Impact of Financial Inclusion Using Community Investment Fund on Poverty Graduation in Rural Sindh of Pakistan

Financial inclusion offers significant benefits to unbanked poor population but barriers such as low literacy, lack of trust in formal financial institutions, and high transaction costs often hinder the use of formal banking services. On the other hand, Community Investment Fund (CIF) is a revolving grant which is managed by community-based organisations and provides a low-cost sustainable solution. The paper examines the impact of financial inclusion through CIF funds on poverty graduation in Rural Sindh of Pakistan. The Poverty Scorecard (PSC) tool is used to assess the changes in the poverty status of CIF loans and grant beneficiaries with before and after approaches. A household survey data of rural Sindh covering 4,023 randomly selected sample households is analysed. The findings suggest that financial inclusion using community investment funds has impacted poor households positively and helped in graduation of the poor households from a lower poverty band to higher poverty band. Compared to conventional sources of finance like Microfinance Banks, the findings suggest that CIF loans appear to be largely cost effective. We thus recommend increasing the coverage of the poor segments of population in Pakistan via CIF that provides low-cost sustainable solution for poverty graduation increasing the cost effectiveness of social protection programme in the country.