Role of micro-credit membership in improving household income in Ilam District, Nepal

Abstract

Banks and other financial institutions are providing the services to people especially living in urban areas but microfinance institutions are providing financial services to women in rural area to improve their economic situation. Microfinance service is fruitful to those women who have good business but no collateral in their name. In this context, this study is focused to find out role of micro-credit membership in improving household income and analyzes the socio-economic indicators of members and non-member’s status and analyzes the impact of micro finance membership on income and economic welfare of household in Ilam Municipality. Ilam is one of the major districts of province one of Nepal and role of microfinance has been reported to be effective and successful in this district. So, Ilam Municipality is selected as a study area of this thesis to validate this information and examine the pathway of its success. The conceptual framework of this study comprises of a comparison the micro-credit members and non-member’s status in Ilam Municipality. Data was collected through household survey by using structured questionnaire. To comparison of member and non-member, 120 households selected for purposive sampling, among them, 60 microfinance members and 60 non-microfinance members were selected. The collected data were analyzed by using simple mathematical and statistical tool such as percentage, tables and t-test analysis as well. Many characteristics of microfinance members and non-members were similar. There were no significant differences in wage income, business income, remittance income, food grain income, outstanding loan borrowed status, and agriculture land between members and non-members. But, there was statistically significant difference especially in cash crop income, household income and livestock income. Cash crop income, household income and livestock incomes were 2.27 times, 1.5 times and 1.83 times higher for members compared to non-members respectively. This implies that microfinance has created opportunities for female members to participate in production for the market and enhanced their income and welfare. This has also empowered them economically.