The Role of Microfinance in Eradication of Poverty in Riyadh - Research Proposal Example

The Role of Microfinance in Eradication of Poverty in Riyadh Name Course Name and Code Instructor’s Name Date Introduction The role of micro enterprise in terms of employment and economic output in many countries cannot be underestimated. It is estimated that micro enterprise make up 30% of employment in emerging economies and underdeveloped countries (Johnson and Rogaly, 1997). Such small enterprises often faces the hurdle of getting finance since lenders are more interested with large firms which command larger returns on investment (BinSaeed and Webster University, 2008). The ability of such small firms to repay their debts makes lenders to be a bit sceptical (Midgley, 2008). The emergence of micro-credit was meant to address the needs of such small firms. Micro-credit refers to very small loans given to poor or unemployed entrepreneurs who often are seen as un-bankable (Yunus and Weber, 2007). These individuals are characterized by lack of employment, collateral or verifiable history of credit worthiness. Micro-credit firms have recognized the need to help the poor access to credit and other financial services (Anand, 2005). As such, they are involved in provision of both credit facilities to this lower end segment of financial markets and other financial products such as insurance, savings, micro-pensions and transfer payments (Diallo, 2003). They help poor individuals in the society to be self employed and hence enable them to create their own wealth and move out of poverty chains (Midgley, 2008). Microfinance targets the poor segment of financial market (Midgley, 2008). The main challenges plaguing this segment of the market is that they lack basic facilities such as health facilities, educational facilities, food security and other basic necessities (Johnson and Rogaly, 1997). Micro-finance tries to address these problems in order to eradicate poverty. Saudi Arabia has a very big gap between the rich and the poor (BinSaeed and Webster University, 2008). This study aims to find out whether microfinance services can bridge this gap in Riyadh. Significance of the study Saudi Arabia has one of the greatest gaps between the poor and the rich. Furthermore, the country is experiencing an explosion in its population. Moreover, over 50% of youths who have completed college education are job seekers currently (Anand, 2005). This is making it difficult for the Saudi government and private sector to create jobs for ever increasing number of job seekers (Ashraf, 2011). Even though Saudi Arabia has a very strong economy the unemployment problems is persistent and hence diversification is needed to create more jobs (Diallo, 2003). Microfinance can provide capital to the poor and the unemployed to enable them create their own jobs and prosper economically (Midgley, 2008). There has been no direct link between poverty alleviation and micro-finance and thus there is need to assess if such link exists (Johnson and Rogaly, 1997). The linkage between poverty reduction and microfinance can be established by understanding changes brought about by microfinance, whether they move people out of poverty, how various microfinance products are contributing to reduction of poverty and the effect of microfinance on the income, employment, empowerment, asset creation, housing, vulnerability reduction, education and health. Hypothesis Microfinance helps in bridging the gap between the rich and the poor in Riyadh Objective 1. To establish the micro finance products in existence in Riyadh 2. To carry out an analysis of the living conditions of the poor people in Riyadh 3. To assess the effect of various micro finance products on the poor in relation to income generation, employment, housing, education and health 4. To estimate the time frame required for such changes to take place Study area The study will be undertaken in Riyadh with special focus on the poor population in the city Methodology Sampling Both purposive and probability sampling will be used. Purposive sampling will be used in sampling microfinance institutions in Riyadh while probability sampling will be used to sample employees from these firms (Johnson and Rogaly, 1997). Furthermore, probability sampling will be used to sample participants from poor regions of Riyadh city (Diallo, 2003). The sample selection ­­­­­will be based on the individuals aged above 18 years with the aim of obtaining their perception of the role of microfinance in eradication of poverty. Research strategy There are a number of research strategies for the collection of data. Some of the methods are more suited to the deductive approach whilst others clearly belong to the inductive approach (Anand, 2005). Choice of the research strategy is guided by various factors, however significant among them is the research question and objectives and philosophical underpinnings (Johnson and Rogaly, 1997). The most prominent strategies in management research include experiment, survey, case study, action research and grounded research (Diallo, 2003). For the purposes of addressing the research question and objectives, this research will employ the following strategy: 1. Case study: this is a strategy for doing research which involves an observed investigation of a particular contemporary observable fact within its real life context using multiple sources of evidence. Therefore, a case study strategy will be employed to investigate the role of microfinance in eradication of poverty in Riyadh (BinSaeed and Webster University, 2008). The case study strategy is mostly used in explanatory and exploratory research. It has the advantage of combining various data collection techniques critical for the collection of reliable information (Johnson and Rogaly, 1997). However, critics of the case study method argue that the study of a small number of cases can offer no grounds for establishing reliability of findings (Ashraf, 2011). Whilst others argued that the intense exposure to study of the case makes the findings bias, and dismissed case study research as useful only as an exploratory tool (Anand, 2005). Yet researchers continue to use the case study as a research method with success in carefully planned studies of real-life situations, and problems. Therefore, a single case of the city, Riyadh, will be used to address the requirements of the research objectives (Westover, 2008). Advantages of using case study are that, it uses a combination of data collection techniques important for triangulation. 2. Survey: Usually used for the collection of a large amount of data from a sizeable population obtained using a questionnaire administered to a sample of the population (Diallo, 2003). The data collected using survey strategy can be used to suggest possible reasons for particular relationships between variables and to produce models of these relationships (BinSaeed and Webster University, 2008). Survey strategy has the advantage of generating findings that are representative of the whole population at a lower cost than collecting the data for the whole population (Johnson and Rogaly, 1997). However, data collected is unlikely to be as wide ranging as those collected using other research strategies. This is because there is a limit to the number of questions a questionnaire can contain, and richness of the data to be collected is dependent on the goodwill of the respondents (Westover, 2008). However in this research a survey strategy will be used. Data collection method 1. A self- completion survey method involving the use of structured questionnaires to collect data will be used in this research. A structured questionnaire is a predetermined set of questions designed to capture data from respondents (Carter, 2000). Self –administered questionnaires will be administered to a cross-section of Riyadh population living in regions of the city perceived to be made up of mainly poor people (Johnson and Rogaly, 1997). The questionnaires will be administered manually and the questionnaire will have a return mailing stamp (BinSaeed and Webster University, 2008). This has advantage over the computer based mailing because it covers it will be able to cover most people who do not have access to computers most of which are poor population (Westover, 2008). However, the method is a bit expensive as compared to computer based method. Questionnaire containing both closed and open questions will be developed from the literature review. A small pilot study is being arranged with selected number of Riyadh population to allow for testing, revision and refinement of the questionnaire. 2. Semi-structured interviews: Used for the collection of qualitative data through interviews, allow respondents to talk about their perspectives on a particular subject. It uses open-ended questions prepared by the researcher or questions that may arise during the interview (Carter, 2000). Advantages of this method are that it is simple, efficient and practical way of getting data about things that cannot be easily observed, it has high validity as respondents are able to talk about things in detail and depth (Anand, 2005). However, limitations of using Semi structured interview include; it depends on the skill and ability of the researcher to think of questions during the interview and articulacy of the respondent. In addition it is time consuming and expensive, is not reliable as respondents may be asked different questions and qualitative data collected may be difficult to analyse (Carter, 2000). Nonetheless Semi- structured interviews will be conducted in this research with two relevant senior managers in each of microfinance found in Riyadh (Roy, 2010). The two senior staff will be selected based on the criteria that, they have worked in microfinance for the past 12 months, participate in microfinance activities and are responsible for the developing the microfinance products offered. Data analysis Data obtained will be analysed quantitatively in three stages. These will include data preparation, data description and testing hypotheses (Johnson and Rogaly, 1997). During data preparation logging in the data, entering the data into the computer, data transformation and development and documentation of a database will be undertaken to integrate the various measures (Saeed, 2008). Description of data will employ descriptive data analysis such Analysis of Variance (ANOVA) to provide description of basic features of the data in the study (Anand, 2005). This will be used to provide summaries about the measures and samples. Testing of hypothesis will involve inferential statistics. Reference Johnson, S., and Rogaly, B. 1997. Microfinance and poverty reduction. London: Oxfam. Anand, M. 2005. Dalit women: fear and discrimination. Dubai: Gyan Books. Diallo, O. 2003. The role of microfinance in the eradication of poverty and women's empowerment: two case studies in Mali. Glasgow: University of Glasgow. Carter, G. 2000. Death in Riyadh: dark secrets in hidden Arabia. London: Arena books. BinSaeed, R., and Webster University. 2008. Urban poverty in Riyadh. London: ProQuest. Saeed, R. 2008. Urban poverty in Riyadh. Geneva: Webster University. Midgley, J. 2008. Microenterprise, global poverty and social development. International Social Work, vol 51, no. 4, pp. 467-479 Westover, J. 2008. The record of microfinance: The effectiveness/Ineffectiveness of microfinance programs as a means of alleviating poverty. Electronic Journal of Sociology. Available at http://www.sociology.org/content/2008/_westover_finance.pdf Ashraf, M. 2011. Microfinance and Poverty: Mahathir's Failed Project in Malaysia. Lambert: Lambert Academic Publishing Roy, A. 2010. Poverty capital: microfinance and the making of development. London: Taylor & Francis. Yunus, M., and Weber, K. 2007. Creating a world without poverty: social business and the future of capitalism. London: PublicAffairs. Read More