University of Massachusetts Boston ScholarWorks at UMass Boston Graduate Doctoral Dissertations Doctoral Dissertations and Masters Theses 12-31-2013 Microfinance: A Tool for Financial Access, Poverty Alleviation or Gender Empowerment ? - Empirical Findings from Pakistan Ghazal Mir Zulfiqar University of Massachusetts Boston Follow this and additional works at: http://scholarworks.umb.edu/doctoral_dissertations Part of the Economics Commons, Political Science Commons, and the Public Policy Commons Recommended Citation Zulfiqar, Ghazal Mir, "Microfinance: A Tool for Financial Access, Poverty Alleviation or Gender Empowerment ? - Empirical Findings from Pakistan" (2013). Graduate Doctoral Dissertations. Paper 144. This Open Access Dissertation is brought to you for free and open access by the Doctoral Dissertations and Masters Theses at ScholarWorks at UMass Boston. It has been accepted for inclusion in Graduate Doctoral Dissertations by an authorized administrator of ScholarWorks at UMass Boston. For more information, please contact [email protected]. MICROFINANCE: A TOOL FOR FINANCIAL ACCESS, POVERTY ALLEVIATION OR GENDER EMPOWERMENT? – EMPIRICAL FINDINGS FROM PAKISTAN A Dissertation Presented by GHAZAL M. ZULFIQAR Submitted to the Office of Graduate Studies, University of Massachusetts Boston, in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY December 2013 Ph.D. Public Policy Program © 2013 by Ghazal M. Zulfiqar All rights reserved MICROFINANCE: A TOOL FOR FINANCIAL ACCESS, POVERTY ALLEVIATION OR GENDER EMPOWERMENT? – EMPIRICAL FINDINGS FROM PAKISTAN A Dissertation Presented by GHAZAL M. ZULFIQAR Approved as to style and content by: ________________________________________________ Christian E. Weller, Professor Chairperson of Committee ________________________________________________ Donna H. Friedman, Research Associate Professor Member ________________________________________________ Craig N. Murphy, Professor Member ________________________________________________ Christopher Candland, Associate Professor Wellesley College Member _________________________________________ Mark R. Warren, Program Director Department of Public Policy and Public Affairs _________________________________________ Christine T. Brenner, Chairperson Department of Public Policy and Public Affairs ABSTRACT MICROFINANCE: A TOOL FOR FINANCIAL ACCESS, POVERTY ALLEVIATION OR GENDER EMPOWERMENT? – EMPIRICAL FINDINGS FROM PAKISTAN December 2013 Ghazal M. Zulfiqar, Ph.D., University of Massachusetts Boston M.Sc., University of London M.B.A., Institute of Business Administration, Karachi Directed by Professor Christian E. Weller In just 30 years microfinance has transformed from a credit-based rural development scheme that has claimed to reduce poverty and empower poor women, to a $70 billion financial industry. In the process, the traditional NGO-led model has given way to commercialized institutions, resulting in an increased emphasis on profitmaking. This has also led to confusion in the sector around its mission: is it to alleviate poverty and empower poor women or simply to provide the “unbanked” with access to formal sources of finance? This research considers the main debates in microfinance with regard to its mission and presents empirical evidence on the effectiveness of microfinance. The study is based on the Pakistani microfinance sector, which provides an ideal opportunity for a comparative analysis of two distinct models of microfinance – the iv nonprofit microfinance institutions (MFI) and the microfinance banks (MFB). The research compares the depth of outreach, mission, practice, and borrower experiences of MFIs and MFBs, employing a political economy framework. The data includes 140 interviews with policymakers, donors, senior, mid and low-level microfinance officers, and their clients; as well as observations of practitioner-client interactions, including the process of disbursement and collection, group meetings, and field visits with loan officers in urban Pakistan. It also comprises two district-level surveys: the microfinance outreach survey from the Pakistan Microfinance Network (PMN) and the Government of Pakistan’s Social and Living Standards Survey (PSLM). The surveys are analyzed econometrically to test whether district-level socioeconomic differences affect patterns of outreach. This study broadens our understanding of the extent to which the local political economy shapes the outcomes of a market-based intervention, such as microfinance. It also provides an insight into the evolution of microfinance, specifically as framed by the global development discourse and subsequent public policy choices. Finally, the study provides an authoritative account of how institutional structure affects microfinance’s effectiveness as a tool for poverty alleviation, empowerment and financial access. v ACKNOWLEDGEMENTS I am deeply grateful to my advisors for their encouragement, support, patience and guidance during these past few years. Christian Weller, my chair and mentor, has guided me on just about all aspects of my professional and academic life. Whether it was writing a grant, putting a conference panel together, choosing a career path, or teaching my first class, he has been a source of constant guidance and encouragement. It was also Christian who suggested that I look at microfinance as a possible dissertation topic, provided critical feedback, and suggested ways to broaden and refine the research. I am grateful to Donna Friedman for her support as a teacher, supervisor, and friend these past five years. Through her I have acquired my qualitative research and analysis skills and the Center for Social Policy has always been a home for me on campus. I am also exceptionally lucky to have Craig Murphy as an advisor. Craig has inspired me with his ideas on development and marginalization, his extensive but engaging scholarship, but most especially his genuine kindness. I continue to be in awe of him. Thank you also to Christopher Candland for his guidance during the research and writing process. Randy Albelda, Michael Johnson and Francoise Carre have been wonderful advisors during my time at the Program. Michael has been a source of support, advice and encouragement since the first semester at UMass and I continue to be touched by his genuine concern for me and his open-door policy at all times. I am grateful to Francoise for being ready to listen and to provide suggestions whenever I knock on her door. I have also been lucky to have Tim Shaw and Jane Parpart provide great advise during the last vi stages of writing this dissertation. They have shared important insights on writing the first and last chapters and in thinking about the dissertation as a cohesive whole. To Karen Means for her support, help and kindness. To Christine Brenner for unhesitatingly writing a letter of support when I began fieldwork in Pakistan. To Mahnaz Fatima I am grateful for introducing me to Development, for inspiring me to change my career path and for giving me this dream in the first place. To Nageen Malik for nurturing a love of scholarship, may she rest in peace. I have many people to thank for helping me make connections in the field. The first few friends to fire off their social networks were Haroon Ahmed Malik, Shehlah Zaheeruddin, Fahim Ahmed Shafiqi, Ahsan Ali, Zulfiqar Haider Ali and Rizwan Mamdani. Haroon alone was able to get in touch with 12 people who found several dozen others for me to meet. Among them I am especially grateful to Zulfikar Khokhar for all the time he spent arranging interviews for me in Karachi, Hyderabad and Islamabad and for candidly sharing his own experience with me. I am grateful also to Brigadier Tariq Mohar at Tameer Bank for opening every single door of the Bank for me. I am grateful to Aban Haq from the Pakistan Microfinance Network, the staff at the Pakistan Poverty Alleviation Fund and Qazi Azmat Isa, and to Ayesha Baig from the First Microfinance Bank for going out of their way to help me. I am thankful to Inshan Ali Nawaz, for sharing his valuable insights as an industry insider all the way from Geneva on multiple occasions and for connecting me to Ayesha Baig. I am grateful to all the officers I met at the various MFI and MFB branches and their clients for opening their doors and pushing aside their own work to make time for me, vii sharing their food and cold drinks with me and when the heat got unbearable for fanning me with handmade fans while patiently answering all my questions. I feel humbled by these fine individuals. I love Khidhr, Eesa and Maryam for their interest and curiosity about my work. I am delighted that we as a family have learnt important lessons through this research that have altered the way we think about the world around us. I thank them for their patience during the time that I have taken away from them to work on this project. They have also provided me with insights rarely available to adults, which have served me well during this research. To my parents I have no words that can describe what they have done for me by putting their own lives on hold and reengineering their work schedules around my needs during fieldwork in Pakistan and otherwise. To my mother for her prayers, inspiration and emotional support throughout this period, and for the time she spent with my children while I was away, taking better care of them than I would have. To my father for being on the constant lookout for potential interviewees, for arranging conversations with key