Microcredit in Rural Bangladesh: Is It Reaching the Poorest?
Dipankar Datta (2004)
What factors stop the poorest people in Bangladesh from accessing microcredit? What is needed to support these people more effectively in routes out of poverty?
This article assesses the reasons why the extreme poor have in general not been covered by the microcredit initiatives of the widespread non-government development organisations in Bangladesh. It draws on data collected during PRA-based study processes by the World Bank in 1999 and Concern Bangladesh in 1999/2000. This data found that only 12 percent of this category had membership of any development organisation, and that those who did had low levels of involvement.
The exclusion of the extreme poor from microcredit facilities is due to:
Inclusion criteria, such as stability of residence, age, or ability to work that they cannot meet, or exclusion by other group members, who feel that the extreme poor are too high risk.
A fear of taking loans that they may not be able to repay; and drop-out due to inability to make regular weekly loan repayments or compulsory savings.
The paper recommends that NGOs:
Assess the gap between their stated objectives and the outcomes of activities, try to establish branches in economically depressed areas and remote villages, and supplement microcredit with other interventions directed at the extreme poor.
Adopt policies of advancing small and flexible loans to the extreme poor and longer, more flexible repayment plans with closer supervision, and make social programmes independent of credit programmes so that the extreme poor are not excluded from both.
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