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Micro Credit

Micro Credit

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Published by palash dash

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Published by: palash dash on Aug 29, 2009
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Microcredit in bangladeshAbstract
This paper has discussed about the Micro credit which was introduced in Bangladeshafter seventies. It has a great impact to the rural community since it is the means of thesocial and economic development in Bangladesh. This paper also discusses about theseveral numbers of credit suppliers which play an important rule for the economicdevelopment. Does the micro credit always brings welfare it is also one of the mainconcern of this paper which suggests that micro level study is required before introducethe micro credit.Mohammad Sharif Hossain Choudhury.Email: tuhin430@yahoo.comEconomics of Innovation and growth programmeKTH, Stockholm.Sweden..
Bangladesh is a developing country having a very poor financial market. In such type of market the introduction of the micro credit was a financial innovation. In Bangladeshmicro credit was introduced late seventies. Micro credit is the provision of small loans forthe income generating self employment activities. It can be define as” Micro credit, ormicrofinance, is banking the unbankables, bringing credit, savings and other essentialfinancial services within the reach of. millions of people who are too poor to be served byregular banks, in most cases because they are unable to offer sufficient collateral. Ingeneral, banks are for people with money, not for people without." (Gert van Maanen,Micro credit: Sound Business or Development Instrument,Oikocredit, 2004) Grameenbank was the first organization which introduced such type of loan. The main objective of the micro credit is to reduce the poverty and make stable the income of the poor people.Since most of the people in Bangladesh live below the poverty line, the micro credit playsan important role. The initiative taken by the Grameen bank was supported by all thepeople and organizations in Bangladesh. Micro credit programmes target those withoutlandless and the poor ladies. 90 percent of the micro credit recipients are women. Theloans provided by the organizations is collateral free and usually have a maturity of 50weeks with weekly repayment. There is no special sector for the micro credit. It can begiven as the agriculture credit or rural credit or cooperative credit or consumer creditfrom the saving and loan associations or from the credit unions or from the moneylenders. After the great success of the Grameen bank in the field of micro credit differentkind of organizations come forward to provide micro credit to the poor people of Bangladesh. The mentionable organizations are Bangladesh rural advancementcommittee ( BRAC), Association for social advancement (ASA), PROSIKA etc. Theseorganizations introduced micro credit for eradicate poverty from the society, empowerthe women , give free education to the children, family planning, women health care.These organizations support the government`s poverty reduction efforts through theabove mentioned policy. In every case women have been able to gain some access toland, they have also taken loans for firming activities, including beef fattening, vegetablegrowing, fish culturing and betel leaf cultivation.
The organizations which provide micro credit:
In Bangladesh there are several types of organizations provide micro credit. All of theorganizations are non governmental organizations (NGO). These organizations play animportant role for the economic development of Bangladesh. Grameen bank ,Bangladeshrural advancement committee ( BRAC), Association for social advancement (ASA),PROSIKA are the important micro credit providing organizations in Bangladesh.
1. Grameen bank 
:Grameen bank is one of the largest non governmentalorganization in Bangladesh. The founder of this bank was thefamous economist Dr. Mohammad Yunus. Grameen bank wasfirst introduced the micro credit to the rural people. This bank always prefer women rather then men to provide micro credit.Because it is found that women are more conscious then menabout the savings children’s diet, family health and nuitrition.However the most important objective of the bank is to provide loan to the poorest first.Women represent the group which is the poorest of the poor. Grameen bank has somesocial commitment. The bank encourages all of its borrowers to save 5 percent of the loanamount plus one taka per week. As soon as a borrower accumulates sufficient saving,she buys one (and only one) share in the Bank, which costs $3.Only the borrowers of thebank can buy the share. One of the important strategy of the bank is that after taking theinterest from the borrowers it make a modest profit and then it gives the profit to theshare holder as dividend. The current rate of interest on workink capitais 20 percent and on home loan is 8 percent. Last year the bank has made a profit of US$680,000. In a developing country such type of organization plays an important role.
Source: All the data has been taken from the HOME PAGE of the Grameen bank.
2. Bangladesh rural advancement committee ( BRAC ) :
.BRAC was introduced after the liberation war in Bangladesh. Itwas started its work to provide relief to the war effected people.After some years this organization has taken some important

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