The Role of Microbusinesses in Poverty Elimination: Punjab, Pakistan

This doctoral thesis investigates the critical role of microbusinesses in poverty elimination within the province of Punjab, Pakistan. The research delves into the challenges of poverty in the region, exploring its various types, causes, and the impact of microfinance initiatives. It examines the effectiveness of Small and Medium Enterprises (SMEs) and microfinance institutions (MFIs) as tools for poverty reduction, analyzing government efforts and sustainable microfinance programs. The study includes a comprehensive literature review, outlining the historical context of poverty, the evolution of microfinance models, and the credit delivery mechanisms employed. The methodology encompasses research questions, objectives, and a detailed analysis of the study area, specifically focusing on Multan, Khanewal, and Sahiwal districts. The thesis also incorporates a discussion of the Punjab Rural Support Program, the history of Pakistan and Punjab, and the selection rationale for the research area, providing a holistic understanding of the subject matter. The findings and recommendations aim to contribute to the development of effective strategies to strengthen microbusinesses and reduce poverty in the region.

Running head: THESIS 0
ROLE OF MICROBUSINESSESS IN POVERTY ELIMINATION
EXPERIENCE FROM THE PROVINCE OF PUNJAB - PAKISTAN
SEPTEMBER 17, 2019
STUDENT DETAILS:

THESIS 1
Contents
1. First chapter: Introduction...................................................................................................................3
1.1 Background of study....................................................................................................................5
1.2 Research Questions-..........................................................................................................................8
1.3 Research objectives-..........................................................................................................................8
1.4 Motivation of study...........................................................................................................................9
1.5 Problem statement.....................................................................................................................10
1.6 Research Gap...................................................................................................................................12
1.7 Significance of research...................................................................................................................12
1.8 Research rationale............................................................................................................................13
1.9 Contribution of research..................................................................................................................13
1.10 Scope of research...........................................................................................................................14
1.11 Dissertation structure-....................................................................................................................15
1.11.1 Introduction:...........................................................................................................................15
1.11.2 Literature Review:..................................................................................................................16
1.11.3 Research Methodology:..........................................................................................................16
1.11.4 Data Analysis and Findings:...................................................................................................17
1.11.5 Conclusion and Recommendation:.........................................................................................17
Chapter 2: Literature Review.....................................................................................................................18
2.1 Introduction.....................................................................................................................................18
2.2 Problem of poverty in Province of Punjab-Pakistan..................................................................19
2.1.1 Types of poverty.......................................................................................................................22
2.1.2 vulnerability and poverty..........................................................................................................23
2.1.3 Poverty and social capital.........................................................................................................25
2.1.4. Causes of poverty....................................................................................................................25
2.1.5 Measures to remove poverty-....................................................................................................30
2.2 Microfinance and its effectiveness...................................................................................................31
2.2.1 Microfinance......................................................................................................................31
2.2.2 Effectiveness of microfinance in elimination of poverty....................................................33
2.2.3 Role of microfinance institutions in poverty-elimination..........................................................34
2.3 Impact of small and medium enterprises on elimination of poverty................................................36

THESIS 2
2.4 Efforts made by government to reduce poverty from province of Punjab-Pakistan.........................42
2.5 sustainable microfinance programs and models-.............................................................................48
2.5.1 Microfinance programs in province of Punjab-Pakistan...........................................................48
2.5.2 Proposed Islamic microfinance models.....................................................................................52
2.6 Credit delivery mechanism or Microcredit-.....................................................................................55
2.7 Meaning and explanation of Variable-.............................................................................................59
2.7.1 Independent Variables..............................................................................................................60
2.7.2 Dependent Variable..................................................................................................................61
2.7.3 Mediating Variable...................................................................................................................63
2.7.4 Moderating Variable.................................................................................................................64
2.8 Theoretical framework.....................................................................................................................64
2.9 Conceptual framework-...................................................................................................................66
2.10 Hypothesis Development...............................................................................................................67
2.11 Chapter Summary..........................................................................................................................68
Chapter 3: Research Methodology............................................................................................................70
3.1 Introduction.....................................................................................................................................70
3.2 Overview of research planning-.......................................................................................................70
3.3 Underpinning Theories to Support the Hypothesis Relationship in Research Model.......................73
3.4 Theoretical Framework Using and Integrating the Underpinning Theory........................................75
3.5 Research philosophy........................................................................................................................76
3.6 Research approach...........................................................................................................................79
3.7 Research design...............................................................................................................................82
3.8 Research strategy.............................................................................................................................85
3.9 Data collection method....................................................................................................................87
3.10 Sampling method...........................................................................................................................89
3.11 Data analysis method.....................................................................................................................90
3.12 Ethical consideration.....................................................................................................................90
3.13 Chapter Summary..........................................................................................................................92
References.................................................................................................................................................93
Appendix.................................................................................................................................................101

THESIS 3
1. First chapter: Introduction
There are more than one billion Persons in all over the world, who live in the poverty (World
Bank data 2010). Therefore, ending the poverty is considered as very urgent task for all the
nations, specifically developing nations. In developing nations, a major cause of poverty
perceived is credit constraint forced upon the poor people. Coleman (1999) stated the situation of
poverty deception. According to this “the poor people frequently search themselves in the
malicious stage; making at the subsistence level creates it critical for accumulating savings and
assets, in this way creating it critical either for investing in productive sources or for getting
access to the credit in formal capital marketplace, resulting in lower productivity as well as
continued poverty”. Thus, rendering cheaper credit to deprived people or microfinance has been
regarded as the device for the financial development as well as reduction in poverty. In the
previous period, this has changed from the grass root’s movement to the international sector with
in excess of one hundred ninety million customers.
This thesis assesses the relation between poverty reduction and microfinance in Province
of Punjab-Pakistan. This paper analyses the hypothesis that access to microfinance as well as
household financial prosperity are definitely connected. When the literature review has stated
that the microfinance is very beneficial for microbusiness, the experiential finding differs highly
as the outcome of numerous methods utilised for accessing the influence of microfinance. In
assessing the financial health of the household, the research appear utilises the expenditure
pointers, involving household per real capital expenditure, actual food expenditures per capita as
well as non-food expenditures per capita. The access to microfinance is evaluated as the whole

THESIS 4
amount of borrowings of household. The thesis of this paper is that with the well-structured as
well as synchronised established microfinance system running in the proper judicial as well as
policies framework, the poor people can be capable for getting out of continuing poverty trap,
which outbreaks the lives. By means of the relevant literature review and conceptual framework
on the poverty, the microfinance services are important tools to address the issue of the rural
poverty in most developing nations. The significance of the microfinance in social-economic
expansion really has been established in practices by the decisions of United Nations to name
2005 as Microfinance’s global year.
Even though there are some practical evidence that microfinance may give contribution to
improve the life of rural deprived people. It is stated by evidence that the microfinance services
like saving, insurance, cash-transfer, along with entrepreneurial training are very attractive to
client’s class. The regulations as well as administration is deemed to constrain the operations of
marketplace however in a matter of the rural microfinance provision the rational amount of
supervision as well as administration is explored to be essential, specifically for securing the
mostly illiterate poor people, from moneylending rate of interest. In every chosen nation as well
as the other developing nations, the administrative control as well as supervision of microfinance
functions is existing, in the direct or indirect way. Subsequently, the microfinance has provided
upon larger level as the policy device for ending poverty as well as promoting the small
organisation’s development, as well as assessing the impact on reduction of poverty is essential
for make sure that restricted means have been spent resourcefully. Henceforth, the research paper
would assess the connection between poverty reduction and microfinance. Specially, the research
paper tries to give response whether and to what level the credit access can be helpful in
increasing financial welfare of household. The following parts are divided in 5 chapters. In the

THESIS 5
first chapter, the issue, purpose, area of study, research aim, objectives of research, as well as
research question are stated (Flick, 2015). In second chapter, the research is conducted by the
creation of the framework of research methodology. The current literature as well as study upon
microfinance and poverty is reviewed in third chapter. Also in chapter three, the microfinance
approaches in the different regions of the country, are selected randomly. The chapter four
assesses the microfinance’s contribution to the rural poverty lessening under numerous types of
the services that involve savings, credit, insurance, as well as amount transfer. In next part, the
researcher has provided recommendation to improve the microfinance services to assess the
whole impact on rural poverty to be realized (Alvesson & Sköldberg, 2017).
1.1 Background of study
The poverty is considered as one of the main issue that is challenged by Pakistan in the
present world. This is rightly said that poverty is a big fear for the people everywhere in the
world. Approximately, sixty per cent of population of Pakistan reside in rural areas. According to
an analysis, poverty has increased thirty per cent to forty per cent since the last periods. In this
way, it can say that about forty per cent of the population of nation is earning their living below
poverty line. In this way, the people are depressed of the fundamental needs of life. The
population of Pakistan lack Proper healthcare services and education. There is biggest question
on the survival of people in Pakistan. The population of Pakistan is forced to think upon its
survival because of no job and education. The biggest reason is poverty. The poverty in Pakistan
has risen because of various elements. The main element is absence of education. Various people
in Pakistan do not know about new and updated technologies to run the business. The people do
not have proper knowledge and understanding in rural area of Pakistan. This is the reason of big

THESIS 6
losses in business and low earning. This problem led poverty in Pakistan. It can see that
the import of Pakistan is more than in comparison of the export. The Pakistan does not have
more exports. Even Pakistan imports raw material from other countries. In this way, it is very
much essential to cut down import and to have advantages from the natural sources of country.
This will also give opportunity to the local people to earn. In Pakistan, the order situation as well
as current laws is also disheartening various depositors and the people, who have already made
investment, are not having any profit. In addition, the corruption is prevailing everywhere in the
country. It is overwhelming the rights of the common people. It is correct to say, “It is true that
no one is over laws, however, the powers may create someone imperceptible.” The same has
been applied in case of Pakistan wherever all the powerful people are plundering. No one will
raise the question upon it.
In Pakistan, the parents do not send their children to school. They chose the work of labour
for them. The parents are required by their children to support the family by generating income
for family. In this way, the children get started to earn in earlier age, in place of going school.
The circumstances where the people and families lack essential resources to be consumed, it may
create difficulties for them. They cannot fulfil their necessities such as clothing and food.
Poverty is a condition wherein people cannot afford fundamental requirements of human being
like shelter, foodstuff, clothes, teaching, nutrition as well as better health services. This paper
examines the relation of financial development to the poverty as well as unemployment. In this
paper, various approaches as well as strategies are discussed to reduce poverty and make the
development in economy of Pakistan. For the development, it is required that the industry should
be categorised into more productive industry and less productive industry. This is obvious that
more productive sector renders more job. By adopting the proper approaches as well as

THESIS 7
strategies, the less productive sector can become the more productive sector. In this way, the
different opportunities for the jobs would be enhanced. In this study, the researcher has outlined
the problem of poverty in province of Punjab-Pakistan. This study also state that it is essential to
solve this problem. There is big role of microbusiness in eliminating the poverty from Pakistan.
The SMEs are very useful in reduction of poverty for the reason that they generate opportunities
of job or unemployment. The main concern of the paper is how to strengthen the SMEs. This
paper also discusses that which strategies can be helpful to reduce poverty form province of
Punjab-Pakistan. This paper assesses the SMEs and its comparison with different medium and
larger enterprises. The Small and Medium Enterprises are best source of providing job
opportunities along with income generation opportunities. Poverty will never end until and
unless real solutions are implemented. There is the requirement of political stability. This paper
also underpins that government of Pakistan should think upon the economic justice. It is required
that there should be equity between men and women at every level or stage involving the
wages. The government should control the problem of overpopulation, as this is one of the key
causes of poverty in a nation. Further, this paper also outlines on the significance of
industrialization to be promoted along with equal allocations of means.
1.2 Research Questions-
This thesis is specifically aimed at the assessment of role of microbusiness in poverty
elimination from the province of Punjab – Pakistan. Following are the general research
questions-
 Why the poverty is a problem in province of Punjab-Pakistan?
 What is meaning and effectiveness of microbusiness?

THESIS 8
 What is impact of SMEs on poverty in area of Punjab-Pakistan?
 How government of Pakistan makes efforts to reduce poverty?
 Which sustainable programs and models are helpful in reduction of poverty?
 What are the models of different credit delivery mechanism?
1.3 Research objectives-
It is important for a researcher to assess specific research objective. A main motive is to find
out significance of microfinance in end of poverty. The specific motive of thesis is to evaluate
impact of microbusiness in poverty elimination from province of Punjab – Pakistan.This section
helps to successfully fulfil the objectives of research. A major aim of research is to analyse a role
of microfinance in reduction of poverty (Quinlan, et. al, 2019). There are some general
objectives of research. They are discussed as below:
 To discover the problem of increasing poverty in area of Punjab-Pakistan
 For understanding the meaning and effectiveness of microfinance
 To know the influence of small & medium enterprises upon poverty in province of
Punjab-Pakistan
 To know efforts made by government in reducing poverty
 To explore sustainable microfinance programs and models
 To discover the mechanism of credit delivery
1.4 Motivation of study

THESIS 9
This study evaluated the role of microbusiness in elimination of the poverty from
province of Punjab-Pakistan, a topic that is relatively unexplored in a literature section. This
section sets the background for the researcher to do research about the concern of research. It
also renders the motivation to do research regarding the problem of research. It also sets the
outline for researcher to renders the framework of further research. This section discusses the
three factors that motivate the researcher to conduct the research for particular concern. The first
factor is that the problem of poverty is increasing in province of Punjab-Pakistan over the past
decade. Another factor is that there is a significance of SMEs because almost ninety per cent of
the overall business is made from Small and Medium Enterprises (microbusiness) in Pakistan. A
last factor is poor economy of nation. There is poor economy of Pakistan because of increasing
poverty. Henceforth, these three factors have motivated investigator to do research to discover a
role of microbusiness in elimination of poverty from the province of Punjab-Pakistan. Further, it
is also found by researcher that the research has been already conducted on relation between
poverty and role of Small and Medium Enterprises (microbusiness) in nations like India.
However, this is motivation for an investigator to do research for establishing connection
between Small and Medium Enterprises (microbusiness) in province of Punjab-Pakistan and
poverty. Additionally, an importance of finding measures, techniques, programs, and models to
eliminate poverty from Pakistan also encourages researcher to conduct research effectively and
properly.
1.5 Problem statement
Poverty is biggest problem that is faced by Pakistan in present time. This problem is
interrelated with various factors that are having indirect relationship along with direct relation

THESIS 10
with poverty (Al-Shami, et. al, 2017). This paper is good try to analyse as well as discuss the
elements related to poverty. This is great contribution from the researcher to do best for the
nation. Poverty does not affect only the Pakistanis; however, this has the effect on other nations
of world. Today it can see that people of Pakistan are searching job and earning sources
everywhere in the world. They get involvement in illegal activities. It can also see that some of
them are involved in terror activities. In this way, it is very risky for other nations of the world.
In addition, Punjab has lowest poverty rate in Pakistan as it is divided into southern parts as well
as northern parts of the province. Sialkot is in the wealthy northern part of province. On the other
hand, Rajanpur District is in the southern part of province. In Sialkot, the poverty rate is 5.63 per
cent. In contradiction of this, the poverty rate of Rajanpur is 60.05%. In this way, as per the latest
report of the World Bank, global poverty ratio is improving little by little in the area. There is not
any exemption of this.
This section explains the main issue of poverty in province of Punjab-Pakistan. With a help
of literature, it can see that there are some certain main issues as well as challenges faced by
Pakistan. The study outlines the problem of poverty ‘the part of microbusiness in end of
poverty’. It also states various helpful approaches as well as strategies to end the poverty. This
study also signifies the efforts made by Pakistan government to reduce poverty from province of
Punjab-Pakistan. The basic responsibilities as well as obligations of the nation are to fulfil the
fundamental requirements of the individuals. The fundamental requirements of people are
shelter, foodstuff along with clothing. While the requirements of human being are not fulfilled,
then it can be biggest problem. This problem is considered as socio-economic issue. Pakistan is
facing these problems at great level. The actual concern is not the presence of the existence of
this problem in the societies. However, an extent to which they are given attention as well as

THESIS 11
resolved. When these problems are not met timely, then it can be resulted occurred into the form
of different behaviour, drug-abuse, trafficking, corruption, deficiency, illiteracy, as well as
various social ills. As for as the large scale enterprises are taken into consideration, they are in
main position because of the capital however if the financing issue of Small and Medium
Enterprises are removed. They may execute much better in comparison of large-scale enterprises.
It is only possible if the government of Pakistan follows the strategies, policies as well as
approaches for strengthen of Small and Medium Enterprises in Pakistan. Various authors and
economists have written so much over the problem of poverty in Pakistan and best possible
strategies to reduce poverty from province of Punjab-Pakistan. However, in Pakistan the problem
of poverty is still same. The poor people always remain poor there. In this way, the Poverty is of
great concern in Punjab-Pakistan as this is the developing nation. The problem of poverty is very
alarming as it is low figure ever noted in a history of the nation.
1.6 Research Gap
There are certain limitations of research that researcher faces while conducting research.
A research gap generates difficulties for doing research in some efficient manners. There were
number of citizens of province of Punjab-Pakistan, who counterattacked in relation to research
concern. There are some people who were not so interested or less interested in taking
participation. In addition of this, the absence of sample size and absence of appropriate data
collection method, the researcher faces so many problem to analyze the role of microbusiness in
eliminating poverty from affected areas of Punjab-Pakistan. In relation to the observation
technique, the introvert persons as well as extrovert people were not capable to share some
innovative ideas in relation to research concern. The beliefs of persons were covered by the