Supply-side Vs Demand-side Factors Facing Rural Households’ Accessibility to Microcredit in Pakistan

Abstract

Agreed on the current attractiveness of microcredit schemes as a means of poverty alleviation, their accessibility to the poor households is of obvious concern. This research article examines the factors influencing the accessibility of microcredit by rural households in Pakistan. An empirical analysis utilizes logit model, with empirical data collected through interviewing 600 households, including both non-borrower and borrower households, a survey conducted between January 2017 and March 2017 in Punjab Province of Pakistan. A total of 13 household-level factors are defined as the determinant of households’ access to microcredit, including household size, income, education level and others. Also, the results indicate that the accessibility of rural households to microcredit can also be reduced by the program-related factors (e.g., interest rates and loan processing time). An empirical examination establishes a significant positive relationship between household microcredit demand and access to microcredit. This paper thus concludes that households should be reinvigorated to raise capital requirements (e.g., generate investment opportunities in on/off agricultural activities) to increase their demand for microcredit, which can enhance their access to microcredit. Also, microcredit institutions such as ZTBL (Zarai Taraqiati Bank Limited) should expand their loaning schemes and collateral free products to suit the diversified needs of the rural population.