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Microfinance is a Non-Productive and Expensive Source of Borrowing: A Case Study of District Sargodha (Pakistan)

Tahir Mahmood and Allah Bakhsh

Journal of Economic Impact, 2020, vol. 2, issue 1, 01-05

Abstract: The study examines Pakistan’s microfinance institutions' performance and checks the productivity of microfinance institutions. For this purpose primary data was collected from a sample of 260 respondents from 6 microfinance banks in Sargodha District. This paper examined the livestock sector and the impact of microfinance on livestock productivity. According to the results of the role of microfinance was non-productive due to the high cost of borrowing, small loan size, high feed cost and use of the loan in a non-productive term. According to the results microfinance productivity is negative due to small loan size and high cost of borrowing. While the productivity of borrowing amount for large farm size is positive which is three times greater as compared to small farm size. So results showed that the efficiency of production increase through large scale farming. Small loan size and high cost of borrowing is a basic cause of negative microfinance productivity. Small loan size is not benefited for investment because the loan amount is unable to meet the basic requirements at the farm level for the increase in productivity of livestock farming. The main reason for the high productivity of livestock financing in large farming is due to its economies of size. Replacement of dilapidated equipment with modern equipment is one way to increase productivity in an organization. Large loan size decreases the inefficiency in input costs. The major three factors of livestock productivity are the amount of interest rates, milk production and feed cost which are responsible to make efficient use of loan amount in its productivity. Productive capacity is a basic characteristic of large farm size and loan productivity depends on productive capacity.

Keywords: Microfinance; livestock; productivity; Sargodha; Pakistan (search for similar items in EconPapers)
JEL-codes: G21 G28 Q14 (search for similar items in EconPapers)
Date: 2020
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