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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 non-
compliance 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.
Concept of microcredit

Microcredit program was innovated in Bangladesh. Grameen Bank, founded in early eighties
By Professor Dr. Mohamed Yunus was the first microcredit organization in the world.
Sparked by the success of Grameen Bank, there have been thousand replication of
‘Grameen” type credit program around the world. Microcredit program has salient features
which makes it different from other credit programs.

Microcredit program can be viewed as a new approach to fight against poverty and under
this approach, 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., 2007).

Singh (2003) conducted a study in India in which he mentioned that there were two main
systems associated with the microcredit program, one was the formal financial institutions
and other was informal system. According to him, both the system had its own positive
and negative aspects. The author stated that under the formal financial system, microcredit
was provided with easy and periodical repayments and moratorium period, charging a low
rate of interest and credit was made available for income generating activities (IGAs), but the
system was involved with complex legal and operational procedure and collateral
requirement was essential which might limit the easy access to credit. On the other hand, he
indicated that under the informal system the disbursement was easy and quick, collateral was
not needed and credit could be used for productive or not productive purposes but at the
same time, the risk of exploitation was higher for the clients and they were forced to pay a
very higher rate of interest as well. Based on these two systems, Singh (2003) defined
microcredit as the provision wherein debtor took money either from both informal and
formal sources of credit, as per the terms and conditions set by the creditors. The author
indicated that the following features were associated with microcredit programs:

(i) Low interest rate;

(ii) Easy and periodical repayments with moratorium period;
(iii) Easy process of disbursement;
(iv) No collateral requirements;
(v) Less paper work; and
(vi) Credit for pursuing income generating activities (IGAs).

Ismail et al. (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. 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.
They identified the following features of the typical microcredit program such as:

(i) No Collateral is needed;

(ii) The average amount of loan size is small;
(iii) Organizing the borrowers into small homogenous groups for guarantee of loans,
bringing in the element of social accountability and peer pressure as substitute for collateral;
(iv) Small weekly saving and repayments spreads over a year;
(v) Intensive credit supervision required;
(vi) Highly participatory involvement of borrowers in planning, implementation and
monitoring loans; and
(vii) Focusing on financial services and targeting poor people and resolving gender issues.

Delivery System:

There were two approaches applied by Microfinance Institutes (MFIs) namely, minimalist or
only credit approach and integrated approach respectively. For example, Grameen Bank
(GB) and Association for Social Advancement (ASA) in Bangladesh, adopt the minimalist
approach whereas Bangladesh Rural Advancement Committee (BRAC) is the unique
example of an integrated approach or credit plus approach. Under the minimalist approach,
only financial intermediation such as saving, loans, insurance and social intermediation like
group formation, leadership training, awareness building were provided to the clients but in
the case of integrated approach, enterprise development services such as marketing, business
training, production training and social services like education, health and nutrition were also
provided along with the financial and social intermediations (Hussain, 2001).

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. Delivery methods vary from
country to country. In the context of South Asian countries like Bangladesh and India,
Subrahmanyam (1999) pointed out that there were three models of delivering microcredit to
the clients. They are:

(i) Direct Approach model: Microfinance Institutes (MFIs) directly provided microcredit to
the poor mainly to women borrowers. e.g, Grameen Bank of Bangladesh.

(ii) Delivery through cooperatives: Microcredit was provided to the poor through banking
institutions or by government agencies through cooperatives, for example, National Bank for
Agriculture and Rural Development (NABARD) in India.

(iii) Delivery By NGOs though Self Help Groups (SHGs) or Village Community
Organization: e.g, BRAC in Bangladesh.

Microcredit providers of Bangladesh

Microcredit program was first started in Bangladesh by Grameen Bank. After that, thousand
of organizations were involved in providing microcredit facilities to the poor. Grameen Bank
(GB), Bangladesh Rural Advancement Committee (BRAC), Proshika and Association for
Social Advancement (ASA) can be thought of as major providers with respect to their area
coverage, number of borrowers, amount of disbursement and performance in loan recovery,
number of employees and dimensions of programs. 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. It
turned into a specialized bank by ordinance in 1983. The prime goal of the ‘Grameen Bank’
is to provide credit facility without any collateral requirements to the poor people especially,
for the rural poor women.

BRAC is a non-governmental development organization established in 1972 as relief

and rehabilitation program in war devastated Bangladesh. Over the past three decades it
has expanded its activities mainly on agricultural development, non-formal education, health
and nutrition, trading, human and legal rights, environmental pollutions and women
empowerment. BRAC works for the poor people giving more attention on poor women with
two major goals such as poverty alleviation and empowerment of poor.

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. The prime goal of Proshika is
to improve the quality of life of the poor people of Bangladesh. Proshika has been
implementing a wide range of development activities like agricultural development, forestry
development, women empowerment, health and nutrition, rural infrastructure development
giving more emphasis on agricultural development.

ASA has been operating microcredit program since 1992 in order to eradicate poverty and to
improve the livelihood of the poor people. Like BRAC and Proshika, ASA has been

implementing different activities including health, education, agricultural development,
women rights and environmental pollution.

Another reputed microcredit providing institution in Bangladesh is Palli Karma Sahayak

Foundation (PKSF). PKSF is a company set by the Government of Bangladesh for poverty
alleviation in 1990. It provides microcredit to the poor (having ownership up to 0.50 acre of
land and assetless people) through partner organizations. The PKSF partner organizations
include cooperatives, voluntary agencies, government and semi-government organizations
and non-government organizations. In keeping harmony with the national agricultural policy,
government agencies such as Department of Agricultural Extension (DAE) is also providing
microcredit to the poor people through agricultural projects. Various types of loan are
provided to the borrowers, based on the nature of needs and purpose of the projects.
Category of loan varies from project to project. There exists differences between the types of
loan provided by the governmental projects and NGOs. For Example, ADIP that was a
microcredit project of Department of Agricultural Extension had the provision of providing
three types of loans. These were general loan, seasonal agricultural loan and joint venture
loan. General loans were provided for trading, manufacturing, peddling, food processing,
shop keeping, poultry rearing. Only marginal and landless groups were allowed to apply for
the general loan. Seasonal loan was provided for seasonal agricultural activities like
production of winter and summer vegetables, production of local or high yielding variety
oilseeds and pulses, small scale poultry and livestock farming, pond or open water fishery,
small-scale nursery, kitchen gardening. On the other hand, joint venture loan was provided
for undertaking joint investment activities by the group as a whole such as market lease,
purchase of power tiller, lease of government fish pond, lease of agro-farm, irrigation
equipment etc. Usually, short term and medium term loans were offered by ADIP. Short-
term loan period was twelve months for the target group members. Proposed general and
seasonal loans were provided on short term basis while medium term loan was provided for
joint ventures. The maximum period for medium term loan given to an individual member or
group members was three years. NGOs were also providing various types of loan as per their
own rules and activities. For instance, BRAC provides mainly three types of loan for its
members such as general loan, program loan and housing loan. General loans were provided
for income generating activities including rural trading, rural transportation, paddy husking,
food processing, small-shop keeping, and restaurants. Group members were also allowed to
take the program loan for projects involving of livestock, agriculture, fisheries and social
forestry. Finally, 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. It is also notable that in
microcredit program most of the beneficiaries were women as compared to men. For

instance, in 2004, total female members of BRAC were 33929 as compared to 9499 male
members and in case of PKSF, 90 percent of the borrowers were female (Bangladesh
Economic Review, 2004). Loan disbursement and recovery rate of major microcredit
providers in Bangladesh are shown in Table 1.23. As can be seen from Table 1.23; Grameen
Bank provided the highest amount of loan to borrowers followed by BRAC and ASA. The
amount of disbursement was lowest for PKSF but the recovery rate was highest for PKSF.

Table 1: Disbursement and recovery rate by major microcredit providers

Organization Period Total Disbursement Recovery (%)
beneficiary (million USD)
Grameen bank 1983 to June, 3.62 3015.79 91.25
BRAC 1972 to June, 38.41 1771.30 88.96
Proshika 1976 to June, 27.33 409.85 93.90
ASA 1992 to June, 27.04 1437.23 85.56
PKSF 1990 to June, 51.04 272.45 98.17
Source: Bangladesh Economic Review, 2004 (Plz Update the data)

Eligibility of getting loans

Eligibility of becoming a group member varies based on the nature, types and activities of
different microfinance institutions; there are no hard and fast rules. The Department of
Agriculture Extension, (DAE) which is a government organization, is assigned for the
development of overall agricultural extension activities. In accordance with the essence of
the New Agricultural Extension Policy (NAEP), DAE operates various microcredit programs
through different projects like Agricultural Diversification and Intensification Project
(ADIP), Smallholder Agricultural Improvement Project (SAIP) by using group based
approach. NGOs have their own criteria as well for selecting group members. Usually, the
following issues are considered in selecting borrowers by the microcredit providers. They

(i) Land ownership of the household. For example, landless and marginal farmers owning or
cultivating less than 1.50 acre (0.6ha) of land on share-cropping including homestead can
become members of ADIP credit program.

(ii) Age of the individuals. For example, in case of BRAC, individuals applying for credit
must be aged between 18-54 years.
(iii) Income of the households: For example, household having a maximum monthly income
of up to 3000 taka (equivalent to 44.44 USD) can become members of marginal and landless
group of ADIP.
(iv) Residence of the individuals. The individual should be a permanent resident of the
(v) Marital Status of the individuals. For example, married people were encouraged in ADIP
rather than singles.
(vi) The individual cannot be affiliated with other NGOs or any other microcredit program at
the same time.
(vii). Health status of the individuals. Individuals must be physically active having no
serious diseases like cancer or disabled.
(viii) Focus on poor and destitute women. For instance, BRAC gives priority on widowed or
divorced women with children. In case of ADIP, as per the design of the project, 85 percent
of group members were women.

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. 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,
2006). Commercial banks in Bangladesh have also failed to serve the need of the rural poor
mainly for three main reasons: (i) bank requires collateral, which poor people find difficult
to provide, (ii) their procedures for filling application forms and completing other formalities
for obtaining loans are too cumbersome for the illiterate poor, and (iii) they prefer handling
large amount of loans rather than the petty loans that the poor need (Gofran, 1996). The
majority of the rural families in Bangladesh have limited access to the institutional credit and
thus, 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, 1999). 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, 2000). Mircocredit programs can be considered as
poverty alleviating programs which are being implemented to address the issues like
agricultural development, development of health care and nutritional status, development of

small scale enterprises, housing issues, development on gender relation, conservation of
environment, enhancement of social forestry etc. In Bangladesh, most of the microfinance
providers mainly target the rural poor with less than half acre of land, as well as marginal
and small farmers. One of the major objectives of providing microcredit is that, the program
must reach the poor and the loan must bring net benefits to the poor and uplift their
socioeconomic conditions.

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. The author mentioned that
microcredit program had positive role in poverty alleviation and women empowerment.
Nevertheless, the author further stated that the program had failed to reach the poorest of the

Doocy et al. (2005) conducted study in Ethiopia in order to examine the impact of micro
credit program on the nutritional status of the borrowers. They observed that microcredit
program had increased the nutritional status of the women borrowers and their family
members. They mentioned that provision of providing credit to women had enhanced
household’s well-being.

Dowla and Alamgir (2003) conducted a study on the borrowers of NGOs in Bangladesh.
They examined their saving behavior. They found that microcredit program had positive
impact on the compulsory saving of the borrowers. The authors indicated that the amount of
savings of the borrowers had increased over time. 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. They suggested that appropriate regulation must be made for mobilizing

Kabeer (2001) indicated that in Bangladesh, women were still backward in their decision-
making process despite their participation in the microcredit program. According to author,
men, even poor men, always had more choices in terms of accessing to the economic
opportunities than women. The author also indicated that when loans were directed to
women rather than to men, it was much more likely to benefit women themselves and as well
as their entire family.

Khandker (2003) conducted a study on Bangladeshi borrowers on the impact of microcredit
on the household consumption. The author found that microfinance had benefited the
poorest, and it had a sustained impact on poverty reduction among the program participants.
According to the author, it had also positive spillover impact in reducing poverty at the
village level. But, the author also indicated that the effect was more pronounced in reducing
extreme than moderate poverty.

Pitt et al. (2003) estimated the impact of microcredit program on the rural Bangladeshi
women’s autonomy within the household. They observed that women’s participation in the
microcredit program had helped to increase women’s empowerment in terms of household-
decision making ability, access to financial and economic resources, women’s social
networking and mobility.

Rao (2003) conducted a study on microfiance institutions in India and Bangladesh. The
author mentioned that microcredit programs can be veiwed as an important component of
rural development strategies for generating employment, microenterprise development and
in reducing poverty. According to the author, microcredit program had mainly targeted the
rural poor women because they were found to have minimum access to economic resources.
The author also reported that microcrdit program had improved the social, economic, legal
and political status of the rural poor among women.

Bayes (2001) evaluated the role of telecommunication within the context of rural
development in Bangladesh under the Grameen Bank’s telecommunication program. The
author indicated that the program had benefited the poor more than non-poor. 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.

Pitt (2000) conducted a study on the group-based credit program in Bangladesh. The author
examined the effects of credit program on agricultural contracts and supply of agricultural
labor. The author stated that microcredit programs had increased own-cultivation through
sharecropping for the male members. It had also increased their hours in field crop self-
employment . Accroding to the author, female credit effect was larger than male credit effect

in increasing sharecropping. The author observed that credit program had increased self-
employment for both male and female borrowers.

Begum (1998) made a comparative study between credit receivers and non-credit receivers
in Dinajpur district of Bangladesh. The author reported that the annual average family
income of the credit receivers was higher than that of non-credit receivers. 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

Hossain (1998) conducted study on the borrowers of Grameen Bank of Bangladesh. The
author indicated that there was a positive impact of agricultural program of Grameen Bank
on the loanees. The income of loanees was higher after joining the Grameen Bank program
than before. The overall change in income was 50 percent and the change in employment
was 33 percent over the study period.

Onal et al. (1995) investigated improved allocation of subsidized credit among farm groups
in East Java, Indonesia. They found that not only agricultural output, but also rural income
distribution would be improved by increasing the availability of subsidized credit to the
small farmers.

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. The author mentioned that Grameen model reached
the upper level of the poor but it failed to address the needs of the poorest. The author
identified the following reasons for not reaching the extreme poor.

(i) Fragile source of income and income fluctuation of the poorest,

(ii) Joint liability in the group,
(iii) Social exclusion, and
(iv) Supply-driven, progressive loan disbursement.

Hussain (2001) indentified several weaknessess and strengths of NGO programs in

Bangladesh. The author mentioned that NGOs had grass-root linkages. They had committed

field staffs as well those who helped to solve problem efficiently and promptly at the grass-
root level. According to the author, NGOs had less hirerarchy in their ogranization which
helped the field staff to give suggestion and quick decision at the field level. In addition, due
to limited activities, NGOs were able to concentration on specific areas. On the other hand,
they had problems implementing the programs. The author indicated that flexibility had
created opportunities for suppressing transparency and avoiding accountability. Moreover,
their projects were limited to particular circumstances which could not be generalized. The
author added that their activities were also under suspicion by the government.

Hussain (1999) identified several weaknesses of microcredit programs operating in

Bangladesh. According to the author, the drawbacks were as follows:

(i) Credit disipline failed to be established among members due to felxibility and simplicity
of NGOs rules and regulations,
(ii) Lack of standard techniques of saving mobilization,
(iii) Training was limited in saving and loans,
(iv) Transparency was often questionable,
(v) No regulatory supervision was received by the program providers from the government
such as auditing of account, and
(vi) Existence of subsidies might have negative impact of the sustainability of many MFIs.

McNamara and Nga (1998) conducted a study in Vietnam to assess the impact of credit
program of Facts For Life (FFL) Communication Project. They concluded that the project
had positive impact on the income of the borrowers. They also found that the project had
weaknesses as well. They mentioned that the project had severe shortage of staffs to monitor
and implement the project and to train others on credit and savings. In addition, 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.

Problems of access to formal credit

Schreiner and Woller (2003) conducted a study on the microenterprise development

programs in USA. They assessed whether the microenterprise programs were successful or
not in the context of USA. They identified three major barriers for the American
entrepreneurs in accessing to the credit facility and they were (i) racial discrimination, (ii)
lack of credit history for recent immigrants, and (iii) a scarred credit history. They concluded

that microenterprise development was much more difficult in USA than in developing

Panjaitan-Drioadisuryo and Cloud (1999) conducted a study on Indonesian women to

explore the effect of microcredit program on women’s empowerment. They mentioned that
due to high cost of operation, low repayment rate and risk, bankers in Indonesia were
reluctant to provide credit facilities to their poor people. They also observed that microcredit
program had positive effect on the women borrowers of Indonesia in reducing poverty.

Khan (1998) conducted a study on small and rural microenterprises in Pakistan. The author
identified several constraints for the rural and small producers in accessing to the formal
credit facility. According to the author, the major causes were:

(i) Constraints of physical distances, cultural gap and transport cost,

(ii) Location of formal institutions in the urban environments with restricted banking hours,
(iii) Lack of information regarding credit program,
(iv) Inflexible repayment schedule and complex procedure,
(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,
(vii) Dominance of men on women for controlling over borrowed money, and
(viii) Due to pride and social status, some small producers were unwilling to borrow from

Safilios-Rothschild (1991) conducted a study in Asian countries like India, Bangladesh,

Pakistan, Phillipine, Malaysia and Indonesia to examine the relationship between gender and
poverty under agricultural project. The author mentioned that due to social and cultural
norms women were not allowed to engage themselves in agricultural production. They had
limited access to institutional credit and the amount of credit provided to the women was too
small. The author found that gender barriers for women in accessing credit were :

(i) Lack of assets for women to meet collateral requirements,

(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 self-
(iii) Resistances and interferences from male relatives.

Berger (1989) stated that women had less access to credit than male. The author made an
effort to find out the major causes of women’s limited access to credit. According to the
author, the major barriers for accessing to the formal credit were:

(i) Inappropriate bank credit for the needs of micro-entrepreneurs,

(ii) Complex procedure to apply for loans,
(iii) Discrimination of bank employees prevented women from applying for loan,
(iv) Collateral requirement,
(v) Women’s low level of education put them in backward position in getting loans, 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. In fact, improvement of livelihood does not depend only on one factor like credit
support. In order to improve the overall living standard of the rural poor, they must be
supported by other five types of capital such as human capital, social capital, natural capital,
financial capital, and physical capital. Ensuring education facilities, financial support,
training facilities, enhancing social mobility and interactions among the borrowers and other
service providers and establishing rural infrastructures can play a crucial role in alleviating
poverty. Policy makers should consider the following implications in order to operate
microcredit program for alleviating poverty among the borrowers.

This study shows that that borrowers had low level of education. It hampered their economic
performances. Thus, steps should be taken to provide educational facilities to the borrowers
through formal and non-formal education. Setting up night schools under project
management may assist borrowers to participate in the educational activities. Necessary
materials (like books, pens or pencils etc) should be provided free of charge. Moreover, a
nominal charge should be imposed on them for their education. At the same time, awareness-
building and motivational program can be undertaken in the rural areas to encourage rural
people to send their family members (especially children) to the schools.

Poor borrowers are not aware of the modern technology. They depend much on the
traditional method of farming resulting in low level of production. They are also unaware
about the social aspects of life as well. Therefore, provision should be made to provide
adequate and effective training on different aspects such as on-farm and off-farm activities,

credit management, environmental pollution, legal rights, nutrition and health care. Training
must be provided based on the borrower’s demand.

Increasing the time on income generating activities (IGAs) would increase the probability for
the borrowers’ well-being. In rural areas, people have very limited access to start up or to
continue their IGAs. Lack of opportunity to pursue IGAs in the rural areas is one of the
major causes of poverty for the rural people. Steps should be taken to create adequate
income generating activities for the poor by establishing industries in the rural areas.
Necessary financial and technical support should be provided to the rural entrepreneurs.

Mobility is an important factor for enhancing economic activities. Due to lack of mobility,
borrowers fail to share their views with others, forcing them to lead a low quality of life.
Thus, It is important to take proper steps to ensure linkage among borrowers, local
agricultural office and other service providers.

Due to their poverty, poor cannot bear the health care expenses properly and ultimately they
have to live a lower quality of life. 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. It is important to establish adequate
health center in the rural areas. Very nominal rate should be charged on them for their health
care services.

Rural people have limited access to the rural infrastructure facilities such as roads, health
centers, and rural markets. For instance, due to lack of rural markets, producers cannot sell
their products on time and receive less return from selling their outputs and consumers also
fail to obtain quality products. Lack of road communication is one of the major obstacles for
their mobility resulting less interaction with others. Thus, necessary steps should be taken to
establish rural infrastructures under the microcredit program through creating effective
partnership between government and NGOs.

Risk is highly involved with the farming activity. 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, hail storm and sudden sickness of the earning members of the family.
Thus, necessary steps needs to be taken under the microcredit program to cover all the
borrowers with insurance.
Majority of the borrowers had their opinion that the loan size was inadequate to pursue
income generating activities properly. Therefore, in order to enhance the economic activity,

microcredit providers should increase their loan amount to the borrowers based on the nature
of the IGAs. Loan should be provided to the borrowers on time. The study showed that
amount of repayment was negatively related with the household food expenditure. Therefore,
steps should be taken to reduce repayment rate.

Microcredit program must be supported by the other development programs (such as health
program, infrastructure development program, education program, awareness building
program). Both Government and NGOs should work hand in hand by establishing effective
partnership in order to alleviate poverty through microcredit program.