Paper short abstract:

This study assesses how microfinance, when advanced to poor entrepreneurs helps them to fight poverty and inequality. Findings show that if the loans are utilised for entrepreneurial purposes, both poverty and inequality can be decreased over time.

Paper long abstract:

The survey is based on direct observations and primary data gathered from semi-structured interviews of 463 client households across 11 districts in the rural areas of the province of Punjab in Pakistan. Out of these, 22 percent were engaged in 'casual work', 14 percent were working as salaried employees, and around two percent were either retired, unemployed or unable to work. The remaining 61 percent were engaged in casual labour. By running Anova tests and correlating the type of activity respondents were involved in, the study finds that those borrowers who were running some form of a micro-enterprise seemed to fare better across a number of household-related characteristics. There were visible differences when they were contrasted with those who were salaried or were involved in casual labour.

Statistically significant differences were found in terms of the assets that the entrepreneurs possessed, such as the total value of livestock, the total value of household assets and the assets per person, etc. Similarly, those borrowers who were agricultural entrepreneurs seemed to be significantly at an advantage in terms of the household expenditure on clothing and footwear (when expressed as a mean and as a percentage of income and expenditure). When measured for the quality of food consumed and the stock of staple storable food supplies held at their dwelling, agricultural entrepreneurs showed significantly better standing as compared to all other types of borrowers (and even non-agricultural entrepreneurs). Findings suggest that if microfinance is invested in entrepreneurial activities, both poverty and inequality can be decreased over time.