A Research Paper on

Current and Future Prospect of Micro-Credit

Finance in Bangladesh

Hira Mohammad Abdullah

ULAB School of Business
Abstract
Bangladesh is a developing country; most of the peoples are poor and lives in rural area. Those
poor people are depriving from normal banking facilities due to unfavorable loan conditions;
they have no valuable asserts. Micro-credit is a small banking facility for poor people for their
smiling faces. The aim of this study is to know the contribution of micro- credit, there failure
or success, present conditions of different Micro-finance organizations (MFOs) on rural
economic developments. The limitations of micro-credit, contribution to improve health,
education and living standards are discussed. This study will describe the current and future
prospect of micro-credit and send message to the rural peoples to encourage them. Finally this
report will be helpful for the non-government organizations (NGO) to help the rural people for
their smiling faces; gift a country free from Hunger, poverty, and ignorance.

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Table of Contents
Contents Page No.
Chapter 1: Introduction 1-3

1.1 Motivation and Background 1

1.2 Research Objective 1
1.3 Research Questions 1
1.4 Literature Review 2
1.5 Site Selection 3

Chapter 2: Micro Finance and Micro Credit in Bangladesh 4-8

2.1 Overview 4
2.2 Poverty and Rural People 4
2.3 Micro- finance and Micro- credit 4
2.4 Different Types of Loan provide by Micro-finances Organizations 7

Chapter 3: Research Methodology 9-13

3.1 Overview 9
3.2 Research Method 9
3.3 Data Collection 9
3.4 Some Stories of Loan Borrower 13

Chapter 4: Survey Analysis 14-19

4.1 Overview .27

4.2 Survey Question Analysis 14
4.3 Different MFOs and NGO in Chatkhil Upazila 18

Chapter 5: Conclusion 20-21

5.1 Summary of the Project 20

5.2 Key Findings 20
5.3 Limitations 21
5.4 Future Work Plan 21

References 22

Abstract 23

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Chapter 1: Introduction
1.1 Motivation and Background
Bangladesh is a small developing country with large population. Her economics depend on
agriculture. Most of the peoples are lived in rural area and they are farmer, fisher man, and daily
labor etc. They earn small amount of money. There family member are large. But only one
person is earning member. It’s so difficult to survive their daily life. They have another problem
that they are not educated. They have no idea about read and write. A few people can write only
their name. Most of the people are live below the poverty level. Rural peoples do not get any
bank loan because they have no valuable assets, like lands, big house, business etc. Moreover, to
get loan require minimum education label, acceptable label of income source. That’s why they
(normal bank) fail to serve the rural people due to their unfavorable loan conditions. They can
serve only 20% of total population.

Micro credit is the best idea to reduce poverty. Basically micro-credit started at 1976 in
Bangladesh. Some non government organizations (NGO) are working in micro credit or finance
from the beginning. Grameen Bank, Bangladesh Rural Advancement Committee (BRAC),
Association for Social Advancement (ASA), Palli Daridro Bimochon Foundation (PDBF),
Bangladesh Rural Development Board (BRDB), etc are most famous NGO. They work at village
sites. They give small amount of money to the rural peoples. Prof. Dr. Muhammad Yunus and
Grameen bank make the micro-credit popular and got Nobel Price for the innovative idea.

1.2 Research Objective

The main objective of this research is to prove that microcredit programmes are able to bring
favorable changes in the lives of the poor households in Bangladesh.

Within this main objective, three secondary objectives also have been examined:
a) Microcredit programme improves the employment status of the poor households and
increase their income.
b) Microcredit programme improves the consumption pattern of the poor households.
c) Microcredit programme improves the fulfillment of basic needs (education, health,
shelter, clothing and the food availability) of poor households.

1.3 Research Question

1. Is Micro-credit Finance reduces poverty level or not?

2. It Micro-credit Finance Improve rural life status or not?
3. What is the failure and success of microcredit finance in Bangladesh?

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1.4 Literature Review
Dhiraj Kumar Nath (in 2003) on his research paper “Assessment of Microcredit Programme in
Bangladesh” reported the contribution of Government Sectors to reduce poverty through micro-
credit. Some successful stories of micro-credit by govt. sectors are also given. Different micro-
credit programs by Govt. Banks are also described.

A.H. Alamgir Dewan (in 2009) on his project “State of Microfinance in Bangladesh” review
micro-finance sectors based on secondary and published data; evaluate them, discussed
sustainability of services, emerging issues and challenges of micro-finance.

Mohammad Ahshanullah (In 2011) on his paper “Reaching the Poor: Microcredit Experience in
Bangladesh” considered three major microcredit organization Grameen Bank, BRAC and ASA;
describe contribution of micro-credit to alleviate poverty.

Sofia Hercules (in 2006) on his master’s thesis “Microcredit-A Way to Overcome Problems of
Financial Markets in Developing Countries?” reported why finance market is unable to reach the
poor people and how micro-credit overcomes those problems through a case study on Grameen
Bank in Bangladesh and Ghana. Author claimed that micro-credit has great contribution to solve
most of the problems of finance market of development countries.

Abdur Razzak (in 2011) on his master’s thesis, “The role of micro credit in life status
improvement process of rural poor people in Bangladesh” described the role of micro-credit in
rural people life status improvement. He chooses Grameen Bank and Mazira, Bogra, districts of
Bangladesh for the site selection. Collect primary data through phone interview. Author claimed
limitation of data collection is face to face interview.

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1.5 Site Selection
For this project “Romapur” Village in Chatkhil Upazila” in Noakhali district of Bangladesh is
chosen. Chatkhil has 9 unions. This report covers only Hatpukuria union.

Population: Chatkhil has a population of 233,075. Males constitute 48.43% of the population,
and females 51.57%.

Education: Chatkhil has an average literacy rate of 52.1% (7+ years), and the national average
of 32.4% literate.

Occupation: Main occupations Agriculture 23.08%, agricultural laborer 16.07%, wage laborer
2.6%, commerce 13.6%, service 25.5%, transport 2.97%, construction 1.37% and others 14.81%.

Lands: Land use Total cultivable land 9702.14 hectares; fallow land 1250.10 hectares;
cultivable land under irrigation 82%.Land control Among the peasants 32.29% are landless, 28%
small, 27% intermediate and 12.7% rich; cultivable land per head 0.5 hectare.

Main Crops: Paddy, jute, potato, oil seed, brinjal, sugarcane, varieties of pulses, betel leaf,
chili.

Government and private Bank: Sonali bank, Krishi Bank, Asia Bank, One Bank.

NGO: Operationally important NGOs are Brac, ASA, and CARE.

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Chapter 2: Micro-Finance and Micro-Credit in Bangladesh
2.1 Overview:
This chapter is based on basic background about Micro-finance Organizations (MFOs);
economic condition of rural people and contribution of MFOs to reduce their poverty.
Outstanding loan, saving, borrower and branch numbers of different MFOs are analysis for last
five years. Finally different types of loan provide by different MFOs are also discussed.

2.2 Poverty and Rural People:

Bangladesh is a small county with large population (~156.3 millions in 2013). Income of the
people is poor. Most of the people are uneducated; lives country side and lively-hood depends on
agriculture. Smiling face of those people is found with new green growing plants. With new
crops, their hart fill with satisfaction. The main source of sorrow is natural disaster. Those poor
rural remain poor due to unwanted flood. Damage their crops, destroy hope and fill hart with
uncertain futures.

Rural areas are depriving from modern development, no industries or garments and those are
unable to sell their physical labor. Unable to meet their basic needs food, cloths, education and
health. Bangladesh Govt. has given first priority to reduce poverty of the rural people. But the
condition remains same before and after independent. Poverty is a curse for the rural people.

Government and non- Govt. organization are trying to reduce the poverty curse. Most of the
govt. steps are useless and unable to reach to the rural poor people. But non-govt. organizations
(NGO) are successful compare to govt. organization to help rural people. A new way is taken by
NGOs to give small credit to the poor rural people and organize them in small groups. Those
micro-finance organizations are serving door to door and helping rural people to bring smile in
their faces.

2.3 Micro-finance and Micro-credit:

Micro-finance is considered as a banking system for the rural people. Poor people are unable to
access normal banking facilities due to unfavorable loan conditions. Micro-finance
Organizations (MFO) are helping poor rural people to reduce their poverty. They give small
amount of money as a loan with small interest to the poor rural people is known as micro-credit
process. Make small groups and individuals group members are responsible for others to recover
loan. Grameen Bank, BRAC, ASA, BRDB etc. are popular micro-finance organizations. Women
are main members of those organizations.

The micro-finance authority (MFA) is a govt. organization establish in august, 2006; aim to
control MFOs and NGOs in a proper rules and regulations. According to the report published by

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MFO (in June 2013), total outstanding loan is about 341 billion (BDT) and Grameen bank is
about 84 billion (BDT); total saving is about 226 billion (BDT). The number of MFOs and their
members are increasing day by day. Total numbers of present members are about 33 million and
Grameen bank has 8.04 million. MFA (till May 2014) has approved and issued licenses for 742
MFOs and canceled licenses of 43 MFOs.

2.3.1 Different Micro-finance Organization (MFO) In Rural Area

MFOs are contributing to reducing poverty. Rural economical are developing day by day in
small scales. That is why small changes are found in the rural economics but they are working.
This is clear here; total loan outstanding was 211 billion (BDT) in June 2012. That increased to
257 billion (BDT) in June 2013; distributes loans among 19.27 million poor rural people. Total
saving is also increased by 20% in June 2013. Moreover, a lot of people are employing to those
organizations.

Table 2.1: Micro-finance organization (MFOs) in Bangladesh (Source: MRA-MIS Database-

2013)

Particulars June 2009 June 2010 June 2011 June 2012 June 2013
No. off Licensed
419 516 576 590 649
NGOs-MFIs
No. of Branches 16851 17252 18066 17977 14674

No. of Employees 107175 109597 111828 108654 110734

NO. of Clients
24.85 25.28 26.08 24.64 24.60
(Million)
No. Of Borrowers
18.89 19.21 20.65 19.31 19.27
(Millions)
Amount of Outstanding
143134.03 145022.66 173797.60 211283 257010
(BDT. millions)
Amount of Savings
50610.04 51362.93 63304.44 75206 93990
(BDT. Millions)
*Total Licensed MFOs was 698 but only 649 submitted their report.

Table-1 shows MFOs able to create direct jobs to 110,734 peoples; Outstanding loans 257,010
million (BDT) distributed among 19.27 million people in June, 2013. Moreover amount of loan
outstanding and saving are increasing each years. Moreover, it is reported by MRA that 93% of
total members are women and its indication of good sign “A Development Nation- women not
just for household works”.

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Table 2.2: Different MFOs loan in Bangladesh (Source: MRA-MIS Database-2013)
Total loan % of
Range of No. of No. of % of total No of Total savings
Categories outstanding total
Borrowers MFIs borrowers (BDT. Millions)
outstanding savers (BDT. millions)
Savings
Up to 1000 170 135130 1831.37 0.71 183504 538.48 0.57

Very Small 1001-2000 165 232729 1955.97 0.76 312069 837.35 0.89
2001-6000 123 436916 3962.65 1.54 573741 1870.75 1.99
6001-10000 42 322254 3765.44 1.47 404944 1652.38 1.76
Small 10001-50000 105 2374418 26809.01 10.43 3202366 9792.37 10.42
Medium 50001-100000 22 1588952 22735.43 8.85 1933230 7228.29 7.69
Large 100001-1000000 20 5722781 71403.24 27.78 7476576 26467.80 28.16
1000000 and
Very Large above
2 8452815 124546.89 48.46 10478226 45602.80 48.52
Total 649 19265995 257010.00 100 24570656 93990.00 100
Table 2.2 shows different MFOs loan in Bangladesh. Here, different categories are divided
according to the numbers of members. The number of loan borrowers for medium categories
MFOs is high compare to others. Total saving (BDT million) is higher for the small categories
MFOs than medium.

Table 2.3: Market share of different MFOs (Source: MRA-MIS Database-2013)

Total me Loan Total loan
Total number of Total Number % of me %of me loan
NGOs -MFIs Outstanding outstanding
me borrowers Borrower borrower Outstanding
(BDT. Millions) (BDT Million)
BRAC 391072 4220283 9.27 19128.64 66446.03 28.79
ASA 178457 4232532 4.22 9194.57 55733.98 16.50
BURO Bangladesh 39630 950234 4.17 187.45 12999.58 1.44
TMSS 13260 659584 2.01 621.12 7945.47 1.82
Jagoroni Cakra
35428 330995 10.70 1067.96 6835.08 15.62
Foundation
Society of Social Service 20293 390371 5.20 1155.4 6122.08 18.87
UDDIPAN 11645 258082 4.51 149.1 3713.60 17.86
SHAKTI foundation 1108 391597 0.28 149.1 3032.34 4.92
Padakkhep Manobik
11639 195687 5.95 561.26 2704.77 20.75
Unnayan Kandar
RDRS Bangladesh 4734 212351 2.26 141.12 1912.55 7.38
Top 10 MFIs 707323 11841.716 5.97 32870.02 167445.48 19.63
Total 649 MFIs 953717 19265995 4.95 67168.33 257010.00 26.13
Table 2.3 shows market scenario of different MFOs in Bangladesh. BRAC and ASA are two top
MFOs; contribute 50% of total outstanding loan and saving. Each of them is serving more than
four million borrowers. Grameen Bank is another strongest candidate in MFOs; missing in this
data base. A report by MFA mentioned that Grameen Bank’s total outstanding loan 84 billion
(BDT) and total saving is about 226 billion (BDT); which is much more than BRAC or ASA.

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Table 2.4: Selected Indicator of MFOs in Bangladesh (Source: MRA-MIS Database-2013)

Particulars June 09 June10 June11 June2012 June2013

Savings per member 1735.52 2097.83 2434.49 3052.18 3820.73
Outstanding Loan per Borrower 6188.01 7558.92 8804.69 10941.63 13337.31
Borrower to client(member)
78.90% 78.00% 78.80% 78.37% 78.33%
ratio
Savings to outstanding loan
35.50% 35.60% 35.90% 35.59% 36.57%
ratio
Borrower per branch 1036 1115 1093 1074 1072
Member per branch 1312 1429 1388 1371 1368
Outstanding Loan per Branch
6.41 8.42 9.63 11.75 17.51
(million BDT)
Savings per branch (million
2.28 2.99 3.46 4.18 6.41
BDT)
Table 2.4 shows that saving per year is increased every year. It is almost double within last five
years (June, 2009 to June, 2013). Outstanding loan also increased per years (increased to 100%
for last five years, June, 2009 to June, 2013). The number of member and branches are increased
yearly. It is reported by MFA that it is hard for new MFOs to find new geographical areas and
new members. This is due to the reason that old MFOs already here with larger number of
members.

2.4 Different Types of Loan provide by Micro-finances Organizations:

Different micro-finance originations (MFOs) have different types of loan for their members; aim
to attract people with different loan features (interest rate, loan recover time frames etc.). Types
of loan also based on aim of loan borrower and amount of money. Here, some of the common
loan types provide by different MFOs is given.

a) Basic Loan
b) Housing Loan
c) Higher Education Loan
d) Struggling Members (Beggars) Loan Programs and
e) Micro Enterprise Loan.

a) Basic Loan

Basic loan is the most common types of loan to the borrower. This type of loan is popular to the
borrower; used for income generating activities. For this type of loan, borrower should use the
loan money within one week; repay from their income with 46 installments (weekly basis);
having 20% simple interest rate. If the loan borrower unable to repay the borrowed money, the
basic loan converted to flexible loan or reschedule loan. The average recovery rate of this type
loan is near to 100%.

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b) Housing Loan

This type of loan is not so popular to the most of rural areas. The aim of this type loan is to help
poor rural people to become owner of a house. This type of loan has smaller interest rate (5-8%)
than basic loan. But amount of money is limited (~25,000- 30, 000 BDT), compare to basic loan.
Sometime people use this type loan money to their business or family problems and unable to
fulfill the aim of housing loan.

c) Higher Education Loan

A developed nation is developed because they are educated. Aim of this type to help student for
their higher education in bachelor and masters level. This type of loan helps talents children of
members; cover fees, accommodation, administration food and all kind of cost during study; give
money monthly basis. Repayment starts after his finishing study (bachelor or masters level), with
5-8 % annual interest. This type of loan is not so popular to members.

d) Struggling members (Beggars) Loan Programs

This type loan is last option for the poor people, unable to survive themselves. This type of loan
has small interest or zero interest. The amount of money is limited. This type of loan is not so
popular.

e) Micro Enterprise Loan

This type loan is popular after basic loan. Aim to help the member’s existing business to extend
their business or to start new business. This type of loan interest is lower than basic loan. The
amount of money is larger than basic loan. Members need documents of their asset to get these
types of loan.

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Chapter 3: Research Methodology
3.1 Overview:
This chapter is based on research method, structural and un-structural data collections and some
stories of the borrowers.

3.2 Research Method:

Research method is a tool to investigate problems on a systematic way and find the possible
solutions. According to Ghauri & GrØnhaug, “Research is a process of planning, executing and
investigating in order to find answers to our specific questions”. The aim of research method is
to make report easy and understandable to the reader.

This research is based on the rule of micro-credit in the rural economic development of
Bangladesh. The report based on both primary data and secondary data. Primary data is collected
from face to face interview. Secondary data are also important for this report and collected from
published documents.

Research Method:
➢ Primary Data Collection
➢ Secondary Data collection

This report is based on the Qualitative Approach. That mean data are based on words rather than
numbers. Observation and Interview are important tools for Qualitative Approach. It is also
based on people’s thinks, perceptions and judgments. For this reason, pre-defined questionnaire
surveys has been done to the loan borrowers, non-loan borrowers or normal peoples and request
them to answer those questions. It is also important to talk with official staffs of MFOs and
request them to answer the survey questions. Therefore, Qualitative Approach is more important
than Quantitative Approach.

3.3 Data collection:

3.3.1 Primary Data:
The aim of the primary data collection is to get the answers of our research questions. Micro-
credit helps poor people to reduce the poverty label or not? Improve life status or not? What are
the limitations/failures of Micro-credit or its success?

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Different micro-credit program (Grameen Bank, BRAC, ASA, and PDBF) and three categories
of peoples are chosen:

A. Loan borrower
B. Official staff of Micro-finance Organizations (MFOs)
C. Non-loan borrower or Normal peoples.

Primary data are accurate and gives actual result of the research. Because it is based on face to
face interview and collection of information from peoples. Moreover, primary data can be collect
from interview by Phone or Email. For this survey, face to face interviews and interview over
mobile have been taken.

Primary Data Collection:

➢ Interview by face to face

➢ Interview by Mobile
➢ Interview by Email

3.3.1.1 Interview Method:

Interview method is based on the way interview has been taken for a particular research. Before
start works on interview, some preliminary steps should be followed to make effort more effect
to meet the project goal.

➢ Analysis the research questions and objectives.

➢ What kind of information should be really needed for this research?
➢ Should select right person at right place and time.
➢ Should be aware of environment during interview.

To make interview effective, it should be simple, easy to understandable to the peoples. In this
report, survey question make simple and used words which easily understandable to the listeners
during the interview. Keep mind research questions objective, spoke and explain the question to
the people by own words, not simply speak the words that are written in the question papers.

Interview:
➢ Structural interview
➢ Un-structural Interview

Interview may be structural or un-structural based on the method of interview. This report is
based on both structural and un-structural types of interview.

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3.3.1.1(A) Structural Interview:
Structural interview is based on which people are request to answer from pre-defined questions.
They are limited to only few questions from question set. This type of interview is simple, fast
process and able to collect information from large peoples with limited time period.

Structural interview

No. of people Name of people Categories MFOs Age Interview Date

1 NargisParvin A Grameen Bank 33 October 11
2 Rokeya A Grameen Bank 35 October 11
3 Renu Begum A Grameen Bank 44 October 11
4 Nasima A Brac 42 October 11
5 Anowera A Brac 38 October 11
6 Kulsum A Brac 26 October 11
7 Ojufa Begum A Brac 51 October 11
8 Mina Begum A Asa 44 October 11
9 Jorina A Asa 35 October 08
10 Halima A Asa 35 October 08
11 RozinaAkter A Asa 40 October 08
12 Monthie A Asa 42 October 08
13 Saleha A Asa 45 October 08
14 Aysha A Asa 42 October 08
15 Surma A Asa 30 October 08
16 AkterHossain B Brac 26 October 08
17 Abdullah Al Noman B Brac 35 October 08
18 MasudAlam B Buro 47 October 08
19 ShoreotChowdhury B Asa 32 October 08
20 KabilurRahman B Asa 34 October 08
21 LakiAkter C - 28 October 11
22 Bilkis C - 39 October 11
23 SohelHossain C - 40 October 11
24 Md. Majharul C - 27 October 11
25 RiyadHossain C - 34 October 11

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3.3.1.2(B) Un-structural Interview:
Some time it is important to discuss with the peoples rather than question them from pre-define
questions. Un-structural Interview is a method in which peoples are not asked from pre-define
questions. This type is based on important discussion with important persons or expertise on a
specific field.

Un-structural Interview

Name of people and Duration

No. of people Discussed topics
occupation (minutes)
01 MD. Humayun Kabir 45 Loan recovery method, types of
BURO Bangladesh loan, recovery rate, problem with
Branch Accountant recovery.
Mobile No. 01719598241
02 Md. Monir Hossain 35 Basic knowledge about Micro-
ASA credit, Loan recovery method,
Branch Manager Legal action ton to fail recovery.
Mobile No.01730093113
03 Imamul Hossain 25 Installment process, problem to
ASA recover Loan.
Field Worker
Mobile no. 017337956
04 Nur E Alam 60 Types Of Loan, Recovery method,
BRAC interest Rate, Legal action to fail
Area Manager recovery, Problem to recovery.
Mobile no.01718130310
05 Md. SalimHossain 60 Success And Failure of MFOs in
Elected member of Romapur Romapur Village.
Village

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3.3.2 Secondary Data:
Some time it is important to think, what other people thinks, look overview their words and
works on a particular research work. Secondary data are based on the published works by other
peoples. The source of secondary data may be books, research articles on conferences or journals
and online publication at different web sites. Some time, research goes to wrong direction due to
wrong data from wrong source. Therefore, before take data from secondary data, source of data
is important. To make the secondary data meaningful for a report, it should be reduced,
summarized, select proper data in a proper way that will be suitable for a particular research.

Secondary data for this report is based on the annual report of Grameen Bank, ASA, BRAC,
Buro Bangladesh and MFA; analysis of number of borrower, outstanding loans and saving etc.

3.4 Some stories of Loan Borrower:

Ayesha Begum

Ayesha begum is a house wife, she lives in Romapur village in Chatkhil upazilla. Her husband
name is Soleman mia. He is security guard. She took 20000 taka from Dipu unnayan for their
agriculture. She has 5 children. She is happy with Dipu unnayan.

Mobile no. 01832908787

Tazu Begum

Tazu begum is a house wife, she lives in Romapur village. Her husband name is Shirazul
Abedin. She took 25000 taka for his husband agriculture from Brac. BRAC helps her from 10
years. She wants a long relationship with Brac.

Mobile no. 01766311328\

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Chapter 4: Survey Analysis
4.1 Overview:
This chapter is based on the outcome found from survey; results are analysis with suitable
diagrams.

4.2 Survey Questions Analysis:

For the survey analysis, Romapur Village in Chatkhi lUpazila and Noakhali District have been
chosen. Data have been collected from 25 different families with different ages. Structural
interview has been taken and request them to answer multiple choice from survey questions.
Three types of peoples: A) Loan borrower, B) Official Staffs of MFOs C) Non-Loan Borrower
has been chosen. Un-structural interview of officials staffs are also taken to get data about
outstanding loan, number of loan borrowers, number of MFOs and NGOs (opening and closing)
during last five years in Chatkhil Upazila, Noakhali District.

4.2.1 Structural Interview (Category A. Loan Borrower)

(i) Loan Period:

Most of the peoples are member of MFOs more than 2 years. Some peoples are member from
last 10 years. Longer time period indicating the positive effect of MFOs on the life of rural
peoples.

Loan Period

2years
30%
40% 4years
6years
8years
7%
10 and more years
6%
17%

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(ii) Loan Money

Most of the peoples are taken 20,000 BDT as a basic loan. Most of peoples start their basic loan
with 5000 BDT. When they become older, they get higher amount of loan. The figure 20,000
BDT as a basic loan is indicating that most people are maintained long time relationship with
MFOs. Some peoples take loan from different MFOs to reduce their poverty and offices have no
aware of them. They think MFOs are only their source of fund. MFOs give small basic loan to
the poor people; even they have no lands or valuable asset. But for large amount of loan, MFOs
see the source of possible family outcomes of the borrowers.

Amount of Money and Percentage of Loan

Borrower

Above 20000
17%
23% 20000
15000
13% 10000
37%
5000

(iii) Financial Improvement

Most of the loan borrower think, taking loan from the MFOs help them to reduce their sorrow
and get financial improvement. They think MFOs are like friend and help them during their
danger period.

Financial Improvement

3%
10%

Yes
No
Not so much

87%

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(iv) Loan Payment, Interest Rate and Payback

People pay their loan weekly basis. Some MFOs also allow borrower in Monthly (Total amount
should be same, 4* weekly payment); this is exception case. Their weekly payments depend on
the amount of borrowed loans. For example, 5,000 BDT basic loan, borrower pay ~250 BDT
weekly and 50, 000 BDT micro-enterprise loan borrower pay ~1100 BDT weekly. Any amount
of borrowed loan should be finished within ~46 weekly payments and interest rate is ~20%.
Most of the people give weekly payment regular basis and loan recovery rate of MFOs is about
~97-98%.

(v) Use of Loan Money

Most of the peoples used their borrowed money to their business. Some people used this money
to start business, some to extend their business. Some people used it to family conditions
(marriage ceremony, unwanted situations). All the people find the MFOs staffs friendly during
taking loan and face no problems. Borrowers think, with this loan they found improvement in
their families health, education and living standard. their families health, education and living
standard.

(vi) Poverty Reduction

Most of the peoples think that MFOs reduce the poverty of the rural people. They have no idea
about Micro-credit and Prof. Dr. Mohammad Yunus. Most of them have no primary education
and able to write their name. They knows that Grammen Bank, BRAC, ASA, PDBF etc. help
people and gives loan. Most of them get idea about loan from field workers and neighbors. They
are also interested to send message others about micro-credit.

Structural Interview (Category B. Official Staff)

a) Family income of Borrower
Most of the borrower family incomes are less than 6, 000 BDT. They are interested with the
basic loan.
b) Loan Recovery
Loan recovery rate is about ~97-98%. Some time they are also unable to pay the loan due to
natural disaster.
c) Feasible of Micro-credit on rural economic development
All of staffs of MFOs think that they help poor rural people to reduce their poverty; they are
happy to do this work.

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4.2.2 Un-structural Interview (Category B. Official Staff)

A. Problems to Recover the Loan:

Peoples always want to back their loan money. Some time they are unable to pay them. The main
reasons for poor rural people are unable to pay their loan due to natural disaster or unwanted
situations. They possible reasons are

1. Flood destroys their crops

2. Storms destroy their house or properties
3. Reduce the opportunities for jobs
4. Loss of money for illness of family members
5. Loss of Business or source of income.

B. Steps Taken to Recover the Loan:

The staffs of MFOs follow some steps to recover their outstanding loans. Their possible steps
are:

1. Group Enforcements: Members are organized into small groups. If any member unable to
pay loan, other members make responsible to recover this loan.
2. Face to Face Communication: Staffs communicate with the members regularly and try to
convince or find some ways to recover the loan. Face to face communication regularly is
a strong method that gives 97-98% recovery rate of MFOs.
3. Legal Actions: Managers of the branch or higher officers also responsible to recover the
loan. If field workers are unable to recover the loan, higher officer also meet with the
members and convince or force them to pay the loan. For small loan or Basic loan, MFOs
do not take any legal actions. But for micro-finance loan (more than 30,000 BDT), MFOs
takes some legal actions to recover loan.

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4.3 Different MFOs and NGO in Chatkhil Upazila:
There are different MFOs and NGO in Chatkhil Upazila. Some of them are Grameen
Bank, BRAC, ASA, BRDB, PDBF etc. There also exist some unauthorized moneylender;
provide loans to the poor with high interest than MFOs. To get present condition of micro-crdeit
of Chatkhil Upazila, interviews have been taken from different staffs of MFOs like Grameen
Bank, ASA, BRAC and PDBF. According to their comment, last five years (2009-2014) number
of borrower, branches and outstanding loan amount increased. Now a day, it is really hard
to get new members to this areas and number of NGOs are also enough meet the crisis. All the
organization working from more than 10 years; no new popular organization comes very recent
years. Some members are taken loan from different MFOs; facing problem to recover the loans.
But loan recovery rate is about ~97-98%.

Grameen Bank is a popular organization in this area. They have maximum outstanding loan in
2013-2014 Fiscal Years and this increased last five years. Most of the borrower of this
organization are found Basic Loan borrower. They have no legal action for loan recovery,
according to borrower’s comment.

BRAC is an old organization after ASA in this area. Number of borrower and outstanding loan is
small than Grameen Bank. Most of the loans of this organization are micro-enterprise loan,
according to borrower comments and they take legal action: staffs came with police to the
borrower’s houses if they are unable to pay, at the last moment. They also forced the borrower to
sell the borrower’s assets. Some borrowers have been found leave their house or relative (wife,
children and parents) due legal action of BRAC.

ASA is an oldest organization in this area; working with poor rural peoples. Most of their
borrowers are taken basic loan; they do not take any legal action for loan recover. Borrowers are
satisfied with these organizations. The Number of Borrower is much more than Grameen Bank
and BRAC.

Buro Bangladesh is popular due to small amount of loans and they have highest number of
borrower in this area. Most of the members are taken basic loans. Their staffs are found very
friendly than other organizations. They do not take any legal action for the basic loan recovery.

The MFOs are ~ 97-98% successful with their aim, reducing poverty of poor rural peoples and
curse for around 2-3% peoples.

According to our survey, (97-98%) loan are recovered successfully. That's why I have
mentioned MOFs are successful (97-98%). Additionally, 2-3% loan are not recovered. It’s
happen because; some people are played the hiding game after they took the loan. Some people
are struggle to return the loan but, unfortunately they are not able to utilize the taken
loan money. Somehow, they cann ot make profit using their loan money. This situation is not
only their fault but also their fate. As a result, some of them lost their valuable properties (such

~ 18 ~
as, house, business etc.) to return the loan money. By considering such issues, we mentioned
this situation is curse for around 2-3% people.

Total Outstanding Loans (BDT) of Different MFOs in Last Five Years:

MFOs 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

8,27,00,000 10,12,00,00 16,33,00,000
GrameenBank 4,25,00,000 BDT 6,35,00,000 BDT
BDT BDT BDT

9,70,00,000 11,28,00,00 10,80,00,000

BRAC 5,00,00,000 BDT 7,35,00,000 BDT
BDT BDT BDT

7,15,00,000 9,90,00,000 12,59,00,000

ASA 3,20,00,000 BDT 5,27,00,000 BDT
BDT BDT BDT

2,35,00,000 2,72,00,000 3,95,00,000

Buro Bangladesh 1,80,00,000 BDT 2,12,00,000 BDT
BDT BDT BDT

(Source: Local offices of MFOs in Chatkhil Upazila, Noakhali Dist.)

Number of Borrower of Different MFOs in Last Five Years:

MFOs 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

GrameenBank 520 625 732 920 975
BRAC 370 403 510 650 712
ASA 350 522 653 922 1122
Buro Bangladesh 665 712 915 1270 1330

(Source: Local offices of MFOs in Chatkhil Upazila, Noakhali Dist.)

From the Tables, it is clear that number of borrower in the last five years increased. Same is true
for total outstanding loan provided by different MFOs. This indicating that poor rural peoples
find MFOs as a source of fund during danger situations; they are like friend of rural people and
making the rural economic stronger than previous.

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Chapter 5: Conclusion
5.1 Summary of the Project:
This report presented the role of micro-credit on rural economic development; contributions in
the poverty reductions. Rural poor people are unable to get small amount of loan from Govt. or
privet due to un-favorable loan conditions and payment of normal bank is also based on yearly or
monthly basis. Due to higher interested of unauthorized moneylender, normal rural people are
also uninterested with them. Thanks to Prof. Dr. Muhammad Yunus and Grameen Bank, ASA,
BRAC, BRDB, and PDBF etc. to help poor people by giving small amount of credit as a loan
and make payment as weekly basis (reduced mental pressure).

This report is based on the contribution of MFOs on the rural people’s poverty reduction. For
this purpose, structural and un-structural survey analysis has been done for a rural location
(Romapur Village, Chatkhil Upazila, Noakhali Dist.). Most of the peoples (Borrower and Non-
borrower) think that MFOs helps poor rural peoples to reduce their poverty. Those poor people
have no lands, valuable assets. They (MFOs) are like friends of poor rural peoples. They gives
small amount of money (~ 20% interest), compare to unauthorized local moneylenders. Most of
the borrowers are members from more than two years and taken 20, 000 BDT or more and faced
no problems to get this money. Peoples pay the loan money regularly by 46 weekly payments.
Due to face to face regular communications of staffs and group enforcement make higher
recovery rate (`97-98%) of MFOs. Most of the borrowers are able to write their name and get
idea about the micro-credit from field workers and neighbors. They also like to send message
others about micro-credit and happy to do so. Finally, report makes its conclusion by
contributions of four different MFOs (Grameen Bank, ASA, BRAC and PDBF) on economic
development of Chatkhil Upazila; analysis of total outstanding loans and number of members for
the last five fiscal years (2009-2014) and found positive impression.

5.2 Key Findings:

➢ Success or Failure: The MFOs are success (~ 97-98%, related with recovery rate and
found from our survey analysis) with their aim, reducing poverty of poor rural peoples;
helping them in danger situation (or natural deserter) and gives loan with small interest;
acting as a source of fund for those landless, hopeless peoples. If peoples are unable to
use them properly (to their business) it becomes curse for them (2-3%, found from our
survey analysis). They are unable to match with MFOs system.
➢ Present & Future: Rural peoples are pleased with MFOs. Number of borrower are
increasing day by day and also total outstanding loans; peoples are more encouraged
with basic loan and want to maintain long relationship with MFOs.

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5.3 Limitations:
The main limitation of this research is short time period. Survey is also based on limited area that
covers a village (Romapur) of Chatkhil Upazila in Noakhali district; but given overview the
contributions of MFOs on rural economic development. Real pictures need more survey on large
areas in different districts of Bangladesh.

5.4 Future Work Plan:

Have a plan to do MBA on Micro-finance and thesis works on the same topics with larger areas
and features.

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References
➢ Dhiraj Kumar Nath (in 2003) “Assessment of Microcredit Programme in Bangladesh”
➢ A.H. AlamgirDewan (in 2009 “State of Microfinance in Bangladesh”
➢ Mohammad Ahshanullah (in 2011) “Reaching the Poor: Microcredit Experience in
Bangladesh”
➢ www.banglapedia.com
➢ mra-misdatabase-2013
➢ www.google.com

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Appendix
Survey Question for Current and Future Prospect of Micro-Credit Finance in Bangladesh

Question for loan Borrower

Name: Age: Survey no.

Address:

1. How many years you are taking this loan?

a) < 2months b) < 6 months c) < 1years d) <2 years e) >2 years

2. How much money (BDT) you have taken as a loan?

a) < 2,000 b) < 4000 c) < 10,000 d) 15,000 e) > 15000

3. Have you got any financial improvement by taking this loan?

a) Yes b) No c) Sometimes d) Not so much e) No idea

4. How pay the loan?

a) Daily b) Weekly c) Per two weeks d) Monthly e) Yearly

5. How much money you pay (per installment) for the loan?

a) <500 BDT b) <700 BDT c) <900 BDT d) < 1200 BDT e) >1200 BDT

6. What is the interest rate of your loan?

a) <5% b) <10% c) <15% d) <20% e) <25%

7. How you spend this money or loan?

a) Family b) Business c) Education d) Health e) House making

8. Have you faced any problem to take this loan?

a) Yes d) Not so much e) No idea d) Not mentionable e) No

9. If yes, than what kind of problem you faced?

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10. Are you paying installment regularly?

a) Yes always b) Yes, most of the time c) Rarely d) Never e) No comments

11. If yes, how much money you have paid?

12. Do you think, this loan improves your family member’s health, education and leaving
standards?

a) Yes b) No c) Not so much d) No comments e) No idea

13. How you get idea about micro credit finance and Dr. Mohammad Yunus?

a) Friends b) Relative c) Neighbour d) Field Worker e) Media

14. Do you think micro credit finance reduce poverty level?

a) Yes b) No c) Sometimes d) Not so much e) No idea

15. What is your educational Qualification?

a) Secondary and above b) Primary and above c) Some formal education

d) Able to write and read e) Can’t write and read

16. Do you want to send message for others to encourage Micro-finance?

a) Yes I like it b) I will never mind c) I don’t think so d) No comments e) No idea

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Survey Question for Current and Future Prospect of Micro-Credit Finance in Bangladesh

Question for Field Worker

Name: Age: Survey no.

Address:

1. What kind of people is interested to takes the loan?

a) Income <2000 b) Income <5000 c) Income <10000 d) Income <15000 e) Income >15000

2. What kinds of loan people are interested?

a) Basic Loan b) Housing Loan c) High education loan d) Struggling member loan e) Micro enterprise loan

3. What is the problem to recover the loan?

4. Do you know any people who face any kind of problem by taking this loan?

a) Yes b) No c) Sometimes d) Not so much e) No idea

5. If yes, please tell me the problems with micro finance?

6. Do you think micro finance is economically feasible for rural economical development?

a) Yes b) No c) Sometimes d) Not so much e) No idea

7. Do you want to send message for others to encourage micro finance?

a) Yes I like it b) I will never mind c) I don’t think so d) No comments e) No idea

8. What is the average loan recover rate last five years?

a) 100% b) >95% c) >90% d) No comments e) No idea

9. What steps are followed to recover the loans?

10. If peoples are unable to pay the loan, then what kind of legal actions are taken to recover the
loans?

~ 25 ~
Survey Question for Current and Future Prospect of Micro-Credit Finance in Bangladesh

Question for Non-loan borrower

Name: Age: Survey no.

Address:

1. Do you have any idea about micro-credit finance?

a) Yes b) No c) Not so much d) No comments e) No idea

2. If yes then how you get the idea please explain?

3. Who makes popular the micro-credit?

a) Sheikh Hasina b) Khaleda Zia c) Hussain Ershad d) Dr. Md. Yunus e) No idea

4. Are you interested about micro-finance or loan borrowing?

a) Yes b) No c) Sometimes d) Not so much e) No idea

5. What kind of loan you are interested or helpful for people?

a) Basic Loan b) Housing Loan c) High education loan d) Struggling member loan e) Micro enterprise loan

6. If you get this loan, what kind of benefit your family members able to achieve?

7. Do you know any people who face any kind of problem by taking this loan?

a) Yes b) No c) Sometimes d) Not so much e) No idea

8. If yes, please tell me the problems with micro finance?

9. Do you think micro finance is economically feasible for rural economical development?

a) Yes b) No c) Not so much d) No comments e) No idea

10. Do you want to send message for others to encourage micro finance?

a) Yes I like it b) I will never mind c) I don’t think so d) No comments e) No idea

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