Empirical Analysis for Financial Contribution of Micro Enterprises for Poverty Reduction in Pakistan

The purpose of the study is to highlight the importance of microenterprises for local and national economy. This paper provides evidence on relationship between microenterprises and poverty in Pakistan. The cross sectional data for the period from 2010 to 2011is analyzed using Ordinary Least Square (OLS). The study would find out the relationship of microenterprise income and poverty, which is helpful for the decision making purpose for investors and policy makers. The analysis of the data suggests that microenterprises play a significant role in the enhancement of house hold income in Pakistan. The microenterprises based in the urban areas combat poverty more effectively than those situated in the rural areas. The analysis of the data suggests that the entrepreneurs having higher education have higher income and higher Progress out of Poverty Index (PPI). Although with the increase of the age of the entrepreneurs its income and PPI increases but age factor is less significant. The performance of microenterprises in non-agriculture sector is much better than those of in the agriculture sector. The study concludes that microenterprises play an effective role in combating poverty in Pakistan. So it is recommended that the role of private sector in the economic development of the country need to be increased through establishment of more microenterprises.