Microfinance is non something new in Malaysia. It has been operated by recognition brotherhoods. co-operative Bankss and specialised recognition Windowss of Bankss. Microfinance services of fiscal recognition scope for about RM10. 000 ( USD2. 631 ) and largely to finance little concerns. agricultural loans and loans for poorness decrease. Microfinance plan in Malaysia has been implemented since 1987 as one of the poorness obliteration schemes in the state. There are three big microfinance establishments in Malaysia viz. AIM. YUM and TEKUN that targeted to different groups of people. Each of the microfinance establishment has its ain loaning systems and has been subsidized by the authorities since their being.

Majlis Amanah Rakyat ( MARA ) . council of trust to the Bumiputera and Credit Guarantee Corporation ( CGC ) are some of the innovators to present microfinance loans to its borrowers. The rural recognition establishments consisting of Agriculture Bank of Malaysia ( BPM ) . Farmers Organisation Authority ( LPP ) . Federal Land Development Authority ( FELDA ) . and agro-based Co-operative Societies provide micro recognition for the agribusiness sectors. There are a figure of non-government administrations ( NGOs ) that engaged in microfinance. These include Yayasan Usaha Maju runing in Sabah. Koperasi Kredit Rakyat in Selangor and the best and significantly known microfinance establishment ( MFI ) is Amanah Ikhtiar Malaysia ( AIM ) .

Background of the survey

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This survey research about microfinance and its scheme to cut down the poorness among Malaysia’s citizen. Microfinance was introduced in Malaysia during the last three decennaries. Two types of establishments viz. banking establishments and non-bank establishments offer microfinance plans. Banking establishments that offer microfinance merchandises are Public Bank. AM Bank. EONCAP Islamic Bank. CIMB Bank. Alliance Bank. United Overseas Bank. Bank Simpanan Nasional. Agro Bank and Bank Rakyat.

The issue of poorness has been a major concern to many states. peculiarly the development states. Poverty has been defined as a state of affairs where a population or a subdivision of the population is able to run into merely its bare subsistence. the necessities of nutrient. vesture and shelter. in order to keep a minimal criterion of life ( Balogun. 1999 ) . Low productiveness and ill working markets for agricultural end products are among the causes of poorness as indicated in the government’s poorness decrease scheme paper. Small graduated table husbandmans rely on fundamental methods and engineering and they have limited accomplishments and inputs such as improved seeds that would increase outputs. Rural poorness in Malaya

Remarkable advancement has been achieved in poorness obliteration in Malaysia. In the early 1970’s about half of families were classified as hapless while in 1997 the incidence of poorness had significantly declined to 6. 1 % However. the crisis brought a little upward swing at 8. 1 % in 1998. Attempts by the Malayan authorities to counter the effects of the crisis bore positive consequences when the incidence of poorness was reduced to 7. 5 % in 1999. By 2005. the incidence of poorness was targeted to cut down further to 0. 5 % ( Abdul Rahman Hasan and Sa’idah Hashim. 2001 ) .

Poverty is both a societal and an economic job. Eliminating poorness from society is everyone’s dream but in world it is still about even in economically developed states. Governments have duties to eliminate the poorness or. at least cut down poorness rates. In fact. poorness decrease is everyone’s societal duty. This is important because Malaysia is switching towards an industrialised economic system and get downing to bask economic growing but there are still so many people who are under the poorness line.

Definition of footings

1. Microfinance

Microfinance is a proviso of a wide scope of fiscal services such as nest eggs. recognition. insurance and payment services to the hapless or low-income group who are excluded from the normal banking sectors ( Ledgerwood. 1999 ) . While. Bank Negara Malaysia ( BNM ) defined microfinance as the proviso of little loans/financing runing from RM1. 000 up to RM50. 000 ( USD16. 129 ) to microenterprises or freelance persons. for their concern activities. Microfinancing is meant for concern financing merely. such as for working capital and for capital outgo. It is non a personal loan. Microfinance is defined as the proviso of fiscal services to low-income clients. including consumers and the self- employed. who traditionally lack entree to banking and related services ( Gonzalez-Vega. 2008 ) . Microfinance is a topographic point for the hapless and close hapless clients to acquire entree to a high quality fiscal service. which include non merely recognition but besides nest eggs. insurance and fund transportation.

However. Conroy ( 2002 ) stated that microfinance is the proviso of a wide scope of fiscal services such as sedimentations. loans. payment services. money transportations. and insurance to hapless and low-income families and their micro-enterprises. The term evolved from the constructs of “microcredit” and “microenterprise” funding. to include the importance of nest eggs every bit good as borrowing. Although the footings are used interchangeably. microfinance represents the field as a whole. while the other two footings are more proficient and refer merely to recognition proviso ( Maria. 2004 ) .

The World Bank defines microfinance as “… . Small-scale fiscal services – chiefly recognition and nest eggs – provided to people who farm or fish and who operate little endeavors or microenterprises where goods are produced. recycled. repaired. or sold ; who provide services ; who work for rewards or committees ; who gain income from leasing out little sums of land. vehicles. bill of exchange animate beings. or machinery and tools ; and to other persons and groups at the local degrees of developing states. both rural and urban” ( Robinson. 2001 ) . Microfinance activities normally involve giving little loans to clients for working capital. group warrants. mandatory nest eggs. insurance and entree to reiterate loans for a larger sum based on repayment public presentation.

2. Poverty

A province or status in which a individual or community lacks the fiscal resources and necessities to bask a minimal criterion of life and well-being that’s considered acceptable in society. Harmonizing to Carlton G. Davis ( 1977 ) . “the word poorness has assumed a multiplicity of significances at different times and topographic points. Furthermore. the term now has different significances for different individuals even within the same academic subject. ” For Marshall ( 1998 ) . poorness is “a province in which resources. normally stuffs but sometimes cultural. are missing. It is common to separate between absolute and comparative definitions of poorness. Poverty defined in absolute footings refers to a province in which the person lacks the resources necessary for subsistence. Relative definitions. often favored by sociologists. refer to the individual’s or group’s deficiency of resources when compared with that of other members of the society…in other words their comparative criterion of life. ” The causes of poorness are sometimes pointed to countries where concern constitutions are non successful and the hapless depend on aid from authorities and bureaus.


Poverty is a rough and unsought phenomenon in world. Reducing. if possible eliminating poorness is unquestionable. Therefore. microfinance plans have been considered as one of the chief instruments in poorness decrease in recent development docket. It has been observed that microfinance play a major function to the socio-economic development and relieving poorness. Rural Bankss and micro finance establishments were established in response to the demand and the demand to do institutional recognition and banking services available to small-scale husbandmans and rural enterprisers. Microfinance establishments were created to run utilizing local enterprises and local committedness to mobilise resources locally and to impart them to meriting clients utilizing simplified processs and eligibility standards.

However. microfinance establishments are faced with tonss of jobs of salvaging mobilisation. and use of financess. For case there is deficiency of cognition in hazard direction. long processs accessing financess and others. Harmonizing to David Hulme. microfinance has become an progressively of import constituent of schemes to cut down poorness. However. knowledge about the accomplishments of such enterprises remains contested. While some research workers argued that microfinance has positive economic and societal impact on the hapless. others warn of its negative impacts on the hapless. Still others in the in-between contend that microfinance so has a positive impact. but non on the poorest. as is so frequently claimed. Therefore. this research. is to analysis and see how microfinance is used as an effectual poorness decrease scheme in Malaysia.


The chief aim of the survey is to analyze the impact of microfinance in poorness decrease in Malaysia. The specific aims are to: 1. Find out the function of microfinance in poorness relief or decrease. 2. To demo how microfinance works. by utilizing group loaning methodological analysis for cut downing poorness 3. To happen out the impact of microfinance on poorness decrease 4. To analyze the challenges or barriers to recognition bringing by microfinance establishments. 5. To utilize the services/products of microfinance with good.

Research inquiries

The steering research inquiry is ‘to what extent and in which manner microfinance services of the two instances can take to poverty decrease in Malaysia? ’ Based on this steering inquiry. it is hoped that the survey will reply the following specific inquiries: 1. What are the function ( s ) of microfinance in poorness relief or decrease in the state? 2. What is the effectivity of microfinance establishments in the state? 3. What are the impacts of microfinance on poorness decrease? 4. What are the challenges faced by microfinance establishments in the state?


While questioning the people. we have faced jobs in explicating the inquiries as most of the people. who are involved in microfinance plan. are illiterate and life in small towns. Therefore. it was excessively hard to do them understand some of the proficient footings: like capital. income etc. Due to the non-co-operative attitude of some of the respondents. the figure of people given questionnaire was smaller than the research worker had originally intended. Financial constrain besides affected the attempt of the research worker thereby. doing it hard for the research worker to garner the necessary informations. Time restraint was besides restricting factor for the research worker.

Significance OF THE STUDY

A survey of this nature would do a important part by helping authorities and other stakeholders to happen permanent solutions to jobs confronting micro funding in the state. The survey is really important because it will add to the bing literature or the research has added to the stock of books and works already written on microfinance in Malaysia. The survey will assist Micro Finance Institutions to set in topographic point flexible policies and plans that will assist SMEs to entree their installations to guarantee its development and enlargement.


The survey consists of three chapters. The first chapter consists of the background to the survey. significance of the survey. definition of footings. statement of the job. Objective of the survey. research inquiries. and restrictions of survey and in conclusion the organisation of the survey. Chapter two trades with literature reappraisal of construct relevant to the survey. While in chapter three. trades with the methodological analysis adopted to carry on he research. This chapter deals with issues such as the research design. population and sample size. instrument. processs. proposed information analysis and sum-up.


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