Financial system of Bangladesh Bangladesh has a mixed banking system.

The financial system of Bangladesh consists of Bangladesh Bank as the central bank, nationalized commercial banks, Government owned specialized banks, domestic private banks, foreign banks and non-bank financial institutions. The financial system also embraces insurance companies, stock exchanges and co-operative banks. Bangladesh Bank has legal authority to supervise and regulate all the banks. IT performs the role of a traditional central Bank. It formulates and implements monetary policy, manages foreign exchange reserves and supervises banks and non-bank financial institutions. Bangladesh Bank has the power to impose penalties for noncompliance and also to intervene in the management of a bank if serious problems arise. It also has the delegated authority of issuing policy directives regarding the foreign exchange regime. The commercial banking system dominates Bangladesh's financial sector. There are four types of banks in Bangladesh namely (i) nationalized commercial Bank, (ii) private commercial bank, (iii) foreign commercial bank, and (iv) specialized bank. The three nationalized commercial banks, Sonali Bank, Janata Bank and Agrani Bank dominate the banking system. Recently, a good number of private banks such as Rupali Bank, Pubali Bank, United Commercial Bank, Dhaka Bank, BRAC Bank, One Bank and foreign banks such as American Express Bank, Credit of Agricol Indosuez Bank, Dutch-Bangla Bank had started operation in Bangladesh. These banks are providing credit facility on various aspects such as business, health, housing, education, garments development and infrastructure development. There are few specialized banks in Bangladesh such as (i) Bangladesh Krishi Bank (BKB), (ii) Rajshahi Krishi Unnayan Bank (RAKUB), (iii) Grameen Bank (GB), (iv) Bangladesh Shilpa Bank (BSB) and (v) Bangladesh Shilpa Rin Sangstha (BSRS). Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank were established to cater for agricultural credit needs of farmers. Grameen Bank was made responsible for rural development while the other two Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangtha were made responsible for providing loans to the industrial sector.

According to him. collateral was not needed and credit could be used for productive or not productive purposes but at the same time. Singh (2003) conducted a study in India in which he mentioned that there were two main systems associated with the microcredit program. The author indicated that the following features were associated with microcredit programs: (i) Low interest rate. and (vi) Credit for pursuing income generating activities (IGAs). founded in early eighties By Professor Dr. (ii) Easy and periodical repayments with moratorium period.2 . On the other hand. 2007).Concept of microcredit Microcredit program was innovated in Bangladesh. microcredit was provided with easy and periodical repayments and moratorium period.. Sparked by the success of Grameen Bank. Microcredit program can be viewed as a new approach to fight against poverty and under this approach. charging a low rate of interest and credit was made available for income generating activities (IGAs). (iv) No collateral requirements. Based on these two systems. Grameen Bank. provision was made to provide small amount of credit to the very poor people (those who have no access to the traditional banking) creating self-employment projects for them so that they can generate income for them (Gutiérrez-Nieto et al. Singh (2003) defined microcredit as the provision wherein debtor took money either from both informal and formal sources of credit. he indicated that under the informal system the disbursement was easy and quick. but the system was involved with complex legal and operational procedure and collateral requirement was essential which might limit the easy access to credit. one was the formal financial institutions and other was informal system. the risk of exploitation was higher for the clients and they were forced to pay a very higher rate of interest as well. (v) Less paper work. both the system had its own positive and negative aspects. as per the terms and conditions set by the creditors. 1. there have been thousand replication of ‘Grameen” type credit program around the world. (iii) Easy process of disbursement. Microcredit program has salient features which makes it different from other credit programs. Mohamed Yunus was the first microcredit organization in the world. The author stated that under the formal financial system.

business training. (iv) Small weekly saving and repayments spreads over a year. They are: (i) Direct Approach model: Microfinance Institutes (MFIs) directly provided microcredit to the poor mainly to women borrowers. health and nutrition were also provided along with the financial and social intermediations (Hussain. They identified the following features of the typical microcredit program such as: (i) No Collateral is needed. (v) Intensive credit supervision required. only financial intermediation such as saving. bringing in the element of social accountability and peer pressure as substitute for collateral. (ii) The average amount of loan size is small. Under the minimalist approach. Delivery methods vary from country to country. Grameen Bank of Bangladesh. 1. (vi) Highly participatory involvement of borrowers in planning. Subrahmanyam (1999) pointed out that there were three models of delivering microcredit to the clients. enterprise development services such as marketing. awareness building were provided to the clients but in the case of integrated approach.3 . Delivery System: There were two approaches applied by Microfinance Institutes (MFIs) namely. adopt the minimalist approach whereas Bangladesh Rural Advancement Committee (BRAC) is the unique example of an integrated approach or credit plus approach. 2001). and (vii) Focusing on financial services and targeting poor people and resolving gender issues. e. implementation and monitoring loans. For example.Ismail et al.g. minimalist or only credit approach and integrated approach respectively. loans. production training and social services like education. Grameen Bank (GB) and Association for Social Advancement (ASA) in Bangladesh. In the context of South Asian countries like Bangladesh and India. leadership training. One of the prime goals of the microcredit program is to provide credit to the targeted people quickly and timely through an efficient delivery system. (2004) conducted a study in Yemen and their study focused on the preference of credit facilities and its accessibility based on the socioeconomic attributes of micro finance and agricultural credit borrowers. (iii) Organizing the borrowers into small homogenous groups for guarantee of loans. They mentioned that the emphasis of microfinance was to build up local financial institutions that was sustainable in the rural area to serve the poor. insurance and social intermediation like group formation.

Proshika and Association for Social Advancement (ASA) can be thought of as major providers with respect to their area coverage. health and nutrition. forestry development. human and legal rights. ASA has been operating microcredit program since 1992 in order to eradicate poverty and to improve the livelihood of the poor people. BRAC in Bangladesh. Like BRAC and Proshika. National Bank for Agriculture and Rural Development (NABARD) in India. number of employees and dimensions of programs. BRAC works for the poor people giving more attention on poor women with two major goals such as poverty alleviation and empowerment of poor. non-formal education. (iii) Delivery By NGOs though Self Help Groups (SHGs) or Village Community Organization: e. Grameen Bank (GB). health and nutrition. BRAC is a non-governmental development organization established in 1972 as relief and rehabilitation program in war devastated Bangladesh. number of borrowers. Proshika has been implementing a wide range of development activities like agricultural development. Microcredit providers of Bangladesh Microcredit program was first started in Bangladesh by Grameen Bank. for example. The prime goal of Proshika is to improve the quality of life of the poor people of Bangladesh.(ii) Delivery through cooperatives: Microcredit was provided to the poor through banking institutions or by government agencies through cooperatives. It turned into a specialized bank by ordinance in 1983.g. Over the past three decades it has expanded its activities mainly on agricultural development. After that. for the rural poor women. Grameen Bank began as a pilot project in Jobra village in 1976 under Chittagong district of Bangladesh to provide credit to the landless and the very poor people as traditional banking system failed to reach the poor. trading. Bangladesh Rural Advancement Committee (BRAC). The prime goal of the ‘Grameen Bank’ is to provide credit facility without any collateral requirements to the poor people especially. Proshika’s development process started in a few villages of Dhaka and Comilla district of Bangladesh in 1975 but formally it took its first step in 1976. rural infrastructure development giving more emphasis on agricultural development. ASA has been 1. environmental pollutions and women empowerment. thousand of organizations were involved in providing microcredit facilities to the poor. amount of disbursement and performance in loan recovery.4 . women empowerment.

PKSF is a company set by the Government of Bangladesh for poverty alleviation in 1990. Seasonal loan was provided for seasonal agricultural activities like production of winter and summer vegetables. food processing. manufacturing. It provides microcredit to the poor (having ownership up to 0. housing loan was provided for a period of two years with a ten percent flat interest rate in order to construct or upgrade member’s houses. Only marginal and landless groups were allowed to apply for the general loan. Another reputed microcredit providing institution in Bangladesh is Palli Karma Sahayak Foundation (PKSF). Group members were also allowed to take the program loan for projects involving of livestock. The maximum period for medium term loan given to an individual member or group members was three years. There exists differences between the types of loan provided by the governmental projects and NGOs. pond or open water fishery. government and semi-government organizations and non-government organizations. BRAC provides mainly three types of loan for its members such as general loan.50 acre of land and assetless people) through partner organizations. Proposed general and seasonal loans were provided on short term basis while medium term loan was provided for joint ventures. Shortterm loan period was twelve months for the target group members. NGOs were also providing various types of loan as per their own rules and activities. government agencies such as Department of Agricultural Extension (DAE) is also providing microcredit to the poor people through agricultural projects. These were general loan. In keeping harmony with the national agricultural policy. food processing. kitchen gardening. and restaurants. fisheries and social forestry. The PKSF partner organizations include cooperatives. It is also notable that in microcredit program most of the beneficiaries were women as compared to men. small scale poultry and livestock farming. For Example.5 . small-shop keeping. agriculture. joint venture loan was provided for undertaking joint investment activities by the group as a whole such as market lease. Finally. education. General loans were provided for trading. women rights and environmental pollution. paddy husking. production of local or high yielding variety oilseeds and pulses. voluntary agencies.implementing different activities including health. based on the nature of needs and purpose of the projects. On the other hand. purchase of power tiller. irrigation equipment etc. Category of loan varies from project to project. small-scale nursery. peddling. For instance. For 1. program loan and housing loan. lease of agro-farm. agricultural development. seasonal agricultural loan and joint venture loan. lease of government fish pond. poultry rearing. short term and medium term loans were offered by ADIP. shop keeping. General loans were provided for income generating activities including rural trading. rural transportation. Usually. ADIP that was a microcredit project of Department of Agricultural Extension had the provision of providing three types of loans. Various types of loan are provided to the borrowers.

instance. 2004 (Plz Update the data) Eligibility of getting loans Eligibility of becoming a group member varies based on the nature. in 2004. 2004 1990 to June.33 27. there are no hard and fast rules. 1. DAE operates various microcredit programs through different projects like Agricultural Diversification and Intensification Project (ADIP).17 Recovery (%) 2004 Source: Bangladesh Economic Review. (million) 3.50 acre (0. 2004).56 98. NGOs have their own criteria as well for selecting group members.04 Disbursement (million USD) 3015. Loan disbursement and recovery rate of major microcredit providers in Bangladesh are shown in Table 1.96 93. For example. is assigned for the development of overall agricultural extension activities.23 272. (DAE) which is a government organization. Grameen Bank provided the highest amount of loan to borrowers followed by BRAC and ASA. The Department of Agriculture Extension. Usually. the following issues are considered in selecting borrowers by the microcredit providers. 2004 1976 to June.90 85. They are: (i) Land ownership of the household.04 51.45 91. The amount of disbursement was lowest for PKSF but the recovery rate was highest for PKSF. Smallholder Agricultural Improvement Project (SAIP) by using group based approach.23.6ha) of land on share-cropping including homestead can become members of ADIP credit program.25 88. landless and marginal farmers owning or cultivating less than 1. total female members of BRAC were 33929 as compared to 9499 male members and in case of PKSF.41 27. types and activities of different microfinance institutions. As can be seen from Table 1.62 38. In accordance with the essence of the New Agricultural Extension Policy (NAEP).79 1771.30 409. 90 percent of the borrowers were female (Bangladesh Economic Review. 2004 1972 to June. 2004 1992 to June.23.85 1437. Table 1: Disbursement and recovery rate by major microcredit providers Organization Period Total beneficiary Grameen bank BRAC Proshika ASA PKSF 1983 to June.6 .

individuals applying for credit must be aged between 18-54 years. and (iii) they prefer handling large amount of loans rather than the petty loans that the poor need (Gofran. For example. as per the design of the project. Health status of the individuals. (v) Marital Status of the individuals. (viii) Focus on poor and destitute women. BRAC gives priority on widowed or divorced women with children. Justification of operating microcredit program Due to lack of capital poor people living in the rural areas have limited opportunity to invest in productive activities and hence cannot get out of poverty. 2006). 2000). 85 percent of group members were women. which poor people find difficult to provide. Commercial banks in the developing countries fail to cater for the credit needs of the poor because of perceived high risk and high transaction costs associated with the small loans and saving deposits (Coleman. Individuals must be physically active having no serious diseases like cancer or disabled. 1996). married people were encouraged in ADIP rather than singles. in case of BRAC. Failure of traditional financial institutions in to extend credit facility to the poor is the most important reason of perpetuations of poverty and the microcredit system offers opportunities for the poor to eradicate poverty their through income-generating activities (Yunus. rural people depend much on local money-lenders for credit who charge a very high rate of interest and ultimately the poor people fail to repay and become the victims of exploitation (Mahmud. Mircocredit programs can be considered as poverty alleviating programs which are being implemented to address the issues like agricultural development.44 USD) can become members of marginal and landless group of ADIP. For example.7 . household having a maximum monthly income of up to 3000 taka (equivalent to 44. The majority of the rural families in Bangladesh have limited access to the institutional credit and thus. development of health care and nutritional status. (vi) The individual cannot be affiliated with other NGOs or any other microcredit program at the same time. development of 1. (iv) Residence of the individuals. For instance.(ii) Age of the individuals. 1999). In case of ADIP. The individual should be a permanent resident of the village. Commercial banks in Bangladesh have also failed to serve the need of the rural poor mainly for three main reasons: (i) bank requires collateral. (vii). (iii) Income of the households: For example. (ii) their procedures for filling application forms and completing other formalities for obtaining loans are too cumbersome for the illiterate poor.

According to author. as well as marginal and small farmers. The author mentioned that microcredit program had positive role in poverty alleviation and women empowerment. development on gender relation. most of the microfinance providers mainly target the rural poor with less than half acre of land. women were still backward in their decisionmaking process despite their participation in the microcredit program. Dowla and Alamgir (2003) conducted a study on the borrowers of NGOs in Bangladesh. Nevertheless. even poor men. it was much more likely to benefit women themselves and as well as their entire family. One of the major objectives of providing microcredit is that. The authors indicated that the amount of savings of the borrowers had increased over time. They found that microcredit program had positive impact on the compulsory saving of the borrowers. the program must reach the poor and the loan must bring net benefits to the poor and uplift their socioeconomic conditions. Kabeer (2001) indicated that in Bangladesh. Doocy et al. They observed that microcredit program had increased the nutritional status of the women borrowers and their family members. The author also indicated that when loans were directed to women rather than to men. Role of microcredit in poverty alleviation Datta (2004) conducted a study on the microcredit program in Bangladesh in order to assess whether the credit facility reached the poorest of the poor or not.small scale enterprises.8 . conservation of environment. always had more choices in terms of accessing to the economic opportunities than women. enhancement of social forestry etc. (2005) conducted study in Ethiopia in order to examine the impact of micro credit program on the nutritional status of the borrowers. In Bangladesh. They suggested that appropriate regulation must be made for mobilizing saving. They mentioned that provision of providing credit to women had enhanced household’s well-being. According to them. in case of Buru Tangail (microcredit provider) average saving per borrower was 378 taka in 1993 and it was 670 taka in 1999. men. housing issues. 1. They examined their saving behavior. the author further stated that the program had failed to reach the poorest of the poor.

Bayes (2001) evaluated the role of telecommunication within the context of rural development in Bangladesh under the Grameen Bank’s telecommunication program.Khandker (2003) conducted a study on Bangladeshi borrowers on the impact of microcredit on the household consumption. They observed that women’s participation in the microcredit program had helped to increase women’s empowerment in terms of householddecision making ability. the author also indicated that the effect was more pronounced in reducing extreme than moderate poverty. and it had a sustained impact on poverty reduction among the program participants. women’s social networking and mobility. According to the author. economic. (2003) estimated the impact of microcredit program on the rural Bangladeshi women’s autonomy within the household. But. According to the author. female credit effect was larger than male credit effect 1. The author also reported that microcrdit program had improved the social. The author also mentioned that Grameen Bank’s style of managing telecommunication had helped significantly to expand access to vital information input for all segments of the population and it had also reduced inequality. The author mentioned that microcredit programs can be veiwed as an important component of rural development strategies for generating employment. The author found that microfinance had benefited the poorest. The author stated that microcredit programs had increased own-cultivation through sharecropping for the male members. it had also positive spillover impact in reducing poverty at the village level.9 . Pitt (2000) conducted a study on the group-based credit program in Bangladesh. The author indicated that the program had benefited the poor more than non-poor. Pitt et al. Accroding to the author. The author examined the effects of credit program on agricultural contracts and supply of agricultural labor. microcredit program had mainly targeted the rural poor women because they were found to have minimum access to economic resources. It had also increased their hours in field crop selfemployment . legal and political status of the rural poor among women. Rao (2003) conducted a study on microfiance institutions in India and Bangladesh. access to financial and economic resources. microenterprise development and in reducing poverty.

Onal et al. The author identified the following reasons for not reaching the extreme poor. The author indicated that there was a positive impact of agricultural program of Grameen Bank on the loanees. and Supply-driven. Hossain (1998) conducted study on the borrowers of Grameen Bank of Bangladesh.10 .in increasing sharecropping. They had committed 1. The author also stated that credit receivers had relatively higher level of awareness (on socioeconomic aspects) than the non-credit receivers due to the intervention of Grameen Bank’s credit program. Social exclusion. They found that not only agricultural output. Indonesia. progressive loan disbursement. The overall change in income was 50 percent and the change in employment was 33 percent over the study period. Strengths and weaknesses of credit programs Hasan (2003) conducted a study in Bangladesh to examine whether microcredit faicilities reached the poorest of the poor or not. but also rural income distribution would be improved by increasing the availability of subsidized credit to the small farmers. Begum (1998) made a comparative study between credit receivers and non-credit receivers in Dinajpur district of Bangladesh. The income of loanees was higher after joining the Grameen Bank program than before. (i) (ii) (iii) (iv) Fragile source of income and income fluctuation of the poorest. The author reported that the annual average family income of the credit receivers was higher than that of non-credit receivers. Hussain (2001) indentified several weaknessess and strengths of NGO programs in Bangladesh. (1995) investigated improved allocation of subsidized credit among farm groups in East Java. The author mentioned that Grameen model reached the upper level of the poor but it failed to address the needs of the poorest. Joint liability in the group. The author mentioned that NGOs had grass-root linkages. The author observed that credit program had increased selfemployment for both male and female borrowers.

In addition. and (iii) a scarred credit history. their projects were limited to particular circumstances which could not be generalized. In addition. (ii) lack of credit history for recent immigrants. They also found that the project had weaknesses as well. and (vi) Existence of subsidies might have negative impact of the sustainability of many MFIs. They identified three major barriers for the American entrepreneurs in accessing to the credit facility and they were (i) racial discrimination. NGOs had less hirerarchy in their ogranization which helped the field staff to give suggestion and quick decision at the field level. (iv) Transparency was often questionable. (iii) Training was limited in saving and loans. the drawbacks were as follows: (i) Credit disipline failed to be established among members due to felxibility and simplicity of NGOs rules and regulations. They concluded 1. NGOs were able to concentration on specific areas. The author added that their activities were also under suspicion by the government. The author indicated that flexibility had created opportunities for suppressing transparency and avoiding accountability. (ii) Lack of standard techniques of saving mobilization. borrower groups and Vietnam Women’s Union (VWU) experienced few problems like (i) weak bookkeeping and record keeping. (ii) the need for internal audit team and (iii) the need for a separate bank account for accumulated capital. Hussain (1999) identified several weaknesses of microcredit programs operating in Bangladesh. According to the author. Problems of access to formal credit Schreiner and Woller (2003) conducted a study on the microenterprise development programs in USA. Moreover. They mentioned that the project had severe shortage of staffs to monitor and implement the project and to train others on credit and savings. They concluded that the project had positive impact on the income of the borrowers. According to the author.11 . (v) No regulatory supervision was received by the program providers from the government such as auditing of account.field staffs as well those who helped to solve problem efficiently and promptly at the grassroot level. On the other hand. They assessed whether the microenterprise programs were successful or not in the context of USA. due to limited activities. they had problems implementing the programs. McNamara and Nga (1998) conducted a study in Vietnam to assess the impact of credit program of Facts For Life (FFL) Communication Project.

The author mentioned that due to social and cultural norms women were not allowed to engage themselves in agricultural production. cultural gap and transport cost. (iii) Lack of information regarding credit program. (ii) Gender stereotype beliefs about women’s ability to effectively utilize only small loans and their inability to engage in agricultural production and profitable non-traditional selfemployment. (vii) Dominance of men on women for controlling over borrowed money. They also observed that microcredit program had positive effect on the women borrowers of Indonesia in reducing poverty. They had limited access to institutional credit and the amount of credit provided to the women was too small. They mentioned that due to high cost of operation. Phillipine. (v) Collateral requirement by the formal credit institutions not fulfilled by the poor. (vi) Perceptions of formal banking institutions that the poor were bad credit risk and they were not bankable. low repayment rate and risk. Panjaitan-Drioadisuryo and Cloud (1999) conducted a study on Indonesian women to explore the effect of microcredit program on women’s empowerment. Malaysia and Indonesia to examine the relationship between gender and poverty under agricultural project. The author found that gender barriers for women in accessing credit were : (i) Lack of assets for women to meet collateral requirements. Bangladesh. the major causes were: (i) Constraints of physical distances. bankers in Indonesia were reluctant to provide credit facilities to their poor people. 1.that microenterprise development was much more difficult in USA than in developing countries.12 . Safilios-Rothschild (1991) conducted a study in Asian countries like India. Pakistan. According to the author. (ii) Location of formal institutions in the urban environments with restricted banking hours. and (viii) Due to pride and social status. The author identified several constraints for the rural and small producers in accessing to the formal credit facility. (iii) Resistances and interferences from male relatives. some small producers were unwilling to borrow from bank. Khan (1998) conducted a study on small and rural microenterprises in Pakistan. (iv) Inflexible repayment schedule and complex procedure.

13 . (iv) Collateral requirement. financial capital. According to the author. financial support. Moreover. the major barriers for accessing to the formal credit were: (i) Inappropriate bank credit for the needs of micro-entrepreneurs. Poor borrowers are not aware of the modern technology. and (vi) Cultural factors. What need to do for strengthening microcredit program? The prime objective of the microcredit program is to uplift the overall socioeconomic plight of the poor. (ii) Complex procedure to apply for loans. At the same time. They depend much on the traditional method of farming resulting in low level of production. natural capital. Thus. a nominal charge should be imposed on them for their education. In fact. training facilities. (iii) Discrimination of bank employees prevented women from applying for loan. improvement of livelihood does not depend only on one factor like credit support. steps should be taken to provide educational facilities to the borrowers through formal and non-formal education. provision should be made to provide adequate and effective training on different aspects such as on-farm and off-farm activities. pens or pencils etc) should be provided free of charge. enhancing social mobility and interactions among the borrowers and other service providers and establishing rural infrastructures can play a crucial role in alleviating poverty. (v) Women’s low level of education put them in backward position in getting loans.Berger (1989) stated that women had less access to credit than male. It hampered their economic performances. they must be supported by other five types of capital such as human capital. The author made an effort to find out the major causes of women’s limited access to credit. 1. and physical capital. They are also unaware about the social aspects of life as well. Setting up night schools under project management may assist borrowers to participate in the educational activities. In order to improve the overall living standard of the rural poor. Ensuring education facilities. Policy makers should consider the following implications in order to operate microcredit program for alleviating poverty among the borrowers. Necessary materials (like books. awarenessbuilding and motivational program can be undertaken in the rural areas to encourage rural people to send their family members (especially children) to the schools. This study shows that that borrowers had low level of education. social capital. Therefore.

Thus. due to lack of rural markets. Majority of the borrowers had their opinion that the loan size was inadequate to pursue income generating activities properly. Mobility is an important factor for enhancing economic activities. This study shows that most of the borrowers were having problem to repay their money because of crop failure due to natural calamity like flood. Due to lack of mobility. Lack of opportunity to pursue IGAs in the rural areas is one of the major causes of poverty for the rural people. They are also unaware about the importance of health care. Thus. necessary steps should be taken to create borrowers awareness towards health care and to motivate them to spend more on health care. hail storm and sudden sickness of the earning members of the family. in order to enhance the economic activity. borrowers fail to share their views with others. legal rights. environmental pollution. Risk is highly involved with the farming activity. Necessary financial and technical support should be provided to the rural entrepreneurs. poor cannot bear the health care expenses properly and ultimately they have to live a lower quality of life. nutrition and health care. local agricultural office and other service providers. necessary steps needs to be taken under the microcredit program to cover all the borrowers with insurance.14 . forcing them to lead a low quality of life. health centers. and rural markets. Due to their poverty. Lack of road communication is one of the major obstacles for their mobility resulting less interaction with others. Therefore. Thus. It is important to establish adequate health center in the rural areas. Rural people have limited access to the rural infrastructure facilities such as roads. people have very limited access to start up or to continue their IGAs. Very nominal rate should be charged on them for their health care services.credit management. Increasing the time on income generating activities (IGAs) would increase the probability for the borrowers’ well-being. necessary steps should be taken to establish rural infrastructures under the microcredit program through creating effective partnership between government and NGOs. Training must be provided based on the borrower’s demand. For instance. Steps should be taken to create adequate income generating activities for the poor by establishing industries in the rural areas. It is important to take proper steps to ensure linkage among borrowers. 1. Thus. In rural areas. producers cannot sell their products on time and receive less return from selling their outputs and consumers also fail to obtain quality products.

microcredit providers should increase their loan amount to the borrowers based on the nature of the IGAs. infrastructure development program. education program. Loan should be provided to the borrowers on time. Both Government and NGOs should work hand in hand by establishing effective partnership in order to alleviate poverty through microcredit program. steps should be taken to reduce repayment rate.15 . 1. The study showed that amount of repayment was negatively related with the household food expenditure. Therefore. Microcredit program must be supported by the other development programs (such as health program. awareness building program).

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