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Inside Productivity of Microcredit in Bangladesh: A Surgical Analysis

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Author Info

  • Md. Mahmudul Alam

    ()
    (Institute for Environment and Development (LESTARI) National University of Malaysia (UKM), Malaysia, and Research Fellow, Integrated Education and Research Foundation, Dhaka, Bangladesh)

  • Rafiqul Islam Molla

    ()
    (Specialist in Economics Faculty of Business and Law Multimedia University, Malaysia)

Abstract

Microcredit typically refers to petty collateral-free credits given to groups of poor members in the society for their socioeconomic emancipation. It is claimed to be an effective tool for enhancing income of the poor primarily through creation of self-employment opportunities for them in a variety of small economic activities. However, in this survey of microcredit borrowers in Bangladesh it is found that when self-employed family labor is paid wages at market rate, under the framework of economic-profit counting, economic productivity of credit for about 48 % of the borrowers is not enough to support payment of any interest. Similarly its social productivity in terms of job creation and women’s empowerment at family level is also found to be low and marginal. Even then about 90% of the borrowers prefer taking microcredit from microfinance institutions (MFIs) even at exorbitantly high interest rate, ostensibly to avoid compromising their socio-political rights and potentials at the hands of the local moneylenders or friends and relatives if credits are obtained from them. They see microcredit as a means of socio-political empowerment of the economically weak and underprivileged members of the society. As such they regard it as a more credible social than economic program.

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Bibliographic Info

Article provided by Asian Economic and Social Society in its journal Asian Economic and Financial Review.

Volume (Year): 2 (2012)
Issue (Month): 3 (July)
Pages: 478-490

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Handle: RePEc:asi:aeafrj:2012:p:478-490

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Related research

Keywords: Grameen Bank; microcredit; microenterprise; subsistent; poverty alleviation; economic-profit counting; accounting-profit counting; stereotype; empowerment;

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  1. Mahmudul Alam & Rafiqul Islam Molla, 2012. "Limitations Of Microcredit For Promoting Microenterprises In Bangladesh," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(192), pages 41–54, January â.
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Cited by:
  1. Ayi Gavriel Ayayi, 2012. "Microfinance: A Time to Deliberate," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(3), pages 445-447, July.

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