The Role of Microfinance in Improving Financial Stability of Rural Households in Hyderabad Region, Sindh, Pakistan

Abstract

This research investigates since microfinance is helping rural households in Hyderabad, Sindh, gain financial stability. Microcredit, savings behavior, financial literacy, and women's empowerment are the focus areas. The study used a quantitative methodology. Primary data was obtained from 420 respondents using a survey with a five point Likert scale. The data was analyzed using PLS SEM. Findings of the study show that microcredit has a positive impact on financial stability (β = 0.29), that savings behavior has the highest positive impact (β = 0.34), financial literacy contributes positively (β = 0.21), and that women empowerment has a positive impact (β = 0.25). The model accounts for 68 percent of the financial stability variance (R² = 0.68). This shows that the model has good explanatory power. This study demonstrates that credit alone is insufficient. For long term stability, financial literacy, saving behavior, and women participation are necessary. This study only provides a one region and cross sectional data. For future studies, it is recommended that a cross region and longitudinal data collection approach be undertaken. Exploring digital finance and Islamic microfinance methods is also recommended.

Keywords: Microfinance, Financial Stability, Microcredit, Savings Behavior, Financial Literacy, Women Empowerment, Rural Households, PLS SEM.