The Aim of This Study is to Highlight the Role and Effectiveness of Microfinance in Empowering Women

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    1.0 Introduction

    Women constitutes an integral part of any society but their importance is undermined due to

    gender discriminatory policies set by the government and norms by societies in both developing

    and developed world. The poverty burden is beard by them. Women perform 66% of the global

    work, contribute to the production of 50 % of global food, and in return receive only 10% of

    world income and 1% share of property. 38% of the world registered business is owned by

    women and its rate of growth is increasing in Asia, Europe, Africa and Latin America

    (GEM2009). Despite the fact that women constitutes major share of the population, they

    experience status disparity in developing and developed nations (Rehman and Naoroze,

    2007).Women are the untapped sources of economic growth. International organizations like

    United nation is using women empowerment as a strategy to reduce poverty and population

    growth rate (Kabeer,2001) An economically independent woman invests more in the family and

    community, therefore , women economic empowerment is a prerequisite for sustainable

    economic development and pro poor growth.

    Hisrich (1984) argues that the financial community rates women as a second class citizen.

    Financial markets have been showing gender discrimination and possess a certain bias towards

    women entrepreneurs and had been a major obstacle in their efforts to start up a new business or

    strengthening their position (Thabethe, 2006). Furthermore as per Khan & Noreen (2012) 70 %

    of world poor are women who are rarely financially independent due to hurdles in accessing

    credit and financial services. This makes them most vulnerable members of the society. In order

    to overcome this financial, social, and economic instability, microfinance can be considered as

    an integral source of contribution through targeting women. Littlefield, Murduch, and Hashemi

    (2004) argue that microfinance can be used as a developmental tool to create emancipation and

    women empowerment. In concordance Holvoet (2005) suggests that the only platform that can

    encourage women social, economic and political empowerment in the wake of skeptical financial

    instruments is microfinance. The role of microfinance is considered significant by many

    researches (e.g. Mayoux 2001 or Gurin 2006 for the African context; Mahmud 2003, Holvoet

    2005 or Moodie 2008 in Asia; Velasco and Marconi 2004 in Latin America).

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    Researchers from different parts of the world agreed that women empowerment is created by

    microcredit if the program is structured according to social and economic context of

    women.(Hartungi, 2007; Holvoet, 2005; Gurin, 2006).

    Saqib, ( 2006:2) argued that Muslims deterred participation in conventional microfinance

    programs due to Riba (interest) that is forbidden in Islam. This becomes the basis for the

    development of Khushali microfinance products. Khushali microfinance is in nascent stage of its

    evolution, contributes 1% of total Khushali banking outreach globally. The existing studies on

    Khushali microfinance are mainly done in Malaysia, Bangladesh, Indonesia and Egypt. Many

    writers such as El-Gamal (2006), Ahmed (2001), and others, believe in the great potential of

    Khushali banking to be involved in microfinance programs to cater for the needs of the poor who

    usually fall outside the formal banking sector. Moreover different researchers are of the opinion

    that diverse nature of Khushali instruments in collaboration with mechanisms like Zakat, charity

    and waqaf can promote entrepreneurship (Akhtar, 1996, 1998; S. Al-Harran, 1995, 1996, 1999;

    S. A. S. Al-Harran, 1990 Al-ZamZami & Grace, 2000; Dhumale & Sapcanin, 1998; Hassan &

    Alamgir, 2002).

    There are very limited offerings of Khushali microfinance products in Pakistan. Therefore,

    majority of Muslims are forced to use interest based products or exploitive informal money

    lender. Only two institutions Akhuwat foundation and Wasil Foundation are offering limited

    Khushali microfinance products to both men and women. No exclusive offerings are designed

    for women. The importance of women empowerment through micro credit and possible bridging

    of gap that exists between religious beliefs and practice demands a study to explore the role that

    Khushali microfinance can play in the empowerment of women.

    The aim of this research is to explore the role of Khushali Microfinance products in the

    empowerment of women entrepreneurs in the light of social and financial structures in Pakistan.

    The study focuses on the women entrepreneurs from Lahore District that are using KhushaliMicrofinance products to reveal their rich experiences and challenges in accessing and using the

    Khushali Microfinance products. In addition, the current research will explore the perspectives of

    Khushali and conventional microfinance providers operating in Pakistan on the challenges faced

    by them in offering the Khushali microfinance products and the possible reasons behind the low

    outreach of these products.

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    1.1 Background of Research

    Women possess a disadvantaged position in developed and developing countries. This can be

    tracked from studying history starting from post-world war II period. Women were considered

    unproductive and isolated as housewives till 1970. Post 1970 era is characterized by industrial

    development where women remained an unequal recipient. This resulted in receipt of only 10%

    of world income by women even after performing 67% of world working hours as reported by

    GEM (2010). This reflects that women economic health globally. Cheston and Kuhn (2002)

    argue that women hold low paid jobs mostly in informal sector in most economies of the world.

    This is further supported by the work of Islam (2006) that highlights the contribution of women

    in the economic development. Consequently, World bank (2002) acknowledge that the ease of

    access of financial resources to women creates women empowerment and subsequently

    contributes to the development of economy. Mayoux (1998) noted that increasing women's

    access to micro-credit has the tendency to initiate a series of 'virtuous spirals' of economic

    empowerment, increased well-being for women and their families and on the wider scale, on

    social and political empowerment.

    Jolosheva (2010) argued that microfinance rates are higher for women and creates distress in

    women in Kyrgyzstan. The inherent problem with the conventional microfinance products are

    high interest rates. Also Interest or Riba is forbidden in Islam. Therefore the conventional

    microfinance products create a conflict in ones religious belief system and the practical needs.

    The emergence of Khushali banking and subsequently development of Khushali microfinance

    products are the solutions that can resolve this conflict but it is not that easy. Riba is prohibited

    in Islam and this poses a major challenge to Khushali banks to extend credit in an efficient and

    profitable manner that is Shariah compliant. A study by Isler (2010) revealed an efficiency gap

    in conventional and Khushali microfinance products. He proposed that the gap can be bridged by

    improving the nature of products offered by Khushali banks. He proposed a study to understand

    the nature of products that can improve the profitability of banks.

    A study in Bangladesh (Hossain and Siwar,2008) explores the prospects and problems of

    Khushali micro finance uncover the untapped opportunity. Ahmed (2009) argues that customer

    satisfaction and service quality has weak influence on the performance of Khushali banks in

    Pakistan.

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    1.2 Aims of the Research

    Research in the area of Khushali micro finance and its role in empowerment of women

    entrepreneurs is considered to be important in order to deal with the issues of easy access and

    interest free Khushali micro finance products for the welfare of Women in particular and society

    as a whole . Specifically the studies on independent microfinance programs and

    entrepreneurship are less researched areas (Islam, 2009). The emerging field of Khushali

    banking and Khushali micro finance is characterized with lack of comprehensive knowledge on

    the nature of Khushali micro finance products and their efficiency in serving the women.

    The primary aim of this study is to explore the role of Khushali microfinance products in the

    empowerment of women Entrepreneurs in Pakistan. This study will bring out the perspective of

    women entrepreneurs on challenges faced by them in accessing the Khushali microfinance

    products due to the nature of the products. The study will further examine the perceptions of

    managers of Khushali microfinance institutions about the inherent issues and prospects in

    offering Khushali micro finance products to women entrepreneurs.

    1.3 Research Objectives:

    To assess the effectiveness of Micro-Finance program through Khushali Bank for women

    in Pakistan.

    To analyze the significance of Micro - Finance on women empowerment in Pakistan

    To investigate the contribution of Micro - Finance on economic development of a country

    1.4 Research Questions

    What role does microfinance play in the economic empowerment of women Entrepreneurs in

    Pakistan?

    What are the challenges faced by women entrepreneurs' in accessing the microfinance in

    Khushali Bank?

    What are the reasons behind the limited offering of microfinance products by Khushali Bank

    in Pakistan?

    What changes are required in the Khushali micro finance products to cater to the needs of

    women entrepreneurs'?

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    Chapter #2

    LITERATURE REVIEW

    Women often play a sovereign role in the business and professional life by undertaking their own

    small scale enterprises (Warren, 2001). New theories of economic growth also take this into

    consideration that gender equality is a fundamental part for economic development and the role

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    of women to increase as economic well being of the society (Klasen and Wink, 2002). Gender

    inequality inversely impacts on agriculture and industrial productivity (Blackden and Bhanu,

    1999; World Bank, 2006).

    Krishnaraj and Kay (2002) have defined the role of women empowerment and microfinance:

    In Bangladesh, women have been shown a good deal of empowerment in their capacity to

    articulate their needs and receptivity to new ideas. More impressive was the emergence of

    womens groups as a dynamic, articulate constituency These observations and interviews come

    out to certify the conclusions of other studies (Cheston and Kuhn, 2002).

    MICROFINANCE IN PAKISTAN The work of microfinance started in Pakistan at the early

    1980s. Aga Khan rural support program (AKRSP) was the first microfinance institute in Pakistan

    which started to provide micro credit in northern area of Pakistan. In 1982 Orangi pilot project

    Karachi was launched under AKRSP. Later (1990) on the model of AKRSP was extended across

    the country and established National Rural Support Program which was provided country wide

    microfinance facilities but the provided facilities were not sufficient according to the requirement

    of Pakistan economy. In 1996 it was established as a microfinance bank, that is, Kashaf

    foundation. In 1998, Pakistan micro-finance network was designed, which played a very

    important role to provide microfinance facilities in Pakistan. Further, Pakistan poverty

    alleviation fund (PPAF) was allocated in 2000 which provided funds to microfinance banks and

    SBP (State Bank of Pakistan) established a separate unit for it. The government of Pakistan is

    also creating different financial institute which provide microfinance facilities.

    Leading microfinance institution in Pakistan Highlighted a portfolio position of

    microfinance institution of Pakistan Microfinance institutions strive enables women to

    participate in the professional activities. How much this objective has been achieved is still a

    question mark with reference to microfinance providers in Pakistan. Apart from this, there are

    certain hurdles on the way for women pertaining to the access to microfinance services. Figures2 and 3 depicts scenario of the issues.

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    Chapter 3: Methodology:

    According to Saunders (2007) Research methodology provides a crucial role for investigating a

    phenomenon in a particular research, methodological issues regarding this research could be

    followed according to the following structure:

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    3.1 Research Philosophy:

    The purpose of this research is to explore the Empowering the women through microfinance in

    Pakistan. Researcher has decided to follow realism approach which is the combination of both

    positivism and interpretivism philosophy, to achieve research objective of this study by adopting

    positivism approach some well-established variables have been standardized. On the other hand

    to solve more complex and complicated variables interpretivism philosophy has been adopted.

    3.2 Research Approach:

    To conduct this research inductive approach will be chosen because there is no existing

    hypothesis and to avoid rigidness, inductive approach has been chosen.

    3.3 Research Design:

    Survey method would be applicable to conduct this research because data would be collected

    from large scale respondents and survey is capable to obtain information from large samples of

    the population.

    3.4 Data Collection Method:

    Questionnaire would be used to collect data to explore the effectiveness of microfinance to

    empower the women in Pakistan by taking the Khushali bank as case study. This questionnaire

    would be consists of several questions associated with micro finance, poverty alleviation and

    management of credit by poor and uneducated people.

    3.5 Quantitative Research:

    This research would be conducted according to the quantitative nature of the research as it would

    be difficult to analyse data based on qualitative nature from large scale of population.

    3.6 Sampling:

    Population of this research would be the women Khushali Bank Pakistan and sample size would

    be 100.

    3.7 Data Analysis:

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    Summarizing, categorizing and structuring process with numerical analysis would be applied to

    get maximum outcomes of this research. Several graphs, charts would be used to analyze data of

    this research.

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