1. Impact of Microfinance on Poverty Alleviation
Presented By:
Dipti Dhungel Nitesh Khatiwada
Bipana Subedi Manish Dash
Ranjita Mainalai Jamuna Acharya
4th March, 2016

2. Poverty People having daily income less than $2
Not having access to basic requirements
25.2% live below poverty line
Nepal ranked as 12th in South Asia

3. Sources of Poverty Lack of Income Vulnerability to Income Fluctuations
Lack of Access
Powerlessness

4. Microfinance
Microfinance is the provision of access to high-quality and affordable financial services to low-income households
Intended objective of Micro finance
Income-producing activities
Building assets
Stabilizing consumption
Protecting against risks
Fighting against poverty
(Brau and Woller 2004:3, Duvendack et al. 2011, Robinson 2001, Yunus 1999)

5. Microfinance It principally encompasses Microcredit Micro Savings
Micro-Insurance
Money Transfers for the poor

6. How Microfinance helps in Poverty Alleviation
Source: Systematic review of quantitative evidence on the impact of microfinance on the poor in South Asia, 2015

7. World Scenario
Poverty reduction was institutionalized in 1944, with the establishment of the World Bank at the birth of Bretton woods system.
MFIs are contributing significantly to poverty reduction in Bangladesh and other South East Asian countries by creating income generation and self-employment opportunities for the poor people by providing microcredit.

8. Poverty reduction through Microfinance

9. Emergence of MF in Nepal
Started as rural credit in 1956
Establishment of cooperatives by government in 1963
1976, launching of a Sajha Program
Small farmers development bank by ADBN in 1975
Enactment of cooperative Act in 1992

10. Emergence of MF in Nepal
Initiation of priority sector lending by NRB
Establishment of western and far western grameen bikas banks in 1992
Nirdhan and CSD launched microfinance program in and1994
Enactment of financial intermediaries Act in 1998

11. Emergence of MF in Nepal
Introduction of BAFIA, classified microfinance as class D banks
Establishment of RMDC and SKBBL in 1998 and 2001

12. MFIs in Nepal D Class Development Banks FINGOs
Swabalamban Bikas Kendra
Development Project Services Nepal (DEPROSC Nepal)
Jiwan Bikas Samaj
Sahara (Cooperative Society)

13. MFIs in Nepal
A Class Commercial Bank directly involved in Deprived Sector Lending
Bank of Kathmandu
Laxmi Bank Limited
Prabhu Bank
NMB Bank

14. MFIs in Nepal D Class Development Banks FINGOs
Swabalamban Bikas Kendra
Development Project Services Nepal (DEPROSC Nepal)
Jiwan Bikas Samaj
Sahara (Cooperative Society)

15. MFIs in Nepal Basis of operation Wholesaler Retailer
Rural Self-Reliance Fund (RSRF)
Rural Microfinance Development Center (RMDC)
Sana Kisan Bikas Bank Ltd (SKBBL)
National Cooperative Development Bank (NCDB)
Commercial Banks
Retailer
It includes all 41 microfinance institution.

16. Microfinance Vs. Poverty
Microfinance has helped in reduction of Poverty
A Story from Kathmandu
“Microfinance leads Sharmila out of Poverty Trap”
Source: State of Microfinance in Nepal, 2009

17. Change in Wealth Status
Before
After
Average Annual Income (Rs.)
8723
9417
Average Loan from Money Lenders(Rs.)
479
Average Landholding size (Ha)
0.396
0.394
Type of House Roof
Concrete
Corrugated Sheet
Slate
Thatch
Not Specified
12.1
27.1
15.9
36.1
8.8
18.6
35.3
15.0
19.8
11.3
Household Possessing Radio (%)
50.5
55.1
Household Possessing Television (%)
19.6
28.4
Household Possessing Hand pumps (%)
13.8
20.3
Source: Impact Evaluation of Microfinance Programs in Poverty Reduction

18. Change in Principal Occupation
Before (%)
After (%)
Agriculture Farming
56.0
48.0
Wage Labor
13.8
11.9
Service
8.0
5.6
Petty Trade
11.1
23.2
No Occupation
2.3
2.5
No Response
3.1
Trade allows high frequency of cash inflow, affects income
Source: Impact Evaluation of Microfinance Programs in Poverty Reduction

19. Change in Food Sufficiency
Before (%)
After (%)
Less than 3 Months
15.9
7.7
3-6 Months
43.8
25.9
6 Months – 1 year
36.7
49.0
Surplus
3.5
17.3
Source: Impact Evaluation of Microfinance Programs in Poverty Reduction

20. Change in Literacy Status
Before (%)
After (%)
Illiterate
48.0
10.2
Literate
52.0
89.8
Change in Education Level
Education Level
Before (%)
After (%)
Non Formal 46
218
Primary 68 73
Lower Secondary 57 60
Secondary 42 43
SLC 23
Above SLC 13
Source: Impact Evaluation of Microfinance Programs in Poverty Reduction

21. Change in Schooling of Children
Before (%)
After (%)
Sending Son to School
80.4
84.1
Sending Daughter to School
76.4
Type of School
Government
Private
85.2
14.8
85.1
14.9
Source: Impact Evaluation of Microfinance Programs in Poverty Reduction

22. Change in Consumption of Nutritious Food
Before (%)
After (%)
Fruits Consumption
Once in Less than a week
25.5
30.9
Once in more than a week but less than a month
32.4
34.7
Once in more than a month
42.2
34.4
Meat and Fish Consumption
34.2
35.3
38.4
27.3
22.5
Egg Consumption
23.8
28.2
Source: Impact Evaluation of Microfinance Programs in Poverty Reduction

23. Change in Social and Political Participation
Before (%)
After (%)
Membership of Social Organization
7.8
9.8
Attending Meeting of Social Organization
6.5
7.5
Position Held in Political Parties
2.3
2.5
Elected/Nominated in Local Government Bodies
1.5
Source: Impact Evaluation of Microfinance Programs in Poverty Reduction

24. Changes Decision making role in Family Self Confidence
Awareness of Social Issues
Awareness in Health Issues and Sanitation

25. Poverty Alleviation in Nepal
Microfinance is an effective tool for bringing positive impact on the economic status of the respondents along with their family members (Adhikari and Shrestha, 2013).
Microfinance programs have made significant contribution to reduce poverty (Acharya, 2011).
Micro-finance leads to social and economic changes in the borrowers after the participation in the programs (Sharma, 2010).
There is changes in the wealth status after participation in the microcredit program (Center for Policy Studies and Rural Development, 2004).

26. Findings
In Malasia: Microfinance has positive impact on household income of women borrowers who spent three years in the scheme as compared to new borrowers (Samer, Majid, Rizal, Muhamad, Halim, and Rashid, 2015).
Africa: There is also no evidence of substantial gains along other dimensions of welfare, such as education and health in less then three years period (Banerjee, 2013).
Africa: Poverty reduction can be achieved through alleviation measures through the use of microcredit and entrepreneurship development (Journal of Financial Services Marketing, 2011).

27. Findings
The number of microfinance institutions has a negative impact on the Gini index in Central African countries (Journal of Development and Agricultural Economics, 2011).
Africa: Extensive use of microfinancing has shown to reduce extreme poverty among the users of microcredit. (The Clute Institute International Business & Economics Research Journal, 2009).
Bangladesh: Microcredit may be a more effective remedy against poverty and vulnerability if it is complemented by other interventions (Zaman, 2004).

28. Findings
Pakisthan: Microfinance Scheme help people to improve their living standard and provide them financial opportunity to expand their business (Ayuub, 2013).
India: Access and efficient provision of microcredit can enable the poor to improved quality of life (Bansal and Bansal, 2012).
Bangladesh: Accessto microfinance contributes to poverty reduction, especially for female participants, and to overall poverty reduction at the village level (Khandker, 2005).
Bangladesh: Study indicates that the extent of positive impact has not been equal for all program borrowers (Azad, 2004).

29. Conclusions
Despite the apparent success and popularity of microfinance there has been mixed evidence on its effects on the social and economic wellbeing of the poor (Duvendack et al. 2011, Stewart et al. 2010, 2012).
Microfinance is certainly not a medicine for poverty, it has proved itself as a useful tool to fight against poverty
It has provided important contribution in the country like Nepal , Bangladesh and Malaysia but it is not fruitful in the most undeveloped countries of Africa

30. Conclusions
Impact analysis of microfinance suggests that the majority of borrowers who already have some assets (or business skills and education) are more likely to succeed
Development of microfinance has improved the living standard of rural people of Nepal
Financial system approach and poverty lending approach both are beneficial for the poor

31. Conclusions
Attempts to examine the impacts of microfinance (Gaile and Foster 1996, Goldberg 2005, Odell 2010, Orso 2011) have shown that the methodology, tools and techniques used for assessing the impact suffer from several drawbacks me recent studies have shown its significant effect on poverty using household survey data.
Using panel data at both participant and household levels in Bangladesh, Khandker (2005) confirms that microfinance programmes have a sustained impact in reducing poverty among the participants, especially females and a positive spillover effect at village level, thus contributing to national economic growth.

32. Conclusions
Other studies have shown that microfinance institutions (MFIs) have not reached the poorest of the poor in Asian countries (Weiss and Montgomery, 2005) or in Bolivia (Mosley, 2001).
Thus the relationship between microfinance and poverty is still in question.

33. Thank You!!