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Micro Credit Programs of Gb and Rakub: a Comparative Study in Rangpur District

M. R. U. Mian
Assistant Professor
Dept. of Agricultural Finance, BAU, Mymensingh, Bangladesh

M. S. Rahman
MS Student
Dept. of Agricultural Finance, BAU, Mymensingh, Bangladesh

Abstract/ Executive Summary:

This paper compared different aspects of GB and RAKUB lending in Rangpur district and found that socioeconomic conditions of GB borrowers were better than that of RAKUB to some extent. GB lending procedure was simple and cost effective while lending procedure of RAKUB was complex and costly. None of the institutions fulfilled hundred percent of the respondents' credit requirements. The borrowers of both the institutions however, productively utilized most of the loaned money. Repayment percentage was much higher in GB than in RAKUB implying the relative success of GB credit program compared to RAKUB. Cost of credit was found to be much higher in RAKUB involving unnecessary formalities compared to GB credit, Micro credit programs of both the institutions by and large have brought about positive socioeconomic impacts to the borrowers.

Keywords: Lending procedure, Adequacy, Utilization, Repayment, Cost and Impact

Location: Rajendrapur Branch of GB and Pashuram Branch of RAKUB under Rangpur district

Start Date: 00-08-2004

End Date: 00-10-2004

Program Area: Socio-economic and Policy

Non-commodity: Credit

Objectives:

(i) To assess the socioeconomic characteristics of the GB and RAKUB borrowers,

(ii) To examine the lending procedures of GB and RAKUB,

(iii) To determine the adequacy, loan utilization, repayment and cost of GB and RAKUB and

(iv) To identify the socioeconomic impact of GB and RAKUB credit in the study area.

Methodology:

Rajendrapur Branch of GB and Pashuram Branch of RAKUB under Rangpur district were purposively selected for the study because of convenience of the researchers and size of borrower population. Forty borrowers from each of the branches were randomly selected from the lists provided by the officials and thus the sample size stood at 80. Both primary and secondary data were used for this study which covered the year 2003 and data collection was done during August to October 2004. The respondents were classified into 3 categories, i.e., small (up to Taka 6000, medium (Taka 6001-0000) and large (above Taka 10000). Tabular technique along with descriptive statistics like percentage, frequency counts, mean, etc. were used to arrive at the objectives of the study. Interest on loan @ 20 percent for GB and 10 percent for RAKUB was calculated on annual basis, i.e .. interest per year. Dependency ratio of the family members and land holding under defacto status were calculated.

Source of Information: Bangladesh J. Train. and Dev., Vol. 18(1&2),2005: 87-92 ; ISSN 1013-0306

Article Link (Online Journal):

Funding Source:

Total Budget (Tk.) :

Achievement/Findings:

Though both GB and RAKUB dealt with the poor section of the society the socioeconomic condition of GB borrowers, in some aspects like dependency ratio, education, etc., was better than that of the RAKUB. Lending procedure of GB was found to be more simple and cost effective compared to RAKUB. None of the institutions satisfied fully the credit requirement of the borrowers in the study area. Though time requirement to obtain credit from GB was same for all borrower categories it was negatively related with farm size for RAKUB borrowers. Family expenditure in both GB and RAKUB got less priority in loan use pattern. Loan repayment was found to be positively related with farm size for GB borrowers while it possessed negative relationship for RAKUB borrowers. Overall repayment was much higher in GB than that of the RAKUB implying: that GB micro credit program was more successful than RAKUB's one. Cost of credit incurred was much higher in RAKUB than GB. Micro credit program of both institutions brought positive change in almost all socioeconomic aspects of the borrowers. The study suggests for adequate and timely supply of institutional credit to the poor along with proper supervision which would help them to improve their socioeconomic conditions. In addition to this, lending procedure should be made simple avoiding all unnecessary formalities which in turn would reduce cost of credit of the borrowers.

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