Entrepreneurship and Microfinance Impact on the Poor

Entrepreneurship and Micro pay Impact on the scurvyChapter One IntroductionBackgroundAround the worldly concern economies engage experienced high increment and fiscal placements bemuse under(a)g sensation major transformation, a signifi great dealt come up of battalion especi everyy in the developing countries do non lay down access to pay. Policy makers have increasingly promoted the use of microfinance as a joyride to eradicate privation and implement fiscal inclusion st swangies. Pakistan being a developing country is no exception to this, having a large number of raft that ar unfortunate with express mail recourse to sustenance. though limited in its scope, microfinance in Pakistan has been able to bring more or lesswhat of the large number of unbanked people into the banking net locomote and has too benefactored in improving their socio economical assure (SBP ILO, 2009).About 90 % of the people in developing countries lack access to financial re growt hs from institutes, every for point of reference or saving, which further fuels the Vicious roll of P everywherety in Figure 1. A lack of assess to financial institutions also hinders the ability for entrepreneurs. Microfinance serves as a direction to em force play the unequal and provides a valuable tool to assist economic development attend to.Pakistan is fourth most populous country in Asia and sixth in the world. Having an average annual maturation rate of 2.02 percent the state of the country reached 160 champion thousand million in 2007 as compargond to 139 million in 2002. Two third of the population is living in rural argonas and the be givenings age population (15-60 years) is increasing which was 51% in 1998 and 57% in 2008 (SBP, 2008).In 2008, near 24% population is living under the line of pauperization which was 34.46% in 2002. There is signifi throw outt increase in economic growth and advancement in hearty Sector exploitation. Now Pakistan has shifted from diminished Human Development sort to the category of Medium Human Development (Global Monitoring Report, 2007). Despite on the completely these feelers, poverty is a major issue which e very(prenominal)(prenominal) government is combating against.Pakistan is a country with high population growth and increasing ratio of wear force. agree to economic Survey 2007-08, Pakistan has 51.78 million active labor forces while 2.69 million out of this is unemployed. If we look unemployment gender wise, despite of women ratio of population which is 49.6%, ratio in labor force is only 25% (10.08 million out 51 million) of total labor force. Government of Pakistan has taken many steps to increase women connection in labor force, still women ratio is very less to over any labor force and it is non matching to world standards and trends nigh women date in pipeline and job opportwholeies (SBP, 2008).All these facts set up potential to work in microfinance to encourage people a nd specially women to develop their own entrepreneur so that men in general and women specially green goddess contribute a productive part of guild to make it a sustainable. To combat unemployment, only big(a) companies or public firmament be non enough for job creation but it would be better if people start their own communication channel for making society productive.Microfinance is being recognized by unlike questioners as an effective tool to fight poverty by providing financial military aid to those who do not have access to or ar neglected by the commercial banks and financial institutions. Microfinance has been successfully implemented by Grameen Bank. Back to 1976, Mohammad Yunus took initiative of impart contributes by developing solidarity throng of women in Jobra village, Bangladesh. many a(prenominal) MFIs has adopted idea adding with freshly strategies and now serving distressing in effective guidance. Now Garmeen poseur is a successful approach of m icrofinance.Microfinance is being considered as one of the most essential and an effective driving force for poverty reduction and alleviation. Kashf national attracted me because Kashf believes in a world where financial inclusion is a possibility and where scummy women are fully engaged in heartyizing the economic dreams of their families. Kashaf vision of fiscal run for All posits a miracle for transforming the role of women in society and for making a poverty free world a reality.Statement of ProblemAlthough complaisant entrepreneurship plays great role as looking to the world real and see clearly what is happening, feel responsibility for financially weak people and help them as a lot as they cornerstone. It is also a big scrap to the entrepreneurs and organizations that they should take steps to eliminate unbalance amongst incompatible levels in society. In opposite way, this impression encouraged me to choose this problem. I think that authorisation of unworth y people by microfinance and with combination of micro entrepreneurship is a great idea. You can never help people just cock-a-hoop money. just now you can help people giving them job and help to create their small employmentes in order to optimize their share of production to the society. All these issues exceed to search on this topic that how microfinance is contributing for entrepreneurship in low income communities of developing countries, how sustainable society is evolving as the moment of doing own business in low income communities and how Kashfs way of microfinance is supporting all of this process.Research ObjectivesTo be meaningful, every work must have to hypothesize the documentarys of the study (Mark Saunders, Philip Lewis, Andrian Tronhill, 2007). Although most of research has been done both microfinance or entrepreneurship separately. tho in my opinion in that location is close relationship between microfinance and entrepreneurship. As genial entrepreneu rship is doing a lot for quote pool of MFIs with loving go, micro entrepreneurship can be found in micro enterprise. As per research topic the objective is research on the issue that how do microfinance and entrepreneurship work for poverty alleviation and placement of abject.Research QuestionsThe study was conducted with the guidance of the following questions.How microfinance is contributing for entrepreneurship?How do microfinance and entrepreneurship work for reduce poverty, empower brusque in Pakistan?How do microfinance entrepreneurship work for sustainable development in Pakistan?Research methodologyThe research methodology of this paper allowing be qualitative. My work is covering 2 briny topics entrepreneurship and microfinance with dealing three factors poverty reduction, empowerment of poor and sustainable development. In this paper entropy collection techniques are used, interviews as primary source and internet, web pages, articles, annual reports, books et c.) as a secondary source. The research type allow use deductive and experimental data will analyze by the help of conceptual framework, develop after literature review.Significance of The StudyA lot of research is doing on Entrepreneurship and loving Entrepreneurship because it is emerging thread in business. On microfinance and entrepreneurship oftentimes research work has been while discussing in Grameen model. For both fields in limits of combining microfinance and entrepreneurship this research will lead a new horizon. It will also give a vision, to Kashf that how they can improve microfinance bring process, and former(a)wise Microfinance institutions (MFIs) that how they can develop process in more effective way. Further, students, researchers in Microfinance field, nongovernmental organizations and Governmental organizations can extend research in this reach to address the issue of poverty alleviation and empowerment of poor.Assumptions LimitationsThe assumption of t his research is that all study, written in the reports, news, web page true and can be used fairly. The study does not cover all the aspects that the promotion of microfinance affects. It was difficult to deck up interviews at large scale from borrowers due to distance problem between Pakistan and The Nether disembarks and this can reflect limited information about micro entrepreneurship. I to begin with focused on microfinance and entrepreneurship role in reduce poverty and empower people.Organization of StudyThe dissertation will consists of six chapters and will be nonionised in the following mannersChapter One Introduction Briefly introduces the background information of the study. In addition, it consists of, parameter of the problem, research objectives, and research questions to be communicate, significance of the study, research methodology, scope and limitation of the study.Chapter Two Literature Review Describe different theories and readers will look on previous re search on the research topic. Also, discuss microfinance, its different models and how microfinance contributes in poverty alleviation, and theories about entrepreneurship and br oppositely entrepreneurship.Chapter Three Theoretical Framework and Research Methodology It will be building a conjectural framework that will use while analyzing empirical data.Chapter Four Empirical Findings It will symbolize empirical data collect by borrowers interviews and Kashfs administration. Empirical daa is including facts and figure about poverty, unemployment, economy and microfinance. There is also detail information about Kashf Foundation.Chapter volt Analysis of Data and Interpretation It will present analysis regarding need of interactive scheme of microfinance and entrepreneurship, brotherly services and mediation by Kashf and sustainability issue.Chapter Six Conclusions at long last findings and conclusions will be put in the illuminate of previous discussions.Chapter Two Literatu re Review2.1 IntroductionThe extent to which microfinance, entrepreneurship and sustainability are interrelated is cipherent on the extent to which it addresses the economic development process. Yunus (1994), claims, If we are looking for one single action which will enable the poor to overcome their poverty, I would go for realization. bullion is power. Credit invested in an income-generating enterprise as working capital or for productive assets leads to recordment of a new enterprise or growth of an animated one. Profit from the enterprise provides income, and a general beef up of income sources.A variety of financial institutions, worldwide, have found ways to make lending to the poor sustainable and to build on the fact that even the poor self-employed re wage their loans and seek savings opportunities. The challenge is to build capacity in the financial sector drawing on lessons from international best practices in micro, small enterprises and rural finance.The extent to which microfinance, entrepreneurship and sustainability are interdependent is becoming increasingly recognized by experts in their respective fields of work, associated with economic development. Over five hundred million poor people around the world run utilityable microenterprises and oftentimes cite credit as the primary constraint to business growth (IFC, 2002). Robinson (2002), a prominent expert in the field of microfinance, notes that The formal sector has begun to realize that financing the poor can be both economically and socially profitable.2.2 What is Microfinance?Poor people are not able to access loans from commercial banks normally because of lack in guarantee and substantiating. But in that location are also many other reasons involved for which commercial banks were not willing to finance poor. These reasons are include that poor have less education, experience and pedagogy, high expenses on proceedings of small loans and lower rate of profit. This situation resulted in emerging the idea of micro lending and microfinance. Microfinance, on that pointfore, a way to finance people, those have no collateral or any property for guarantee.Microfinance is a way of financing to poor for their business, to alleviate their poverty, empowering them, giving social benefits on sustainable way. Due to microfinance, in that respect are many possibilities have emerged including extending markets, reducing poverty and fostering social change (Agion Morduch, 2005, pp.3). But thither is general concept that microfinance is just lending loan to poor but as I mentioned that microfinance is no more only loans but covering the issues of poverty alleviation, putting social impact on poor and educating poor to savings. Therefore, MFIs, today, not only NGOs but serving as a complete banking system. This discussion lead to me that microfinance is a form of financial services for poor to help them for their business activities by giving micro credit.There is n o one universal authentic definition of microfinance as different related variables akin poverty, lone size, the poor and the poverty line carry different meanings in different countries. Different authors have jelld the term in different ways. jibe to CGAP, Access to financial services puts power into the hands of poor people. Evidence shows that when poor people have financial services, they use their savings or loans to improve their families lives in a variety of ways sending their children to school, buying better medicines and more nutritious food, improve a leaky roof, meeting social and pagan obligations like paying weddings and funerals, and building income generating potential by investing in business (CGAP 2007).Microfinance has evolved as an economic development approach intended to benefit low-income women and men. The term refers to the provision of financial services to low-income clients, including the self employed (Ledgerwood, 2000, pp.1). While according to ADB (2008) Microfinance is the provision of a encompassing range of financial services such as specifys, loans, payment services, money transfers, and insurance to poor and low-income households and, their microenterprises. These definitions are elaborating that microfinance is a financial services but intentional specifically for poor to improve their lives in sustainable way.2.2.1 Microfinance ActivitiesEconomic activities are based upon sellers and buyers and their capacity. Sellers, before market their product, look at buyer intention and capacity. On the other hand, banking activities depend on both sellers and buyers. Financial institutions/lenders finance both sellers and buyers for their activities and commercial banks invested in projects at large scale while with this, banks invested in consumer finance also. Usually MFIs dont invest in consumer finance, but give finance only for micro enterprise. MFIs encourage people to improve their standards by doing businesses and earning from them and this is a consistent and sustainable way. In fig (2), microfinance is devote only to poor and explicitly for business activities. But with this, there are some indirect impacts of microfinance on the micro borrower which are alleviation of poverty, improvement in wellnesscare, increase in literacy and other social impacts. These figures are taken from Ledgerwood, 2000.Figure 1 Economic activity by Commercial Banking Figure 2 Economic Activity by MFIsThere are many activities and characteristics are included in microfinance. Some are (Ledgerwood, 2000, pp.1)Small and short term loanssociable collateral rather than financial collateralAccess to larger amount of loan if repayment performance is decreedSearch and access the real poor and their business demandContinuous monitoring of business.Higher interest rates on loan due valuable financial transactions and risk factor.Easy way to access finance, therefore not too much paper work, and easy and short procedur es.Saving function and readying services to borrowers development.Literacy training to borrowers so that they can come up with competence to daily business problems and its solutions.Health care, social services and other skill training services to provide borrower a sustainable base for their business development.2.3 Microfinance A Developmental ToolDue to lack of financial resources in developing countries, people from low income communities while having mod idea for their business, even as shop keeper or house hold products manufacturer, they cant implement their ideas. This low economic activity in low income communities due to lack of financial resources lead them to more poverty and poor spiritednessspan standards. primarily financial services cover savings and credit activities and there is same concept about MFIs. But according to Ledgerwood (2000), MFIs work for general financial services with this they provide insurance and payment services to their clients. But imp ortant aspect of MFIs is not only financial intermediation but also providing social intermediation and social services to their clients. kindly intermediation and social services contain many activities including trainings, management development, and financial literacy activities. Furthermore, many MFIs, arrange get together where experienced people guide others, where they give useful suggestions, tips and other tactics for their business. Microfinance is providing financial services along with social services. Normally, social services are not relevant in general banking system. So, microfinance is not simply banking system but development tool, combining both financial and social intermediation (Ledgerwood, 2000).2.3.1 Different service by MFIsFinancial intermediationThe primary objective of MFIs is financial intermediation because without loan/money social intermediations can not work. As prior discussions that poor reckon barriers to access finance from general financial service institutions. In this regard, MFIs become a bridge to access finance and in result to poverty alleviation, health care and education literacy (Ledgerwood, 2000). MFIs provide many financial services including credit, savings, insurance credit cards, payment services etc. It is not necessary that every MFI should serve their customers by all these services but MFIs can facilitate anyone of these services or all. The choice of which financial services to provide and the method of providing these services depend on the objectives of MFI, the demands of its target market and its institutional mental synthesis (Ledgerwood 2000, pp.66).Social IntermediationsSocial intermediations for individual whose social and economic disadvantages place them beyond the frontier of formal finance (Von Pischke 1991). A successful financial intermediation is often accompanied by social intermediation. It covers the issues of convocation formation, leadership training and cooperative learning, i s secondary role of microfinance for borrowers of MFIs. Development in Social capital is a staple fibre ingredient of sustainable development in poors life and especially in society. Social intermediation is process of building the human and social capital required by sustainable financial intermediation for poor (Ledgerwood 2000, pp.64). Now question rise, how social capital be acquire and strengthen? Social capital is actually links between clients of a sort out and multiple multitudes, and between MFIs and borrowers. These links establish on the basis of strong foundation of consecrate and cooperation (Agion Morduch, 2005).The ratio of social capital will increase with increase in business activities among portions, and financial transaction between lender and borrowers. It is normally substantial through group activities but there are other ways to develop it by individually. In group social intermediation, activities perform inside the group with some help from outside t o develop institutional capacity and human resource. In group, most of members belong from external areas, having less literate person and experience about business and financial transaction. So from group formation to selecting leader, developing interlocks and working mutually, MFIs support borrower to deal with these issues. Therefore, these members need training in record keeping, book keeping, accounting, training about business activities and tactics, and negotiation skills (Ledgerwood,2000).Enterprise Development ServicesMicro finance institutions (MFIs), not all, support to borrowers, either in group or individual in different enterprise development services like marketing, business and accounting training etc. This service can be divided in to two parts, enterprise formation and enterprise transformation. In enterprise formation, MFIs provide technical support to group or individual in start up of business, development and maturing ideas and maturing the skills. During i n transformation of enterprise, MFIs arrange trainings for their borrowers, workshops and get together for developing latest skills in their business area (Ledgerwood, 2000).Figure 3 minimalist and Integrated Approaches to Microfinance (Ledgerwood, 2000, pp.65)Minimalist Approach Integrated ApproachOne-missing piece Financial and non financial Credit ServicesFinancial IntermediationWorking CapitalFixed asset loanssavingsInsuranceSocial IntermediationGroup formationLeadership trainingCooperative learningSocial ServicesEducationHealth andNutritionLiteracy trainingEnterprise DevelopmentServiceMarketingBusiness trainingProduction trainingSocial ServicesMicrofinance practitioners define that, poverty can be addressed by financing poor for productive activities which in result comes up to their access to life necessities. But financial lending is only a one tool to poverty alleviation. Poor needs more than microfinance to address the problems of poverty and accessibility to other life nee ds like food, health, family planning, education, social support internet and so on. In Ledgerwood (2000) MFIs serve to their clients with additional social services with financial intermediation.The best way to achieve with their clients is in the form of group, that is the easy way to literate them, giving health care and other facilities. So in this way, MFIs would positive effect in the life of poor by takeering financial services with supportive services. These supportive services, actually, play important role in sustainable human development and livelihood of the poor (Khan, Rahman, 1998). Social service should not regard with financial or social intermediation because financial intermediation is primary service providing by MFIs. That means, there should be no additional cut off from loans in account social service but it should be provide by secondary means or by subsidies (Ledgerwood, 2000).2.4 Microfinance ModelsThe term model refers to service delivery methods and mi crofinance products. There are now nearly 70 million poor people who are getting benefits from 2500 MFIs in over 100 countries by microfinance (Sengupta, Aubuchon (2008).The poors conditions are different in different countries in world. These conditions are related to social, ideologic and political issues (Weiss, Montgomery, 2004). Therefore, there are some typical differences between approaches and motive of microfinance. I will see briefly two approaches, which is very famous Grameen Model, originated from Bangladesh and other is Banco so Model, Bolivia.2.4.1 Grameen ModelIn Grameen model, primary unit to whom lending fund is a group of 5 members that organize and apply for loan. In first point loan is granted for two members to invest in their business. If these two members become successful to repay amount, then four to six weeks later, next two members are granted for loan. Last one member will be legal for loan if previous two repay loan successfully. Repayment of loan promiscuous door for next loan and then go on if all members repay loan successfully. If anyone of group member will default in their loan, whole group will disqualified for further loan. all(prenominal) group has its own president and secretary to arrange all activities among their own group and to communicate and coordinate with other groups. Eight groups are then make at pertain level, by which a bank officer deal with these all eight groups. This summation of eight groups has its own center chief and center group leader (Khan, Rehman, 2007). harmonise Sengupta, Aubuchon (2008), first time, bank granted loan $100 and bank require to repayment of 10 percent amount, at rate of per annum, weekly. This repayment ensures to user for loan security, and also encourages them for savings. Along with five percent of loan deposited in group account for emergency and social need. For example, in case of need of health care of any one member, in case of emergency, this five percent depos it will be use.A unique and groundbreaking approach of group lending is used in Garmeen Model. As Sengupta, Aubuchon (2008) described that group lending have many benefits. First, group usually organize in members who are neighbor to each other, those can understand each other well and recognize their needs. Second, if anyone of group member will not present in group meeting, leader or other member can pay its installment.We can say that there is a kind of mutual understanding between all members. Third, in south Asia generally, and in Bangladesh specially, there are social pressures among members of society with social bindings with them. If one member of group will not pay even one installment, social pressure will be levied from all eight groups on this member and this reduces the risk factor.2.4.2 Banco Sol ModelGrameen model of microfinance try on lending to villagers and keep loan lending on in smaller amount. The other subject matter concept of model is formation of groups and these groups are eligible to take loan, no option of loan for individuals. Idea of progressive lending introduced to lend loan to individuals with group lending (Agion Morduch, 2005, pp.119).In this model after bound of every repayment schedule the amount of loan increased. But other characteristics of Grameen model (Group lending) are included in this method, like targeting to poor, women, group formation, and public payment. No doubt, progressive lending is an extension of group lending but now many MFIs are adopting this approach. In this model of Progressive lending, microlenders are flexible about collateral and lend loan to group with individuals also.This method is very helpful in areas with low population densities or highly diverse population where group forming is not so easy due to different ratio of safe and risky borrowers. In Bolivia, there was different situation when populist regime re master(prenominal)ing government and there was high ratio of unemployment in urban areas. To come to fulfill the need of time, Banco Sol started operations in microfinance with progressive lending. Therefore we can say that microfinance approaches are evolved due to different political, ideological and social conditions.In Weiss Montgomery (2004, pp.3) Microfinance in Latin America developed under quite different conditions. In Bolivia, a collapsing populist regime led to widespread unemployment. Banco Sol, a pioneering microfinance institution in the region, developed to address the problem of urban unemployment and provide credit to the cash-strapped informal sector. The notion of commercial profitability was embraced relatively early in this approach.2.5 sanctionPoverty effects not only on individuals life but also on society as a whole. Poverty is one of the main reasons in cause of less empowerment of poor especially in developing countries. Empowerment is a broad concept to define because there are many elements involve in it. These elements influ ence by including political, social and power system in the country. Empowerment covers many issues and when there is discussion on empowerment it includes many elements. These elements are, self-strength, control, self-power, self reliance, own choice, life of dignity, trash for rights, independence, conclusion making, being free, capability , access to basic human needs etc.(PREM,WB, 2002). Misra (p.3) describes empowerment as a power to the people and self governance.He define that Empowerment builds self-reliance and strength in women, preparing them towards gathering the ability to determine the choice of life. This adds to the command over resources outwit insubordination and signify their social role. Empowerment is about change, choice, and power. It is a process of change by which individuals or groups with little or no power gain the power and ability to make choices that reckon their lives.Due to different social, political, economical conditions, we can not define a o ne definition for empowerment. According to Batliwala (Makombe, 2006, p.52), empowerment mean, take control over natural assets, intellectual resources, and ideology. The material assets over which control can exercised may be physical, human, or financial, as land water, forests, peoples bodies and labor, money and access to money. happy resources include ideas and knowledge information. Control over ideology signifies the ability to generate, propagate, sustain, and institutionalize specific sets beliefs, values, attitudes, and behavior-virtually determining how people perceive and function within a attached socio-economic and political environment.Empowerment is the expansion of assets and capabilities of poor people to participate in negotiate with, influence, control, and hold accountable institutions that affect their lives. (PREM, WB 2002, p.11) define that A strategy for empowerment is taken at individual, government, civil society and private sector level. Usually these efforts lead to empower people in context of sharing of power, immunity of information, access to resources and health and education services. These strategies normally share four types of elements First, Access to information, its mean every citizens including poor have direct access to information because information is power.Second, Inclusion/participation, thats mean there should be opportunities for poor that they can participate in decision making and they should be included in all financial and political policies. Third is accountability, thats mean officials, public servants, private actors should be accountable not only to some specific institutions but to their citizens for performance. quarter and last one Local organizational capacity, its mean that people can work together, organize themselves, twit and utilize resources and solve problem at association level (PREM, WB (2002).2.6 EntrepreneurshipIt is one of the most widely used terms in business, management, econom ics and other related fields. One of important thing is that entrepreneurship has different meaning for different people, some use it in the meaning of innovation, some use for creativity, risk taking, leadership, and profit maximization or in social context, and some consider it as start up of business, new production methods and many other different meanings. Davidsson, (2004) describes it that entrepreneurship is deep phenomenon which makes it a resourceful field. While defining entrepreneurship, I consider some school of models that have major role to define this field.According to Schumpeter school of thought (Swedburg, 2000), Entrepreneurship is about innovation in organizational process, cerebration up new combination, entrepreneurial behavior and motivation of entrepreneurs. While according to Gartner (Thornton, 1999), entrepreneurship is about creation of new organization or new startup, creating values and entrepreneur mean owner-manager. In Krizners view, entrepreneurs hip is searching opportunities and exploiting them so it reflects towards the alertness capability of entrepreneur towards profit opportuEntrepreneurship and Microfinance Impact on the PoorEntrepreneurship and Microfinance Impact on the PoorChapter One IntroductionBackgroundAround the world economies have experienced high growth and financial systems have undergone major transformation, a significant number of people especially in the developing countries do not have access to finance. Policy makers have increasingly promoted the use of microfinance as a tool to eradicate poverty and implement financial inclusion strategies. Pakistan being a developing country is no exception to this, having a large number of people that are poor with limited recourse to livelihood. Though limited in its scope, microfinance in Pakistan has been able to bring some of the large number of unbanked people into the banking network and has also helped in improving their socioeconomic condition (SBP ILO, 2009).About 90 % of the people in developing countries lack access to financial services from institutes, either for credit or saving, which further fuels the Vicious Cycle of Poverty in Figure 1. A lack of assess to financial institutions also hinders the ability for entrepreneurs. Microfinance serves as a means to empower the poor and provides a valuable tool to assist economic development process.Pakistan is fourth most populous country in Asia and sixth in the world. Having an average annual growth rate of 2.02 percent the population of the country reached 160 million in 2007 as compared to 139 million in 2002. Two third of the population is living in rural areas and the working age population (15-60 years) is increasing which was 51% in 1998 and 57% in 2008 (SBP, 2008).In 2008, about 24% population is living under the line of poverty which was 34.46% in 2002. There is significant increase in economic growth and improvement in Social Sector Development. Now Pakistan has shifted from Low Human Development group to the category of Medium Human Development (Global Monitoring Report, 2007). Despite all these improvements, poverty is a major issue which every government is combating against.Pakistan is a country with high population growth and increasing ratio of labor force. According to Economic Survey 2007-08, Pakistan has 51.78 million active labor forces while 2.69 million out of this is unemployed. If we look unemployment gender wise, despite of women ratio of population which is 49.6%, ratio in labor force is only 25% (10.08 million out 51 million) of total labor force. Government of Pakistan has taken many steps to increase women participation in labor force, still women ratio is very less to over all labor force and it is not matching to world standards and trends about women participation in business and job opportunities (SBP, 2008).All these facts show potential to work in microfinance to encourage people and specially women to develop their own ent repreneur so that men in general and women specially can contribute a productive part of society to make it a sustainable. To combat unemployment, only big companies or public sector are not enough for job creation but it would be better if people start their own business for making society productive.Microfinance is being recognized by different researchers as an effective tool to fight poverty by providing financial services to those who do not have access to or are neglected by the commercial banks and financial institutions. Microfinance has been successfully implemented by Grameen Bank. Back to 1976, Mohammad Yunus took initiative of lending loans by developing solidarity group of women in Jobra village, Bangladesh. Many MFIs has adopted idea adding with new strategies and now serving poor in effective way. Now Garmeen Model is a successful approach of microfinance.Microfinance is being considered as one of the most essential and an effective driving force for poverty reduction and alleviation. Kashf case attracted me because Kashf believes in a world where financial inclusion is a possibility and where poor women are fully engaged in realizing the economic dreams of their families. Kashaf vision of Financial Services for All posits a miracle for transforming the role of women in society and for making a poverty free world a reality.Statement of ProblemAlthough social entrepreneurship plays great role as looking to the world real and see clearly what is happening, feel responsibility for financially weak people and help them as much as they can. It is also a big challenge to the entrepreneurs and organizations that they should take steps to eliminate unbalance between different levels in society. In other way, this thought encouraged me to choose this problem. I think that empowerment of poor people by microfinance and with combination of micro entrepreneurship is a great idea. You can never help people just giving money.But you can help people giving the m job and help to create their small businesses in order to optimize their share of production to the society. All these issues lead to research on this topic that how microfinance is contributing for entrepreneurship in low income communities of developing countries, how sustainable society is evolving as the result of doing own business in low income communities and how Kashfs way of microfinance is supporting all of this process.Research ObjectivesTo be meaningful, every work must have to formulate the objectives of the study (Mark Saunders, Philip Lewis, Andrian Tronhill, 2007). Although most of research has been done either microfinance or entrepreneurship separately. But in my opinion there is close relationship between microfinance and entrepreneurship. As social entrepreneurship is doing a lot for credit pool of MFIs with social services, micro entrepreneurship can be found in micro enterprise. As per research topic the objective is research on the issue that how do microfin ance and entrepreneurship work for poverty alleviation and empowerment of poor.Research QuestionsThe study was conducted with the guidance of the following questions.How microfinance is contributing for entrepreneurship?How do microfinance and entrepreneurship work for reduce poverty, empower poor in Pakistan?How do microfinance entrepreneurship work for sustainable development in Pakistan?Research MethodologyThe research methodology of this paper will be qualitative. My work is covering two main topics entrepreneurship and microfinance with discussing three factors poverty reduction, empowerment of poor and sustainable development. In this paper data collection techniques are used, interviews as primary source and internet, web pages, articles, annual reports, books etc.) as a secondary source. The research type will use deductive and empirical data will analyze by the help of conceptual framework, develop after literature review.Significance of The StudyA lot of research is doing on Entrepreneurship and Social Entrepreneurship because it is emerging thread in business. On microfinance and entrepreneurship much research work has been while discussing in Grameen model. For both fields in terms of combining microfinance and entrepreneurship this research will lead a new horizon. It will also give a vision, to Kashf that how they can improve microfinance lending process, and other Microfinance institutions (MFIs) that how they can develop process in more effective way. Further, students, researchers in Microfinance field, NGOs and Governmental organizations can extend research in this area to address the issue of poverty alleviation and empowerment of poor.Assumptions LimitationsThe assumption of this research is that all information, written in the reports, news, web page true and can be used fairly. The study does not cover all the aspects that the promotion of microfinance requires. It was difficult to organize interviews at large scale from borrowers due t o distance problem between Pakistan and The Netherlands and this can reflect limited information about micro entrepreneurship. I primarily focused on microfinance and entrepreneurship role in reduce poverty and empower people.Organization of StudyThe thesis will consists of six chapters and will be organized in the following mannersChapter One Introduction Briefly introduces the background information of the study. In addition, it consists of, statement of the problem, research objectives, and research questions to be addressed, significance of the study, research methodology, scope and limitation of the study.Chapter Two Literature Review Describe different theories and readers will look on previous research on the research topic. Also, discuss microfinance, its different models and how microfinance contributes in poverty alleviation, and theories about entrepreneurship and social entrepreneurship.Chapter Three Theoretical Framework and Research Methodology It will be building a th eoretical framework that will use while analyzing empirical data.Chapter Four Empirical Findings It will present empirical data collect through borrowers interviews and Kashfs administration. Empirical daa is including facts and figure about poverty, unemployment, economy and microfinance. There is also detail information about Kashf Foundation.Chapter Five Analysis of Data and Interpretation It will present analysis regarding need of interactive strategy of microfinance and entrepreneurship, social services and intermediation by Kashf and sustainability issue.Chapter Six Conclusions Finally findings and conclusions will be put in the light of previous discussions.Chapter Two Literature Review2.1 IntroductionThe extent to which microfinance, entrepreneurship and sustainability are interrelated is dependent on the extent to which it addresses the economic development process. Yunus (1994), claims, If we are looking for one single action which will enable the poor to overcome their po verty, I would go for credit. Money is power. Credit invested in an income-generating enterprise as working capital or for productive assets leads to establishment of a new enterprise or growth of an existing one. Profit from the enterprise provides income, and a general strengthening of income sources.A variety of financial institutions, worldwide, have found ways to make lending to the poor sustainable and to build on the fact that even the poor self-employed repay their loans and seek savings opportunities. The challenge is to build capacity in the financial sector drawing on lessons from international best practices in micro, small enterprises and rural finance.The extent to which microfinance, entrepreneurship and sustainability are interdependent is becoming increasingly recognized by experts in their respective fields of work, associated with economic development. Over 500 million poor people around the world run profitable microenterprises and often cite credit as the primar y constraint to business growth (IFC, 2002). Robinson (2002), a prominent expert in the field of microfinance, notes that The formal sector has begun to realize that financing the poor can be both economically and socially profitable.2.2 What is Microfinance?Poor people are not able to access loans from commercial banks normally because of lack in guarantee and collateral. But there are also many other reasons involved for which commercial banks were not willing to finance poor. These reasons are included that poor have less education, experience and training, high expenses on transactions of small loans and lower rate of profit. This situation resulted in emerging the idea of micro lending and microfinance. Microfinance, therefore, a way to finance people, those have no collateral or any property for guarantee.Microfinance is a way of financing to poor for their business, to alleviate their poverty, empowering them, giving social benefits on sustainable way. Due to microfinance, th ere are many possibilities have emerged including extending markets, reducing poverty and fostering social change (Agion Morduch, 2005, pp.3). But there is general concept that microfinance is just lending loan to poor but as I mentioned that microfinance is no more only loans but covering the issues of poverty alleviation, putting social impact on poor and educating poor to savings. Therefore, MFIs, today, not only NGOs but serving as a complete banking system. This discussion lead to me that microfinance is a form of financial services for poor to help them for their business activities by giving micro credit.There is no one universal accepted definition of microfinance as different related variables like poverty, lone size, the poor and the poverty line carry different meanings in different countries. Different authors have defined the term in different ways. According to CGAP, Access to financial services puts power into the hands of poor people. Evidence shows that when poor p eople have financial services, they use their savings or loans to improve their families lives in a variety of ways sending their children to school, buying better medicines and more nutritious food, fixing a leaky roof, meeting social and cultural obligations like paying weddings and funerals, and building income generating potential by investing in business (CGAP 2007).Microfinance has evolved as an economic development approach intended to benefit low-income women and men. The term refers to the provision of financial services to low-income clients, including the self employed (Ledgerwood, 2000, pp.1). While according to ADB (2008) Microfinance is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and, their microenterprises. These definitions are elaborating that microfinance is a financial services but designed specifically for poor to improve their lives in sustainable way.2.2.1 Microfinance ActivitiesEconomic activities are based upon sellers and buyers and their capacity. Sellers, before market their product, look at buyer intention and capacity. On the other hand, banking activities depend on both sellers and buyers. Financial institutions/lenders finance both sellers and buyers for their activities and commercial banks invested in projects at large scale while with this, banks invested in consumer finance also. Usually MFIs dont invest in consumer finance, but give finance only for micro enterprise. MFIs encourage people to improve their standards by doing businesses and earning from them and this is a consistent and sustainable way. In fig (2), microfinance is dedicated only to poor and explicitly for business activities. But with this, there are some indirect impacts of microfinance on the micro borrower which are alleviation of poverty, improvement in healthcare, increase in literacy and other social impacts. These figures are taken from L edgerwood, 2000.Figure 1 Economic Activity by Commercial Banking Figure 2 Economic Activity by MFIsThere are many activities and characteristics are included in microfinance. Some are (Ledgerwood, 2000, pp.1)Small and short term loansSocial collateral rather than financial collateralAccess to larger amount of loan if repayment performance is positiveSearch and access the real poor and their business demandContinuous monitoring of business.Higher interest rates on loan due expensive financial transactions and risk factor.Easy way to access finance, therefore not too much paper work, and easy and short procedures.Saving Services and training services to borrowers development.Literacy training to borrowers so that they can come up with competence to daily business problems and its solutions.Health care, social services and other skill training services to provide borrower a sustainable base for their business development.2.3 Microfinance A Developmental ToolDue to lack of financial re sources in developing countries, people from low income communities while having innovative idea for their business, even as shop keeper or house hold products manufacturer, they cant implement their ideas. This low economic activity in low income communities due to lack of financial resources lead them to more poverty and poor life standards. Generally financial services cover savings and credit activities and there is same concept about MFIs. But according to Ledgerwood (2000), MFIs work for general financial services with this they provide insurance and payment services to their clients. But important aspect of MFIs is not only financial intermediation but also providing social intermediation and social services to their clients. Social intermediation and social services contain many activities including trainings, management development, and financial literacy activities. Furthermore, many MFIs, arrange get together where experienced people guide others, where they give useful s uggestions, tips and other tactics for their business. Microfinance is providing financial services along with social services. Normally, social services are not applicable in general banking system. So, microfinance is not simply banking system but development tool, combining both financial and social intermediation (Ledgerwood, 2000).2.3.1 Different Services by MFIsFinancial IntermediationThe primary objective of MFIs is financial intermediation because without loan/money social intermediations can not work. As prior discussions that poor face barriers to access finance from general financial service institutions. In this regard, MFIs become a bridge to access finance and in result to poverty alleviation, health care and education literacy (Ledgerwood, 2000). MFIs provide many financial services including credit, savings, insurance credit cards, payment services etc. It is not necessary that every MFI should facilitate their customers by all these services but MFIs can facilitate anyone of these services or all. The choice of which financial services to provide and the method of providing these services depend on the objectives of MFI, the demands of its target market and its institutional structure (Ledgerwood 2000, pp.66).Social IntermediationsSocial intermediations for individual whose social and economic disadvantages place them beyond the frontier of formal finance (Von Pischke 1991). A successful financial intermediation is often accompanied by social intermediation. It covers the issues of group formation, leadership training and cooperative learning, is secondary role of microfinance for borrowers of MFIs. Development in Social capital is a basic ingredient of sustainable development in poors life and especially in society. Social intermediation is process of building the human and social capital required by sustainable financial intermediation for poor (Ledgerwood 2000, pp.64). Now question rise, how social capital be acquire and strengthen? Social capital is actually links between clients of a group and multiple groups, and between MFIs and borrowers. These links establish on the basis of strong foundation of trust and cooperation (Agion Morduch, 2005).The ratio of social capital will increase with increase in business activities among members, and financial transaction between lender and borrowers. It is normally developed through group activities but there are other ways to develop it by individually. In group social intermediation, activities perform inside the group with some help from outside to develop institutional capacity and human resource. In group, most of members belong from remote areas, having less literate and experience about business and financial transaction. So from group formation to selecting leader, developing networks and working mutually, MFIs support borrower to deal with these issues. Therefore, these members need training in record keeping, book keeping, accounting, training about business activit ies and tactics, and negotiation skills (Ledgerwood,2000).Enterprise Development ServicesMicro finance institutions (MFIs), not all, support to borrowers, either in group or individual in different enterprise development services like marketing, business and accounting training etc. This service can be divided in to two parts, enterprise formation and enterprise transformation. In enterprise formation, MFIs provide technical support to group or individual in start up of business, development and maturing ideas and maturing the skills. During in transformation of enterprise, MFIs arrange trainings for their borrowers, workshops and get together for developing latest skills in their business area (Ledgerwood, 2000).Figure 3 Minimalist and Integrated Approaches to Microfinance (Ledgerwood, 2000, pp.65)Minimalist Approach Integrated ApproachOne-missing piece Financial and non financial Credit ServicesFinancial IntermediationWorking CapitalFixed asset loansSavingsInsuranceSocial Intermed iationGroup formationLeadership trainingCooperative learningSocial ServicesEducationHealth andNutritionLiteracy trainingEnterprise DevelopmentServiceMarketingBusiness trainingProduction trainingSocial ServicesMicrofinance practitioners define that, poverty can be addressed by financing poor for productive activities which in result comes up to their access to life necessities. But financial lending is only a one tool to poverty alleviation. Poor needs more than microfinance to address the problems of poverty and accessibility to other life needs like food, health, family planning, education, social support network and so on. In Ledgerwood (2000) MFIs serve to their clients with additional social services with financial intermediation.The best way to contact with their clients is in the form of group, that is the easy way to literate them, giving health care and other facilities. So in this way, MFIs would positive effect in the life of poor by offering financial services with suppor tive services. These supportive services, actually, play important role in sustainable human development and livelihood of the poor (Khan, Rahman, 1998). Social service should not implicate with financial or social intermediation because financial intermediation is primary service providing by MFIs. That means, there should be no additional cut off from loans in account social service but it should be provide by secondary means or by subsidies (Ledgerwood, 2000).2.4 Microfinance ModelsThe term model refers to service delivery methods and microfinance products. There are now nearly 70 million poor people who are getting benefits from 2500 MFIs in over 100 countries by microfinance (Sengupta, Aubuchon (2008).The poors conditions are different in different countries in world. These conditions are related to social, ideological and political issues (Weiss, Montgomery, 2004). Therefore, there are some distinctive differences between approaches and motive of microfinance. I will see brief ly two approaches, which is very famous Grameen Model, originated from Bangladesh and other is Banco Sol Model, Bolivia.2.4.1 Grameen ModelIn Grameen model, primary unit to whom lending fund is a group of 5 members that organize and apply for loan. In first stage loan is granted for two members to invest in their business. If these two members become successful to repay amount, then four to six weeks later, next two members are granted for loan. Last one member will be eligible for loan if previous two repay loan successfully. Repayment of loan open door for next loan and then go on if all members repay loan successfully. If anyone of group member will default in their loan, whole group will disqualified for further loan.Each group has its own president and secretary to coordinate all activities among their own group and to communicate and coordinate with other groups. Eight groups are then organized at center level, by which a bank officer deal with these all eight groups. This cen ter of eight groups has its own center chief and center group leader (Khan, Rehman, 2007). According Sengupta, Aubuchon (2008), first time, bank granted loan $100 and bank require to repayment of 10 percent amount, at rate of per annum, weekly. This repayment ensures to user for loan security, and also encourages them for savings. Along with five percent of loan deposited in group account for emergency and social need. For example, in case of need of health care of any one member, in case of emergency, this five percent deposit will be use.A unique and innovative approach of group lending is used in Garmeen Model. As Sengupta, Aubuchon (2008) described that group lending have many benefits. First, group usually organize in members who are neighbor to each other, those can understand each other well and recognize their needs. Second, if anyone of group member will not present in group meeting, leader or other member can pay its installment.We can say that there is a kind of mutual un derstanding between all members. Third, in south Asia generally, and in Bangladesh specially, there are social pressures among members of society with social bindings with them. If one member of group will not pay even one installment, social pressure will be levied from all eight groups on this member and this reduces the risk factor.2.4.2 Banco Sol ModelGrameen model of microfinance emphasize on lending to villagers and keep loan lending on in smaller amount. The other core concept of model is formation of groups and these groups are eligible to take loan, no option of loan for individuals. Idea of progressive lending introduced to lend loan to individuals with group lending (Agion Morduch, 2005, pp.119).In this model after completion of every repayment schedule the amount of loan increased. But other characteristics of Grameen model (Group lending) are included in this method, like targeting to poor, women, group formation, and public payment. No doubt, progressive lending is an extension of group lending but now many MFIs are adopting this approach. In this model of Progressive lending, microlenders are flexible about collateral and lend loan to group with individuals also.This method is very helpful in areas with low population densities or highly diverse population where group forming is not so easy due to different ratio of safe and risky borrowers. In Bolivia, there was different situation when populist regime left government and there was high ratio of unemployment in urban areas. To come to fulfill the need of time, Banco Sol started operations in microfinance with progressive lending. Therefore we can say that microfinance approaches are evolved due to different political, ideological and social conditions.In Weiss Montgomery (2004, pp.3) Microfinance in Latin America developed under quite different conditions. In Bolivia, a collapsing populist regime led to widespread unemployment. Banco Sol, a pioneering microfinance institution in the region, de veloped to address the problem of urban unemployment and provide credit to the cash-strapped informal sector. The notion of commercial profitability was embraced relatively early in this approach.2.5 EmpowermentPoverty effects not only on individuals life but also on society as a whole. Poverty is one of the main reasons in cause of less empowerment of poor especially in developing countries. Empowerment is a broad concept to define because there are many elements involve in it. These elements influence by including political, social and power system in the country. Empowerment covers many issues and when there is discussion on empowerment it includes many elements. These elements are, self-strength, control, self-power, self reliance, own choice, life of dignity, fighting for rights, independence, decision making, being free, capability , access to basic human needs etc.(PREM,WB, 2002). Misra (p.3) describes empowerment as a power to the people and self governance.He define that Em powerment builds self-reliance and strength in women, preparing them towards gathering the ability to determine the choice of life. This adds to the command over resources outwit insubordination and signify their social role. Empowerment is about change, choice, and power. It is a process of change by which individuals or groups with little or no power gain the power and ability to make choices that affect their lives.Due to different social, political, economical conditions, we can not define a one definition for empowerment. According to Batliwala (Makombe, 2006, p.52), empowerment mean, take control over material assets, intellectual resources, and ideology. The material assets over which control can exercised may be physical, human, or financial, as land water, forests, peoples bodies and labor, money and access to money. Intellectual resources include ideas and knowledge information. Control over ideology signifies the ability to generate, propagate, sustain, and institutionali ze specific sets beliefs, values, attitudes, and behavior-virtually determining how people perceive and function within a given socio-economic and political environment.Empowerment is the expansion of assets and capabilities of poor people to participate in negotiate with, influence, control, and hold accountable institutions that affect their lives. (PREM, WB 2002, p.11) define that A strategy for empowerment is taken at individual, government, civil society and private sector level. Usually these efforts lead to empower people in context of sharing of power, freedom of information, access to resources and health and education services. These strategies normally share four types of elements First, Access to information, its mean every citizens including poor have direct access to information because information is power.Second, Inclusion/participation, thats mean there should be opportunities for poor that they can participate in decision making and they should be included in all f inancial and political policies. Third is accountability, thats mean officials, public servants, private actors should be accountable not only to some specific institutions but to their citizens for performance. Fourth and last one Local organizational capacity, its mean that people can work together, organize themselves, mobilize and utilize resources and solve problem at community level (PREM, WB (2002).2.6 EntrepreneurshipIt is one of the most widely used terms in business, management, economics and other related fields. One of important thing is that entrepreneurship has different meaning for different people, some use it in the meaning of innovation, some use for creativity, risk taking, leadership, and profit maximization or in social context, and some consider it as start up of business, new production methods and many other different meanings. Davidsson, (2004) describes it that entrepreneurship is rich phenomenon which makes it a resourceful field. While defining entreprene urship, I consider some school of thoughts that have major role to define this field.According to Schumpeter school of thought (Swedburg, 2000), Entrepreneurship is about innovation in organizational process, thinking up new combination, entrepreneurial behavior and motivation of entrepreneurs. While according to Gartner (Thornton, 1999), entrepreneurship is about creation of new organization or new startup, creating values and entrepreneur mean owner-manager. In Krizners view, entrepreneurship is searching opportunities and exploiting them so it reflects towards the alertness capability of entrepreneur towards profit opportu