The Frontiers of Microcredit Programs in Bangladesh: An Empirical Review

Abstract

Panel survey data indicated that about 47 percent of total land-poor (defined as household owning less than half an acre of land) rural households were non-participants in microcredit programs in Bangladesh. This exploratory study was conducted to have an appraisal of microfinance institutions’ (MFIs) peer-monitoring model or group-based activities in Bangladesh that would help to identify key access barriers to micro-entrepreneurship and microcredit initiatives. The sample was taken on a random basis from Gazipur, Savar and Narayanganj around Dhaka city. The respondents (non-members of MFIs) were asked to evaluate their judgments on different objects selected in the questionnaire. Respondents ranked the attributes on a number of itemized five-point scale ratings bounded at each end by one of two bipolar adjectives. The result of this study indicated that two types of forces are active in this dissociation of the rural ultra-poor with MFIs. One is self-exclusion and the other is indirect-push-exclusion by the MFIs. Besides, there have been some identified factors in principal component factor analysis that are heavily weighted by the respondents as the key access barriers such as tight repayment methods of loan, high costs of credit, disciplinary imperatives, loan use opportunity, risk of loan and religious restrictions. The regression analysis shows that loan repayment method, loan utilization opportunities and religious restrictions are significant variables that play major role in the nonparticipation of the rural poor in microcredit programs in rural Bangladesh. Hence, similar to many others, the findings of this study conclude that microcredit is not the only way out for all the rural poor to resolve poverty.