistance of entrepreneurs. Whereas the distribution of numeric data Shown in the
histogram is definitely rightly skewed. So the interpreted data can be defined as Normal.
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Q#3: Microfinance provide the services within communities that have limited
resources and few avenues for economic development
Cumulative
Valid Stongly Disagree 4 2.7 2.7 2.7

Disagree 10 6.7 6.7 9.3
Neutral 33 22.0 22.0 31.3
Agree 69 46.0 46.0 77.3
Strongly Agree 34 22.7 22.7 100.0
Total 150 100.0 100.0
Out of 150 respondents almost 69 are agreed with the question asked as shown in Frequency
table which means most of institutes prefer communities for micro loan offerings. Similarly the
distribution of numeric data in the histogram is somehow rightly skewed. So the interpreted data
can be defined as Normal.
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Q#4: Provides the whole credit access and proper financial services to develop
valuable income-earning businesses
Cumulative
Valid Strogly Disagree 4 2.7 2.7 2.7

Disagree 4 2.7 2.7 5.3
Neutral 14 9.3 9.3 14.7
Agree 52 34.7 34.7 49.3
Strongly Agree 76 50.7 50.7 100.0
Total 150 100.0 100.0
Total number of respondents were 150 out of which more are agree and strongly agree as
shown in Frequency table so it means the entrepreneurs get whole credit excess and proper
financial services to develop further their businesses. Similarly the distribution of numeric data
in the histogram is more rightly skewed. So the interpreted data can be defined as Normal.
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Q#5: Services provided allow people to save and invest available assets and
resources
Cumulative
Valid Disagree 2 1.3 1.3 1.3

Neutral 23 15.3 15.3 16.7
Agree 86 57.3 57.3 74.0
Strongly Agree 39 26.0 26.0 100.0
Total 150 100.0 100.0
Most of the respondents agree for this question too out of same 150 number of respondents,
Shown in Frequency table so it means mostly the services which MFI’s provide them allow the
people to invest in buseness for expansion and save also. So as the distribution of numeric data in
the histogram is more like rightly skewed. So the interpreted data can be defined as Normal.
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Q#6: Would it be wrong saying that Microfinance institutions primary aim is
acquiring their own institutions profitability, first
Cumulative

Disagree 43 28.7 28.7 55.3
Neutral 23 15.3 15.3 70.7
Agree 38 25.3 25.3 96.0
Strongly Agree 6 4.0 4.0 100.0
Total 150 100.0 100.0
Most of the respondents according to data gathered are disagreed that such institutions which
provide microfinances does not think of their revenue generating methods first but their priorities
are their customers first. Similarly the distribution of numeric data Shown in the histogram is
more like a left skewed.
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Q#7: In addition, microfinance institutions make modern technologies available to
borrowers in the form of credit cards, ATMs and mobile phone banking capabilities
Cumulative

Disagree 34 22.7 22.7 30.7
Neutral 5 3.3 3.3 34.0
Agree 45 30.0 30.0 64.0
Strongly Agree 54 36.0 36.0 100.0
Total 150 100.0 100.0
Total number of respondents were 150 so most of the respondents as shown in Frequency table
are agreed or whether strongly agreed so it means mostly admit that MFI’s uses modern methods
and technologies for repayment of their installments. Similarly the distribution of numeric data
Shown in the histogram is more like rightly skewed.
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Q#8: Your institution consider the business plan of an entrepreneur as its
collateral.
Cumulative

Disagree 57 38.0 38.0 62.7
Neutral 14 9.3 9.3 72.0
Agree 19 12.7 12.7 84.7
Strongly agree 23 15.3 15.3 100.0
Total 150 100.0 100.0
Most of the respondents are disagreed as shown in Frequency table and histogram chart which
self-defines that the institution does not consider its business plans collateral with those of
entrepreneur’s plans of investments.
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Q#9: Banks should decrease the interest rates for social entrepreneurs
Cumulative

Neutral 56 37.3 37.3 39.3
Agree 64 42.7 42.7 82.0
Strongly Agree 27 18.0 18.0 100.0
Total 150 100.0 100.0
Total number of respondents were 150 so most of the respondents as shown in Frequency
table and histogram chart are agreed which defines that the respondents think that the banks
should decrease or lower their interest rates for the ease of most of entrepreneur to avail such
microfinances that can prove to be major sources of income generation for them.
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Q#10: The MFI provide access to financial statements and make the charges
transparent to the clients
Cumulative

Neutral 28 18.7 18.7 20.0
Agree 72 48.0 48.0 68.0
Strongly Agree 48 32.0 32.0 100.0
Total 150 100.0 100.0
Yes, as per the data most of the respondents are agreed that they offer services of micro
financing but at the time of agreement mentions all the exact charges that they would have
to bear in return so therefore the data is skewed right side of histogram chart.
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Q#11: The flexibility of repayment is decided on the demand of clients.
Cumulative

Disagree 24 16.0 16.0 25.3
Neutral 13 8.7 8.7 34.0
Agree 59 39.3 39.3 73.3
Strongly Agree 40 26.7 26.7 100.0
Total 150 100.0 100.0
Most of the respondents as shown in Frequency table are agreed or whether strongly agreed so
it means mostly admit that MFI’s give flexibility to their clients for repayments of installments.
Similarly the distribution of numeric data Shown in the histogram is more right side skewed. So
the interpreted data can be defined as Normal.
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Q#12: Entrepreneurs are properly approached to get funding
Cumulative

Disagree 19 12.7 12.7 20.7
Neutral 24 16.0 16.0 36.7
Agree 55 36.7 36.7 73.3
Strongly Agree 40 26.7 26.7 100.0
Total 150 100.0 100.0
Most of the respondents said while interviewing that they create different teams for
approaching the needy entrepreneurs for causing awareness that they can avail these
microfinance offers and how and also the questionnaire data itself represents that most of the
respondents are agreed as shown in Frequency table and histogram chart.
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Q#13: The size of minimum installment amount easily affordable by most of
entrepreneur’s.
Cumulative

Neutral 10 6.7 6.7 12.0
Agree 77 51.3 51.3 63.3
Strongly Agree 55 36.7 36.7 100.0
Total 150 100.0 100.0
Total number of respondents were 150 so most of the respondents as shown in Frequency table are
agreed or whether strongly agreed so it means mostly admit that MFI’s size of installment loans
are easily affordable one’s. Similarly the distribution of numeric data Shown in the histogram is
more like right side skewed. So the interpreted data can be defined as Normal.
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Q#14: Interest Rate on microcredit is reasonable
Cumulative
Valid Stongly Disagree 10 6.7 6.7 6.7

Disagree 24 16.0 16.0 22.7
Neutral 35 23.3 23.3 46.0
Agree 67 44.7 44.7 90.7
Total 150 100.0 100.0
Total number of respondents were 150 so most of the respondents as shown in Frequency
table are agreed that the interest rates are also reasonable. Similarly the distribution of numeric
data Shown in the histogram is more like rightly skewed. So the interpreted data can be
defined as Normal.
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Q#15: Does entrepreneur’s gets the perceived benefit from microfinance funding’s
Cumulative
Valid Strongly Disagree 1 .7 .7 .7

Disagree 15 10.0 10.0 10.7
Neutral 23 15.3 15.3 26.0
Agree 74 49.3 49.3 75.3
Strongly Agree 37 24.7 24.7 100.0
Total 150 100.0 100.0
Total number of respondents were 150 so most of the respondents agree that the
entrepreneurs definitely get their perceived benefits.
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Q#16: Insurance is granted to the borrower in case of entrepreneur
Cumulative

Disagree 20 13.3 13.3 42.7
Neutral 9 6.0 6.0 48.7
Agree 47 31.3 31.3 80.0
Strongly Agree 30 20.0 20.0 100.0
Total 150 100.0 100.0
As the data was gathered from different banks and institutes so this data provided by the
respondents is a bit confused as there is a less difference in agreed and strongly disagreed options
and while interviewing most the people said that it depends on the conditions that whether MFI’s
should give insurance to entrepreneurs or not.
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Q#17: Microfinance is helping our country to meet developmental needs
Cumulative

Disagree 3 2.0 2.0 2.7
Neutral 10 6.7 6.7 9.3
Agree 87 58.0 58.0 67.3
6 1 .7 .7 100.0
Total 150 100.0 100.0
Here, most of the respondents are agreed that the schemes of microfinance do help the country
to meet the developmental needs. As it can enhance individual lifestyle if properly used.
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Q#18: Microfinance is helping in reducing the economic problems
Cumulative

Disagree 2 1.3 1.3 2.0
Neutral 7 4.7 4.7 6.7
Agree 84 56.0 56.0 62.7
Strongly Agree 56 37.3 37.3 100.0
Total 150 100.0 100.0
Most of the respondents are agreed that MF’s help in reducing the Economics problems of
the country. The data is totally right side skewed in histogram chart so the data is normal.
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Q#19: Microfinance funding have improved the living standards at both the
individual and household level
Cumulative

Neutral 7 4.7 4.7 7.3
Agree 88 58.7 58.7 66.0
Strongly Agree 51 34.0 34.0 100.0
Total 150 100.0 100.0
The data in the frequency table and histogram chart shows that the Respondents agree that the
individual lifestyle and the household level have been increased by the MFI’s micro finances.
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Q#20: Somehow has contributed in Advancement of the less developed areas
Cumulative

Neutral 24 16.0 16.0 29.3
Agree 60 40.0 40.0 69.3
Strongly Agree 46 30.7 30.7 100.0
Total 150 100.0 100.0
Respondents data shows that it is helping somewhat to advance the less developed areas of
the country by enhancing individual lifestyles and households.
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Q#21: Does it has a sound positive impact on inflation and other government
subsidies
Cumulative

Disagree 30 20.0 20.0 26.7
Neutral 26 17.3 17.3 44.0
Agree 57 38.0 38.0 82.0
Strongly Agree 27 18.0 18.0 100.0
Total 150 100.0 100.0
As per respondents mostly are agreed that it has impact on inflation and government subsidies as
in general it affects as a whole community, area’s and individuals life standards.
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Q#22: Microfinance is basically formed & running in your sector for societal &
social betterment.
Cumulative

Neutral 41 27.3 27.3 33.3
Agree 79 52.7 52.7 86.0
Strongly Agree 21 14.0 14.0 100.0
Total 150 100.0 100.0
Mostly respondents are agreed that it helps and contributes in societal and social goals for the
advancement and betterment of the country.
51 | P a g e
Q#23: Does your institution provide any social/emergency Loan
Cumulative

Disagree 44 29.3 29.3 54.0
Neutral 27 18.0 18.0 72.0
Agree 38 25.3 25.3 97.3
Total 150 100.0 100.0
Mostly respondents are disagreed with this because they said that they decide everything with
their clients at the time of agreement. So if there in the agreement there isn’t such condition to
provide so we refuse our clients straight forwardly.
52 | P a g e
Q#24: Bank provides any non-financial services related to social needs
Cumulative

Disagree 56 37.3 37.3 65.3
Neutral 30 20.0 20.0 85.3
Agree 16 10.7 10.7 96.0
Total 150 100.0 100.0
No, the data shows itself that MFI’s don’t provide such non-financial services to their customers
and while interviewing or discussing with the respondents we got to know that they really don’t
offer any non-financial services like providing ideas for which business to start and how one
can enhance his business activities or expand or widen his business.
53 | P a g e
Q#25: Bank agree to provide loans secured only by social collateral
Cumulative

Disagree 34 22.7 22.7 51.3
Neutral 12 8.0 8.0 59.3
Agree 48 32.0 32.0 91.3
Total 150 100.0 100.0
Mostly respondents are agreed the data in this frequency table and histogram chart is scattered
because we randomly choose the institutes and their practices to carry out their businesses were a
bit change.
54 | P a g e
4.2 Regression analysis:
Table: Model Summary

b
Model Summary
Std. Error of the
Model R R Square Adjusted R Square Estimate
1 0.598 0.358 0.353 0.04024
a. Predictors: (Constant), Micro Finance Institutions-Credit Lending Facilities.
b. Dependent Variable: Terms and Conditions, Encouragement, Savings, Impact on

Economic condition, Social Betterment.
The model summary shows the model fit. In the table model summary the value of R is
given which stands for the correlation of the variables. The value of R is 0.598 so it shows
somehow the positive relationship between the dependent variables with the independent
variables of this research work. The value of R Square shows that the variability in the dependent
variable is explained 0.358 by the variability in the independent variables (factors). It shows that
the linear combination of independent variables in the regression analysis predicts total variance
of dependent variable by 35.8% and 36% are other determinants which have an impact on
2
dependent variables, while the value of Adjusted R is 35.3%, Std. Error of the Estimate is also
called standard deviation of error term, and is square root of the mean square residual or error.
55 | P a g e
4.3 Table: Anova
b
ANOVA
Model Sum of Squares df Mean Square F Sig.
1 Regression .133 1 .133 82.358 b

.000
Residual .240 148 ..002
Total .373 149
a. Predictors: (Constant), Micro Finance Institutions-Credit Lending Facilities.
b. Dependent Variable: Terms and Conditions, Encouragement, Savings, Impact on

Economic condition, Social Betterment.
As average level of measuring significance level is 0.05. According to our results in

Table Anova shows the sign value of 0.00 which is under 0.05 which shows that there is an
association between the dependent variable and the independent variables, and this also shows
that there is high level of certainty with variables that we have selected and the hypothesis made
is proved to be authentic and reliable.
56 | P a g e
4.4 Table: Coefficients
Coefficients
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 (Constant) .572 .125 4.567 .000
Micro Finance .716 .079 .598 9.075 .000
Institutions
a. Dependent Variable: Terms and Conditions, Encouragement, Savings, Impact on Economic condition, Social
Betterment.
Here, the above table shows the dependent variables and the independent variables,
Unstandardized Coefficients B shows the change in independent variable will cause change in
dependent variable.
The Equation that defines our model is;
Yi= a + bx
 Where Yi indicates the output we want to predict.

 a is constant also called intercept
 b is the slope
 x defines the scope of the subject
57 | P a g e
Putting values in the equation:
MFI’s = .572 + .716 (Sum of all dependent variables).
Above table shows the value of unstandardized coefficient B is 0.716 which

shows positive relation between the chosen variables.
While T- Value shows the strength of relationship, between variables, if the t values is
more than 2 either positive or negative it shows that there is relationship between two variables.
Since in above table the value of t for variables is more than 2 so it depicts there is significance
relationship between both dependent and independent variables.
58 | P a g e
CHAPTER#5
DISCUSSION AND CONCLUSIONS
In this chapter, key findings of our work and study have been discussed. The goal of
this research was the empirical analysis of microfinance funds provided by financial
institutions for entrepreneurs to study the impact of microfinance on reduction of
unemployment through providing loans to the needy people in order to improve living
standards and increasing empowerment of poor and marginalized quarter of the society.
MFIs have covered a long distance of success by reaching millions of households

and needy people not only in their country of origin, but also around the developing
and underdeveloped world with thousands of branches serving worldwide.
This exponential and spectacular growth by the microfinance industry is just not because of
any market force but it has the dedication, service and hard work of many people and
organizations. Through their commitment and will for the noble cause to help the needy
people, they brought the forces together and gave the momentum to this cause, so that
everyone can live a life worth living as a human being and get the opportunity to have
something in life which they have not even thought of. Today the success of the activities of
MFIs needs no reference or introduction, as the lives of millions of unprivileged people
around the world explains and speaks for itself. Therefore, for the sake of our study results,
some previous studies have been referred to, as empirical piece of evidence.
The data provides information about different MFIs working in the local boundaries. The
analysis of data using the survey we had done, demonstrates main roles of Micro Finance
Institutions that are filling the needed gap by offering loans and financial services within
the industry, through the conducted survey results that 40% of respondents strongly agree
and 150 of the respondents agree that MFIs are helpful in this prospective .Most of the
people started their business by taking loan from MFIs as compared to other sources.
They were able to increase their income and provided not only with the financial help to
their families but also had positive impact on other factors of daily life. These poor
beneficiaries brought about a positive change to their financial and social situation and
59 | P a g e
started taking active part in the decision making process of the family and society. The
results obtained from our analysis regarding MFIs services within communities that have
limited resources 68% of the respondents agree that reveals that microfinance schemes
are highly sociated to build up of social and economic empowerment.
In addition, the analysis of the data obtained in this study indicates that the procedure,
terms and conditions of obtaining loans from MFIs is easier than conventional banking.
Based on our first hand experience of society back home and from our observation it can
be no requirement of strong bank account to take the loan from MFIs have made it
possible for everyone to join the formal monetary process. It is one of the most propitious
reasons to take loan from MFIs unlike the conventional banking where employment and
earning background was the first and foremost requirement.
Furthermore, results of this research portray that a significant portion of the respondents
deem the interest rate of micro-credit is reasonable despite the fact that the interest rate of
micro-credit is higher than commercial banking which we discussed in our chapter about
the theoretical framework and this idea was supported by the information we
gathered.Yet microfinance is becoming popular day by day among the poor people. There
are few reasons, which we can present here based on the experience we gathers while
conducting this study. Firstly, all poor people can get loan from MFIs.
Secondly, the loan taking procedure is less complex than that of commercial banks.
Thirdly, according to our findings most of the respondents were not
aware of the interest rate of traditional banking system owing to not having easy access
to information. What’s more! They cannot compare the interest rates between the MFIs
and conventional banks because of lack of education. Another underlying reason is that
the services of conventional banking are not available in the villages.
As was explained in the analysis section that income and savings are positively correlated
which implies that if income increases, the client’s ability for savings also increases. If
the savings increase, then there will be a positive impact on financial situation of the
family. Henceforth, increase in income as well as savings is mostly associated with the
60 | P a g e
establishment of economic empowerment because applied terms and conditions, income,
savings and employment opportunities are interrelated. The linear relationship among
these economic components was also found in our study.
The study also established the conception about operational assistance of MFIs that
affect positively to run the business successfully. This is also one of the reasons of
micro-credit scheme being popular. It is an effective mechanism, which assists both
lenders and borrowers. The borrowers get the guidelines from the MFI’s workers to
develop or to run the small business, which can hardly be expected from conventional
banks. This is another reason of poor people to become MFIs oriented.
Another impact of MFIs that was found to be important is the creation of employment
opportunity. From the study, it can be interpreted that MFIs affect the creation of
employment. It was found from our observation that most of the family members of
borrowers contributed to run the business directly or indirectly, unrelated to the matter
that which member was sanctioned the loan.
To sum up, it can be noticed from our overall analysis that there is significant impact of
microfinance activities on improvement of the economic development of the family not
only in financial term but also in social term. Amazingly, the relation between different
factors of society and family became evident and clear, which were being neglected and
not thought about during the period of existence of only conventional banking system.
From our study and research, we have come to the conclusions that there is a
noticeable and positive impact of microfinance activities on the economic
development, empowerment and social betterment among the society.
If one can help, a poor person to stand on his own that cannot only bring about a
revolution in their lives but also in the society. The dream of a healthy and educated
society with no discrimination and biased can be achieved through this simple thought,
the dream which seems to be coming true and becoming practical. The simple vision of
one man, Muhammad Yunus has taken the shape of the revolution and has shown the ray
of hope in the path of life to every human, irrespective of his background or status or
position. The hope of a life that no one will sleep hungry, no one will die due to lack of
61 | P a g e
medication, our children can read and write on their own and everyone will be the pillar
of the society.
62 | P a g e
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ITDG Publishing, UK
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66 | P a g e
QUESTIONNAIRE ON
“The Empirical Analysis of Microfinance Fund Provided by Banking
Sector to Entrepreneurs: Hyderabad FI’s Case Study”
Instruction: The following questions are asked to collect your views about the
micro financing that has been done at your bank. Please tick to indicate up to what
extent whether you agree or disagree with the statements given below:
Gender: □ Male □ Female

Age:
□ 18-25 □ 26-35 □ 36-50 □50 and above
Marital Status:
□ Single □ Married
Name of Organization: □ KHUSHALI □ FINCA □ NBP □ APNA BANK
□ U Microfinance □ MOBILINK MICROFINANCE □ TAMEER
Designation □ Manager □ Operation Manager □ Credit officer □ loan officer □ cashier
□ Branch banking officer □ System officer □ Customer Relationship Officer □ others

Requested to mention Time you responded at: ____________
MAIN ROLES:
Strongly Disagree Neutral Agree Strongly
No. Statement Disagree Agree
1 Microfinance institutions & their
different loan offerings, fill a
needed gap within the financial
services providing industry
2 Do you agree that your institutions
provide a reliable source of
financial support and assistance
compared to other sources available
for financing
3 Microfinance provide the services
within communities that have
limited resources and few avenues
67 | P a g e
for economic development
4 Provides the whole credit access
and proper financial services to
develop valuable income-earning
businesses
5 Services provided allow people to
save and invest available assets
and resources
6 Would it be wrong saying that
Microfinance institutions primary
aim is acquiring their own
institutions profitability, first
INSTITUTIONS TERMS & CONDITIONS FOR FUNDING:

1 In addition, microfinance institutions
make modern technologies available
to borrowers in the form of credit
cards, ATMs and mobile phone
banking capabilities
2 Your institution consider the business
plan of an entrepreneur as its
collateral.
3 Banks should decrease the interest
rates for social entrepreneurs.
4 The MFI provide access to financial
statements and make the charges
transparent to the clients.
5 The flexibility of repayment is
decided on the demand of clients.
ENCOURAGMENT FOR FUNDING:

1 Entrepreneurs are properly
approached to get funding
2 The size of minimum installment
amount easily affordable by most of
entrepreneur’s
3 Profit Rate on micro interest is
reasonable
4 Does entrepreneur’s gets the
perceived benefit from
68 | P a g e
microfinance funding’s
5 Insurance is granted to the
borrower in case of entrepreneur
CONTRIBUTION IN GDP:
1 Microfinance is helping our country to
meet developmental needs
2 Microfinance is helping in reducing
the economic problems
3 Microfinance funding’s have
improved the living standards at both
the individual and household level
4 Somehow has contributed in
Advancement of the less developed
areas
5 Does it has a sound positive impact on
inflation and other government
subsidies
DEVELOPMENTAL & SOCIAL GOALS:

1 Microfinance is basically formed &
running in your sector for societal
& social betterment.
2 Does your institution provide any
social/emergency Loan
3 Bank provides any non-financial
services related to social needs
4 Bank agree to provide loans secured
only by social collateral
Thank you!
69 | P a g e

18% Microfinance Funds Provided by Financial Institutions For Enterpreneurs

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THE EMPERICAL ANALYSIS OF MICROFINANCE

FUNDS PROVIDED BY FINANCIAL

SHUMAILA PATOLI (2K15/MBAH/100)

in partial fulfillment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

INSTITUTE OF BUSINESS ADMINISTRATION

SUPERVISOR: HOUNOURABLE TEACHER SAMIUDDIN SHAIKH

SHUMAILA PATOLI (2K15/MBAH/100)

in Institute of Business Administration, University of Sindh, Jamshoro, as particularly a

Signature of Supervisor: Internal Examiner: External Examiner:

____________________ ___________________ __________________

Director of Department: Dean of Department:

Tick the following:

We have had received outside assistance involving other supervisor’s contribution…….Yes No

I have acknowledged by submitting written statement (If Yes)……………………………Yes No

Name and Roll #. Signature

SHUMAILA PATOLI (2K15/MBAH/100) _______________

Microfinance funds provided by financial institutions have significant impact on entrepreneurs.

1.1. INTRODUCTION OF STUDY:

1.2. The Concept of Microfinance:

1.3. MICROFINANCE REGULATIONS AND TAXATION:

1.3.1.SBP’s Microfinance Institutions Ordinance 2001 (As amended

1.3.1.1. PART I – PRELIMINARY:

1.3.1.2. PART II - ESTABLISHMENT AND WINDING UP:

1.3.1.3. PART III – LICENSING:

1.3.1.4. PART IV - REGULATION AND SUPERVISION:

1.3.1.5. PART V – MISCELLANEOUS:

1.3.2.Other Microfinance Institutions:

1.4. THE EVOLUTION OF MICROFINANCE:

1.5. GOVERNMENT AND PRIVATE SECTOR ROLES IN

1.6. LIST OF GOVERNMENT AND PRIVATE MICRO

1.8. Background of the Problem:

1.8.1. Statement of Problem:

1.9. SCOPE OF RESEARCH STUDY:

1.10. PURPOSE OF STUDY:

 Societal and human resources

2. Organizational expertise, like the talent associated to arranging and encouraging,

Wright, 1999, improvement in income level is said to be an essential indicator of poverty

Initially most of the studies examined development of microcredit by developing alternative

More recently there is a transformation in the measurement of performance of the microcredit

3.1. Research Methodology:

3.3. Sample and Sampling Methods:

In order to properly interpret and analyze the impact of microfinance institutions on

3.4. Statistical tool:

3.4.1. Unit of Analysis:

3.5. Application Software:

3.6. Research Hypothesis:

3.7. 6 Key Variables:

Dependent Variables: MFI’s Applied Terms and conditions, entrepreneurial encouragement,

Independent Variables: Independent variable is Micro Financial Institution’s-credit lending

VARIABLES ABBREVIATIONS MEASUREMENT

Encouragement Encouragement This defines in which way it enhances the

Social Social Betterment Society is able to flourish and it causes

3.8. Conceptual Framework

Applied Terms and Conditions

Impact on Economic Condition

DATA ANALYSIS AND INTERPRETATION

4.1 Content and Face Validity:

Valid Strongly Disagree 3 2.0 2.0 2.0

Neutral 24 16.0 16.0 18.7

Agree 61 40.7 40.7 59.3

Strongly Agree 61 40.7 40.7 100.0

__________ _ __________