Chief Editor Dr. A. Singaraj, M.A., M.Phil., Ph.D. Editor Mrs.M.Josephin Immaculate Ruba EDITORIAL ADVISORS ISSN (Online): 2455-7838 1. Prof. Dr.Said I.Shalaby, MD,Ph.D. Professor & Vice President SJIF Impact Factor (2016): 4.144 Tropical Medicine, Hepatology & Gastroenterology, NRC, Academy of Scientific Research and Technology, Cairo, Egypt. 2. Dr. Mussie T. Tessema, Associate Professor, EPRA International Journal of Department of Business Administration, Winona State University, MN, United States of America, 3. Dr. Mengsteab Tesfayohannes, Research & Associate Professor, Department of Management, Sigmund Weis School of Business, Development Susquehanna University, Selinsgrove, PENN, United States of America, (IJRD) 4. Dr. Ahmed Sebihi Associate Professor Islamic Culture and Social Sciences (ICSS), Monthly Peer Reviewed & Indexed Department of General Education (DGE), International Online Journal Gulf Medical University (GMU), UAE. 5. Dr. Anne Maduka, Volume:2, Issue:1, January 2017 Assistant Professor, Department of Economics, Anambra State University, Igbariam Campus, Nigeria. 6. Dr. D.K. Awasthi, M.SC., Ph.D. Associate Professor Department of Chemistry, Sri J.N.P.G. College, Charbagh, Lucknow, Uttar Pradesh. India 7. Dr. Tirtharaj Bhoi, M.A, Ph.D, Assistant Professor, School of Social Science, University of Jammu, Jammu, Jammu & Kashmir, India. 8. Dr. Pradeep Kumar Choudhury, Assistant Professor, Institute for Studies in Industrial Development, An ICSSR Research Institute, New Delhi- 110070, India. 9. Dr. Gyanendra Awasthi, M.Sc., Ph.D., NET Published By : Associate Professor & HOD EPRA Journals Department of Biochemistry, Dolphin (PG) Institute of Biomedical & Natural Sciences, Dehradun, Uttarakhand, India. 10. Dr. C. Satapathy, Director, CC License Amity Humanity Foundation, Amity Business School, Bhubaneswar, Orissa, India. SJIF Impact Factor: 4.144 ISSN: 2455-7838(Online) EPRA International Journal of Research and Development (IJRD) Volume: 2 | Issue: 1 | January | 2017 HOW DOES AN INCREASE IN OUTPUT OF MICROFINANCE BORROWERS AFFECT MICROFINANCE LOANS AND INSTITUTIONAL (BANKS) GROWTH? Kamran Raiysat1 1M.Phil Scholar, Preston University Kohat, Islamabad Campus Pakistan ABSTRACT Microfinance helps in poverty alleviation through raise in income level but does the number of microfinance borrowers and their income level effects the growth of microfinance loans and banks. To study this relationship data of total assets, advances and number of borrowers is collected from all the 10 microfinance banks of Pakistan whereas per capita GDP is collected from Pakistan bureau of statistics. Four hypotheses are developed and attested with the help of descriptive statistics, Pearson correlation and regression analysis The results indicates that the microfinance and level of output is highly significant. Per capita GDP and number of borrowers are also highly significant with microfinance banks’ growth in terms of advances and total assets. Relationship of the advances to total assets is highly significant. It is therefore suggested that not only the government and individuals but also should promote the microfinance loans but also banks because microfinance KEY WORDS: Microfinance Banks; Per Capita GDP; Total assets; advances; borrowers 01. INTRODUCTION which started its operations in Pakistan under the Major commercial banks have been giving State Bank of Pakistan in 2000. Within a period of loans to the rich for the sake of earning profit and do next four years, four new microfinance banks i.e., not care much about the poor but there have been The First Microfinance Bank Limited in 2001, Apna many similar institutions which have been working Microfinance Bank limited in 2003, Rozgar for the welfare of the poor and the Irish Loan Fund Microfinance Bank limited in 2003 and Tameer system in 18th century cannot be ignored because it is Microfinance Bank limited in 2005 started operating considered to be the first proper microfinance in Pakistan. At present there are 11 microfinance institution and after that the concept of microfinance banks and sindh microfinance bank is the last bank institutions have spread around the world. In 1992 which has started its operations in May 2016. Banco Sol was the first commercial bank dedicated Microfinance banks have been actively solely for the microfinance (CGAP). involved in the economic activities and keeping in The importance of microfinance was view their role in the financial system of Pakistan, realized at its peak in the late 1990s. Khushhali microfinance banks are classified separately and Microfinance Bank was the first microfinance bank therefore ranked accordingly. There are major two www.eprajournals.com Volume: 2| Issue: 1| January 2017 136 EPRA International Journal of Research and Development (IJRD) |ISSN:2455-7838 (Online) |SJIF Impact Factor: 4.144 credit rating companies working in Pakistan which household and also dedibit microfinance is also rank the banks according to their credit quality (SBP empowering the women. 2016) and these are Pakistan Credit Rating Agency The effectiveness of microfinance as an limited and JCR-VIS Credit Rating Company effective tool of poverty eradication and the history Limited. According to PACRA (2016) latest rating of microfinance banks in Nigeria by Ihugba et al. Tameer Microfinance Bank is at the top in long term (2014) used stratified sampling technique for credit followed by Mobilink Microfinance Bank selection of customers and the study was divided into Limited and Apna Microfinance Bank limited, and in 16 sample units in various local government areas of short run Mobilink Microfinance Bank Limited and Imo state thought 82 questionnaires. The results Tameer Microfinance Bank limited are at 1st position revealed that the high income class has more capacity followed by Apna Microfinance Bank limited but to save then the poor which supports the economics with good credit quality. On the other hand JCR-VIS theory of savings. The federal government of Nigeria (2016) updated list classify Tameer Microfinance and financial institutions should make efforts to Bank limited, The First Microfinance Bank Limited establish new branches and arrangements to supply and Khushhali banks as top rating banks in short and credit in the rural areas. long term Credit quality. A study was also conducted on the role of The literature has indicated that the most of khushhali bank in poverty reduction (Qureshi et al. the work is done on the role of microfinance 2013) with the objectives to highlight the ways to institutions in poverty reduction and raising the living reduce the poverty, increase the living standard of standard of the people not only in Pakistan but all poor and economic prosperity and growth through over the world and there isn’t much work done on the developed questionnaire from the sample of 150 growth of the microfinance loans and banks due to clients of the same bank and the results indicated that increase in output of the microfinance clients. In this the banks have been able to distribute the loans in study I am going to exam the relationship of the accordance to the needs of the people who did not increase in output and number of borrowers not only have or less access to the formal loan with on the growth of microfinance loans but also on recommendations of expanding this system and banks between a period of 2011 – 2015. Net providing access to the rural and urban areas with advances and total assets are taken as dependent and effective working system. per capita GDP and number of customers of Katsushi and Azam (2012) conducted a microfinance credit is taken as independent variables. research on whether microfinance loans given to 02. LITERATURE REVIEW people by microfinance institutions have reduced the A study on the Tameer Microfinance Bank poverty or not. They wanted to check the effect of (Chughtai, Zaheer and Taj, 2015) using structured general loans and productive loans on the income questionnaire indicated that the enterprise level, consumption and women body mass index. performance and children education have strong They used nationally representative household panel positive relationship but the evidence on household with four rounds for the period 1997 till 2004. The assets and expenses, food and security is mixed. Also overall results were positive on income and the role of microfinance on poverty reduction and consumption of food. They also used alternative sustainability of microfinance program and the estimation methods to check the impact of effects on its customers (Adu et al. 2014) with the microfinance institutions loans on the food help of descriptive and explanatory approaches on consumption growth which proved that microfinance quantitative and qualitative data showed highly banks loans have effects on the poverty reduction of significant positive relationship between the income the Bangladesh. level and savings and a positive impact on the Durrani, et al. (2011) used social and standard of living of the participants not only in economic factors such as income generation, life financial terms but also in social terms. style, life and accommodation standard, purchasing Tefese (2014) also studied the role of the power, self employment, expansion of business dedibit microfinance in poverty alleviation and facilities and adoption of better technology, economic empowerment of woman. The results obtained growth and development to studied the role of micro through closed end questionnaire and semi- finance in poverty reduction.