`A

Table of Contents

I. Introduction 1

Justification of the study ........................................................................................................................... 3

Objectives ................................................................................................................................................. 4

II. LITERATURE REVIEW ................................................................................................................................. 5

2.1 The History of Microfinance in Pakistan ..................................................................................... 7

2.1.1 The Informal Sector ................................................................................................................ 7

2.2 Early Initiatives by Government ........................................................................................................ 8

2.3 Micro-Finance Initiatives by NGOs .............................................................................................. 11

III. Research Methodology .......................................................................................................................... 15

3.1 Universe of the study; .............................................................................................................. 15

3.2 Sample Size .................................................................................................................................. 15

3.3 Data collection; ............................................................................................................................ 16

3.3.1 Questionnaire and interview schedule................................................................................. 16

3.4 Data Analysis:............................................................................................................................. 16

3.4.1 Chi-square test ....................................................................................................................... 16

IV. RESULTS AND DISCUTION ................................................................................................................... 18

4.1 Socio-economic and demographic sketches.............................................................................. 18

4.1.1 Age of the respondents .......................................................................................................... 18

4.1.2 Educational status of the respondents.................................................................................. 18

4.1.3 Level of education ....................................................................................................... 19

 4.1.4 Marital status ..................................................................................................................... 19

4.1.5 Monthly income ................................................................................................................... 20

4.1.6 Size of land ....................................................................................................................... 20

4.1.7 Size of irrigated land ............................................................................................................. 21

4.1.8 Type of family..................................................................................................................... 21

4.1.9 Size of family ........................................................................................................................ 22

4.2 Uni-variate Analysis ....................................................................................................................... 22

Are you satisfied from the interest rate? ............................................................................................. 23

4.2.1 Respondents attitude towards high interest rate ...................................................................... 23

4.2.2 Respondents perception regarding accessibility to micro-credit...................................... 24

4.2.3 Respondents perception regarding rigid rules and regulations .......................................... 25

4.2.4 Respondents opinion regarding lack of education (un-awareness) ....................................... 26

Table 4.2.5 Respondents attitudes about micro-credit ...................................................................... 27

4.3 Bi- varite analysis ......................................................................................................................... 29

4.3.1 Association between high interest rate and micro-credit...................................................... 30

4.3.2 Association between lack of access and micro-credit............................................................. 31

4.3.3 Association between rigid rules, regulations and micro-credit ............................................. 33

4.3.4 Association between lack of education (un-awareness) and micro-credit ............................. 34

V. SUMMARY, CONCLSIONS AND RECOMMENDATIONS ........................................................................... 35

5.1 Summary .................................................................................................................................... 35

5.2 Conclusion .................................................................................................................................. 37

5.3 Recommendations .................................................................................................................... 38

References 39

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List of table
Table 3.1: Proportionate Allocation of Sample Size ............................... Error! Bookmark not defined.

Conceptual frame work; ................................................................................ Error! Bookmark not defined.

Table 4.1.1 Frequency and percentage distribution of respondent according to age .... Error! Bookmark
not defined.

Table 4.1.2 Educational status of respondents ......................................... Error! Bookmark not defined.

Table 4.1.3 level of education ........................................................................ Error! Bookmark not defined.

Table 4.1.4 marital status of the respondent ............................................ Error! Bookmark not defined.

Table 4.1 monthly income of the respondent ............................................... Error! Bookmark not defined.

Table 4.1.6 size of land................................................................................... Error! Bookmark not defined.

Table 4.1.7 size of irrigated land ................................................................. Error! Bookmark not defined.

Table 4.1.8 Type of family ............................................................................ Error! Bookmark not defined.

Table 4.1.9 Size of family ............................................................................ Error! Bookmark not defined.

Table 4.2.1 Respondents attitude towards high interest rate ....................... Error! Bookmark not defined.

Are you satisfied from the interest rate? ................................................ Error! Bookmark not defined.

Table 4.2.2 Respondents perception regarding accessibility to micro-credit Error! Bookmark not defined.

Table 4.2.3 Respondents perception regarding rigid rules and regulations ........... Error! Bookmark not
defined.

Table 4.2.4 Respondents opinion regarding lack of education (un-awareness) ........ Error! Bookmark not
defined.

Table 4.2.5 Respondents attitudes about micro-credit ................................. Error! Bookmark not defined.

Table 4.3.1: (N=152) Association between high interest rate and micro-credit ...... Error! Bookmark not
defined.

Table 4.3.2: (N=152) Association between lack of access and micro-credit ............ Error! Bookmark not
defined.
Table 4.3.3: (N=152) Association between rigid rules, regulations and micro-credit .... Error! Bookmark
not defined.

Table 4.3.4: (N=152) Association between lack of education and micro-credit....... Error! Bookmark not
defined.

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 ACKNOWLEDGEMENTS

All kind of appreciation is for almighty Allah who created the universe and blessed the
mankind with knowledge and wisdom to search for his secrets. I am thankful to him who gave
me the potential, courage and patience to complete this work.

I express my deepest sense of gratitude and indebtedness to my supervisor Mr. Akhtar

Ali Lecturer, Department of Rural Sociology, Khyber Pakhtoon-Khwa Agricultural University
Peshawar, for his valuable guidance, positive criticism and constant supervision that helped me
to complete this research work in time.

It is mater of great pleasure for me to have honourable prof. Dr. Mussawar Shah,
chairman, Department of Rural sociology, Faculty of Rural social sciences, the University of
Agriculture. I am grateful for his kind suggestions and supervision in every step of this work,
without his support, idea and advise my research could never be completed.

I am also thankful to all the faculty members of the Department of Rural Sociology,
faculty of rural social sciences, the University of Agriculture Peshawar for their supportive and
kind attitude. Last but not the least I whole heartedly extend many thanks to my colleagues for their
facilitation in drafting this research.

Last but not the least I whole heartedly extend many thanks to my colleagues for their facilitation
in drafting this research.

I acknowledge with thanks the prayers, encouragements and financial support of my

loving and affectionate parents especially to my father MUHAMMAD RAHMAN. I am also
obliged and grateful to my Brother and Sisters for their love and supplication. I cannot find
words to describe how grateful I am, for all the sacrifices they have rendered to enable me to
pursue the studies and their heated prayers are always been the base of my success.

Inam ullah
 IMPEDIMENTS IN THE DISBURSEMENT OF MICRO-CREDIT AMONG
SMALL FARMERS

Inam ullah and Mr Aktar Ali

Department of Rural Sociology
Faculty of Rural social sciences
The University of Agriculture, Peshawar Khyber Pakhtunkhwa Pakistan
December, 2014

ABSTRACT

The present study entitled impediments in the disbursement of micro-credit among small farmers
was conducted with special references to three purposively selected union councils namely
Kotkay, Lal qilla and Hayasri in Miadan of District Lower Dir. A simple size of 152 farmers
house hold was proportionally allocated to each union council. The study showed that out of
100% respondents 3.3% were between the ranges of 20-24 ages, 50% had the between 25-29
age, and 71% were over the age of 30 and above. It showed from the age that most of the
respondents (farmers) were above 30 years. On the basis of division of respondents educational
status 33.5% were illiterate, while majority of the respondents 64.5% were illiterate. The literacy
rate was not good in the farmers. According to the data 94.7% of the farmers were married while
5.3% were unmarried. The association between independent variables (high interest rate, lack of
access, rigid rules and regulations and lack of education) and dependent variable (micro-credit)
was tested by using Chi-Square Test. In bi-variate analysis the data showed that a significant
association (p=0.034) was found between micro-credit and high interest rate is hurdles in the
way of micro-credit. Moreover the relationship of micro-credit was significant (p=0.001) with
the statement that all the farmers have access to micro-credit. Further, the data revelled that a
highly significant (p=0.000) association was found between the attitude of staff members in bank
with micro-credit. Likewise the association between lengthy process and micro-credit was also
significant (0.003). It indicates that taking process of micro-credit can affect on the whole
process of micro-credit. A significant (p=0.00) relationship between micro-credit and education
was also found. Education is important which bring awareness among the people regarding
micro-credit.the study concluded that high interest rate; lack of access to micro-credit, rigid
rules, and regulations, attitude of the bank staff and lack of education are important impediments
in the disbursement of micro-credit.

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3
I. Introduction
Pakistan is a developing country which depends on agriculture to fulfil their food needs and also
provides raw materials for industries. Majority about 66% of population directly or indirectly
related to this sector and 43.3% of labour force are employs in this sector.

As compared to past this sector is developing more (5.0 during 2006-7). This agriculture sector is
contributing 20.9% of the GDP. The agriculture depends on many factors for examples
availability of inputs, agriculture machinery, and size of farm, credit and education. From the
past history its clear that agriculture credit plays an important role for development of this
sector. In Pakistan most of the farmers are poor. For whom, high quality seeds, fertilizers and
modern farm machineries are impossible, thus resulting in low production (Government of
Pakistan 2006-7).

In Pakistan major portion of the farmers belongs to small farmers having less than 12 acres.
These small farmers are important because out of total cultivated area of 40.76m acres, 19.79 m
(48.56%) are under the control of these small farmers. There are 6.62 m in Pakistan, out of which
85.69 %( 5.6 m) are cultivated by small farmers. In Punjab majority 85.39 (3.29) comes under
the category of small farmers (G0P 2000).

Micro-credit means giving small loans to poor to improve their life condition.

Micro-credit refers to providing small loans to needy people otherwise be unable to secure credit
because of poverty. Related hindrances may composed unemployment or underemployment and
lack of collateral and credit history (Ali 2008).

Microcredit is refers to provided to fund a business initiative by the recipient. The entrepreneurs
involved are sometimes referred to as micro-entrepreneurs because the scope of their projects
and the sums required to fund them are very modest.

There are two important ways of agriculture credit in the country: institutional and non-
institutional sources.
In these the non-institutional sources are mostly practices in rural areas. It may be include
relatives, friends, landlords and shopkeepers etc. the institutional sources are commercial banks,
cooperative societies, NGOs and the agriculture development bank of Pakistan which provides
micro-credit to farmers. In Pakistan commercial banks provides micro-credit to farmers since
1972. Various NGOs also tries to enhance the production of small farmers by providing credit.
Examples are the National Rural Support Program (NRSP), the Sarhad Rural Support Program
(SRSP), the Agha Khan Rural Support Program me (AKRSP), and Sungi Evelopmnet
Foundation. ADBP is the largest source of providing credit to the farmers among institutional
sources (shah, 2008).
Most of the credit requirement of the poor farmers fulfill through informal resources (non-
institutional) in rural areas. Those farmers who are unable to secure the formal rules and
requirements gents credit through non-institutional way. Informal credit are provides by verities
of providers like family and friends, landlords, money lenders, traders or commission agents.
For poor farmers large landlords usually provide credit to their tenants or sharecroppers for the
purchase of seeds, fertilizer and modern equipments. This is common in two province of
Pakistan mostly in Sindh and Punjab. Arties or commission agents like interlinked transactions
example provides seeds and others equipments and return they sell the output or produce. Its
impossible to properly calculate the actual prize of the credit in these types of transitions. The
second supplies of credit are mostly common worked in established markets such as textile and
non-institutional credit is common in the transport sectors as well as in the shoemaking, livestock
and dairy industries. The census 2000 assess that 65% of outstanding debt of all rural farmers
was provided by informal sources. Its clear that in informal sources most of the credit are
provided by family and friends. Financial market survey found that 82% of individuals in rural
area takes 69% of total amount of funds through informal with easy conditions; schedules form
friends and relatives mostly without interest (sarwar 2ooo).
There are numbers of advantages of informal credit because it has no restrictions, for any needs
may be use. That can be offered in small amounts, also have low transitions costs, high interest
by commission agents but have no interest when these are taken from relatives and friends, and
repaid disbursement of credit. Although informal way of micro-credit have decline to some
extent, still its a major source of credit in rural areas. The close relation among the people and
inability of formal institution the farmers mostly depend on the informal market. Most of leaders

2
have, however limited loan portfolios and exist within small area of their under control. In
Pakistani agriculture sector most of the farmers are small with scare financial resources. Because
of poverty and small land holding their production is low and they are not able to use modern
technologies to increase desires output. The financial problem and low production the agriculture
sector in Pakistan is poor which rise others social problems, like unemployment, poverty, crimes
and scarcity of food etc. so providing financial support to the farmers are necessary to purchase
of good seeds, chemical fertilizers, pesticides and mechanical equipments( umair 1999).

However there are numbers of formal institution which provides loans to medium and large
farmers because of its ability to provide security. The small farmers are unable to takes full
advantages because of inability to fulfil the condition and requirement procedure of loans.

The government of Punjab lunched micro-credit program in 1990 to enhance the production and
socio-economic conditions of small farmers through Punjab rural support program (PRSP). The
main objectives of this program are to provide credit mainly to small farmer of the rural areas to
improve the socio-economic condition which is ignored in the past. Through this program the
government tried to ensure the access of all farmers and provide credit to purchase seeds,
chemical fertilizers to increase the level of production. This program has increased the
production and improved the life condition of small farmers. The poor farmers are able to
purchase various inputs at proper time and also help to introduce new production technologies.
.Different studies have been conducted to know about the impact of micro-credit on agricultural
production and these studies indicate that provision of micro-credit has increased agricultural
production and productivity to a substantial extent ((Kazi and Raza,2006).

Justification of the study

In Pakistan 45 to 80% of population depends on agriculture. There are 5.1 million

farmers and majority of them 93% are small farmers and the remaining only 7% are the
medium and large farmers. The production of the small farmers is low as compared to
the others countries of the world. Most of small farmers are poor because of low
income. They are unable to increase production without the help of micro-credit. The
government wants to increase the production of these farmers by giving micro-credit.
But there are some obstacles in the disbursement of micro-credit. The study conducted

3
 in Miadan tries to highlight those factors which hinder in the disbursement of micro-
credit.

Objectives
1. To know the socio-economic profile of the sampled respondents.
2. To explore the perception of small farmers regarding micro-credit.
3. To assess the relationship between (high interest rate, access to micro-credit,
rigid rules and regulation, lack of education) and disbursement of micro-credit.
4. To suggest recommendations in the light of present study.

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II. LITERATURE REVIEW
In Pakistan like most of others developing countries of the world about 45 to 80% of population
depends on agriculture. Agriculture is the main sector of economy in Pakistan, contributing
24.6% of the GDP in the year 2000-01 which is slightly decrease to 24.1% during the year of
2001-02. According to survey there are 5.1 million farmers and most of them 93% are small
farmers which controlled 60% of total cultivated area. The minority only 7% of total farmer are
large controlled 40% of cultivated area. Size of land holding is small in Pakistan which
decreasing day by day due to increase in population and law of inheritance. These factors effect
on investment, productivity and result 52% of population are poor in Pakistan (Ayaz.S.and .z.
Hussan 2003).

In the last decade agriculture sector grew at the rate 4.5% per year. The causes of low
productivity are bad weather conditions and diseases of crops. The agriculture also have
problems like, old or traditional method of farming, low production, shortage of inputs (credit,
good seeds, fertilizer) adulterated pesticides, improper plant protection measures etc. majority
81% of the farmers are unable to remove all these obstacles because the lack of money
(Ayaz.S.and .z. Hussan 2003).

Like the previous year this year the agriculture production is low because of dry weather and
scarcity of water, which grew by 1.4%in 2001-02 as against a decline of 2.6% last year. Among
the major crops, the production of wheat is estimated at 18,475 thousand tons last year decline of
2.9%. However the production of sugarcane has increased by 10.2% in 2001-02 and estimated at
48,606 thousand tons last year (Govt of Pakistan 2004).

Micro-credit or finance for agriculture sector will increase production and more employment.
But for this modern technological change and broad based land in agriculture. Under such
condition the micro-credit would have more impact of this sector.

To transfer from conventional to modern farming methods are require change in agronomic
practices to increase productivity per unit of cultivation. This leads to credit based transactions
for the purchase of good seeds, fertilizers, pesticides and modern mechanical equipment (Govt of
Pakistan 2004).

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The small farmers have large family sizes as compared to their income or land. For modern
seeds, fertilizers and pesticides etc, they require funds to meet these needs. For improving the
conditions of small farmers, who constitute more than three fourth of the farming community
proper measures should be taken on great priority basis for a country like Pakistan. Most of
medium and large farmers also need credit to improve the production level. To increase the
production its necessary to increase the use of agriculture inputs. However the farmers are not in
the position to increase the use of inputs without the help of external help or micro-credit (Govt
of Pakistan 2006).

The Govt with the help of various NGOs tries to alleviate poverty, create employment
opportunity and increase the production of poor in Pakistan. In this regard the successful
experience is Gramen Bank (Bangladesh) a bank which provides funds for poor citizens, which
established in the year 1983, it became a model, more productive and effective thing to reduce
poverty in the people.

After the successful experience of Gramen Bank the micro-financing program has became very
popular and consider a tool of removing poverty in most of the developing countries. It starts
both for farming and non-farming sectors in rural areas. In the light of the success of Gramen
bank Pakistan also started various programs to increase the production of the farmers and remove
poverty, like National Rural Support Program (NRSP), Punjab Rural Support Program (PRSP) in
1991 and 1997 respectively which is non-governmental organizations (Idress.M and M.Ibrahim
1997).

The government of Pakistan started rural support program (PSPs) in 1990 for improving the life
condition of rural people all over the country. This program is funded by the government for the
purpose to mobilize the rural people. Among these programs the largest one is the Nation Rural
Support Program (NRSP) followed by Sindh Rural Support Corporation (SRSC), Baluchistan
rural support program, (BRSP) and Punjab rural support program (PRSP). All these programs are
the result of the success of Agha khan rural support program (AKRSP) based in northern areas
and Chitral (iqbal M. and A. Munir 2005).

The government always tries to remove poverty from the country. Government tries to highlight
the problems which causes poverty and also takes appropriate measures to improve the socio-

6
economic conditions of the people. In these measures include, establishment of Pakistan poverty
alleviation fund (PPAF), micro finance bank (khushali bank) and food support program etc.
micro-credit is being given to the farmers to start sustainable economic activities and improve
the agriculture sector.

The start of micro finance bank in the recent past is for the purpose of promoting micro business
among the poor segments of people by making available banking service to fulfill their particular
needs. These banks provide service for poor and also guide their clients in various matters such
as crop production, diseases prevention, animal husbandry and education.

Loans must be provides to small farmers because their history of repayment is good. Special
attention should be providing to small farmers because most of the farmers are small. Micro
finance provides help to increase access to the farmers to use modern technologies. It increases
the empowerment of clients, like marginal and small farmers who are often ignored by formal
financial institute.

There are problems of timing in micro-credit disbursement. It not provide on proper time. Credit
disbursing agency should have proper check on the people to utilize the credit for their respective
purposes (M.A. Munir and K. Abbas 2003).

2.1 The History of Microfinance in Pakistan

2.1.1 The Informal Sector
The poor of Pakistan have generally depended on non institutional sources for meeting most of
their credit requirements. Informal providers serve a predominantly lower income group who are
perceived by the financial institutions as un-bankable due to their inability to comply with
conventional rules and regulations of the banks. The informal credit market is served by a wide
variety of providers including predominantly family, relatives and friends, landlords, money
lenders, traders and commission agents. Large landlords usually provide credit to their tenants or
sharecroppers for the purchase of modern agriculture inputs and consumption purposes. This is
most common in the province of Sindh and Southern Punjab. Arties or commission agents like
interlinked transactions providing, for example, inputs to farmers and undertaking to sell their
produce. It is difficult to properly assess the actual price of credit in these interlinked
transactions. Suppliers' credit is common in established markets such as textile, and informal

7
finance is common in the transport sector as well as in the shoemaking, dairy and livestock
industries. The Agriculture Census of 2000 estimated that 65% of outstanding debt of all rural
households was provided by informal sources. In case of agriculture households, the share was
61% and for livestock holders it stood at 85%.12 A fact not fully acknowledged is that most of
the funds in the informal sector are actually provided by family and friends. A Financial Markets
Survey found that 82% of individuals borrowed 69 percent of the total amount of funds at very
low or no interest payments with flexible repayment schedules from friends and
relatives.(Khander S.R. and R.R. Faruqee. 2003)
Distinct advantages are offered by informal credit, as there is no restriction on the purpose of its
use, can be provided in small amounts, is characterized by low transaction costs, high interest
rates by commission agents but no interest rate when provided by friends and family and rapid
disbursement of credit. Although, its share in total credit has declined, it still remains a major
source of credit in rural areas. The close familiarity of borrowers with informal lenders, inability
of formal institutions to reach the poor explain why there is a heavy dependency of the rural
population especially farmers on the informal market. Most of the informal lenders have,
however, limited loan portfolios and operate within a narrow area of their influence (Qureshi, Dr.
Sarfraz Khan. TA 4478-PAK)

In Pakistan majority of the people uses rotating saving. Credit associations are exist all over the
country. This is common among all types of socio-economic background women for the purpose
of private saving. This is doing with trusty people. The members know each other very well in
the committee and they take some money from each member on specific time. Then the whole
money is distributed by the rotation policy among the members. This helps to meet the savings
need in an informal manner in a system which is based on trust. This money is generally used for
a large financial outlay such as a marriage, house building, consumer durables, education, etc
(Qureshi and Shah. 1992).

2.2 Early Initiatives by Government

In the past government made little distinction between micro lending and agriculture. The
main objective was providing credit to small farmers. Before independence formal credit was
provide to the farmers by the government in the form of Taccavi loans which were started before

8
commercial and cooperative banks came into crop and other agriculture sector loans. Taccavi
loans were distributed through revenue department of provincial government is given form the
govt treasury. These loans were given for the purchase of seeds and fertilizers by revenue
agencies. These types of loan are also given in case of damage to crops in flood or famine
conditions. Taccavi loans were provided on the basis of interest. Any delay in the repayment
penal interest was also levied. The rules, regulations of taccavi loans was established under the
land improvement loan act of 1883(LILA) and agriculture loan act 1884(ALA). Later on these
are replaced by West Pakistan agriculture loan act of 1958 (ALA). Under LILA loans were
provided for the purchase of irrigation wells, tube wells, land levelling and land reclamation and
development. After the development of new institutions the contribution of the mention
institution is decline with passage of time. Delays and difficult procedure in sanctioning and
disbursement of loans rendered the system of Taccavi inefficient and ultimately these loans were
stopped in 1993-94(Iqbal, Muhammad, Ahmad, Munir and Abbas 1993).
The Cooperatives is another source of credit from the institutional sector. Credit cooperatives
have existed in this region form the past, since their introduction in India under the Cooperative
Credit Societies Act of 1904. The main purpose was to provide loans to small farmers through
their own local associations on relatively easy terms and free them from the exorbitant rates
offered by moneylenders and grain merchants. At the time of independence, the co-operative
banks were engaged in financing commercial activities mainly and had ignored the financing of
co-operative societies. To further increase the level of rural credit and to promote the cooperative
societies and cooperative movement in the country, the Government established the Federal
Bank for Cooperatives (FBC) and Provincial Cooperative Banks (PCBs) in the late 1970s. This
was
Through an Ordinance in 1976 entitled the Establishment of Federal Bank for Co-operatives
and Regulation of Co-operative Banking Ordinance was promulgated. The Federal Bank for
Cooperatives (FBC) was designed as the highest institution meet the credit needs of cooperative
banks and societies. It was designed as a development bank and served as a tool for the State
Bank of Pakistan to regulate the Provincial Cooperative Banks. The SBP would lend to the
Federal Co-operative Bank at just 0.5 percent. The Federal Bank would keep a percentage-based
fee and pass on the subsidized funds to Provincial Co-operative Banks. These would then on-

9
lend to the Co-operative Societies established in the provinces and registered and regulated under
the aegis of the Provincial Co-operative Societies Department at a profit.
Both F.B.C. and P.B.C. played important role in the extension or rural credit and development of
corporations in the initial stage. However it could not sustain this effort despite the development
of 66000 primary societies, primarily due to unfair use of funds and inability of FBC to monitor
and activities PCBs and the societies effectively. The societies are uneven coverage, with no
presence in two third of the villages, lack of professional and accountability management, poor
portfolio management and weak supervisory capacity of the provincial cooperation departments.
Although the cooperative was succeed to some extent but failed due to politicization and
domination by the rural elites. The Punjab Economic Research Institute (PERI) started an
evaluation of the Cooperative Credit Program in Punjab in August 1986. One of its main findings
was that only four percent of the cooperative societies were genuine. An estimation of the
Subsidy Dependence Index (SDI) which measures the percentage increase in the financial
institutions average on-lending interest rate required to fully compensate for the elimination of
subsidy, revealed that the Punjab Provincial Bank was heavily subsidy dependent. It would have
to increase its on-lending interest rate to 25 percent instead of 14 percent to fully eliminate the
subsidy in 1994-95. Provisioning for reserve requirements would have entailed an even higher
increase in on lending rates (Report of the Committee on Rural Finance. SBP. 2002).

In Pakistan two specialized institutions were established namely the agriculture bank and
agriculture development finance corporation in the year 1950. After some time both merged in
the year 1961 to agriculture development bank of Pakistan (ADBP). Historically the ADBP
provide money to the clients on low interest as compared to the market. The bank introduced
various approaches like a village and clients centered approach through the expansion of its
supervised credit scheme by bringing credit services to the farmers through mobile credit officers
(MCOs). To provide access all over the country wide network of branches and MCOs was
developed. For women the ADBP also started credit program through female credit officers. The
rules was relaxed for lending which in the past had been based on mortgaging land as a result
had excluded tenants, women and landless for accessing most credit lines. The mention credit
program of the govt proved to be subsidy dependent and failed to achieve their desired goals.
Instead of building a sustainable financial infrastructure, many of the directed programs
undermined the development of a viable financial market. For alleviating rural poverty cheap

10
credit was ineffective in increasing agriculture investment and production. Support for these old
traditional directed agricultural credit efforts began to wane in the 1980s and by the end of the
decade most donors and some government agencies rapidly decreased their support for
agricultural credit. This decline in support was due to the low performance of these efforts.
Critics increasingly argued that relatively few of the credit subsidies were captured by poor
people and that subsidized and directed credit had a weak effect on agriculture production and
investment. Serious and chronic loan recovery problems, dependency on outside funding, and
overall costs eroded the support for these efforts. Poor performance and the lessening of donor
and government support led to the end of many public agricultural development banks and rural
(government directed) co-operatives in the 1980s. The Agriculture Development Bank of
Pakistan (ADBP) was converted into a public limited company and renamed the Zarai Taraqiati
Bank Limited (ZTBL) in 2002. The ZTBL was allowed increased paid up capital and a clean
balance sheet with a leaner structure. The restructuring included its process, system and product
reengineering, with major emphasis being laid on reorientation of existing employees with
specific focus on their capacity building, induction of a professional management team. ZTBL
restructuring was undertaken as part of the reform agenda of the ADB-funded Rural Finance
Sector Development Program. At the same time the Government liquidated the Federal Bank for
Cooperatives (FBC). The Punjab Provincial Cooperative Bank is now the only scheduled
cooperative bank which still has operations on the ground. The other Provincial Cooperative
Banks may also be finished as they currently exist only on paper. At this time a host of private
sector institutions were also established to increase the accountability and transparency of the
private sector formal institutions (Qureshi, Dr. Sarfraz Khan 2000).

2.3 Micro-Finance Initiatives by NGOs

Several NGOs also initiated micro-finance on a small scale running development programs
when they felt that the credit was an important input for increasing productivity and incomes.
The Orangi pilot program in urban Karachi and the Agha khan rural support program (AKRSP)
in the northern areas were among the first to start micro-finance program. In the initial stage
loans were not the part of (AKRSP). For rural development saving was the only component of
this program due to its basic premise that social capital, human capital development and capital
formation, constituted basic elements. This program emphasis on weekly village organization
meetings, promoted considerable interest among both men and women and its provided

11
motivation for the first women organization established in the northern areas. The saving
program of AKRSP provided the opportunity to small savers to save with the formal sector
through its intermediation with the banks. For NGOs it was not allowed to take deposits, the
saving was deposited with commercial banks. In the beginning of this program operation had not
systematically planned a micro-credit program for its clients. When AKRSP realized that its
clients need credit for investment purposes and credit from the formal sector could not easily
tapped due rigid rules and regulations, they entered the credit market. AKRSP credit chronology
illustrates its dynamic nature and the less experience of its financial mangers. From 1982 the
program experienced with many types of loans. Agha khan rural support program have struggled
in designing its loan products, balancing several different motivations, like social cohesion,
access inexpensive sources of credit for its members, investment in rural development and
sustainability. The AKRSP start with long and short term loan (Akbar Zaidi. PMN. November
2008).

The Orangi pilot program started a credit program when they realized critical need for financial
service in slums in Karachi for improvement of sanitation. However, opp not have only model
either and under the guidance of D.R Akhtar Hameed khan experienced with several different
approaches. These programs grow gradually and spawn others rural development programs all
over the country such as the Punjab rural support program in Lahore, national rural support
program in Islamabad and Sarhad rural program in Peshawar. These programs were made
according in the light of AKRSP. These programs were not designed to run as sustainable
programs and were managed by social organizers with no experience of managing such
programs. In fact in the beginning there was no estimation of how much it will cost to actively
deliver these credit service and the adhoc basis interest rate were fixed reflect what the
programmer felt the poor could bear to pay. Most of the NGOs in early 1990 were running their
micro-finance from outright donor grants. . The sector was not at a stage where it was
considering loans to finance its programs. There was little consideration given to the source of
funds that would help for the future growth. Most of the NGOs, except from the Sarhad Rural
Support Corporation (now SRSP) which had been given a loan from Khyber Bank as part of a
Donor project, was reporting any financial cost on borrowings because they did not incur any
cost on this account. The year 1996 is viewed as an important year in the history of the micro-
credit sector in Pakistan (Report on Rural Finance. SBP. 2002).

12
In that year Kashf Foundation was started as the first specialized organization of micro-finance
in the country with a grant from Grameen Foundation, AKRSP realized the need to separate its
microfinance operations and created a separate unit to track financial performance, and the
National Rural Support Program initiated its Urban Poverty Alleviation Program (UPAP) in
Rawalpindi to help develop a pilot program on a sustainable pattern. Some of the NGOs started
to collaborate and form an association of micro-finance providers in Pakistan in 1998, called the
Microfinance Group-Pakistan, which later evolved into a formal organization in 2001 in the form
of the Pakistan Microfinance Network (PMN). The establishment of PMN spurred a focus on
transparency, performance reporting, capacity building and tracking progress in the microfinance
sector. At the government level, concerted efforts for the promotion of the sector began in the
year 2000 when an apex funding body, the Pakistan Poverty Alleviation Fund (PPAF) was
established for the reduction of poverty. As an apex organization, the role of PPAF is to act as a
whole saler and intermediary of funds, while its Partner Organizations (POs) perform the actual
retailing function of loaning funds and implementation of projects on the ground. PPAF provides
its partner NGOs three types of facilities which consist of (i) extending lines of credit for
expansion of poverty targeted micro credit programs (ii) grants for Community Physical
Infrastructure (CPI) schemes and social sector services on a cost sharing basis and (iii) grants to
strengthen the human and institutional capacity of POs.
The establishment of PPAF and its financing of NGOs provided a real impetus to the growth of
the sector. In the last eight years from 2000 to 2008, PPAF has established itself as one of the
main players in the development sector in Pakistan. From the initiation of its activities in 2000 to
the end of December 2007, PPAF had disbursed a cumulative total of US$ 457 million to 71
Partner Organizations. On a cumulative basis it has disbursed US$ 348 million for credit, US$ 75
million for community infrastructure schemes and US$ 34 million for capacity building. It has
developed itself as a professional and highly credible apex institution with a strong and efficient
corporate culture. It is today one of the largest social funds in the world. While its Partner
Organizations may hold a wide range of views regarding PPAF, they all agree that it has been the
main catalyst which has led to the exponential growth in the microfinance sector, enabled a more
integrated approach to rural development and allowed a long-term perspective to social
mobilization and community empowerment. They also agree that it has transformed them from

13
charity driven organizations dependent upon donor financing to organizations with a clear
business plan for becoming sustainable development partners.
There was little conception of working towards sustainability in the micro-finance operations
when PPAF first started its operations. For many years the main providers in the sector were
micro-finance NGOs which started micro-finance as one of their many activities. They started
micro-finance more as a tool for social mobilization than as a sustainable financial product.
Some of the leading organizations had not properly separated out their micro-finance operations
from their other operations and assigned notional costs to their micro-finance operations. The
Pakistan Poverty Alleviation Fund (PPAF) was the first organization which was able to change
the expectation that NGOs could only operate with grants. Prior to PPAF, none of the NGOs had
ever taken loans to finance their operations. PPAF thus brought about a significant shift in the
institutional mindset of these organizations. This change entailed a complete transformation in
organizational culture, appraisal criteria, staffing pattern, financial management and monitoring
and evaluation criteria (Akbar Zaidi. PMN. November 2008).

14
III. Research Methodology
This chapter contains mainly the methodology which the researcher will adopt during this study,
its containing conceptual frame work, universe of the study, sample size, tools of data collection
and methodology for data analysis. The detail of the methodology is as bellow

3.1 Universe of the study;

The universe of the study was Maidan. In Maidan three union councils Kotkay, Haysari
and Lal qilla purposively selected were universe of the study.

3.2 Sample Size

The acquired populations according to criteria were selected from those members who
have their livelihood through agriculture as well as beneficiary of micro-credit. The total
population size comprises of 250 respondents, in which only 150 respondents were selected for
data collection according to sekaran (2003).

Purposive sampling procedure was used as a method of data collection. The area of Maidan
is wide and it was not possible to study the whole area. That is why the researcher used
purposive sampling for data collection (Bailey 1987). Three union councils namely
Kotkay,Hayasri and lal qilla were selected through purposive sampling.

ni = n.Ni

n = total sample size

Ni = population size in each strata

N = population size

Table 3.1: Proportionate Allocation of Sample Size

15
S.No Tehsils Farmers households Sample size
1 Kotkay 120 72
2 Lal qilla 80 48
3 Hayasri 50 30
4 Total 250 150
Source Agriculture bank Timergara

3.3 Data collection;

3.3.1 Questionnaire and interview schedule
Both questionnaire and interview schedule were used for data collection. Questionnaire was used
for educated farmers while interview schedule for un-educated farmers. This method was used to
obtained relevant data from respondents the questions was devised by using Likert Scale While
keeping in view the method devised by (Smith, 1981)

Conceptual frame work;

Independent variables Dependent variables

High interest rate micro-credit

Lack of access to micro-credit

Rigid rules and regulations

Lack of education(un-awareness)

3.4 Data Analysis:

The collected data was analyzed by using a computer software i.e. statistical package for social
sciences (SPSS 20 version) and MS EXCEL. The data was transferred on this program and
frequencies and percentages were drawn on the basis of data entered in the base of SPSS.

3.4.1 Chi-square test

Chi-square (x2) test will be used to test the association between dependent and independent
variables.

16
 r c (Oij eij )2
x
2
Chaudry and Kamal (1996)
i l j l eij

i1
= Total of ith row

j 1
= Total of jth column

Oij and eij = Represent the observed and expected frequencies shown by Chaudry and

Kamal (1996).

17
IV. RESULTS AND DISCUTION
Findings of the study are given under various sections and subsections of this chapter. Section
4.1 describes demographic and general characteristics of respondents. Sections 4.2 explain uni-
variate analysis of both independent and dependent variables. Section 4.3 contains information
about bi-verate analysis and chi square statistics shoeing relationship of dependent variable
(micro-credit) with independent variable (high interest rate, access to micro-credit, rigid rules
and regulations and lack of education).

4.1 Socio-economic and demographic sketches

The variables including in this section comprises of age, gender, educational status, marital
status, and monthly income, size of land, size of irrigated land, types of family and size of family
of respondents.

4.1.1 Age of the respondents

Table 4.1.1 tells of the age limits of the respondents. Out of total 50% of the respondents
were in the age group of 25 to 29 years, followed by 46.7% in the age group of 30 and above
years and the remaining 3.3% were in the age group of 20 to 24 years.
Table 4.1.1 Frequency and percentage distribution of respondent according to age
Age of the respondents Frequency percentage

20-24 5 3.3

25-29 76 50.0

30 years and above 71 46.7

Total 152 100.0

4.1.2 Educational status of the respondents

Table 4.1.2 reveals the educational status of the respondents. On the basis of division of
respondents educational status 64.5% were illiterate while 35.5% were literate. The table shows
that majority of the farmers were illiterate.

Table 4.1.2 Educational status of respondents

18
Educational status Frequency Percent

Literate 54 35.5
Illiterate 98 64.5

Total 152 100.0

4.1.3 Level of education

Table 4.1.3 shows the level of education of the respondents. 64.5% of the
respondents had no education (illiterate) while 18.4% had education up to metric, 11.8% were
intermediate, 4.6% were up to graduate and 0.1% was the qualification of post graduate.

Table 4.1.3 level of education

Level of education Frequency Percent

98 64.5
Nil
28 18.4
Metric
18 11.8
Intermediate
7 4.6
Graduate
1 .7
Post graduate
Total 152 100.0

4.1.4 Marital status

According to the table 94.7% of the farmers were married while 5.3% were
unmarried. It clear from the data that most of the respondents were married.

Table 4.1.4 marital status of the respondent

19
Marital status Frequency Percent
Married 144 94.7

Unmarried 8 5.3

Total 152 100.0

4.1.5 Monthly income

The data in the table shows monthly income of the respondents. Monthly income of a
large number of the respondents i.e. 55.9% were from Rs 9001 to 14000, followed by 22.4%
respondents having their income in between Rs 5000 to 9000 and the remaining 21.7% having
monthly income Rs 14001 to 19000.

Table 4.1 monthly income of the respondent

Monthly income Frequency Percent

5000-9000 34 22.4

9001-14000 85 55.9

14001-19000 33 21.7

Total 152 100.0

4.1.6 Size of land

The table 4.1.6 depicts the size of land holding of the respondents. Out of total
56.6% had between (4 to 8) acre, followed by 35.5% had from (1 to 4) acre and the remaining
7.9% had from (8 to 12) acre. The data clearly indicates that most of them were small farmers.

Table 4.1.6 size of land

20
Size of land in acre Frequency Percent

1-4 54 35.5

4- 8 86 56.6

8- 12 12 7.9

Total 152 100.0

4.1.7 Size of irrigated land

According to the table 84.2% of the respondents had the irrigated land from (1-4)
acre, and 15.8 of the respondents had from (4-8) acre. The data shows that there was no farmer
which has the irrigated area from (8-12acre).most of the farmers defends on rain.

Table 4.1.7 size of irrigated land

Irrigated land in acre Frequency Percent

1-4 128 84.2

4- 8 24 15.8

8- 12 0 0

Total 152 100.0

4.1.8 Type of family

The data shows about the types of family which the respondents belonged. 44.7 % of
the respondent belonged to nuclear family, followed by46.06 % of the respondents had joint
family and the remaining respondents belong to extended family. It could easily be depicted
form the study that nuclear and joint family systems were prevalent in study area.

Table 4.1.8 Type of family

Type of family Frequency Percent

21
Nuclear family 68 44.7

Joint family 70 46.06

Extended family 14 7.9

Total 152 100.0

4.1.9 Size of family

The table shows the number of persons the respondents had in their families. 36.2% of
the respondents claimed at the range of (6 to 10) members followed by 25.7 were having (11 to
15) members, 5.9% respondents family had members from (1 to 5), and 32.2% had (15 and
above) members. 25.7% had (10-15) and 25.7 respondents had members from (15 and above).
The population ratio was high in the respondents families.

Table 4.1.9 Size of family

Size of family Frequency Percent

1-5 9 5.9

5-10 55 36.2

10-15 39 25.7

15 and above 49 32.2

Total 152 100.0

4.2 Uni-variate Analysis

This portion of the chapter deals with the uni-variate analysis of independent
variables (high interest rate, access to micro-credit, rigid rules and regulations, lack of
education) and dependent variable (micro-credit).

22
Table 4.2.1 Respondents attitude towards high interest rate

STATEMENT TOTAL YES NO DONT

KNOW

Are you satisfied from the interest rate? 152(100) 6(3.9) 138(90.8) 8(5.3)

Are you paid interest ever in your life on

micro-credit? 152(100) 122(80.3) 30(19.7) 0(0.00)

Is it convenient paying profit on loan to bank? 152(100) 15(9.9) 119(78.3) 18(11.8)

Is it possible to you to give profit on loan to

bank in case of lost in business? 152(100) 14(9.2) 124(81.6) 14(9.2)

Is there any chance of pardon of laon?

152(100) 12(7.9) 105(69.1) 35(23.0)

Are you agree that interest is the main hurdle

in the way of micro-credit? 152(100) 112(73.5) 40(26.5) 0(0.00)

Do you wish that govt should remove interest

on micro- credit for small farmers? 152(1000 140(92.1) 1(.7) 11(7.2)

Table values in each cell indicate frequency while value of parenthesis indicated percentage.

4.2.1 Respondents attitude towards high interest rate

It is the responsibility of the government to provide small loans to the poor farmers on
concessional profit. Agriculture is considered the backbone of economic sector in Pakistan.
Nearly 70% of the population directly depends on agriculture ((Ali 2008).

The above table depicts that 90.8% of the respondents were not satisfied due to high interest rate.
80.3% of the respondents were paid interest ever in life on micro-credit. Moreover 78.3% of the
respondents were not considering convenient to pay profit to loan. 81.6% of the respondents
were not in the position to pay profit to bank in case of lost in business. 69.1% of the respondents
were of the view, that there is no chance to pardon loan from the banks. Furthermore, 73.5% of
the respondents agreed that high interest rate is the main hurdle in the way of the disbursement of
micro-credit. In last 92.1% of the respondents wished to remove interest from micro-credit.

23
Table 4.2.2 Respondents perception regarding accessibility to micro-credit

STATEMENT TOTAL YES NO DONT

KNOW
Are you fulfilling the criteria for loan?
152(100) 128(84.2) 11(7.2) 13(8.6)
Are you beneficiary of micro-credit? 1(.7)
152(100) 151(99.3) 0
Are you prefer to short term loan?
152(100) 57(37.5) 95(62.5) 0
Does micro-credit help the poor farmers?
152(100) 64(42.1) 82(53.9) 6(3.9)
Are all the farmers have access to loans?
152(100) 87(57.1) 20(13.3) 45(29.6)
Were you faced any difficulty in getting loan?
152(100) 130(85.5) 22(14.5) 0(0.00)
Is the concerned authority cooperative in
lending money? 152(100) 51(33.6) 101(66.4) 0(0.00)
Do you satisfied from the efforts of the govt
regarding micro-credit? 152(100) 16(10.5) 132(86.8) 4(2.6)
Do you want any improvement in this
process? 152(100) 142(93.4) 4(2.6) 6(3.9)

Table values in each cell indicate frequency while value of parenthesis indicated percentage.

4.2.2 Respondents perception regarding accessibility to micro-credit

In Pakistan majority of population dont have access to micro-credit (Amir 2012). The
table shows that out of 100% respondents 84.2% of the respondents claimed for fulfilling criteria
for loans, 99.3% of the respondents were benefited from this facility. Moreover, 62.5% of the
respondents were not like short term loans, 53.9% of the respondents thought that micro-credit
does not help the small farmers. Majority 57.1% of the respondents claimed that all the farmers
had access to loans. Furthermore, 85.5% of the respondents gave their opinion about difficulties
getting loans, and 66.4% of the respondents viewed that the concern authority were not
cooperative. Majority 86.8% of the respondents were not satisfied from the efforts of the govt

24
regarding micro-credit and 93.4% wanted improvement in the process of getting micro-credit.
So its concluded that majority of the respondents have no access to micro-credit, respondents
liked long term loan, faced various difficulties, the concern authority was not cooperative and
they want improvement in this process.

Table 4.2.3 Respondents perception regarding rigid rules and regulations

STATEMENT TOTAL YES NO DONT

KNOW

Does the existence process of micro-credit is

satisfactory? 152(100) 17(11.2) 127(83.6) 8(5.26)

Do you think that rules and regulation are same

for all loan lending? 152(100) 19(12.5) 109(71.7) 24(15.8)

Do you agree that it is a lengthy process?

152(100) 128(84.2) 22(14.5) 2(1.3)

Do you agree that loans are available on proper

time? 152(100) 29(19.1) 113(74.3) 10(6.6)

Is there any tension in case of delay of loan to

bank? 152(100) 118(77.6) 29(19.1) 5(3.3)

Are you agree that staff in the bank was

cooperative? 152(100) 128(84.2) 22(14.5) 2(1.3)

Is getting loan from bank a cumbersome task?

152(100) 130(85.5) 14(9.2) 8(5.3)

Do you think that rigid rules and regulation is

one of the obstacles in getting micro-credit? 152(100) 118(77.6) 8(5.3) 26(17.1)
Table values in each cell indicate frequency while value of parenthesis indicated percentage.

4.2.3 Respondents perception regarding rigid rules and regulations

Rules and regulations are important for getting micro-credit. It is impossible to takes
micro-credit without it from bank shahid(2011).

In the first statement result shows that out of 100% respondents 83.6% were not satisfied from
the existence process of micro-credit, 71.7% of the respondents claimed that rules and regulation
were not same for all. Furthermore, 84.2% of the respondents negate lengthy process for
looan.74.3% agreed upon non-availability of loans on proper time and 77.6% of the respondents
revealed tension in case of delay of loans. Similarly 84.2% of the respondents gave positive

25
opinion about the attitude of the bank staff. 85.5% of the respondents thought that getting loans
from bank is cumbersome task. Majority i.e. 77.6% of claimed that rigid rules and regulation an
obstacle in the way of loans.

Table 4.2.4 Respondents opinion regarding lack of education (un-awareness)

STATEMENT TOTAL YES NO DONT

KNOW

Do you agree that education bring awareness 152(100) 121(79.7) 15(9.9) 16(10.4)
among the small farmers?
Have you ever guided by the govt officials in 152(100) 40(26.3) 112(73.7) 0(0.00)
getting micro-credit?
Do you attain any workshop or training session 152(100) 30(19.7) 122(80.3) 0(0.00)
regarding micro-credit?
Are you think that educated farmers are more 152(100) 121(79.6) 7(4.6) 24(15.8)
aware of getting micro-credit as compare to un
educated?
Do you believe that un-awareness is a hurdle in 152(100) 122(80.3) 4(2.6) 26(17.1)
the way of micro-credit?
Table values in each cell indicate frequency while value of parenthesis indicated percentage.

4.2.4 Respondents opinion regarding lack of education (un-awareness)

Education is one of the important factors which increase the capabilities of the people
Ali (2010).

Asking about the awareness and importance of education most of respondents i.e. 79.7% of the
view the education bring awareness among the farmers, 73.7% of the respondent claimed that
they are not ever guided by the government regarding micro-credit. Moreover, 80.3% of the
respondents thought that they never attainted any workshop regarding micro-credit. Majority
79.6% considered educated farmers have enough information about loans and 80.3% reported
that un-awareness en a main hurdle in the way of loans.

So it clear from the data that majority of the respondents claimed that education bring awareness
among the farmers and un-awareness is the main hurdle in the process of micro-credit.

26
Table 4.2.5 Respondents attitudes about micro-credit

STATEMENT TOTAL YES NO DONT

KNOW

Are you takes micro-credit on proper time? 152(100) 57(37.5) 93(61.2) 2(1.3)

Do you follow rules and regulations while 152(100) 111(73.0) 40(26.3) 1(.7)
taking micro-credit?
Do you want to continuous micro-credit in 152(100) 90(59.2) 57(37.5) 5(3.3)
future?

Are you agree that investment of loan in 152(100) 38(25.0) 104(68.4) 10(6.6)
farming enhance yours income?
Does it bring any change in your life 152(100) 38(25.0) 103(67.7) 11(7.2)
standard?

Are you appreciates govt measures regarding 152(100) 28(18.4) 109(71.7) 15(9.9)
micro-credit?
Table values in each cell indicate frequency while value of parenthesis indicated percentage

Table 4.2.5 Respondents attitudes about micro-credit

Micro-credit can play important role to increase production and improve the life condition of
the small farmers in Pakistan. In this perspective various programs are start to enhance
production in agriculture sector.

The table 4.2.5 declared that majority 61.2% thought that loans are not available on proper time,
73.0% respondents followed rules and regulations. Majority 59.2% respondents wanted to
continue micro-credit in future .The table also showed 68.4% dont see any change in their
income, 67.7% did not see any change. In the last statement of the table minority of 71.7%
thought that the government measures are not sufficient.

So the data shows that loans were not available on proper time, not change the life standard of
the people and they are not satisfied from the measurement of the government regarding micro-
credit.

27
28
Bi-variate analysis for association between independent and dependent variables

This section deals with the ascertaining level of association between independent and
dependent respectively

4.3 Bi- varite analysis

Association between dependent (micro-credit) and independent variable (high interest

rate, lack of access, rigid rule and regulations and lack of education) was worked out through
chi-square (2) test. This sort of analysis leads to depicting inflame with regard to data through
association between dependents variable and independents variable respectively.

Table 4.3.1: (N=152) Association between high interest rate and micro-credit

High interest rate Perception Micro credit Total Chi-

Yes No Dont Square
Know (P-Value)
Are you satisfied Yes 4(2.6) 2(1.3%) 0 (0.00) 6 (3.9) 2=4.989
from the interest No 43(28.3) 93(61.2 2(1.3) 138 (90.8) (0.288)
rate? )
Dont 1(0.7) 7 (4.6) 0 (0.00) 8 (5.3)
know
Are you paid Yes 39(25.7 81(53. 2=
interest ever in your 2(1.3) 122(80.3) 0.568
) 3)
life on micro-credit? No (0.753)
21(13.
9 (5.9) 0(0.00) 30(19.7)
8)
Is it convenient Yes 7(4.6) 8(5.3) 0(0.00) 15(9.9) 2=
paying profit on No 31(31.4 86(56. 8.339
loan to bank? 2(1.3) 119(78.3) (0.80)
) 6)
Dont 0
know 10(6.6) 8 (5.3) 18(11.8)
(0.00)
Is it possible to you Yes 10(6.6 2=0.624
4(2.6) 0(0.00) 14(9.2) (0.960)
to give profit on )
loan to bank in case No 39(25.7 83(54.
of lost in business? 2(1.3) 124(81.6)
) 6)
Dont
know 5(3.3) 9(5.9) 0(0.00) 14 (9.2)
Is there any chance Yes 6(3.9) 6(3.9) 0(0.00) 12(7.9) 2=2.950
of pardon of laon? No 32(21.1) 71(46.7 2(1.3) 105(69.1) (0.566)
)
Dont 10(6.6) 25(16.4 0(0.00) 35(23.0)
29
 know )
Are you agree that Yes 99(65.0) 13(9.0) 0(0.00) 112(73.7) 2=4.135
interest is the main No 32(21.0) 8(5.0) 0(0.00) 40(26.3) (0.034)
hurdle in the way of Dont 0(0.0) 0(0.0) 0(0.00) 0(0.00)
micro-credit? know

Do you wish that Yes 42(27.6) 96(63.2 2(1.3) 140(92.1) 2=3.410

govt should remove ) (0.492)
interest on micro- No 2(1.3) 0(0.00) 0(0.00) 1(0.7)
credit for small Dont 5(3.3) 6(3.9) 0(0.00) 11(7.2)
farmers? know
*Number in table represent frequencies and number in parenthesis represent percentage
proportion of respondents and in the last columns number in the parenthesis represent P-Value

4.3.1 Association between high interest rate and micro-credit

The govt of Pakistan provides micro-credit to increase the production level of the farmers.
On micro-credit interest is takes by the government. The farmers dont like to take micro-credit
because of high interest rate (14.5%) per year.

Table no 4.3.1 showed that a significant association (p=0.034) was found between micro-credit
and high interest rate. However non significant (p=0.288) association was found between micro-
credit and satisfaction of the farmers relating high interest rate. The formers were not ready to
pay such high interest rate. Similarly non significant (p=0.753) relation was disclosed between
micro-credit and with opinion interest paid by the farmer ever in life on micro-credit.
Furthermore the results showed that the relationship of micro-credit was non- significant (p=
0.80) with convenience of farmers paying profit on loan to bank. There was also non significant
relation (p=0.960) between micro-credit with the opinion of to give profit on loan to bank in case
of lost in business. Moreover a non-significant (p=0.566)) relationship was found between
micro-credit and the chance of pardon of loan. In last the relationship between micro-credit and
wish of the people to remove micro-credit was also non-significant (p=0.492)

It is concluded from the above results that high interest rate is the main hurdles in the way of the
disbursement of micro-credit. It is necessary for the government to remove complaints of the
people regarding high interest rate

30
 Table 4.3.2: (N=152) Association between lack of access and micro-credit

lack of access Perception Micro credit Total Chi-

Yes No Dont Square
Know (P-Value)
Are you fulfilling the Yes 40(26.3) 86(56.6) 2(1.3) 128(84.2) 2=1.793
criteria for loan? No 5(3.3) 6(3.9) 0(0.00) 11(7.2) (0.774)
Dont know 3(2.0) 10(6.6) 0(0.00) 13(8.6)
Are you beneficiary of Yes 47(30.9) 102(67.1) 2(1.3) 151(99.3) 2=2.181
micro-credit? No 1(0.7) 0(0.00) 0(0.00) 1(0.7) (0.336)
Are you prefer to short Yes 20(13.2) 36(23.7) 1(0.7) 57(37.5) 2=0.701
term loan? No 28(18.4) 66(43.4) 1(0.7) 95(62.5) (0.704)
Does micro-credit Yes 21(13.8) 42(27.6) 1(0.7) 64(42.1) 2=0.824
help the poor farmers? No 26(17.1) 55(36.2) 1(0.7) 82(53.9) (0.935)
Dont know 1(0.7) 5(3.3) 0(0.00) 6(3.9)
Are all the farmers Yes 78(51.1) 9(5.9) 0(0.00) 87(57.1) 2=14.433
have access to loans? No 19(12.4) 1(0.8) 0(0.00) 20(13.3) (0.001)
Dont know 34(22.3) 11(7.3) 0(0.00) 45(29.6)
Were you faced any Yes 41(27.0) 87(57.2) 2(1.3) 130(85.5) 2= 0.343
difficulty in getting No 7(4.6) 15(9.9) 0(0.00) 22(14.5) (0.842)
loan?
Is the concerned Yes 19(12.5) 32(21.1) 0(0.00) 51(33.6) 2=2.010
authority cooperative No 29(19.1) 70(46.1) 2(1.3) 101(66.4) (0.366)
in lending money?
Do you satisfied from Yes 9(5.9) 7(4.6) 0(0.00) 16(10.5) 2=6.835
the efforts of the govt No 39(25.7) 91(59.9) 2(1.3) 132(86.8) (0.145)
regarding micro- Dont know 0(0.00) 4(2.6) 0(0.00) 4(2.6)
credit?
Do you want any Yes 45(29.6) 95(62.5) 2(1.3) 142(93.4) 2=1.404
improvement in this No 2(1.3) 2(1.3) 0(0.00) 4(2.6) (0.848)
process? Dont know 1(0.7) 5(3.3) 0(0.00) 6(3.9)
*Number in table represent frequencies and number in parenthesis represent percentage proportion of respondents and in the
last columns number in the parenthesis represent P-Value

4.3.2 Association between lack of access and micro-credit

The above table depicts that there is significant (p=0.001) relationship between micro-
credit and farmers access to loans. Its clear from data that access can affect on the process of
micro-credit. The result further showed a non-significant (p= 0.774) relationship was found
between micro-credit and the required criteria for small loans. Majority of the farmers were
not in position to fulfill the essential requirement for small loans. Similarly a non-significant
(p=0.336) relationship was found between micro-credit and the beneficiary of micro-credit.
A non-significant (p= 0.704) relationship was found between short term loan and micro-

31
 credit. The data indicated that the farmers were not in the position of short term loans.
Moreover a non-significant (p=0.935) relationship was found between micro-credit help the
poor farmers and micro-credit. A non-significant (p=0.842) association was disclosed
between micro-credit and obstacles faced by farmers in getting loans. The table further
showed that non-significant (p=0.366) relationship was found between micro-credit and the
cooperation of the concern authority lending money. A non-significant (p=0.145) relationship
was disclosed between micro-credit and government efforts regarding small loans. Moreover
a non-significant (p=0.848) relationship was found between micro-credit and improvement in
the process of loan.

Its concluded form the result that access to micro-credit is important factor in the process of
micro-credit.

Table 4.3.3: (N=152) Association between rigid rules, regulations and micro-credit

Rigid rules and Perception Micro credit Total Chi-

regulations Yes No Dont Square
Know (P-Value)
Does the existence Yes 8(5.3) 9(6.0) 0(0.00) 17(11.3) 2=3.225
No 39(25.8) 86(57.0) 2(1.3) 127(84.1) (0.521)
process of micro-
credit is satisfactory? Dont know 2(1.3) 6(4.0) 0(0.00) 8(5.3)

Do you think that Yes 8(5.3) 11(7.2) 0(0.00) 19(12.5) 2=4.463

No 36(23.7) 71(46.7) 2(1.3) 109(71.7) (0.347)
rules and regulation
are same for all loan Dont know 4(2.6) 20(13.2) 0(0.00) 24(15.8)
lending?
Do you agree that it is Yes 40(26.3) 87(57.2) 1(0.7) 128(84.2) 2=38.173
No 7(4.2) 15(9.9) 0(0.00) 22(14.5) (0.003)
a lengthy process?
Dont know 1(0.7) 0(0.00) 1(0.7) 2(1.3)
Do you agree that Yes 13(8.6) 16(10.5) 0(0.00) 29(19.1) 2=4.062
No 31(20.4) 80(52.6) 2(1.3) 113(74.3) (0.398)
loans are available on
proper time? Dont know 4(2.6) 6(3.9) 0(0.00) 10(6.6)
Is there any tension in Yes 37(24.3) 79(52.0) 2(1.3) 118(77.6) 2=0.746
No 9(5.9) 20(13.2) 090.00) 29(19.1) (0.946)
case of delay of loan
to bank? Dont know 2(1.3) 3(2.0) 0(0.00) 5(3.3)
Are you agree that Yes 40(26.3) 87(57.2) 1(0.7) 128(84.2) 2=38.174
No 7(4.6) 15(9.9) 0(0.00) 22(14.5) (0.00)
staff in the bank was
cooperative? Dont know 1(0.7) 0(0.00) 1(0.07) 2(1.3)
Is getting loan from Yes 37(24.3) 91(59.9) 2(1.3) 130(85.5) 2=5.139
bank a cumbersome No 8(5.3) 6(3.9) 0(0.00) 14(9.2) (0.273)
task? Dont know 3(2.0) 5(3.3) 0(0.00) 8(5.3)

32
Do you think that rigid Yes 35(23.0) 81(53.3) 2(1.3) 118(77.6) 2=4.245
rules and regulation is No 5(3.3) 3(2.0) 0(0.00) 8(5.3) (0.374)
one of the obstacles in Dont know 8(5.3) 18(11.6) 0(0.00) 26(17.1)
getting micro-credit?
*Number in table represent frequencies and number in parenthesis represent percentage proportion of respondents and in the
last columns number in the parenthesis represent P-Value

4.3.3 Association between rigid rules, regulations and micro-credit

Rules and regulations are important for the smooth process of micro-credit. There are
some rules and regulations which is necessary to fulfil while taking micro-credit form banks.

the table no 4.3.3 depicts that a highly significant (p=0.000) association was found between
micro-credit and cooperation of the banks staff. Cooperative attitudes of the banks staff are
necessary for clients. Furthermore a significant (0.003) association was disclosed between micro-
credit and the process for lending loans. However a non-significant (p=0.521) relationship was
found between micro-credit and satisfaction of the clients about micro-credit process. The result
further showed a non-significant (p=0.347) relationship was found between micro-credit and
clear cut rules and regulations for all. a non-significant (p=0.398) association was found between
micro-credit and availability of loans on proper time. Likewise, a non-significant (p=0.946)
relationship between micro-credit and with the opinion of tension delaying in the process of
micro-credit. A non-significant (p=0.273) relationship was found between micro-credit and
hurdles in getting micro-credit. Moreover a non-significant (p=0.374) relationship was found
between micro-credit and rules and regulation is hurdles in the way of micro-credit.

From the above results it can be concluded that the attitude of the banks staff and the process of
taking micro-credit can play important role in the process of micro-credit

Table 4.3.4: (N=152) Association between lack of education and micro-credit

lack of education(un- Perception Micro credit Total Chi-

awareness) Yes No Dont Square
Know (P-Value)
Do you agree that Yes 112(73.7) 9(5.9) 0(0.00) 121(79.7) 2=50.954
education bring No 9(5.9) 6(4.0) 0(0.00) 15(9.9) (0.000)
awareness among the Dont know 10(6.6) 6(4.0) 0(0.00) 16(10.6)
small farmers?
Have you ever guided Yes 15(9.9) 24(15.8) 1(0.7) 40(26.3) 2=1.590
by the govt officials in No 33(21.7) 78(51.3) 1(0.7) 112(73.7) (0.452)

33
getting micro-credit?
Do you attain any Yes 10(6.6) 19(12.5) 1(0.7) 30(19.7) 2=1.272
workshop or training No 38(25.0) 83(54.6) 1(0.7) 122(80.3) (0.529)
session regarding
micro-credit?
Are you think that Yes 37(24.3) 82(53.9) 2(1.3) 121(79.6) 2=0.941
educated farmers are No 2(1.3) 5(3.3) 0(0.00) 7(4.6) (0.919)
more aware of getting Dont know 9(5.9) 15(9.9) 0(0.00) 24(15.8)
micro-credit as
compare to un
educated?
Do you believe that Yes 37(24.3) 84(55.3) 1(0.7) 122(80.3) 2=2.487
un-awareness is a No 1(0.7) 3(2.0) 0(0.00) 4(2.6) (0.647)
hurdle in the way of Dont know 10(6.6) 15(9.9) 1(0.7) 26(17.1)
micro-credit?
*Number in table represent frequencies and number in parenthesis represent percentage proportion of respondents and in
the last columns number in the parenthesis represent P-Value

4.3.4 Association between lack of education (un-awareness) and micro-credit

Education is one of the important factors which enhance awareness among the people.
According to the book of Asha(2005), this is the sayings of the Holy prophet (PBUH) that to
support the importance of education for Muslim men and women( Asha.2005).

The table no 4.3.4 showed significant (p=0.00) relationship between micro-credit and education.
Education is important which bring awareness among the people regarding micro-credit.
However a non-significant (p=0.452) relationship between micro-credit with the opinion of
guidance provides by the government to the farmers regarding micro-credit. A non-significant
(p=0.529) relationship was found between training or workshop done by respondents and micro-
credit. Moreover a non-significant (p=0.919) relationship was found between micro-credit and
with the opinion that educated farmers are more aware of getting micro-credit and micro-credit.
In the last a non-significant (p=0.647) relationship was found between micro-credit and un-
awareness is hurdles in the process of getting loans.

It can be concluded that education is important factor which increase awareness among the
farmers. For improvement in the process of micro-credit the role of education (awareness) is
important.

34
 V. SUMMARY, CONCLSIONS AND RECOMMENDATIONS
This chapter consists of summary, conclusion and recommendations. Summary sections
displays the results obtained from uni-variates (simple frequency) and its major findings on the
behalf of bi-variates. Conclusion is the outcome of results of the study in the form of very short
paragraph. Recommendations deal with probable strategies, to be adopted in light of the study.

5.1 Summary
Pakistan is developing country in which majority of the farmers are poor. The
government tries to increase the production of farmers by giving credit and other facilities.

Table 4.1.1 tells of the age limits of the respondents. Out of total 50% of the respondents
were in the age group of 25 to 29 years, followed by 46.7% in the age group of 30 and above
years and the remaining 3.3% were in the age group of 20 to 24 years. On the basis of division
of respondents educational status 64.5% were illiterate while 35.5% were literate, 18.4% had
education up to metric, 11.8% were intermediate, 4.6% were up to graduate and 0.1% was the
qualification of post graduate. According to the data 94.7% of the farmers were married while
5.3% were unmarried. It clear from the data that most of the respondents were married. .
Monthly income of a large number of the respondents i.e. 55.9% were from Rs 9001 to 14000,
followed by 22.4% respondents having their income in between Rs 5000 to 9000 and the
remaining 21.7% having monthly income Rs 14001 to 19000. . Out of total 56.6% had between
(4 to 8) acre, followed by 35.5% had from (1 to 4) acre and the remaining 7.9% had from (8 to
12) acre. The data clearly indicates that most of them were small farms. 84.2% of the
respondents had the irrigated land from (1-4) acre, and 15.8 of the respondents had from (4-8)
acre. The data shows that there was no farmer which has the irrigated area from (8-12acre).most
of the farmers defends on rain, 44.7 % of the respondent belonged to nuclear family, followed
by46.06 % of the respondents had joint family and the remaining respondents belong to extended
family. It could easily be depicted form the study that nuclear and joint family systems were
prevalent in study area. 36.2% of the respondents claimed at the range of (6 to 10) members
followed by 25.7 were having (11 to 15) members, 5.9% respondents family had members from
(1 to 5), and 32.2% had (15 and above) members. 25.7% had (10-15) and 25.7 respondents had
members from (15 and above). The population ratio was high in the respondents families.

35
 It is the responsibility of the government to provide small loans to the poor farmers on
concessional profit. Agriculture is considered the backbone of economic sector in Pakistan.
Nearly 70% of the population directly depends on agriculture ((Ali 2008).

The results depicts that 90.8% of the respondents were not satisfied due to high interest rate.
80.3% of the respondents were paid interest ever in life on micro-credit. Moreover 78.3% of the
respondents were not considering convenient to pay profit to loan. 81.6% of the respondents
were not in the position to pay profit to bank in case of lost in business. 69.1% of the respondents
were of the view, that there is no chance to pardon loan from the banks. Furthermore, 73.5% of
the respondents agreed that high interest rate is the main hurdle in the way of the disbursement of
micro-credit. In last 92.1% of the respondents wished to remove interest from micro-credit.
The data further shows that out of 100% respondents 84.2% of the respondents claimed for
fulfilling criteria for loans, 99.3% of the respondents were benefited from this facility. Moreover,
62.5% of the respondents were not like short term loans, 53.9% of the respondents thought that
micro-credit does not help the small farmers. Majority 57.1% of the respondents claimed that all
the farmers had access to loans. Furthermore, 85.5% of the respondents gave their opinion about
difficulties getting loans, and 66.4% of the respondents viewed that the concern authority were
not cooperative. Majority 86.8% of the respondents were not satisfied from the efforts of the
govt regarding micro-credit and 93.4% wanted improvement in the process of getting micro-
credit. So its concluded that majority of the respondents have no access to micro-credit,
respondents liked long term loan, faced various difficulties, the concern authority was not
cooperative and they want improvement in this process. Furthermore, the result shows that out of
100% respondents 83.6% were not satisfied from the existence process of micro-credit, 71.7% of
the respondents claimed that rules and regulation were not same for all. Furthermore, 84.2% of
the respondents negate lengthy process for looan.74.3% agreed upon non-availability of loans on
proper time and 77.6% of the respondents revealed tension in case of delay of loans. Similarly
84.2% of the respondents gave positive opinion about the attitude of the bank staff. 85.5% of the
respondents thought that getting loans from bank is cumbersome task. Majority i.e. 77.6% of
claimed that rigid rules and regulation an obstacle in the way of loans. Asking about the
awareness and importance of education most of respondents i.e. 79.7% of the view the education
bring awareness among the farmers, 73.7% of the respondent claimed that they are not ever
guided by the government regarding micro-credit. Moreover, 80.3% of the respondents thought

36
that they never attainted any workshop regarding micro-credit. Majority 79.6% considered
educated farmers have enough information about loans and 80.3% reported that un-awareness en
a main hurdle in the way of loans. The results declared that majority 61.2% of the respondents
thought that loans are not available on proper time, 73.0% respondents followed rules and
regulations. Majority 59.2% respondents wanted to continue micro-credit in future .The data also
showed 68.4% dont see any change in their income, 67.7% did not see any change. In the last
statement of the table minority of 71.7% thought that the government measures are not sufficient.

In bi-variate the data showed that a significant association (p=0.034) was found between micro-
credit and high interest rate. The association result also showed that a significant (p=0.001) was
found between micro-credit and accessibility of the farmers to micro-credit. The data revealed a
highly significant (p=0.000) relationship was found between micro-credit and cooperative
attitude of the bank staff. The association between lengthy process and micro-credit was also
significant (0.003). A significant (p=0.00) relationship between micro-credit and education was
also found. Education is important which bring awareness among the people regarding micro-
credit.

5.2 Conclusion

The study was conducted in Maidan to determine the impediments in the disbursement
of micro-credit among the small farmers. The study concluded that most of the farmers were
illiterate and their income was also low as compared to their needs. Moreover, majority of them
were married and they belong to nuclear and joint families. They were small farmers because
their lands were less than 12 acre and they wanted to take micro-credit for the betterment of
agriculture sector. But there are some factors which hinder the process of taking microcredit.
Among these factors one was the high interest rate which made difficult to take micro-credit. The
lack of education and unawareness among the farmers and access to micro-credit also considered
important factors by these farmers. Moreover the negative attitude of the bank staff and lengthy
procedure of taking micro-credit were made it a cumbersome task for the people to take micro-
credit from the micro-credit institutions.

37
5.3 Recommendations
The government should provide loans on concessional interest rate and maximum funds
should be allocated for small farmers.
Accessibility of the farmers should be encouraged to improve the process of micro-credit.
Banks and especially agriculture banks should be opened all over the country.
Personnel of the banks should be cooperative to monitor farmers for small loans.
The process of getting micro-credit is very lengthy and cumbersome task. So its
important for the government to introduce some reforms to make it easy for the small
farmers.
Education and awareness can play important role in the process of the disbursement of
micro-credit, the govt should arrange various seminars and workshops for small farmers
to educate them on proper lines.
The media having strong influence in modern age should play positive role in order to
enhance education and awareness among the masses.

38
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