Microfinance Horizon

Author(s): Zahoor Khan and Muhammad Usman

Abstract:

The present study has been conducted in the year 2009 to find out the impact of Microfinance programs of Islamic Relief-Pakistan and Sungi Development Foundation (SDF) on the standard of life of poor marginalized masses. For this end a set of both primary and secondary data have been used. Secondary, time series data, ranging from 2002-2008 about the Disbursement of funds, number of beneficiaries [gender wise], financing methods, recovery rate, average loan size have been taken from the annual reports of Islamic Relief Pakistan and Sungi Development Foundation respectively. The efficiency and performance of financial programs have been evaluated on the basis of secondary data, by using various financial ratios i-e Return on assets (ROA), Net return Margin (NRM) and Beneficiaries to Employee Ratio (BER). The socioeconomic impacts of the said programs on the poor marginalized groups have been evaluated by a set of ANOVA and Binary logit models. Heterogeneity in area and earnings have been controlled by introducing several variables.

The study reveals that financial health, efficiency and sustainability indices of Islamic Relief Pakistan are better than its counterpart i-e SDF. The socio- economic positive impact on the livelihood of poor and marginalized segments of the society of the area under study is also far better than it counterpart. The conventional Microfinance program of SDF is superior than IR-Pakistan in the sense that it provides credit to relatively poor and ignored people. Findings of the study suggest that there is a great potential and greater chance of growth for Islamic microfinance organizations over here in Pakistan.

Based on the findings of the study the government with the help of Islamic Development Bank should initiate a comprehensive Islamic microfinance program, which is comfortable with the religious belief of Muslims to alleviate the absolute level of poverty and to improve the standard of life of extreme marginalized groups of the society.

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