Impact Of Microfinance Policy On Small Enterprises Finance Essay

A study was conducted through questionnaire in order to happen out the impact of microfinance policy on little endeavors. For this intent little enterprisers were contacted. All the the informations related to the enterpriser is collected from The Bank of Khyber Peshawar cantt subdivision and Sarhad Rural Support Programme ( Defense Head Branch ) . Due to clip restrictions and deficiency of easy handiness of client ‘s responses, merely Twenty Five ( 25 ) clients were asked who respond to a set of inquiries. The consequences of the study are presented in this chapter.

4.1 Gender-wise distribution of Respondents

Table 4.1 Gender-wise distribution of respondents

Gender

Number of Respondents

Percentage ( % )

Male

24

96

Female

1

4

Entire

25

100

Figure 4.1 Gender-wise distribution of respondents

The entire figure of respondents is 25 ( 25 ) in which merely one respondent is Female that is 4 % of the sample informations and the remainder of 24 ( 24 ) respondents are Male 96 % of the sample informations.

4.2 Age of Respondents

Table 4.2 Age of Respondents

Age Group

Number of Respondents

Percentage ( % )

18-25

4

16

26-35

9

36

36-45

5

20

46 & A ; above

7

28

Entire

25

100

Figure 4.2 Age of Respondents

As illustrated in the Table and Figure 4.2, the bulk of the micro-finance borrowers are from the age group 26-35 ( 36 % ) and 46 & A ; above ( 28 % ) .Whereas, 16 % are from the age group of 18-25 and. 20 % are from 36-45 of the sample informations.

4.3 Qualification of Respondents

Table 4.3 Qualification of Respondents

Qualification

Number of Respondents

Percentage ( % )

Matriculation

12

48

FA/FSc

6

24

BA/BSc

6

24

MA/MSc

1

4

Entire

25

100

Figure 4.3 Qualification of Respondents

The above Table & A ; Figure 4.3 Most of the respondents consisting 48 % of sum are merely metric. Merely one respondent has higher making of MA. And the staying FA/FSc & A ; BA/BSc both were 24 % of the sample informations.

Nature of Business

Table 4.4 Nature of Business of Respondents

Nature

Number of Respondents

Percentage ( % )

Whole sale

1

4

Retail

20

80

Servicess

4

16

Entire

25

100

Figure 4.4 Nature of Business of Respondents

The above Table & A ; Figure 4.4 shows that Majority of the Respondent ‘s are running Retail concern. This Respondent ‘s represent 80 % of entire sample informations. However, there is merely one respondent running sweeping Business and the staying four respondents ‘ represent 16 % of the sample informations are supplying services.

Form of Business

Table 4.5 Form of Business of Respondents

Form of Business

Number of Respondents

Percentage ( % )

Sole proprietary

25

100

Partnership

0

0

Entire

25

100

Figure 4.5 Form of Business of Respondents

The above Table & A ; Figure 4.5 shows all of the respondents are exclusive owners that are 100 % of the Sample Data. There is no such respondent running a partnership concern.

Purpose of Borrowing

Table 4.6 Purpose of Borrowing

Purpose of acquiring loan

Number of Respondents

Percentage ( % )

Get downing a new concern

5

20

Stability of bing concern

3

12

Expansion of bing concern

8

32

Others

9

36

Entire

25

100

Figure 4.6 Purpose of Borrowing

The above Table & A ; Figure 4.6 shows Majority of the Respondent ‘s ( 36 % ) borrowed for other Purpose that is for Purchase of Raw Material or Purchase of Inventory etc. while 8 Respondent ‘s are borrowed for the enlargement of bing concern and 3 Respondent ‘s are borrowed for stableness of bing concern i.e. they borrowed for the intent of working capital. While five Respondent ‘s i.e. 20 % of the sample informations borrowed for get downing new concern which shows the Employment coevals through Micro-Finance.

4.7 Amount of Loan Borrowed

Table 4.7 Amount of Loan Borrowed

Sum Borrowed ( Rs. )

Number of Respondents

Percentage ( % )

10000 to 20999

5

20

21000 to 30999

6

24

31000 to 40999

6

24

41000 to 50000

8

32

Entire

25

100

Figure 4.7 Amount of Loan Borrowed

The above tabular array & A ; figure 4.7 clearly indicates that The Organizations have lent from Rs. 41000 to Rs. 50000 to bulk of the respondents ( 32 % ) , followed by the sum from Rs. 21000 to Rs. 30999 and Rs. 31000 to Rs. 40999 lending 24 % . Merely 20 % i.e. five respondents borrowed from Rs. 10000 to Rs. 20999.

4.8 Respondents Satisfaction from involvement rate

Table 4.8 Respondents Satisfaction from involvement rate

Degree of Satisfaction

Number of Respondents

Percentage ( % )

Not satisfactory

9

36

Low satisfactory

10

40

Satisfactory.

6

24

High Satisfactory.

0

0

Entire

25

100

Figure 4.8 Respondents Satisfaction from involvement rate

For most of the concerns the one-year involvement rate is about 20 % on the sum of loan borrowed.

Majority of the respondent ‘s ten out of 20 five ( 40 % ) are small spot satisfied with the involvement rate. which shows degree of satisfaction depend upon income after borrowing. While nine of the respondents are non satisfied with the involvement rate which indicates that they are acquiring low return on their investing or they incur high disbursals. Merely six out of 20 five are satisfied with involvement rates that consist 24 % of the sample informations. However, there is non even a individual respondent holding higher satisfaction with the involvement rate.

4.9 Manners of Repayment.

Table 4.9 Modes of Repayment.

Mode of Repayment

Number of Respondents

Percentage ( % )

Installment

21

84

Lump sum Payment

4

16

Entire

25

100

Figure 4.9 Modes of Repayment.

There are by and large two different types of refund manners i.e. Installment and Lump sum Payment with markup. This manner of refund offered by the organisations to the clients are non the same. These are different for each client depending upon the nature of his/her concern. Furthermore, the installments are based on the measure of sum borrowed and the repayment period.

The tabular array & A ; figure 5.9 shows 21 Respondent ‘s ( 84 % ) of the sample informations repay their loan in installments while the staying 4 Respondent ‘s paid Lump amount with markup.

4.10 Repayment Time periods

Table 4.0 Repayment Periods.

Repayment Time period

Number of Respondents

Percentage ( % )

18 Calendar months

5

20

24 Calendar months

20

80

Entire

25

100

Figure 4.10 Refund Time periods.

The above tabular array & A ; figure 5.10 shows repayment period 80 % of the sample informations were 24 months while the staying 5 respondent ‘s repayment period were 18 month.

4.11 Entire Income before Borrowing.

Table 4.11 Entire Income before Borrowing

Income Before Borrowing ( Rs. )

Number of Respondents

Percentage ( % )

New Business

5

20

2000 to 5999

7

28

6000 to 10999

8

32

11000 to 15999

3

12

16000 to 20000

2

8

Entire

25

100

Figure 4.11 Entire Income before Borrowing

The above figure and table 4.11 indicate that bulk of the respondent ‘s income before loan borrowed were in the scope of Rs. 6,000 to Rs. 10,999 eight out of 20 five respondents ( 32 % ) of the sample informations while seven out of 25 ( 28 % ) respondent ‘s were in the scope of Rs. 2,000 to Rs. 5,999. 12 % of the respondent ‘s income were in the scope of Rs. 11,000 to Rs. 15,999 while 8 % of the respondent ‘s income were in scope of Rs. 16,000 to Rs. 20,000 ) and the staying five respondents 20 % of the entire sample informations who started new concerns earned nil before loan borrowed.

4.12 Entire Incomes after Borrowing.

Table 4.2 Total Incomes after Borrowing

Income After Borrowing ( Rs. )

Number of Respondents

Percentage ( % )

2000 to 5999

5

20

6000 to 10000

9

36

11000 to 15999

6

24

16000 to 20000

5

20

Entire

25

100

Figure 4.12 Sum Incomes after Borrowing

The above figure & A ; table 5.12 clearly illustrate the respondent ‘s income after loan borrowed were increased. Majority of the respondent ‘s income after borrow were in the scope of Rs. 6,000 to Rs. 10,999 i.e. 36 % of entire respondent ‘s. While before borrowed was 32 % . Similarly, each scope of income addition by certain per centums. 24 % of the respondent ‘s income after borrowed were in the scope of Rs. 11,000 to Rs. 15,999 while earlier borrowed that was 12 % . The staying respondent ‘s income scope Rs. 2000 to Rs. 5,999 and Rs. 16,000 to 20,000 after borrowed were 20 % each of the entire respondent ‘s.

4.13 Is it easy to refund the principal sum plus involvement?

Table 4.13 Is it easy to refund the principal sum plus involvement?

Options

Number of Respondents

Percentage ( % )

Yes

12

48

No

13

52

Entire

25

100

Figure 4.13 Is it easy to refund the principal sum plus involvement

From the above pie chart and table 4.13 clearly indicate that Most of the respondent ‘s are non happy with the involvement rates as harmonizing to them they are high and therefore leaves them with lesser sum to put. Expenses were another factor because of rising prices they did high disbursals therefore generate low income as comparison to their loan. While, the staying 48 % of the respondents were satisfied and they had paid markup and chief sum easy.

4.14 Does the borrowers intend to re-borrow after refunding the first loan?

Table 4.14 Purposes for re-borrowing of respondent ‘s

Purposes for

re-borrowing

Number of Respondents

Percentage ( % )

Yes

6

24

No

19

76

Entire

25

100

Figure 4.14 Purposes for re-borrowing of respondent ‘s

Majority of the Respondent ‘s ( 76 % ) said that they had no purposes to borrow once more ; nevertheless, 6 respondent ‘s ( 24 % ) had the purposes to borrow once more.

CHAPTER – 5

Findingss and Decision

Findingss

Micro-finance is still in the initial phases of development in Pakistan, so a batch has to be done to better its range to the mark groups and to better the benefits that it can convey with its proper execution. However, the people to whom this installation has reached ; are acquiring the fruitful consequences. Although, the study was conducted on a really little graduated table, it does give an penetration on the tendencies of adoption, economic activities, degree of borrowers ‘ satisfaction and benefits obtained from the micro-finance installation among little enterprisers. The major findings are illustrated in the undermentioned parity:

5.1.1 Entrepreneurs from Age-Groups with Major Family-Responsibilities

Harmonizing to the study little enterprisers of the sample size belong to different age groups demoing different facets. 16 % of the Respondent ‘s are from age group ( 18-25 ) and bulk ( 36 % ) are from the age group ( 26-35 ) , demoing a higher energetic and immature group involved in executing positive activities for the upheaval of their households and state ‘s economic system. 20 % of the enterprisers are from age group ( 36-45 ) and 28 % are from age group 46 and supra. These two groups ( 26-35 & A ; above 45 ) show the engagement of more responsible and experient group in the concern.

5.1.2 Gender and Qualification of Micro finance borrowers

The sample size consists of 25 micro finance Respondent ‘s. Out of these 25 merely one Respondent was female demoing really little part of females in the industry of little endeavor as compared to males.

In add-on, bulk of the micro finance- Respondent ‘s possessing low educational making and most of them are merely Matric ( 48 % ) .

5.1.3 Business Sector of little enterprisers

Harmonizing to the study and sample size all of the enterprisers were exclusive owners. 80 % of the respondent ‘s belonged to Retail concern while the 4 % and 16 % of the respondent ‘ belonged to sweeping and services concern severally.

5.1.4 The Amount of Loan Borrowed

Harmonizing to the study bulk ( 32 % ) of the clients used to borrow in big sums from Rs. 41000 to Rs. 50000 and 24 % borrowed from Rs. 21000 to Rs. 40,999. However, there were five respondent ‘s who used to borrow from Rs. 10000 to Rs. 20999.

In add-on, the establishments are used to imparting in big nominations after the regular refund of the perennial loans by the clients.

5.1.5 Purpose behind acquiring loan

For 32 % of the Respondent ‘s the intent of acquiring loan was the enlargement of current concern. However, for the bulk ( 36 % ) the intent was the Purchase of stock list or natural stuff while merely 12 % borrowed for stableness of bing concern. They used to borrow for working capital refinancing.

This on the job capital re-financing, consequences in continued adoption by the borrower and thereby profiting the loaners, which in other words means the stableness of MFIs. This is because the MFIs are in their initial phases and they do non hold adequate staff or other installations to advance the non-working hapless to get down their concerns. So to guarantee the return of their loan expenses, they need to back up the persons who have the concern cognition at this phase of micro finance industry.

5.1.6 Effect of Borrowing on Income of the Entrepreneurs

As early stated, most of the enterprisers were holding low educational making. Due to this low making they were unable to keep proper records of their net incomes, ensuing in their inefficiency for giving the exact figures sing the addition in their income. However, there was decidedly an addition in their incomes and nest eggs for those who to the full invested their adoptions in their concern. The income of the bulk of borrowers showed an addition of 100 % after the application of borrowed loan.

5.1.7 Consequence of the Business Expansion of Small Entrepreneurs on Employment Generation

In bulk of the instances the application of micro finance installation by the little enterpriser has led to the enlargement of their concerns. Before the enlargement of concern most of the enterprisers were holding no workers but after borrowing they employed workers for the smooth operations of their concerns. However, really few Respondents ‘ said that there is easiness in bearing the daily outgos merely after borrowing.

5.1.8 Beginnings of Information to Clients about the Bank of Khyber and

SRSP Micro-Finance Facilities:

The respondents came to cognize about The Bank of Khyber ‘s Micro-finance installation through different beginnings like friends, relations, bank ‘s ads & A ; employees and concern brotherhoods and associations of the enterprisers. In fact, most of the respondents got the information about The Bank of Khyber ‘s micro loans from friends who found the installation utile and therefore informed others about it.

5.1.8.1 Loan sum

The establishments can supply fiscal aid from Rs. 10,000 up to an sum of Rs. 30 Million. In instance of Khyber Bank it is compulsory for the borrower to run into the debt: equity ratio of at least 60:40 which means that at least 40 % of the project’s/enterprise ‘s funding should come from the borrower in the signifier of equity. Up to 60 % would be financed by The Bank of Khyber.

5.1.8.2 Mark-up Rate

What a client pays to the Bank, in add-on to the loan sum, is called the ‘mark-up ‘ . This is necessary to prolong the Bank ‘s activities. It is market based and depends upon the undertaking ‘s expected hard currency flows. It varies from concern to concern, but is in the scope of 4 % to 8 % above the Government of Pakistan ‘s 5-year PIB rate.

5.2 Decision

Micro-finance is non a new construct ; nevertheless, Pakistan has to travel a long manner in this sector through larning from others ‘ success narratives every bit good as her ain experience in the sector.

The findings in this above pages are based on the study of little endeavor micro-finance borrowers of The Bank of Khyber and Sarhad Rural Support Programme ( SRSP ) . The careful analysis of those findings leads to the following concluding comments. During study it was observed that the traffic of micro-finance borrowers was really low as compared to the mission of micro-finance policy in Pakistan. It is because of many grounds. Majority of people are incognizant particularly in rural countries about the micro-finance plan, demoing slightly inefficient selling runs of the Bankss supplying micro-loans.

The borrowers who used to use for micro-finance to The Bank of Khyber and SRSP were holding less educational making. Most of them were merely matric. Due to this factor they were unable to maintain a proper path of their concern records.

Harmonizing to the micro-finance borrowers of SRSP ; the involvement on the loan is high. However, the expense of loan is speedy and big sum of loan is issued in lump amount.

Despite, the less range of MFIs to their targeted clients the betterment brought by them in the concern conditions of little enterprisers being reached is extremely appreciable.

Harmonizing to the study ; the income of bulk of the little endeavors has already become dual after the use of micro-loans. 32 % of the borrowers expanded their existing concern due to increase in their incomes.

36 % of the little enterprisers got the ability to keep and go on their existing concern which was really hard for them before borrowing. 20 % have started new concerns along with go oning bing concern after the use of micro-loans. All these show a great impact of micro-finance on the betterment of little endeavors.

More specifically, These major micro-finance installations in N.W.F.P have critical function in bettering the economic conditions of little endeavors, but to do this establishment more sustainable and good, certain betterments are required which have been presented in the signifier of recommendations in the following chapter.

Collateral security may change from undertaking to project. In most instances, it is mortgage of urban belongings along with personal warrants, hypothecation of works and machinery/stocks and pledge of authorities securities.

Installments Calculation is based upon the mark-up rate and the hard currency flow of the proposed venture. The client/borrower is provided a complete refund agenda at the clip of expense of canonic sum.

The repayment period normally varies from 18 to 24 months ; nevertheless it would be linked to the hard currency flows of the project/enterprise. Normally the payments are in the signifier of monthly installments. Grace period depends on the nature of endeavor.

A borrower can borrow as many times from as he/she wants, but merely when he/she has to the full repaid the old loan sum ( chief + involvement ) ; capable to his/her repayment public presentation in the earlier adoption and the nature of the concern of borrower, i.e. if the concern has further opportunities to thrive with more investing. Furthermore, repetition borrowers with a good recognition history may profit from higher loan sums against equal collateral or less indirect for equal loan sums.

CHAPTER – 6

Recommendations

There is a presence of demand for Micro-Finance services in the state and really unequal supply of such installations, so it is needed to give a encouragement to this sector through the joint attempts of authorities and private sector. Since, the primary study is based on The Bank of Khyber and Sarhad Rural Support Programme ; most of the undermentioned recommendations are based on the findings obtained from this study:

6.1 CALCULATED SELECTION OF TARGET CLIENTS

First of wholly, the MFIs, although are aimed at bettering the lives of the hapless, can non impart loans to every hapless ; they have to maintain in head the refund factor which is must for their ain sustainability and to better function the people they are already functioning.

6.2 FACTORS ENSURING HIGH REPAYMENT Ratess

Particularly those MFIs that are in the early developmental phases should guarantee their long-run sustainability. This is possible merely if the refund rate is good. To better refund rate, the MFIs must happen the appropriate clients. This means, that it should be ensured before expense that the client, particularly little enterpriser, has a echt concern and the client is capable to run it from all facets such as the concern know-how and so on in running that concern.

6.3 MORE WEIGHT-AGE TO BUSINESS KNOWLEDGE & A ; EXPERIENCE THAN THE BUSINESS CONDITION

The concern know-how of the client is more of import than the present status of the concern. Even if a concern non making good, the enterpriser can be lent the loan if there is a possible for the concern to gain net incomes for the client on the investing of more money in it.

6.4 APPROPRIATE LOAN AMOUNT

The loan sum should non be really little so that puting that in the concern has no important impact on its net incomes. But, at the same clip, it should non be that large sum that consequences in higher installment sum makes it hard for the borrower to refund on agenda. So, the sum should be lent on the footing of the nature of the concern and the potency for growing in it.

6.5 AVAILABILITY OF REQUIRED MICRO-FINANCE STAFF

There should be equal figure of staff for transporting out the Micro-Finance activities. It is besides recommended that there should be a separate office and field staff with close coordination on the advancement of the clients. This will decrease the staff load and better the refund rate.

6.6 Right JUDGMENT OF REQUIRED FLEXIBILITY IN REPAYMENT FROM CLIENTS

Since the Micro-Finance borrowers belong to really hapless section of the society, they may confront jobs at times in paying their installments, so a small flexibleness in these footings is good. But, it has besides been recorded that some clients are able to pay in clip when they fear the supervising and stringency from the loaners. So, the flexibleness is a affair of judgement and should change from instance to instance.

6.7 NEED FOR REALIZATION OF RIGHT LOAN-UTILIZATION AMONG CLIENTS

The clients should be guided as to the proper use of the borrowed money. They should be made to recognize the fact that if these adoptions are invested in the concern, it will non merely spread out their concern, but besides increase their income and do them able to pay installments in clip therefore opening the doors for future adoptions from the same establishments.

6.8 PROVISION OF Training TO MICRO-FINANCE CLIENTS

Apart from this counsel, if the clients could be trained in their concern Fieldss, this will besides convey improved consequences. At least, if they are trained in record maintaining, it ‘ll assist the policy-makers to estimate the impact in exact figures.

6.9 INCREASED & A ; AUTHENTIC KNOWLEDGE OF MFI ‘s MICRO-FINANCE FACILITY TO THE POOR

The micro-financing staff of the establishments should travel to the doorsills of the hapless to inform them of the Micro-Finance installation in order to increase the range of this effectual tool.

6.10 INCREASED REACH OF MICRO-FINANCE SERVICES

More MFIs are needed to be launched or the subdivisions of bing MFIs be opened in countries ( small towns ) which lack entree to this installation.

6.11 SIMPLE & A ; EASIER PROCEDURES FOR MICRO-FINANCE BORROWING

The loaning processs should be kept easier and simple for the hapless people, so that entree is non denied to the possible clients due to rigorous and hard policies.

6.12 TARGETING POOR WITH THE AIM OF TRANSFER BENEFITS TO THE LARGER PART OF THE SOCIETY

Although loan should be disbursed to hapless even if that does non increase the figure of workers, but particular attending should be given to the concerns with a possible to bring forth employment, therefore one loan disbursed will hold many beneficiaries- the loan borrower, the forces employed as a consequence of concern enlargement, and the dependants of the freshly employed forces to call a few.

6.13 FLEXIBILITY IN INTEREST Rate IF POSSIBLE

Most of the clients are non happy with the MFI ‘s involvement rates as harmonizing to them they are high and therefore go forth them with lesser sum to put.

Therefore, the MFIs should cut down the involvement rates to the extent of possibility. This act would farther promote the clients and would ensue in higher rate of loan refunds.