Micro Credit in Bangladesh
Micro Credit in Bangladesh. Micro credit is a small size of loans that is given to the poor for self-employment. Today Bangladesh is called the land of micro credit revolution. The poverty of the world can be rooted out through effective micro credit programmed that was originated in a poor country like Bangladesh.
Conceptually, micro credit can be described as collateral free small loan offered to the poor to create self-employment in income generating activities based on group lending methodology. Micro credit can be broadly defined as a programme that provides credit for self-employment and other financial.
Characteristics of Micro credit
In the micro credit system, service providers go to the doorsteps of the poor based on the principle that the people should not go to the bank rather than bank should go to the people.
The other important features of micro credit are –
Micro credit is given with minimum paperwork. Workers have to make regular visits to the borrowers’ premises to offer advice and supervision.
- Micro credit is collateral free. Small size of loans. All loans are to be paid back in installments on weekly or bi-weekly basis.
-Micro credit is demand driven. 95 percent borrowers are poor women.
-Recovery rate is above 90 percent.
Historical Background of Micro credit
The Micro credit is not a new thing in this country. The birth and evolution of micro credit have been enumerated below –
Traditional Money Lenders –
At early stage, people would borrow from conventional money lenders. Then the minnows of the Zemindars used to lend money to the subjects only to grasp their lands. Then the kabuliwalas were more interested in getting the interest than the capital.
Camilla Model –
The Camilla Model was developed by the Bangladesh Academy for Rural Development (BARB) in 1960 under the guardianship of principal Akter Hamid khan. This model was also based on group approach and provided micro credit to the co-operators. It was expanded throughout the country in 1970 as Integrated Rural Development Programme (IRDP). Under IRDP farmers were organised into two tier cooperative groups, credits and other development inputs were mobilised through these cooperative groups.
Grameen Model –
Prof. Dr. Mohammad Yunus conducted an experiment in 1976 distributing small loans in Zobra village of Chittagong. It was expanded into a project entitled Grameen Bank Prakalpa with the financial aid of Bangladesh Bank. After the success of this project, the government declared Grameen Bank Ordinance 1983. Dr. Mohammad Yunus transformed the micro credit practice into systematic, institutionalized, rationalized and innovative which is known to the whole world as Grameen Model.
Besides these, different approaches of micro credit have been developed by BRAC, ASA, PROSHIKA and other NGOs. Today Bangladesh is called the Laboratory of Micro credit and the land of Micro credit Revolution.Micro Credit in Bangladesh.
Micro credit Campaign –
The first Micro credit Summit was held in Washington DC, USA in 1997. The, Micro credit Summit launched a global movement to reach 100 million of the world’s poorest families with credit for self employment and other financial and business services by the year 2005. In that Summit prof. Yunus said. ‘We believe that poverty does not belong to civilized human society. It belongs to museums.’ The Micro credit campaign has successfully organised three regional meetings : in October 2000 in Harare of Zimbabwe, in February 2001 in New Delhi of India, in October 2001 in Puebla of Mexico and in February 2004 in Dhaka of Bangladesh.Micro Credit in Bangladesh.
Micro credit and Poverty Alleviation –
The Secretary General of the then UN Kofi Anan opines that eradicating poverty is perhaps the greatest global challenge. Out of 6 billion population in the world 2.8 billion live on less than two dollars income a day. Of the 1.2 billion people 50 million live in Asia and 300 million in Africa. Micro credit programmes in these regions show that micro credit is a strong poverty alleviating weapon. The major objective of micro credit is to create income among poor households and thereby to alleviate poverty. Micro credit leads to an improvement in income and the increase in income lifts the poor above the poverty line. Micro Credit in Bangladesh.
More than 64 million of the world’s poorest people have taken part in the past seven years in micro finance projects with the purpose of coming out of the vicious circle of poverty.
Women Empowerment –
Micro credit has played a significant positive role in empowering rural Munch during the past two decades. The direct effect of micro credit programme on women’s position has been through the expansion of women‘s mobility in the public spheres like bank, Thane quasars’ hospitals etc. Besides these, the women credit borrowers can take part in the decision making Prism which is a strong indicator of empowerment.
When women generate and control their own income, women gain a level of power; so they can make decisions negligently and demand more respect.
Objectives of the Government –
The main objectives of government to patronize the micro credit sector were:
a) the unbanked poor with financial service;
b) Starting easy cash flow in the rural financial market;
c) Empowering the women.
Failure of the Government –
The failure of government involvement in the micro credit activities was due to
(i) poor service delivery mechanism,
(ii) lack of adequate monitoring,
(iii) improper client selection and
(iv) low recovery rate.
Micro credit Act –
On 16 July 2006 “Micro credit Regulatory Authority Act, 2006” was enacted which came into force from 27 August 2006. Micro credit Regulatory Authority (MRA) was established under this act to bring this sector under a regulatory framework. In fact, the establishment of MRA is an endeavor of the government to create an enabling environment for sustainable growth and development of micro finance sector in Bangladesh. Micro Credit in Bangladesh.
Micro finance in Bangladesh at a glance –
More than a thousand micro finance institutions are working in Bangladesh of which 503 institutions have been licensed by Micro credit Regulatory Authority. Micro finance institutions are offering various savings, credit and insurance services to their clients. Savings products include regular savings, voluntary savings and term savings; while the credit products include rural noncredit, urban noncredit, micro enterprise credit, hard core poor credit, seasonal credit etc.
The number of beneficiaries of the sector would be around 30 million and amount of savings and credit would be (including Grameen Bank) around US$ 1.67 billion and US$ 2.86 billion respectively. Average savings and credit per client is around US$ 22.46 and US$ 89 respectively. The amount of savings and credit of this sector are increasing by around 30% in every year, However, Grameen Bank and 3 large NCO-WIS hold around 80% of the total market share. Micro Credit in Bangladesh.
Micro Credit in Bangladesh