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Impact of Micro-credit Programmes on Poverty Alleviation in Bangladesh

Mst. Asma Khatun
Assistant Professor, Department of Agricultural Statistics, Sylhet Agricultural University, Sylhet.

Mohammad Amirul Islam
Professor, Department of Agricultural Statistics, Bangladesh Agricultural University, Mymensingh-2202, Bangladesh

Shankar Majumder
Professor, Department of Agricultural Statistics, Bangladesh Agricultural University, Mymensingh-2202, Bangladesh

Abstract/ Executive Summary:

This present study examines the impact of micro-credit programs of six government organizations (GO), non-government organizations (NGO) and micro-finance institutes (MFI) on poverty alleviation in Bangladesh using a purposive sample of 406 credit receivers. Alongside respondent’s perceived change in poverty situation this study devised an alternative measure of poverty change based on the change in household wealth and education of a household. Two-level binary logistic regression and multinomial logistic regression analysis suggest that amount of loan, different GO /NGOs/MFIs, satisfaction level, taken loan before and micro-credit as main means of asset change were the determinants of change in poverty situation. Significant community level variation was found in this analysis which indicates that the respondents from different communities with same set of characteristics will exhibit different influences on the change in poverty situation. Further research should be carried out to identify the sources of such variation to optimize the effect of micro-credit.

Keywords: Impact, Micro- credit, Poverty alleviation, Bangladesh

Location:

Start Date: 01-07-2010

End Date: 01-06-2012

Program Area: Socio-economic and Policy

Non-commodity: Analysis and interpretations

Objectives:

i)To identify the poverty situations in which the micro-credit clients belong,

ii) To devise a suitable method for measuring the change in poverty situation

iii) To test if micro-credit programs have any significant effect on poverty alleviation and

iv) To evaluate the relative performances of organizations offering micro-credit in alleviating poverty

Methodology:

This paper is based on the data collected under a small project grant of Bangladesh Agricultural University Research System, Bangladesh Agricultural University, Mymensingh. The research adopted purposive sampling technique. At first six micro-credit offering organizations namely ASA, BRAC, GB, PROSHIKA, SSS and TMSS were selected purposively then eight districts namely Dhaka, Mymensingh, Sherpur, Netrokona, Kishoreganj, Sylhet, Lalmonirhat and Narsingdi were selected purposively for data collection. Note that no prior ranking was considered for the selection of organizations and districts. It was assumed that the micro-credit program under same organization is same in different areas and clients under same organizations were homogenous in terms of program structure, e.g., interest rate, number of installments for a certain range of loan. Hence, it was expected that findings may be more or less comparable with a national level study of such kind. From the eight targeted districts, twenty-six villages (where at least one of the selected organizations operates) were selected purposively and among these villages, 406 micro-credit clients were chosen randomly for the present study. It is to be noted that the sampling technique as being purposive in nature the determination of sample size was not based on the population size. Rather it was considered on the basis of a reasonable size that would allow complicated model ling practices (around 400). Data collected in this study are hierarchical in nature where individuals are nested into villages (sharing common contextual variables) and villages are nested into districts. The data were collected from July 2010 to June 2012.

Source of Information: Bangladesh J. Agric. Econs. XXXV; 1&2 (2012) 115-130

Article Link (Online Journal):

Funding Source:

Total Budget (Tk.) :

Achievement/Findings:

The present study explored the likely impact of micro-credit program of six organizations on poverty alleviation in Bangladesh. Firstly, this study used the approach of measuring poverty change based on respondents’ perception. Finally, this study devised an alternative measure of poverty change based on change in household wealth and education of a household. This study reveals that the perceived change in poverty was 76.1 percent. However, the analysis of poverty change index (PI) suggests that about 50.5 percent of the respondents permanently overcame the poverty situation. The main contributing factors for change in poverty situation revealed from the analysis were amount of loan, different organizations, satisfaction level, taken loan before and main means of asset change (mainly micro-credit). The specific recommendations made from the results are i) the lowest amount of loan should be increased to Tk 11000- 15000 for sustainable business and ii) the satisfaction of the clients should be increased with proper field visit and other feasible means (these might be lowering interest rate, delaying the starting time of first installment etc.). Analysis suggested that there are some villages where clients are performing differently than clients of other villages. This means there are some community characteristics which vary between the villages. These may be literacy rate, communication network, percent awareness of the availability micro-credit, level and severity of poverty, differences in main profession of the household head, the overall attitude and behavior of the clients and the motivation, and sincerity of the officials of the organizations in the communities. Further study should be conducted to identify and prioritize the community characteristics to accelerate the poverty alleviation process in the villages where the performance of micro-credit is still poor. Though micro-credit programs in Bangladesh have positive impact in alleviating poverty but it has varying effects for different organizations. The strategy suggested by Islam et al. (2012) based on different assessment indicators namely, client’s knowledge of actual interest rate, visit by field workers, if request is needed to take loan, client’s perception on the affordability of loan, client’s satisfaction, impact of micro-credit on poverty change and operating cost of the organizations for the program may be used to find out the best practice.

Knowledge Management: Journal