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Working femalesKofi Annan UN Secretary- general discussed that there is no effective tool to achieve development except women’s empowerment. For its chief proponents, empowerment is a humanistic device to increasingly being viewed as one of the key con- constituent elements of the poverty reduction strategy. It is not only seen as a development objective in itself but as a means of promoting growth, re- during poverty and promoting better governance (World Bank, 2001).Working females are not only contributing to the national income, but also plays a vital role to maintain a sustainable livelihood of the communities and families. Females in the western countries play a larger role in improving the income of their countries than the females living in poor and backward areas like Pakistan. In developing countries like Pakistan, especially in the rural areas, unfortunately females are still facing many legal barriers, socio- cultural attitude, lack of education and personal difficulties. The problem of poverty cannot be resolved without money as money generates money or service generates money. The problem is that most females do not have access to finance to start their business to meet their needs and to overcome poverty. In the past, the resources of financing were limited, but now globally, women are being supported. Several programs served the women by providing them with financing. Microfinance is one of the financial services that targets small borrowers especially women. According to the Official Report on Strategic Framework for Sustainable Microfinance in Pakistan, there is interest on the Pakistani government and state bank of Pakistan to promote women’s empowerment in Pakistan. This report highlights the importance of microfinance institutions in Pakistan. Since 2000, Pakistan has supported microfinance institutions to empower women. In Pakistan, the microfinance sector is underdeveloped and is relatively young.

Literature Review

Females living in developed countries contribute to their national income more than women living in underdeveloped and developing countries. The household development of the country depends on both working male and female. In the developed countries, women have household decision power and freedom. To improve thehouseholdpower of public and household development of under developing countries like Pakistan, developed countries provide loans through different programs through IMF and World Bank. The Pakistani government to secure loans from IMF and World Bank and spend this money on different projects for the well-being of the nation. When government starts projects, it needs machinery and human capitals to implement the project gives hence provide employment to people. However, women living in rural areas of Pakistan are still facing problems of social barriers, freedom in decision making, etc. Relative to most countries globally, Pakistan has male dominant society, especially in the rural areas. There are restrictions on women where they neither moves outdoor nor are allowed to have social contacts with male society. Women faced many cultural and social barriers to enter into the formal labor market. However, they also face problems when they enter into the informal sector. Women in urban areas have relatively easy access to informal sources of credit like money lender, friends and relatives more than females living in rural areas but, they are charging high rate of interests. All people have their own demands which may not be satisfied at once but some of them want to be realized immediately. It may be achieved due to speedy cash online payday loans.

Some studies (Hasherniet al. 1996, Parveen, 2007) have highlighted that accessibility to loan through the poor has a big positive impact on empowerment, quality of life and living standard. Rehman and Khan, attempted to explore how microfinance helps poor people to improve their living standard. They concluded that provision of microfinance in the form of collateral free loans is an effective mechanism for reduction of poverty, improving health, education, legal rights, sanitation. Chaudary and Nosheen narrate that the micro credit has a significant impact on women empowerment. Nevertheless, on the basis of the previous studies, limited evidences exist on which type of empowerment is more significant for poor female. The above previous studies show the positive impact of microfinance empowerment. However, some studies also show that microfinance has no impact on women’s empowerment. Chowdhury found that in Pakistan, poverty is not declining through micro-finance, as poor households simply remain poor because of the extra burden of interest rate and debt. Microfinance institutions charge high rate of interest, where this interest rate has an inverse relationship with empowerment. Asim found that the microfinance has no positive impact on female empowerment.

loanOn the basis of the above discussion, we can conclude that there are mixed results, Hasherni et al., Parveen andBanuet al. found positive impact of microfinance on empowerment, while Asim found a negative impact of microfinance on women empowerment in Pakistan.

Loans and women empowerment

Microfinance and empowerment Microfinance is regarded as a means to empower developing countries by supporting entrepreneurship. Scholars such as Woodworth argue that microfinance is needed to lift developing countries out of poverty (Khandker, 2005). In contrast to conventional development aid, microfinance involves and often even focuses on the informal sector (Alter Chen,2005) and may be an alternative to macroeconomic solutions that are often used in development aid programs(Woodworth, 2000).

Negative consequences of the informal sector’s importance are, that potential borrowers mostly are not aware of the products and services that are offered by microfinance institutions and commercial banks or that they are not able to access loans because of their illiteracy or knowledge in regional languages(ShabibulHasan, 2012). Additionally, credit evaluation procedures of institutionalized lenders are often stricter than those of informal lenders preventing borrowers from asking for loans at commercial banks of microfinance institutions (Arora&Meenu, 2011).

With respect to the gender of the micro borrowers, an analysis conducted by Woodworth suggests that 65% of all microloans were provided to women in order to help them to start or maintain an enterprise with some institutions having even higher rates of loans for women (Chowdhury&Chowdhury, 2011; Noponen, 2003). Often, microfinance focuses on the empowerment of women in order to enable them gain a greater degree of control over their destinies (Paxton, 1995). Studies suggest that microfinance is able to increase women’s upward mobility and their influence on family decisions (Todd, 1996), both being a part of empowerment (Muhammad et al., 2012). Another rationale for focusing on female borrowers is the lower default rate compared with male borrowers (D’Espallier, Guerin, &Mersland, 2011) though some studies could not replicate this argument (Godquin,2004). But does the provision of loans to women automatically guarantee the empowerment of female borrowers? Hunt and Kasynathan suggest that in order to guarantee the empowerment of female borrowers, microfinance institutions should have an understanding of gender issues and women’s rights and have implemented this understanding in their own organization. Aspects of empowerment should be monitored continuously after having provided a microloan and a clear mission on the importance of women having control over decision- making related to the use of their loan should be implemented. Speedy Payday Loans is the only way out in case of lack in money because you will easily solve all your problems.

Furthermore, training programs should support this mission. Ali and Hatta demonstrate that a “minimalist approach of microfinance” that mainly takes the repayment rate and the financial sustainability of the microfinance institution into account does not create a significant impact on empowerment. They demonstrate that women’s empowerment must not be a consequence of microfinance but that it may be achieved if it is integrated in the vision, strategy, and operations of microfinance institutions (Haile, Bock, &Folmer,2012). Swain and Wallentin conducted one of the few studies that used a quasi-experimental approach to test whether microfinance had an impact on the empowerment of women. Their results suggest that women who were members of a microfinance program experienced a significant increase in empowerment compared to a non-member group. In another study, using a multivariate approach and working with a sample and a control group, Chowdhury and Chowdhury concluded that the participation in a microloan program created significantly higher outcomes, including empowerment, for the participants.

From a methodological and theoretical standpoint, Kabeerargues that differences in studies with respect to empowerment of women through microfinance arise because different concepts or aspects of empowerment such as intra-household power relations (Kabeer, 2001) vs. an increase of the financial situation of a borrower are applied. Depending on the understanding of the concept of empowerment, different studies suggest different impacts of microfinance on women empowerment, for instance, health care (Rai& Ravi, 2011).

empowermentIn addition to the provision of a loan, external livelihood and personal factors may influence the success of microloans. External variables may be market characteristics, entrepreneurial and market knowledge as well as numerical and financial literacy (Leach &Sitaram, 2002). Khan and Noree identified age, education of the husband, father-inherited assets, marital status, number of sons alive, and the amount of microfinance as covariates that influence empowerment in addition to the direct impact of microfinance.

Obviously, other external factors such as infrastructural development, access to resources, skill building trainings, borrowers’ education, mobility, labor availability, and other factors have an impact on women’s empowerment (Otero,1999). Because of these external effects the study was conducted in a particular region in Pakistan to guarantee comparable conditions for borrowers with respect to external socio-political factors. According to Ngo and Wahhaj microfinance increases the empowerment of women, if it is invested profitably in a joint activity, and when a large share of the household budget is spent for household public goods.

Consequently, the study suggests the loan to be invested in a joint business run by husband and wife. Hence, it seems that a number of external variables, such as societal impacts, family relations, and knowledge, moderate the impact of microfinance on empowerment (Khan &Noree, 2012).

Measuring the impact of microfinance on empowerment

Empowering people is an important—but not the exclusive— mission of microfinance (Kabeer, 2001). Controlling non-financial aspects of microfinance, however, is important to be able to manage potential positive effects, such as resulting from family-based micro enterprises (Maldonado &Gonza’lez-Vega, 2008) or the risk of overindebtedness. Though many studies explore methods for measuring microfinanceimpacts (Weber, 2013), it is still unclear how effects of microfinance can be evaluated. Common impact measurement methods are outreach measurement (Cull, Demirguec_-Kunt, &Morduch, 2007; Yaron, 1992a), which sometimes includes social outreach (BartualSanfeliu, Cervello’ Royo, &MoyaClemente, 2013), and social cost-benefit analysis (Bhatt &Tang, 2001; Stewart, 1975). Neither method focuses on the measurement of empowerment, however. Many outreach studies focus on the number and the size of loans and the group of borrowers receiving the loans. The approach assumes that smaller loans, being provided to borrowers at the base of the pyramid, create a higher outreacthan bigger loans to small- and medium-sized enterprises. Size and type of borrower are the main indicators that are assessed in outreach measurement studies that are often used to compare different types of microfinance institutions such as those following a poverty alleviation approach vs. those following a financial systems approach (Hishigsuren, 2007; Mersland&Str0m, 2010; Morduch, 1999; Yaron, 1992b). Social cost-benefit analyses concentrate on costs, such as administrative costs or capital costs, and both financial and social benefits of the microfinance business for the respective institutions and their clients (Stewart, 1975). Shadow prices are often used to measure the value of social costs and benefits. The method is often applied to evaluate the efficiency of microfinance compared with other means of poverty alleviation (Bhatt & Tang, 2001) such as publicly financed development aid (van de Walle, 1997).

Methodological issues of measuring the impact of microfinance:

Empowerment When it comes to measuring the impact of microfinance on empowerment, a number of methodological issues have to be dealt with. The first issue is to operationalize empowerment. As mentioned above, empowerment is not a uni-dimensional variable but a multidimensional construct. Therefore, the components of empowerment have to be selected, and to be merged into a measurable construct that can be tested regarding its validity. The second issue is the cause-effect relation between microfinance and empowerment. The use of case studies without control groups is not able to analyze cause-effect relations in contrast to control-group studies like the one by Chowdhury and Chowdhury. Therefore, the presented study useda control-group setting that tests cause and effect relations between microloans and a multidimensional construct of empowerment. Thirdly, many studies use outreach measurement and focus on the characteristics of the borrowers, their social status or gender, and on loan size (Hermes & Lensink, 2011; ShabibulHasan, 2012). Though these indicators are important, however, they do not indicate the social impact of microfinance directly. Accounting for the percentage of women borrowers may be an indication for striving to improve female borrowers’ empowerment, but it does not explicitly prove that microfinance influence empowerment. Consequently, loan cycles—with one loan granted per loan cycle—were used as independent variable in order to measure the effect of microfinance on empowerment. The approach bases upon the assumption that the effect of microfinance on empowerment does not emerge until the business that was financed through the microloan creates a stable financial return. New borrowers being in the first loan cycle will not experience an effect on empowerment at this stage because the time for the loan to cause this effect is too short.