Role of Microfinance in poverty alleviation in Khyber Pakhtunkhwa, Pakistan (Case Study of District Karak)

Abstract

This study investigates whether microfinance alleviates poverty in District Karak of KPK. The population of the study is all southern districts of Khyber Pakhtunkhwa, and the sample of the study is district Karak of KPK. The study selected 150 respondents from District Karak who had already availed of micro-credit facility and 5 staff members from the microfinance institutions. Both primary and secondary data have been used for this study, primary data was gathered through direct personal interviews and questionnaires while secondary data was collected through newsletters and published magazines. Ms. Excel and SPSS software has been used while analyzing the data. After analysis, it was found that Microfinance plays an important role to alleviate poverty by increasing household expenditure, and the income of the beneficiaries. Despite the significance of Microfinance, people are also facing some challenges like high interest rates and collateral from microfinance Institutions. Similarly, Micro fiancé institutions also face some challenges like loan recovery and most of the clients become the default. This research study concluded that microfinance has great importance to reduce poverty but needs to redesign the financial policies of the institution so that creditors don’t feel fear to pay the huge penalty in case of delay in payment.