Micro-credit, a tool for empowering the poor


Bangladesh is one of the populous and rural countries in the world where most people live in poverty. In addition, our country is devastated.

Every year we have to face natural disasters that lead to misery. Despite the periodic natural disaster, Bangladesh has made remarkable progress over the past 50 years. It has moved from the least developed country to the developing country. Microcredit goes a long way in becoming a developing country.

Bangladesh is the first country to introduce such development programs. Microfinance has evolved as an approach to the development of livestock and low-income people in local areas since the day after independence. He only succeeded thanks to the existence of micro-credit. The microcredit program provides small loans to the rural poor without collateral for the creation of self-employment. It increases income and improves the standard of living. In addition to providing credit, it offers a range of services and resources (eg, savings facilities, training, housing, family planning, health services, etc.) to the poor. The program helps eradicate poverty, ensure financial security and empower rural populations, which tends to strengthen sustainable development.

Special groups of microcredit programs are women and people who struggle to fill three meals a day, for example, the unemployed, low-income people or groups, people affected by disaster or those who have not. no other access to take an unsecured financial services. It helps generate income and is free from poverty. It was first started during the Pakistani period by Dr Akhter Hamid Khan under the name of the Pakistan Academy for Rural Development (PARD). At present, this project is known as the Cumilla model. It grants loans to marginalized people and sharecroppers through the Samabay Samity system.

The Grameen Bank was a pioneer in Bangladesh in pioneering the modern idea of ​​microcredit. After the liberation war, Bangladesh experienced a devastating famine in 1974. At that time, Muhammad Yunus, a young economics professor, closely observed the famine-stricken villagers and observed desperate situations. There is a dearth of formal institutions to provide loans. This is why people largely rely on local money lenders.

To provide money to the poor on a large scale, it creates formal institutions. First, it lends money based on the confidence of poor and poor farmers to invest in microenterprises. It started in 1976 as a pilot project. Finally, he created the Grameen Bank in 1986 for the poor in collaboration with the Central Bank of Bangladesh. According to the Grameen Bank report, in 1994, the loan repayment rate was 98%, of which 5% of borrowers were freed from poverty. In 2018, the share of female members reached a higher level of 98.66%. The total number of members increases to 9.08 million members. Estimated that, about 5.32% of the country’s population comprises in this bank.

Although BRAC focuses on relief and rehabilitation activities as well as the socio-economic empowerment of women, it started micro-credit activities in 1984. It targets landless people living below the poverty line. extreme. Ultimately, these members are offered unsecured loans ranging from TK 1,000 to 10,000, repayable in a year or more.

Today, BRAC’s micro-credit program has extended to all districts of Bangladesh as well as to approximately 293,016 village organizations covering 8.09 million VO members. 93% of the participants are women. After being successful in Bangladesh, microfinance activities are expanded internationally, notably in Afghanistan, Sri Lanka, Tanzania, Uganda, Pakistan, South Sudan, Sierra Leone and Liberia.

Besides Grameen Bank and BRAC, at present, more than 800 non-governmental organizations (NGOs), four nationalized commercial banks and specialized financial institutions run microcredit programs in the country.

In 2006, the government of Bangladesh established the Microcredit Regulatory Authority (MRA) to ensure accountability and transparency. MRA provides licenses to non-governmental organizations (NGOs). The MRA issues a license to MFIs under the preconditions of having more than 1,000 clients or a minimum outstanding loan of BDT 4 million. However, until May 2014, MRA had accepted licenses in favor of 742 NGOs and canceled the licenses of 44 NGOs. There are 43 other requests pending for a final decision.

Although microfinance has become popular in recent years, especially in countries of the second and third world, it is the subject of much criticism. Microcredit can be harmful to vulnerable populations for various reasons. For example, large microfinance companies offer a small amount of money with a high interest rate, and borrowers fall victim to their oppressive behavior. Most of the borrowers face these complexities severely.

Yet thousands of NGOs have been working in Bangladesh for a long time. They contribute to the development of Bangladesh through microcredit programs in terms of meeting basic needs such as education, health, etc. Thus, the microcredit program plays an important role in empowering rural populations, especially rural women.

The author is a public administration student at Cumilla University and a member of the Bangladesh Social Research Group.

E-mail: [email protected]

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