Entrepreneurial finance, poverty reduction and gender: the case of women entrepreneurs’ microloans in Pakistan

Access to credit for entrepreneurial women is of interest to governments, academics and policymakers worldwide due to its significant socio-economic and poverty-reducing implications. In the context of Pakistan, financial institutions tend to cater for the upper- and middle-classes to the exclusion of the poor in general and low-income women in particular. Whilst poverty is a multifaceted term categorized as financial (income) poverty and human poverty, financial poverty specifically serves as a barrier to the growth of women-owned enterprises which, in turn, gives rise to their exclusion from labour markets and social, educational and health services. Financial exclusion directly correlates with lower levels of empowerment or independence within the household due to a lack of access to health services and basic education. Such inequalities in access to entrepreneurial finance impact upon women disproportionally, as the proposed interventions tend to be through microcredit programmes targeted at low-income women. In this chapter we assess the relationship between microfinance and poverty reduction using a binary logistic model. The findings indicate that microfinance positively reduces financial poverty; however, it contributes much less to human poverty reduction. The chapter concludes with some observations on the experiences of women in accessing finance and on the role and effectiveness of microfinance to aid Pakistani women’s access to finance.