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Micro-Credit Reja_13

Micro-Credit Reja_13

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Published by: api-3788255 on Oct 17, 2008
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Project No: 05
Title: Theoretical and Operational Aspects of Micro Credit System in Rural Area
of Bangladesh.

Micro-credit was invented 35 years ago in Bangladesh by Proof Dr. Muhammad Yunus.
Now it is most important and powerful to reduce poverty in rural area actively. So we
need to know the Theoretical and Operatical aspect of Microcredit system .

2. What is Micro Created?
The word \u201cMicro\u201d means small and the word \u201cCredit \u201c means loan, So we can
say that MicroCredit mean small loan.
The idea began when Bangladeshi economist Professor Mohammad Yunus first
demonstrated that poor people, especially poor women, could produce near-perfect
repayment rates.
According toOxfam, micro credit consists of "very small scale financial
services, including savings, loans for emergencies, day-to-day living, and investment in
productive activities"
3. Micro Created background:
In the world many institution give microcredit, as, Associations, Bank
Guarantees, Community Banking, Cooperatives, Credit Unions, Group, Individual,
Intermediatories, Non-Governmental Organizations, Peer Pressure, Rotating Savings
and Credit Associations, Small Business, Village Banking ,Grameen Bank.
(Source : The Virtual Library on Microcredit )
No one now gets shocked if somebody uses the term "microcredit" to mean
agricultural credit, or rural credit, or cooperative credit, or consumer credit, credit from
the savings and loan associations, or from credit unions, or from money lenders.
Acording to Proof Dr. Muhammad Yunus ,Microcredit are classified into some
types. Those are:
Traditional informal microcredit (as, moneylender's credit, pawn shops, loans from friends and
relatives, consumer credit in informal market, etc.)
Microcredit based on t raditional informal groups (as, tontin, su su, ROSCA, etc.)
Consumer microcredit.
Activity -based microcredit through conventional or specialised banks (as, agricultural credit,
livestock credit, fisheries credit, handloom credit, etc.)
Rural credit through specialised banks.
Cooperat ive microcredit (cooperative credit, credit union, savings and loan associations,
savings banks, etc.)
Bank-NGO partnership based microcredit.

Grameen type microcredit or Grameencredit.
Other types of NGO microcredit.
Other types of non-NGO non-collateralized microcredit.

As of July, 2004, it has 3.7 million borrowers, 96 percent of whom are women. With
1267 branches, Grameen Bank provides services in 46,000 villages, covering more than
68 percent of the total villages in Bangladesh.

(Web site of Grameen Bank -
http://www.grameen -info.org, Date: 07/04/2005) 4. Micro Credit process and theory

For getting microcredit at first we need a membership of that institution or
NGOs. After that make a group and then apply for loan and approve that. Lastly
distribution loan by that institution orNGOs.

Objectives of the micro credit system:
1. To extend economic facilities to poor men and wome n;
2. To eliminate the exploitation of the poor by money- lenders;
3. To create opportunities for self-employment for the vast number of unemployed
people in rural Bangladesh;
4. To bring the disadvantaged, mostly women from the poorest households, within
the fold of an organizational format that they can understand and operate; and
5. To reverse the age-old vicious cycle of "low income, low savings, low
investment" into an expanding cycle of "low income, credit, investment, more
income, more investment, more income."
6. Its mission is to help the poor families to help themselves to overcome poverty.
It is targeted to the poor, particularly poor women.

Loans are small, but sufficient to finance the micro-enterprises undertaken by
borrowers: rice- husking, machine repairing, purchase of rickshaws, buying of milk
cows, goats, cloth, pottery etc. The interest rate on all loans is 16 percent. The
repayment rate on loans is currently - 95 per cent - due to group pressure and self-
interest, as well as the motivation of borrowers.

5. Micro Created Operational Aspect
Working system of microcredit come from the idea of circle of poverty.
Fig1: Vicious Circle of poverty
Fig2: Effect of micro-credit
Apply for loan
Distribution loan
Approve for loan
Loan collect
Fig: Process of Microcredit

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