Table of Contents

CHAPTER ONE: Introduction..........................................................5

1.1

Background of the study..............................................................................5

1.2

Necessity of Microfinance to people...............................................................6

1.3

Statement of the Problem.............................................................................7

1.4

Rationale of the Study.................................................................................7

1.5

Objectives...............................................................................................8

1.6

Methodology............................................................................................8

1.7

Limitation of the study................................................................................9

CHAPTER TWO: Literature Review................................................10

2.1

Micro-Finance.......................................................................................10

2.2

Microfinance and microcredit.....................................................................10

2.3

The History of Microfinance.......................................................................11

2.4

Providers and models of microfinance interventions.........................................11

2.5

Microfinance and its impact in development...................................................14

2.6

The impact of microfinance on poverty.........................................................16

2.7

Current debates on the impact of microfinance in development............................18

2.8

Empowering Women................................................................................23

2.9

Impacts beyond the household....................................................................26

2.10

The use of the Sustainable Livelihoods Framework in impact measurement............27

2.11

Current debates about MFIs and their role in development..................................29

CHAPTER THREE: A Glimpse of The Microfinance Sector in

Bangladesh................................................................................33
3.1

Micro-Finances History and Development.....................................................33

3.2

Evolution of MFIs financing sources............................................................34

CHAPTER FOUR: Data Analysis and Interpretation.........................37

4.1

Hypothesis & Model................................................................................37

4.2

Respondents Information (Frequencies & Cross-Tabs).......................................38

1

4.3

Results of the Regression Analysis for Hypothesis One......................................43

4.4

Results of the Regression Analysis for Hypothesis Two.....................................45

CHAPTER FIVE: Findings And Conclusions.....................................47

5.1

Findings................................................................................................47

5.2

Scope for Further Research........................................................................48

5.3

Conclusion.............................................................................................48

REFERENCES............................................................................... 50
APPENDIX - A.............................................................................. 52
APPENDIX - B.............................................................................. 55

List of Figures
Figure 1:Conceptual Model of the Study........................................................37
Figure 2: Loan reserve of NGO-MFIs in the Micro-finance sector based on the
size of the firms.............................................................................................55
Figure 3: Savings of NGO-MFIs in the Micro-finance sector based on the size
of the firms....................................................................................................56

List of Tables
Table 1: Broad picture of Micro-credit Program in the financial year 20132014..............................................................................................................34
Table 2 :Cumulative loan disbursement of some NGOs & MFIs......................35
Table 3: Age & Gender Cross Tabulation........................................................38
Table 4: Marital Status & Gender Cross Tabulation........................................39
Table 5: Education & Gender Cross Tabulation...............................................40
Table 6: Education & Yearly Family Income Cross Tabulation.........................41
Table 7: Family Members Frequencies............................................................41
Table 8: Non-Institutional Sources Borrowing.................................................42
Table 9: Loan collection frequencies & Gender Cross Tabulation...................42
Table 10: Loan Re-Payment Schedules Frequencies.......................................43
Table 11: Regression Analysis between social issues and social-economic
development..................................................................................................44
Table 12: Regression Analysis between social issues and social-economic
development..................................................................................................44
Table 13: Regression Analysis between economic issues and social-economic
development..................................................................................................45
Table 14: Regression Analysis between economic issues and social-economic
development..................................................................................................45
Table 15: Partnership of the NGO-MFIs in the Micro-finance sector based on
the number of borrowers as of 2014.............................................................55

CHAPTER ONE
Introduction

1.1 Background of the study

Todays economic development cannot be imagined without microcredit or microfinance.
Microfinance, also known as microcredit, has emerged as a movement in Bangladesh and in the
larger part of the world. There has been record growth of Microfinance organizations in this
country over the past two and a half decades. Bangladesh can be considered birth place of the
current concept of Microfinance. This country provides models of recognized global significance
in several aspects of Microfinance, viz., scale of operation, modes and practices of Microfinance,
wider financial services, women empowerment and poverty alleviation (Fallavier, 1998). The
experience of Bangladesh is increasingly being replicated in many developing countries.
More than one billion people in the world are living in poverty despite enormous economic
development during the past decades (Barr, 2005). The burden of poverty is spread unevenly
creating inequalities in all basic needs like, food, education, access to healthcare, and so on. With
a population of over 160 million people in only 55,100 square mile of land, Bangladesh is one of
the poorest and most densely populated countries in the world, with 36% of the population living
below US$1 a day. At present, at least 56 million people (44% of the population) live in absolute
poverty, of which more than 25 million constitute the extreme poor (20%, of the population,
variously described as hardcore poor, ultra poor, or poorest of the poor) (BBS, 2008).
There are numerous poverty-reduction programs in Bangladesh. Unfortunately even well
respected programs generally fail to reach the extremely and the persistently poor. A national
survey found that 41 percent of eligible, poor households did not have any contact with the
NGOs operating in their localities. Almost three quarters of the hardcore poor have never
received social development services from GOs/NGOs. It is well known that the mainstream
development approaches, especially the microfinance, the mainstay of most GOs/NGOs
programs in Bangladesh, though an effective poverty-alleviating instrument, is not suitable for
5

all categories of the poor, and largely bypasses the extreme poor. The moderately poor
households who are the principal user of microfinance have been able to overcome poverty and
reduce vulnerability. There are several reasons why poorer households are less likely to join or,
once joining, less able to make effective use of loans. Perhaps the most common factor is that the
households need an existing source of regular income with which to service loans. Very often,
GOs staff or other borrowers discourage such poor households joining the program. Thus,
policies and programs that work for the moderate poor may not work for the extreme poor. This
significant number of poor people require immediate and special attention if Bangladesh is to
fulfill its commitment towards attaining the 5 Millennium Development Goals (MDG) which
promise, among other thing is, to halve the proportion of people living on less than one US dollar
a day by 2015 . (Barr, 2005)
1.2 Necessity of Microfinance to people
Micro finance is regarded as an effective tool for poverty alleviation. The Asian Development
Bank has recognized micro finance as a powerful tool to promote economic growth, reduce
poverty, support human development and improve the status of women. For the past 20 years, the
government, international agencies and social organizations have been focusing on womens
development programs. The main priority of the Tenth Periodic Plan was poverty alleviation,
womens empowerment and gender mainstreaming. Most of the poor people live in rural areas
and have little opportunity. Micro-finance could help poor people who have no collateral, but a
willingness to work and a desire to do some business activities from which he/she will acquire
employment as well as income.
Most of the poor people live in rural areas and have little opportunity. Therefore, Microfinance
could help poor people who have no collateral, but a willingness to work and a desire to do some
business activities from which he/she will acquire employment as well as income. What is more,
the economic environment provides great business opportunities. Most Bangladeshi micro
entrepreneurs are economically isolated, which means that their market is often local, small and
does not offer any demand growth prospects. Commercial banks and other financial institutions
normally do not like to go in that area because of the geographical constraints, underdeveloped
infrastructure and other physical constraints. However on the other hand, there is a substantial
6

demand of micro credit in the rural areas. In this scenario, locally operating micro finance
institutions such as BRBD, BRAC, Grameen Bank & ASA could obviously play an important
role to mobilize local savings, extend credit as well as canalize borrowed fund/grant to the local
rural people.
Micro finance is equally important to both men and women. Womens experience of poverty is
different and more acute than that of men because of gender-based forms of exclusion. Women
become poor through deterioration in the households access to resources. Womens lives are
governed by more complex social constraints and responsibilities than mens and they are more
concentrated in the non-monetized sector. In almost every Asian country, women comprise a
large percentage of the poor. The existence of the gender complexities in the handling of income
affects the quality of family life, the quality of childrens nutrition and education, as well as
household stability. Unless and until women do not have access to economic opportunities,
poverty cannot be reduced.
1.3 Statement of the Problem
Microfinance is the form of financial development that has its primary aim to alleviate the
poverty (Ibid, 2005, p.273). But lack of access to income opportunities or skill-based training
opportunities keep many people in Bangladesh shackled to poverty. Unemployment is forcing
many skilled people to seek work in distant countries that hampers suitable social-economic
development. Until and unless rural people are not brought into the mainstream for economic
and social change, we will fail to bring change in rural development or social-economic
development of the Chittagong. MIFs need to be the main focus on social-economic
development and poverty alleviation program as they comprise a major section of the poor
population. Because economic and social issues are closely intertwined, one reinforces the other.
1.4 Rationale of the Study
In this predominantly agricultural based economy Micro-credit is largely applied to agricultural
and allied activities and livestock development. The small and marginal members benefit greatly
from the micro-finance programs. Although many programs have been implemented for poverty

alleviation in Bangladesh, only micro-finance programs are seen as a poor targeted and rural
based.
This study will mainly focus on the BRAC, ASA, Grameen Bank & BRDB groups and try to
find out how they are providing benefit by the program. The data collected in turn will provide
the information that rural people can make some benefits from the credit and saving facilities if
they are provided equal opportunity. This will provide encouragement to all other institutions and
individuals to work in a group and fight against the existing poverty of the country. The study
will help to show how poor or lower middle class people can properly utilize the given
opportunities for the betterment of the society if provided to them. The study will draw various
recommendations to the NGOs, GOB and Human right activist regarding micro credit to
reduction of poverty & social-economic development.
1.5 Objectives
1.5.1 Primary objective:

To find out the roles of MFIs in social-economic development of Bangladesh.

1.5.2 Secondary objectives:

To assess the social issues as supported by MFIs influences on socio-economic

development.

To assess the economic issues as supported by MFIs influences on socio-economic

development.

To find out the possible alternative ways for further improvement of livelihood situation of
the MFIs clients.

1.6 Methodology
1.6.1 Sources of data:
Two sources of data collection are used. Those are as follows:

Primary -data are collected through personal interview of 120 micro credit recipients of
Chandpur and Chittagong districts of Bangladesh.

Secondary -data are collected through web-sites, books, articles and business journals etc.
8

1.6.2 Sample method:

The required data for this study has been collected by applying random sampling method. The
selected micro-finance institutions provided a small list of their respective borrowers. In this
regard primary data of 120 respondents are collected from Chittagong District and the area is
chosen for personal convenience of the researcher. Sample size is determined based on
researchers availability of resources.
1.6.3 Data collection instrument:
A structured questionnaire has been used to collect the study-related data. The questionnaire has
been segmented into three major sections: general section, social issue-related section, and
economic issue-related section. Demographic background of the respondents has been
investigated in the general section of the questionnaire. Total eight questions have been used to
measure the impact of micro-finance on the social aspects of the participating borrowers. Finally,
the economic aspects of the micro-finance institutions have been identified by using seven
questions which measure diverse economic dimensions.
1.6.4 Tools of data analysis:
The collected data is analyzed by using several statistical techniques the outcomes of which have
been presented in the form of tabular presentations. The categorical data has been analyzed
through frequency distribution, and cross-tabulation. The hypotheses of the study have been
tested by deploying bi-variate regression analysis.
1.7 Limitation of the study
This study has several limitations. Time limitations and expertise on the part of the researcher are
two notable limitations. The number of sample size is still another limitation of the study since
this study took only 120 samples. And, if the study could cover more regions of the country, the
results could be different considering diversity of social and economic issues related to different
regions of the country.

CHAPTER TWO
9

Literature Review

2.1 Micro-Finance
Microfinance, according to Otero (1999, p.8) is the provision of financial services to lowincome poor and very poor self-employed people. These financial services according to
Ledgerwood (1999) generally include savings and credit but can also include other financial
services such as insurance and payment services. Schreiner and Colombet (2001, p.339) define
microfinance as the attempt to improve access to small deposits and small loans for poor
households neglected by banks. Therefore, microfinance involves the provision of financial
services such as savings, loans and insurance to poor people living in both urban and rural
settings who are unable to obtain such services from the formal financial sector. Micro-finance
means transactions in small amounts of both credit and saving, involving mainly small-scale and
medium-scale businesses and producers. The poor, who cannot run a small business because they
lack capital, may also benefit from micro-finance organization. Actually microfinance is the form
of financial development that has its primary aim to alleviate the poverty (Khan and Rahaman,
2007).
Microfinance is a credit methodology, which employs effective collateral substitute for shortterm and working capital loans to micro-entrepreneurs (Hubka, 2005).
Micro finance is the practice of extending small loans to people in poverty so that they can start
small businesses and develop savings. It is the extension of small loans to entrepreneurs too poor
to qualify for traditional bank loans. (Micro credit Summit, 1997)

2.2 Microfinance and microcredit

In the literature, the terms microcredit and microfinance are often used interchangeably, but it is
important to highlight the difference between them because both terms are often confused. Sinha
(1998, p.2) states microcredit refers to small loans, whereas microfinance is appropriate where
NGOs and MFIs supplement the loans with other financial services (savings, insurance, etc).
Therefore microcredit is a component of microfinance in that it involves providing credit to the
10

poor, but microfinance also involves additional non-credit financial services such as savings,
insurance, pensions and payment services (Okiocredit, 2005).
2.3 The History of Microfinance
Microcredit and microfinance are relatively new terms in the field of development, first coming
to prominence in the 1970s, according to Robinson (2001) and Otero (1999). Prior to then, from
the 1950s through to the 1970s, the provision of financial services by donors or governments was
mainly in the form of subsidized rural credit programs. These often resulted in high loan defaults,
high loss and an inability to reach poor rural households (Robinson, 2001).
Robinson states that the 1980s represented a turning point in the history of microfinance in that
MFIs such as Grameen Bank and BRI began to show that they could provide small loans and
savings services profitably on a large scale. They received no continuing subsidies, were
commercially funded and fully sustainable, and could attain wide outreach to clients (Robinson,
2001). It was also at this time that the term microcredit came to prominence in development
(MIX, 2005). The difference between microcredit and the subsidized rural credit programs of the
1950s and 1960s was that microcredit insisted on repayment, on charging interest rates that
covered the cost of credit delivery and by focusing on clients who were dependent on the
informal sector for credit (ibid.). It was now clear for the first time that microcredit could provide
large-scale outreach profitably.
2.4 Providers and models of microfinance interventions
MIX defines an MFI as an organization that offers financial services to the very poor. (MIX,
2005). According to the UNCDF (2004) there are approximately 10,000 MFIs in the world but
they only reach four percent of potential clients, about 30 million people. On the other hand,
according to the Microcredit Summit Campaign Report (Microcredit Summit, 2004) as of
December 31st 2003, the 2,931 microcredit institutions that they have data on, have reported
reaching 80,868,343 clients, 54,785,433 of whom were the poorest when they took their first
loan. Even though they refer to microcredit institutions, they explain that they include
programs that provide credit for self-employment and other financial and business services to
very poor persons (Microcredit Summit, 2004).
11

The differences between these sources highlight a number of points. Firstly, how the two terms,
microcredit and microfinance are often confused and used interchangeably, though in the strictest
sense microcredit should refer only to the provision of credit to the poor. Secondly, the difference
between the statistics shows how difficult it is to get a true picture of how many MFIs are in
existence today and how many clients they are reaching. The IMF state that no systematic and
comprehensive data on MFIs is collected and there are no authoritative figures on key
characteristics of the microfinance industry, such as the number and size of MFIs, their financial
situation, or the population served (2005, p.6).
Despite the lack of data on the sector, it is clear that a wide variety of implementation methods
are employed by different MFIs. The Grameen Bank (2000a) has identified fourteen different
microfinance models of which I will focus on three; Rotating Savings and Credit Association
(ROSCAs), the Grameen Bank and the Village Banking models, as these are the three
microfinance models that I encountered during my field research.
Rotating Savings and Credit Associations
These are formed when a group of people come together to make regular cyclical contributions
to a common fund, which is then given as a lump sum to one member of the group in each cycle
(Grameen Bank, 2000a). According to Harper (2002), this model is a very common form of
savings and credit. He states that the members of the group are usually neighbors and friends,
and the groups provide an opportunity for social interaction and are very popular with women.
They are also called merry-gorounds or Self-Help Groups (Fisher and Sriram, 2002).
The Grameen Solidarity Group model
This model is based on group peer pressure whereby loans are made to individuals in groups of
four to seven (Berenbach and Guzman, 1994). Group members collectively guarantee loan
repayment, and access to subsequent loans is dependent on successful repayment by all group
members. Payments are usually made weekly (Ledgerwood, 1999). According to Berenbach and
Guzman (1994), solidarity groups have proved effective in deterring defaults as evidenced by
loan repayment rates attained by organisations such as the Grameen Bank, who use this type of
12

microfinance model. They also highlight the fact that this model has contributed to broader social
benefits because of the mutual trust arrangement at the heart of the group guarantee system. The
group itself often becomes the building block to a broader social network (1994, p.121).
Village Banking Model
Village banks are community-managed credit and savings associations established by NGOs to
provide access to financial services, build community self-help groups, and help members
accumulate savings (Holt, 1994). They have been in existence since the mid-1980s. They usually
have 25 to 50 members who are low-income individuals seeking to improve their lives through
self-employment activities. These members run the bank, elect their own officers, establish their
own by-laws, distribute loans to individuals and collect payments and services (Grameen Bank,
2000a). The loans are backed by moral collateral; the promise that the group stands behind each
loan (Global Development Research Centre, 2005).
The sponsoring MFI lends loan capital to the village bank, who in turn lend to the members. All
members sign a loan agreement with the village bank to offer a collective guarantee. Members
are usually requested to save twenty percent of the loan amount per cycle (Ledgerwood, 1999).
Members savings are tied to loan amounts and are used to finance new loans or collective
income generating activities and so they stay within the village bank. No interest is paid on
savings but members receive a share of profits from the village banks re-lending activities.
Many village banks target women predominantly, as according to Holt (1994, p.158) the model
anticipates that female participation in village banks will enhance social status and intrahousehold bargaining power.

2.5 Microfinance and its impact in development

Microfinance has a very important role to play in development according to proponents of
microfinance. UNCDF (2004) states that studies have shown that microfinance plays three key
roles in development. It:
helps very poor households meet basic needs and protects against risks,
is associated with improvements in household economic welfare,
13

 helps to empower women by supporting womens economic participation and so promotes

gender equity.
Otero (1999, p.10) illustrates the various ways in which microfinance, at its core combats
poverty. She states that microfinance creates access to productive capital for the poor, which
together with human capital, addressed through education and training, and social capital,
achieved through local organization building, enables people to move out of poverty (1999). By
providing material capital to a poor person, their sense of dignity is strengthened and this can
help to empower the person to participate in the economy and society (Otero, 1999).
The aim of microfinance according to Otero (1999) is not just about providing capital to the poor
to combat poverty on an individual level, it also has a role at an institutional level. It seeks to
create institutions that deliver financial services to the poor, who are continuously ignored by the
formal banking sector. Littlefield and Rosenberg (2004) state that the poor are generally
excluded from the financial services sector of the economy, so MFIs have emerged to address
this market failure. By addressing this gap in the market in a financially sustainable manner, an
MFI can become part of the formal financial system of a country and so can access capital
markets to fund their lending portfolios, allowing them to dramatically increase the number of
poor people they can reach (Otero, 1999).
More recently, commentators such as Littlefield, Murduch and Hashemi (2003), Simanowitz and
Brody (2004) and the IMF (2005) have commented on the critical role of microfinance in
achieving the Millennium Development Goals. Simanowitz and Brody (2004, p.1) state,
Microfinance is a key strategy in reaching the MDGs and in building global financial systems
that meet the needs of the most poor people. Littlefield, Murduch and Hashemi (2003) state
microfinance is a critical contextual factor with strong impact on the achievements of the
MDGsmicrofinance is unique among development interventions: it can deliver social benefits
on an ongoing, permanent basis and on a large scale. Referring to various case studies, they
show how microfinance has played a role in eradicating poverty, promoting education,
improving health and empowering women (2003).

14

However, not all commentators are as enthusiastic about the role of microfinance in development
and it is important to realize that microfinance is not a silver bullet when it comes to fighting
poverty. Hulme and Mosley (1996), while acknowledging the role microfinance can have in
helping to reduce poverty, concluded from their research on microfinance that most
contemporary schemes are less effective than they might be (1996, p.134). They state that
microfinance is not a panacea for poverty-alleviation and that in some cases the poorest people
have been made worse-off by microfinance. Rogaly (1996, p.109/110) finds five major faults
with MFIs. He argues that:
They encourage a single-sector approach to the allocation of resources to fight poverty,
Microcredit is irrelevant to the poorest people,
An over-simplistic notion of poverty is used,
There is an over-emphasis on scale,
There is inadequate learning and change taking place.
Wright (2000,p.6) states that much of the skepticism of MFIs stems from the argument that
microfinance projects fail to reach the poorest, generally have a limited effect on incomedrive
women into greater dependence on their husbands and fail to provide additional services
desperately needed by the poor. In addition, Wright says that many development practitioners
not only find microfinance inadequate, but that it actually diverts funding from more pressing or
important interventions such as health and education (2000, p.6). As argued by Navajas et al
(2000), there is a danger that microfinance may siphon funds from other projects that might help
the poor more. They state that governments and donors should know whether the poor gain more
from microfinance, than from more health care or food aid for example. Therefore, there is a
need for all involved in microfinance and development to ascertain what exactly has been the
impact of microfinance in combating poverty.
Considerable debate remains about the effectiveness of microfinance as a tool for directly
reducing poverty, and about the characteristics of the people it benefits (Chowdhury, Mosley and
Simanowitz, 2004). Sinha (1998) argues that it is notoriously difficult to measure the impact of
microfinance programs on poverty. This is so she argues, because money is fungible and

15

therefore it is difficult to isolate credit impact, but also because the definition of poverty, how it
is measured and who constitute the poor are fiercely contested issues (1998, p.3).
Poverty is a complex issue and is difficult to define, as there are various dimensions to poverty.
For some, such as World Bank, poverty relates to income, and poverty measures are based on the
percentage of people living below a fixed amount of money, such as US$1 dollar a day (World
Bank, 2003)
2.6 The impact of microfinance on poverty
There is a certain amount of debate about whether impact assessment of microfinance projects is
necessary or not according to Simanowitz (2001b). The argument is that if the market can
provide adequate proxies for impact, showing that clients are happy to pay for a service,
assessments are a waste of resources (ibid.). However, this is too simplistic a rationale as market
proxies mask the range of client responses and benefits to the MFI (ibid.) Therefore, impact
assessment of microfinance interventions is necessary, not just to demonstrate to donors that their
interventions are having a positive impact, but to allow for learning within MFIs so that they can
improve their services and the impact of their projects (Simanowitz, 2001b, p.11).
Poverty is more than just a lack of income. Wright (1999) highlights the shortcomings of
focusing solely on increased income as a measure of the impact of microfinance on poverty. He
states that there is a significant difference between increasing income and reducing poverty
(1999). He argues that by increasing the income of the poor, MFIs are not necessarily reducing
poverty. It depends on what the poor do with this money, oftentimes it is gambled away or spent
on alcohol (1999), so focusing solely on increasing incomes is not enough. The focus needs to be
on helping the poor to sustain a specified level of well-being (Wright, 1999, p.40) by offering
them a variety of financial services tailored to their needs so that their net wealth and income
security can be improved.
It is commonly asserted that MFIs are not reaching the poorest in society. However, despite some
commentators skepticism of the impact of microfinance on poverty, studies have shown that
microfinance has been successful in many situations. According to Littlefield, Murduch and
16

Hashemi (2003, p.2) various studiesdocument increases in income and assets, and decreases
in vulnerability of microfinance clients. They refer to projects in India, Indonesia, Zimbabwe,
Bangladesh and Uganda which show very positive impacts of microfinance in reducing poverty.
For instance, a report on a SHARE project in India showed that three-quarters of clients saw
significant improvements in their economic well-being and that half of the clients graduated out
of poverty (2003, p.2). Dichter (1999, p.26) states that microfinance is a tool for poverty
reduction and while arguing that the record of MFIs in microfinance is generally well below
expectation he does concede that some positive impacts do take place. From a study of a
number of MFIs he states that findings show that consumption smoothing effects, signs of
redistribution of wealth and influence within the household are the most common impact of MFI
programs (ibid.).
Hulme and Mosley (1996, p.109) in a comprehensive study on the use of microfinance to combat
poverty, argue that well-designed programs can improve the incomes of the poor and can move
them out of poverty. They state that there is clear evidence that the impact of a loan on a
borrowers income is related to the level of income as those with higher incomes have a greater
range of investment opportunities and so credit schemes are more likely to benefit the middle
and upper poor (1996, pp109-112). However, they also show that when MFIs such as the
Grameen Bank and BRAC provided credit to very poor households, those households were able
to raise their incomes and their assets (1996, p.118).
Mayoux (2001, p.52) states that while microfinance has much potential the main effects on
poverty have been:
Credit making a significant contribution to increasing incomes of the better-off poor, including
women,
Microfinance services contribute to the smoothing out of peaks and troughs in income and
expenditure thereby enabling the poor to cope with unpredictable shocks and emergencies.
Hulme and Mosley (1996) show that when loans are associated with an increase in assets, when
borrowers are encouraged to invest in low-risk income generating activities and when the very
poor are encouraged to save; the vulnerability of the very poor is reduced and their poverty
17

situation improves. Johnson and Rogaly (1997, p.12) also refer to examples whereby savings and
credit schemes were able to meet the needs of the very poor. They state that microfinance
specialists are beginning to view improvements in economic security, rather than income
promotion, as the first step in poverty reduction (ibid.) as this reduces beneficiaries overall
vulnerability.
Therefore, while much debate remains about the impact of microfinance projects on poverty, we
have seen that when MFIs understand the needs of the poor and try to meet these needs, projects
can have a positive impact on reducing the vulnerability, not just of the poor, but also of the
poorest in society.
2.7 Current debates on the impact of microfinance in development
2.7.1

Livelihood security and microfinance

Carney (1998, p.4) defines a livelihood as comprising the capabilities, assets (including both
material and social resources) and activities required for a means of living. Chambers (1997,
p.10) states that livelihood security is basic to well-being and that security refers to secure
rights and reliable access to resources, food, income and basic services. It includes tangible and
intangible assets to offset risk, ease shocks and meet contingencies. Lindenberg (2002, p.304)
defines livelihood security as a familys or communitys ability to maintain and improve its
income, assets and social well-being from year to year. Concern also state that livelihood
security is more than just economic well-being as they define livelihood security as the
adequate and sustainable access to and control over resources, both material and social, to enable
households to achieve their rights without undermining the natural resource base (Concern,
2003). Livelihood security therefore, like poverty, is not just about income, but includes tangible
and intangible assets, and social well being.
Johnson and Rogaly (1997, p.122) state that NGOs aiming for poverty reduction need to assess
the impact of their services on users livelihoods. They argue (1997) that in addressing the
question of the impact of microfinance, NGOs must go beyond analyzing quantitative data
detailing the numbers of users, and volumes and size of loans disbursed, to understanding how
18

their projects are impacting on clients livelihoods. They state (1997, p. 118) that the provision of
microfinance can give poor people the means to protect their livelihoods against shocks as well
as to build up and diversify their livelihood activities. Therefore when analyzing the impact of
microfinance, the overall impact of the microfinance services on the livelihoods of the poor
needs to be taken into consideration, which is the focus of this study.
A livelihood security approach according to Concern (2003) aims for a holistic analysis and
understanding of the root causes of poverty and how people cope with poverty. They identify
livelihood shocks such as natural disasters and drought, the social, political and economic
context, and peoples livelihood resources such as education and local infrastructure as factors
affecting peoples livelihood security (ibid.). Therefore, when analyzing the impact microfinance
is having on livelihood security, as is the objective of this dissertation, a holistic analysis of
peoples livelihood security must be conducted, rather than just focusing on the
material/economic impact microfinance is having on the livelihoods of the poor.

2.7.2

Social impact analysis

Traditionally, the impact of microfinance projects was assessed by the changes in the income or
well being of the clients. Mansell-Carstens, cited in Rogaly (1996, p.103) argues that such a
focus is flawed because respondents may give false information. It is also very difficult to
ascertain all the sources of income of a client, so a causal effect is difficult to establish, and it is
also difficult to establish what would have happened if the loan was not given. Therefore a
broader analysis is needed that takes more than economic impact into consideration.
We have seen that poverty and livelihood security consist of economic and social conditions,
therefore, when analyzing the impact of microfinance, social impact must be assessed. Kabeer
(2003, p.106) states that wider social impact assessment is important for an organizations
internal learning process, as an MFI should be aware of the full range of changes associated
19

with its efforts and uses these to improve its performance. She considers social impact to relate
to human capital such as nutrition, health and education, as well as social networks (2003).
Impact must be assessed on each of these issues if a true picture of the impact of microfinance is
to be obtained.
However, Kabeer moves beyond individual or household analysis to state that analysis should
also be conducted at community, market/economy and national/state levels (2003). She refers to
these as domains of impact because societies are comprised of different institutional domains
each with their own rules, norms and practices which can be influenced by microfinance
interventions in different ways (2003, p.109). Kabeer (2003, p.110) not only refers to domains of
impact but also highlights dimensions of change that should be assessed. She lists cognitive
change, behavioral change, material change, relational change and institutional change as
dimensions of change that need to be taken into account if the wider effects of microfinance
interventions are to be understood.
Zohir and Matin (2004, p.301) make a similar point when they state that the impact of
microfinance interventions is being under-estimated by conventional impact studies which do
not take into account the possible positive externalities on spheres beyond households. They
propose that impact should be examined from cultural, economic, social and political domains at
individual, enterprise and household levels (2004). McGregor et al. (2000, p.3) states that wider
social and economic impacts can occur through the labor market, the capital market, the market
for goods consumed by poor people, through production linkages and through clients
participation in social and political processes.
Chowdhury, Mosley and Simanowitz (2004) argue that if microfinance is to fulfill its social
objectives of bringing financial services to the poor it is important to know the extent to which
its wider impacts contribute to poverty reduction. In the following sections I will examine the
findings from wider assessments of microfinance interventions at a household and community
level, to show what learning can be gained when impact assessments have a broad scope of
analysis.

20

2.7.3

Impacts at a household level

Health and education are two key areas of non-financial impact of microfinance at a household
level. Wright (2000, p.31) states that from the little research that has been conducted on the
impact of microfinance interventions on health and education, nutritional indicators seem to
improve where MFIs have been working. Researches on the Grameen Bank show that the
members are more likely to use contraceptives than that of non-members, thereby affecting
family size (ibid.). Littlefield, Murduch and Hashemi (2003, p.3) also acknowledge the sparse
specific evidence of the impact of microfinance on health but where studies have been conducted
they conclude, households of microfinance clients appear to have better nutrition, health
practices and health education than comparable non-client households. Among the examples
they give is of FOCCAS, a Ugandan MFI whose clients were given health care instructions on
breastfeeding and family planning. They were seen to have much better health care practices than
non-clients, with 95% of clients engaged in improved health and nutrition practices for their
children, as opposed to 72% for non-clients (Littlefield, Murduch and Hashemi, 2003).
Microfinance interventions have also been shown to have a positive impact on the education of
clients children. Littlefield, Murduch and Hashemi (2003, p.4) state that one of the first things
that poor people do with new income from microenterprise activities is to invest in their
childrens education. Studies show that children of microfinance clients are more likely to go to
school and stay longer in school than for children of non-clients. Again, in their study of
FOCCAS, client households were found to be investing more in education than non-client
households. Similar findings were seen for projects in Zimbabwe, India, Honduras and
Bangladesh (ibid.).
Robinson (2001) in a study of 16 different MFIs from all over the world shows that having
access to microfinance services has led to an enhancement in the quality of life of clients, an
increase in their self-confidence, and has helped them to diversify their livelihood security
strategies and thereby increase their income.
Following a three-year study of 906 clients, ASA17 an MFI working with 60,000 rural women in
Tamil Nadu, India, found that their project had many positive impacts on their clients (Noponen,
21

2005). The program was having a positive impact on livelihoods, social status, treatment in the
home and community, living conditions and consumption standards (2005, p.202). Compared
with new members, some of the findings showed that long-term members were more likely to
live in tile roofed and concrete houses, to have a higher percentage of their children in school, to
have lower incidence of child labor, to be the largest income provider or joint provider in the
home, and to make decisions on their own as regards major purchases (Noponen, 2005). Clients
also reflected significant increases in ownership of livelihood assets such as livestock, equipment
and land (ibid.).
In 2002, FINRURAL, a microfinance networking organization in Bolivia, carried out impact
assessments on eight of its partner MFIs focusing on economic and social impacts at an
individual, household and community level on both clients and non-clients (Marconi and Mosley,
2004). Many of the impacts on income were positive for the less poor and negative for the poorer
clients, a trend that we have already seen. However, it was found that social networks played an
important part in helping clients escape from poverty. Access to social networks provided clients
with a defense against having to sell physical and human assets and so protected household
assets (ibid.).
Chowdhury and Bhuiya (2004, p.377) assessed impact of BRACs poverty alleviation program
from a human well-being perspective in a program in Bangladesh where they examined seven
dimensions of human-well being. The project included the provision of microfinance and
training of clients on human and legal rights (ibid.). They noted that the project led to better child
survival rates, higher nutritional status, improvement in the basic level of education, and
increased networking in the community. Children of BRAC clients suffered from far less proteinenergy malnutrition than children of non-members, and the educational performance of BRAC
members children was also higher than that of children in non-BRAC households (ibid.). BRAC
member households spent significantly more on consumption of food items than poor nonmembers did and per capita calorie intake was also significantly higher.
Therefore, various studies and findings indicate that microfinance can, and is having very
positive and diverse impacts at a beneficiary level.
22

2.8 Empowering Women

A key objective of many microfinance interventions is to empower women. Mosedale (2003, p.1)
states that if we want to see people empowered it means we currently see them as being
disempowered, disadvantaged by the way power relations shape their choices, opportunities and
well-being. She states that empowerment cannot be bestowed by a third party but must be
claimed by those seeking empowerment through an ongoing process of reflection, analysis and
action (2003).
Kabeer, quoted in Mosedale (2003, p.2) states that women need empowerment as they are
constrained by the norms, beliefs, customs and values through which societies differentiate
between women and men. She also states that empowerment refers to the process by which
those who have been denied the ability to make strategic life choices acquire such an ability,
where strategic choices are critical for people to live the lives they want (such as choice of
livelihood, whether and who to marry, whether to have children, etc) (Kabeer, 1999, p.437).
Therefore MFIs cannot empower women directly but can help them through training and
awareness-raising to challenge the existing norms, cultures and values which place them at a
disadvantage in relation to men, and to help them have greater control over resources and their
lives.
Littlefield, Murduch and Hashemi (2003, p.4) state that access to MFIs can empower women to
become more confident, more assertive, more likely to take part in family and community
decisions and better able to confront gender inequities. However, they also state that just because
women are clients of MFIs does not mean they will automatically become empowered. Hulme
and Mosley (1996, p.128) also make this point when they refer to the naivety of the belief that
every loan made to a woman contributes to the strengthening of the economic and social position
of women. However, with careful planning and design womens position in the household and
community can indeed be improved. According to Littlefield, Murduch and Hashemi (2003), the
Womens Empowerment Program in Nepal found that 68% of its members were making
decisions on buying and selling property, sending their daughters to school and planning their
family, all decisions that in the past were made by husbands. They refer to studies in Ghana and

23

Bolivia, which indicated that women involved in microfinance projects, had increased selfconfidence and had an improved status in the community (ibid.).
Hulme and Mosley (1996) state that microfinance projects can reduce the isolation of women as
when they come together in groups they have an opportunity to share information and discuss
ideas and develop a bond that wasnt there previously. From studies of the Grameen Bank and
BRAC they show that clients of these programs suffered from significantly fewer beatings from
their husbands than they did before they joined the MFI (ibid.). However, in a separate study of a
BRAC project Chowdhury and Bhuiya (2004, p.383) found that violence against women actually
increased when women joined the program, as not all men were ready to accept the change in
power relations, and so resorted to violence to express their anger. This violence did decrease
over time. The study found that when the violence did rise, the members, because of their
increased awareness, reported back to the group on their martial life and got support from the
group (ibid.).
Jeffery Sachs (2005) in a visit to a BRAC project was amazed to find that women he spoke to
had only one or two children, when he was expecting them to have five or six as he had become
accustomed to for Bangladeshi women. When he asked those with no or one child how many
children theyd like to have, the majority replied two. He calls this a demonstration of a change
of outlook (2005, p.14). He refers to a new spirit of womens rights, independence and
empowerment among clients, showing the positive empowerment effects the project has had on
the women (ibid.).
Osmani (1998) analyzed the impact of credit on the well being of Grameen Bank women clients.
The project was found to have increased their autonomy in that they were able to spend family
income more freely than non-clients. They had greater control over family planning, but the
project was not shown to have had an impact on clients control over other decision-making but
they were found to have greater access to household resources than non-clients did.
However, Johnson (2004, p.5) states that having women as key participants in microfinance
projects does not automatically lead to empowerment; sometimes negative impacts can be
24

witnessed. She refers to increased workloads, increased domestic violence and abuse. This leads
her to ask a crucial question of whether targeting women is just an efficient way of getting credit
into the household, since women are more likely than men to be available in the home, attend
meetings, be manageable by field staff and take repayment more seriously, even if they do not
invest or control the loan themselves? Or on the other hand, if such targeting is fully justified on
the grounds of enhancing gender equity. She claims the answer is probably somewhere between
the two alternatives (ibid.). She argues that MFIs must analyze both the positive and negative
impacts their interventions are having on women, and that MFIs need to work with men to help
pave the way for a change in attitudes to womens enhanced contribution to the household (2004,
p.6). 10.

2.9 Impacts beyond the household

In this section I will refer to various findings that show the positive impacts microfinance
interventions can have beyond client households. Imp-Act (2004b) gives examples where the
impact of microfinance projects goes beyond clients. They refer to studies on CERUDEB, an
MFI in Uganda, which show that loans given to small farmers have resulted in substantial
increases in part-time and permanent wage labor of non-clients (ibid.). Even though the clients
themselves were usually above the poverty line, the people they employed were not, thereby
showing the positive knock-on effects of such an intervention, even if the poorest were not
targeted. Mosley and Rock (2004, p.467) in a study of six African MFIs found similar results.
They concluded from their study that MFI services provided to the non-poor can reduce poverty
by sucking very poor people into the labor market as employees of microfinance clients. They
also state that microfinance services often enhance human capital through increased spending on
education and health that may extend to poor households through intra-household and intergenerational effects (ibid.).
Zohir and Matin (2004, p.318) state that many MFI loans are used for agricultural production,
trading, processing and transport, resulting in an increase in the use of agricultural inputs and
increased output of agricultural production. This leads to enhanced employment opportunities in
25

these sectors for the wider community and a reduction in the prices of such produce due to
increased supply. They also state that trading activities financed by MFIs can help to establish
new marketing links and increase the income of traders, and this can lead to reduced migration
due to increased employment opportunities and increased income (Zohir and Matin, 2004). From
a social perspective, they state that reduced migration increases family cohesion and greatly
contributes towards improving child-upbringing (ibid.).
Kabeer (2003, p.110) refers to a study conducted by the Grameen Bank which showed that
nonmembers of a Grameen village were significantly more likely to use contraception than nonmembers in a non-Grameen village. This was due to a diffusion of the small family norm of
Grameen women through social networks within the village as the Grameen Bank emphasizes
womens productive roles, as opposed to their reproductive role, and non-members picked up
this norm from members. Studies have also shown that Grameen-style projects, based on
collective activism, can lead to a greater level of legal and political awareness among clients,
with a greater likelihood of clients taking part in political campaigns the longer they had been a
member (Kabeer, 2003, p.111).
Zohir and Matin (2004) state that the interaction within MFI groups can create co-operation and
trust that not only facilitates the microfinance activities, but also contributes benefits beyond the
service provided, such as a greater sense of community, trust and reliance on the group in times
of crisis. These networks can lay the foundations for other social capital developments in the
community. They state that examples of cultural impacts of social intermediation that affect the
greater community could be a change in attitude of society towards the acceptable age of
womens marriage, domestic violence, dowry, etc. (ibid.).
Therefore, impact of microfinance projects should not just focus on the individual and household
levels if the true impact is to be assessed. Microfinance can have a far wider impact than the
household level, as shown in Figure 2.1, and this must be assessed if a true representation of
microfinance projects is sought.
2.10

The use of the Sustainable Livelihoods Framework in impact measurement

26

We have seen that microfinance can have a wide range of impacts on households involved in the
project, but also can have wider social impacts. There are different ways of measuring impact
such as using Social Performance Assessments (SPAs) (Copestake, 2004), AIMS toolkit
(Simanowitz, 2001c) and Internal Learning Systems (Noponen, 2005). Most assessments use
quantitative research tools such as surveys, financial ratios and participatory tools, and
qualitative tools such as focus group discussions and participant observation (Simanowitz,
2001c).
This research is focused on the impact of microfinance on livelihood security. Hussein (2000,
p.5) states that a livelihoods impact assessment highlights the need to understand the significance
of a project to the livelihoods of project beneficiaries and other local people. This is the objective
of this dissertation. Simanowitz (2001b, p.17) states that impact assessment must be based on a
sound conceptual framework that can be used for developing hypothesis about possible impact
channels, and as a framework for analysis and understanding. Particularly useful is a livelihoods
analysis that helps contextualize specific interventions in a broader understanding of poverty.
One such livelihood analysis approach is a livelihoods framework.
According to Neefjes (2000, p.82) a livelihoods framework is people centered and aims to
explain the relationships between people, their livelihoods, (macro) policies and all kinds of
institutions. Brocklesby and Fisher (2003, p.187) explain the four main components of the
livelihoods framework, as used by DFID21 which has been widely adopted in the development
field. These are:
People live within a vulnerability context i.e. they are exposed to risks such as sudden shocks,
trends over time and seasonal change;
People have a number of capital assets22 which they draw upon to make their livelihoods;
These assets are drawn upon within peoples livelihood strategies;
Policies, institutions and processes help to shape peoples assets, livelihood activities and the
vulnerability context within which they live.
Carney (1998) states, that, an examination of the five capital assets offers a holistic analysis of
peoples livelihoods. These capital assets from the centerpiece of peoples livelihoods as these
27

assets dictate the level of vulnerability of beneficiaries to shocks and trends. Policies and
institutions also have an impact on these assets. These policies and institutions, and beneficiaries
own vulnerability context influence their livelihood strategies which in turn dictate their
livelihood outcomes as indicated in Figure 2.2 (ibid.). IDS (2004) also states that such a
framework allows investigation into the ways in which a project directly and indirectly affects
peoples livelihoods. This framework therefore will be used in this study to assess the impact of
microfinance on the beneficiaries livelihoods by focusing on its impact on their five capital
assets.

2.11

Current debates about MFIs and their role in development

When examining the impact microfinance has on livelihood security and poverty it is important
to be aware of the current debates that are taking place in the field of microfinance. One of those
debates, as we have seen, is on impact measurement. However, there are two other major issues
that will be examined in this section of the study, reaching the poor and financial sustainability.
2.11.1

Reaching the Poor

As highlighted, one of the key roles microfinance has to play in development is in bringing
access to financial services to the poor, to those who are neglected by the formal banking sector.
This is their social mission. Mainstream banks target clients that have collateral. The poor do not
have assets to act as collateral, therefore they are ignored by the formal financial sector. These
banks tend to be found in urban centers while the majority of the poor in the developing world
live in rural areas, where financial services are not provided. Therefore, if MFIs are to fill this
void they must reach the rural poor. However, according to most studies, microfinance is only
reaching a small fraction of the estimated demand of the poor for financial services (Littlefield
and Rosenberg, 2004).
MFIs do not have the depth of outreach that is needed to meet the demands of the rural poor.
Serving the rural poor in the developing world involves a major financial commitment, as it is
expensive to run rural microfinance projects. Claessens (2005) states that high transaction costs,
small volumes and the high costs of expanding outreach, make it unprofitable to serve the rural
28

poor. It is for this reason that commercial banks are positioned in areas of high population
density. However, if MFIs are to meet their social mission of serving the poor then financial
services need to reach the rural poor.
Another common criticism of the current operational procedures of MFIs, for instance, peer
group self selection and the drive for self-sustainability, is that they end up working with the
moderately poor, and marginalizing the poorest of the poor. Simanowitz (2001a, p.5) highlights a
number of factors leading to the marginalization of the poorest, which lessens the impact
microfinance, is having on poverty; self exclusion, exclusion by other members, exclusion by
MFI staff and exclusion by design. Markowski (2002) and Rogaly (1996) argue that MFIs in
their project designs are failing to meet the needs of the very poor and destitute, who do have a
demand for microfinance services, especially for savings (Littlefield and Rosenberg, 2004 and
Dichter, 1999). They are ignored, yet an objective of the Microcredit Summit is to reach 175
million poor people by 2015 but MFIs do not seem to be on target for meeting this objective.
Organizations such as BRAC with their IGVGD and CFPR programs have shown that the
poorest people can be targeted in a sustainable manner (Halder and Mosley, 2004). Johnson and
Rogaly (1997) state, some features of savings and credit schemes are capable of meeting the
needs of very poor people. In relation to reaching those living in extreme poverty, Littlefield,
Murduch and Hashemi (2003, p.5) refer to a study of 62 MFIs that have reached full financial
self-sufficiency with 18 MFIs that targeted what they defined as the poorest clients averaging
better profitability than the others. This shows that when properly managed, programs that target
the very poor can become financially sustainable. The onus is therefore on other MFIs to develop
products and services that will meet the needs of the very poorest if the social mission of
microfinance is to be achieved.
MFIs therefore need to improve their depth and breadth of outreach. They must design
appropriate products based on the needs of the poorest and they must ensure such products are
delivered in a cost-effective manner (Simanowitz with Walter, 2002).
2.11.2

Financial sustainability versus serving the poor

29

MFIs have more than just a social mission. Markowski (2002, p.117) states they have a dual
mission: a social mission to provide financial services to large numbers of low-income persons
to improve their welfare, and a commercial mission to provide those financial services in a
financially viable manner. We have already seen that MFIs are not fulfilling their social mission
to the extent needed to meet the demands of the poor for financial services. Simanowitz with
Walter (2002) argue that microfinance is a compromise between this social mission and
commercial mission. As there is more emphasis on financial and institutional performance,
opportunities for maximizing poverty impact and depth of outreach have been compromised.
They call for a balancing of social and financial/commercial objectives because the current focus
on financial objectives means fewer of those most in need of microfinance services are being
targeted. To do this they argue it is now time to innovate and design services that maintain high
standards of financial performance, but which set new standards in poverty impact (2002, p.3).
Markowski (2002) states that CGAP estimates that only about 5% of MFIs worldwide are
financially sustainable while the IMF (2005) puts the figure at only 1%, so this is a huge issue
for the microfinance sector. To achieve financial sustainability according to Havers (1996), an
MFI must cover the cost of funds, operating costs, loan write-offs and inflation with the income
it receives from fees and interest. According to the IMF (2005) the MFIs that have become selfsustainable tend to be larger and more efficient. They also tend not to target the very poor, as
targeting the less poor leads to increases in loan size and improved efficiency indicators, whereas
MFIs focusing on the poorest tend to remain dependent on donor funds (IMF, 2005). This is
where the compromise exists. In order to achieve such sustainability, while at the same time
reaching those most in need, microfinance programs need to be managed in a rigorous and
professional manner, subsidies must be removed, and tight credit control procedures and followup on defaulters needs to be in place (Havers, 1996). There is no doubt that sustainability is also
very important from clients perspectives, as they place a high value on continued access to
credit, and if they feel that the MFI will not survive it reduces their incentive to repay loans (Von
Pischke, 1999).
Appropriate loan sizes for clients matching their needs, realistic interest rates, savings as a
prerequisite, regular, short and immediate repayment periods and achieving scale can contribute
30

to sustainability (Havers, 1996). If these measures to achieve sustainability are put in place,
while focusing on the needs of the poorest, then both the social and financial objectives can be
achieved. In simple terms, the tradeoff between financial and social objectives can be balanced if
the MFI is well managed and understands the market and its clients (Morduch, 2004) and by
combining both objectives, financial returns can potentially be increased in the long run (Pawlak
and Matul, 2004). ImpAct (2004a) states it when assessing the performance of an MFI, both its
financial and social performance must be assessed, as both are needed for the successful running
of an MFI. Simanowitz, quoted in Imp-Act (2004a) refers to this as an MFIs double bottom
line. As stated by Morduch achieving profitability and strong social performance is the
ultimate promise of microfinance. It is not impossible but neither is it easy (2004a, p.3) and this
is the challenge facing all MFIs.
Therefore the current challenges facing MFIs are threefold, it concerns, not only, financial
sustainability, but also outreach - extending the services to greater numbers of poor, and depth of
outreach - trying to reach the poorest members of society.

31

CHAPTER THREE
A Glimpse of the Microfinance Sector in
Bangladesh

3.1 Micro-Finances History and Development

A highly developed banking and finance system is one of the important steps in the process of
economic development. It is argued that the economic development of our country is possible
only through the development of agricultural sector. The micro finance is assumed as one of the
major agricultural input. The finance device is an independent mechanism through which the
available resources are mobilized. Insufficiency of capital accumulation has become the most
serious limiting factor in developing countries like Bangladesh. Rural finance in Bangladesh can
be assumed as the financing in agriculture. Higher percentage of population is in agriculture
where it also contributes about 23.50% of the GDP. In this connection, the poverty alleviation
program in our country is directly related with the change in substantial farming into commercial
farming.
There will be the primary role of money and finance in each developed or developing country for
their economic development. Now-a-day, the economic performance of a country is also
measured in terms of availability, and quality of finance. Thus, there will be a primary role of
banking & finance in the economic development of a country. The finance is an important device
which accumulates the spread small resources to mobilize it for the investment on production.

32

Finally, it can be claimed that the banking system and financial market will have the significant
role in economic development of a country.
While looking at the history of finance it is found that it started with the development of human
civilization. Before the evolution of money, people used to borrow the goods with the claim to
repay in terms of goods. In our society it still exists. Due to the different difficulties of the barter
system it was replaced by the introduction of money, which made the transaction of finance
easier where people started to borrow and repay the loan with some interest in it.

Particulars

No. of
Borrowers
(Million)

Loan Reserve
(Billion Tk)

Total savings
(Billion Tk)

Loan
Disbursement
(Billion Tk)

Licensed from MRA

19.42

282.2

106.99

462

Grameen Bank

8.62

87.73

117.2

150.97

Government
agencies

1.11

19.52

7.99

25.52

Banks

1.43

31.06

6.15

68.15

Total

30.58

420.51

238.33

706.64

Source: Microcredit Regulatory Authority- MIS database- 2014.

Table 1: Broad picture of Micro-credit Program in the financial year 2013-2014

Bangladesh Rural Development Board (BRDB) has been playing a prominent role in improving
the rural economy of the country since 1970, Originating from the widely acclaimed "Comilla
Model" of the 1960s. Besides this time BRAC (1972), Grameen Bank (1976) & ASA (1978)
started their activities. But the activities of micro finance institutions started only after the
establishment of BRAC in 1972. (Annual Reports)
3.2 Evolution of MFIs financing sources
MFIs came into existence in the early 1980s when Professor Mohammad Yunus, 2006 Nobel
Peace Laureate, established Grameen Bank to provide small loans to poor people especially
33

women who were outside the traditional banking system. Although microfinance has existed for
centuries in various forms, the development of distinct social capital in lieu of asset collateral
brought in common outreach without getting into default. The success spread on its own and
with the momentum of the World Bank millennial goals initiative to other countries.
Two major explanations are offered for the evolution of MFI funding sources. First, in recent
years, there has been an increasing internal and external pressure on the MFIs to decrease the
dependence on subsidized or grant funding. Second explanation stresses that the evolution of
MFI financing takes place according to life-cycle theory of institutional financing. The first
reason is quite an apparent reason to look elsewhere for continued financing through
commercialization. The second one is where we turn now to illustrate (Yunus, 2011).
Cumulative loan disbursement of some NGOs & MFIs in Bangladesh is shown below:
Institutions
Grameen
Bank
BRAC

2007
356.8

2008
418.9

238.3

ASA
BURO
Bangladesh
TMSS
Jagorani
Chakra
Foundation
SSS
Shakti
Foundation
Proshika
Uddipon
Padakhep
RDRS
Palli Mongal
Karitas
CDIP
SAJIDA

2012
821.61

2013
903.31

544.3
9
454.9
6
44.87

642.12

754.77

195.2
4
12.09

2010
594.4
6
469.4
6
377.4
9
33.38

2011
703

313.4
3
249.4
1
16.64

2009
489.3
1
394.3
5
305.0
8
23.6

549.58

645.76

58.14

80.25

16.17
7.02

24.56
9.56

31.11
12.77

38.71
17.29

48.45
25.29

60.3
34.65

74.94
45.73

103.8
8
93.58
56.06

9.63
8.12

13.73
10.15

19.23
13.2

24.78
18.33

32.01
26.93

41.48
29.24

53.88
34.27

66.27
39.68

36.64
4.35
3.99
5.75
4.61
7.56
1.7
2.4

39.59
6.31
5.82
7.07
6.03
8.9
2.5
3.43

41.04
9.27
8.34
8.82
7.67
10.38
3.72
4.9

43.07
13.15
11.1
10.79
9.77
11.72
5.44
6.85

45.04
17.76
14.62
13.48
12.31
13.91
7.97
9.11

47.34
25.5
20.04
16.65
15.27
16.42
11.22
12.34

49.64
30.36
24.71
20.06
18.83
19.16
15.11
16.1

51.86
38.76
30.27
24.14
22.77
22.11
19.32
20.74

34

2014
997.1
1
888.6
4
748.4

Foundation
CSS
RRF
RIC
POPI
DSK
Total

1.55
3.96
2.18
2.86
2.66
923.
58

2.03
5.39
3.04
4.39
3.78
1154.
66

2.92
7.05
4.25
5.89
5.26
1408.
16

4.18
8.59
5.66
8.28
6.31
1718.
81

6.99
10.82
8.26
9.21
8.24
2057.
62

8.58
13.17
11.01
11.32
10.56
2456.
54

11.4
15.76
14.1
13.76
14.45
2856.
35

14.89
19.23
17.69
16.49
17.41
3309
.3

Source: Microcredit Regulatory Authority- MIS database- 2014.

Table 2: Cumulative loan disbursement of some NGOs & MFIs

One finds three major funding sources of an MFI: savings, shareholder capital, and loans. The
evolution of MFI funding sources is usually explained by institutional life-cycle theory of MFI
development. The explanation goes something like this in the formative stage most MFIs start
out as NGOs with a noble vision of reaching out to poor and disenfranchised people funding
their operations with grants and concessional loans from donors and international financial
institutions. A growing number of MFIs have financed their growth through forced savings and
public deposits with attendant banking regulation. As the MFI matures, private debt capital
becomes available with concomitant restrictive covenants and/or guarantees. In the final stage of
MFI evolution, traditional equity financing becomes available (Fehr and Hishigsuren, 2006).
Thus, capital structure changes with the changes of stages of the institutional life cycle. The
researchers note an increase in competition in microfinance industry and provide evidence that
supports the life cycle theory. They further note three key trends that have emerged in the
industry: increased leverage and public deposit, and more generally, a shift away from subsidized
donor money toward commercial funding (Farrington and Abrams, 2002; de Sousa-Shields and
Frankiewicz, 2004). This commercialization of funding sources brought in more risk for growth
in the microfinance sector and a transition to a regulated industry. The poor is getting more
vulnerable to increased interest rate as risk is eventually transferred to them.
However, development agencies or NGOs balance social objectives and need to make the MFIs
independent of donors, take a new approach to help newly regulated entities. They usually
provide credit enhancements through guarantees for capital market issuances or bank loans so
that these newly regulated MFIs borrow at cheaper rates (Counts, 2005).
35

The MFI financing patterns are shaped by local and regulatory factors as well. In some countries,
a savings bank model rather than a commercial one is chosen because of preponderance of credit
unions in the region. Additionally, mature regulatory environment plays a role in national and
regional variations in financing patterns. In India where there is a more balanced and informed
regulatory structure, the impetus for transition to commercial debt and equity financing is high.
However, this transition happens for the matured players who are known to access bank loans
and other mezzanine financing at a very high cost (Basu and Srivastava, 2005). Because of these
factors, we see regional variations in commercialization: several Latin American countries have
transitioned to market funding and concomitant regulation (Jansson, 2003; Conger, 2003),
whereas, the major financing in the Middle East, North Africa, Eastern Europe, and Central Asia
is offered by unregulated and NGO structures.

CHAPTER FOUR
Data Analysis and Interpretation

4.1 Hypothesis & Model

4.1.1

Hypotheses

H: Social issues, handled by MFIs through microfinance program, influence socialeconomic development of the borrowers.
H: Economic issues, handled by MFIs through microfinance program, influence socialeconomic development of the borrowers.
4.1.2

Model

The following figure (1), presents the working model of my thesis. The aim of this model,
subsequently my thesis, is to investigate the research question based on the theories and the
primary data, I have collected.
36

Social Issues

Microfinance
programs and MFIs

Social & Economic

Development

Economic Issues

Figure 1: Conceptual Model of the Study

This chapter provides the empirical findings gleaned from the collected data. It provides
information of the respondents and the statistical analysis of the information collected from
them. This is followed by the interpretation & discussion about study findings.
4.2 Respondents Information (Frequencies & Cross-Tabs)
Respondent informations are basically based on general question. Those actually represent by
Q-1, Q-2, Q-3, Q-4, Q-5, Q-6, Q-7, Q-13, Q-14, Q-20, Q-22 and Q-23. Frequencies distribution
and cross-tabulation methods are used to analyze general questions.
Table-3 provides the information about the gender distribution of the respondents. It shows that
62% of the respondents were male and whereas 38% were male. At present the lions shares of
the respondents were men that testify to the fact that most of the beneficiaries of microfinance
are male.

37

Age

Age * Gender Cross-tabulation

Gender
Male
Female
Count
15
4
Above 50 years
% of Total 12.5%
3.3%
Count
12
2
50 to 41 years
% of Total 10.0%
1.7%
Count
14
12
40 to 31 years
% of Total 11.7%
10.0%
Count
23
18
30 to 21 years
% of Total 19.2%
15.0%
Count
11
9
20 years or
below
% of Total 9.2%
7.5%
Count
74
46
Total
% of Total 62%
38%
Table 3: Age & Gender Cross Tabulation

Total
19
15.8%
14
11.7%
26
21.7%
41
34.2%
20
16.7%
120
100.0%

In Table-4, the respondents are analyzed in terms of their marital status. This study shows that
many of the study respondents are married, which represents 44.2% of the study sample,
however 37.5% are single and rest of the 18.3% are represents divorced, widow & wider.
Marital Status * Gender Cross-tabulation
Gender
Male
Female
Count
38
15
Married
% within Gender
50.7%
33.3%
Count
32
13
Single
% within Gender
42.7%
28.9%
Count
1
7
Marital
Divorced
Status
% within Gender
1.3%
15.6%
Count
0
10
Widow
% within Gender
.0%
22.2%
Count
4
0
Widower
% within Gender
5.3%
.0%
Count
75
45
Total
% within Gender
100.0% 100.0%
Table 4: Marital Status & Gender Cross Tabulation
38

Total
53
44.2%
45
37.5%
8
6.7%
10
8.3%
4
3.3%
120
100.0%

In Table-5, the study classified the respondents in terms of their educational experience and their
gender. This study shows that many respondents had at least basic primary education (up to class
5), which represents 16.7% of our sample, however 21.7% had secondary educational
experiences and only 48.4% had more than 10 years of educational (HSC & Degree)
experiences. Rest of the 13.3% had no educational background.

Education * Gender Cross-tabulation

Gender
Male
Female
Count
26
3
Degree/Hons
% within Gender
34.7%
6.7%
Count
18
11
HSC
% within Gender
24.0%
24.4%
Count
13
13
Education
SSC
% within Gender
17.3%
28.9%
Count
9
11
Class 5
% within Gender
12.0%
24.4%
Count
9
7
No
Education
% within Gender
12.0%
15.6%
Count
75
45
Total
% within Gender 100.0% 100.0%
Table 5: Education & Gender Cross Tabulation

Total
29
24.2%
29
24.2%
26
21.7%
20
16.7%
16
13.3%
120
100.0%

Table-6 classified the respondents in terms of their education & their annually family income.
This study shows that some respondents who passed degree/honors; annual family income is
above 3.00 lac, in other word, 25 thousands monthly. However 56.6% of the respondents family
incomes are above 2.40 lacs, which are at least monthly 20 thousands.

39

Education * Yearly Family Income Cross-tabulation

Yearly Family Income
3.00 Lac 3.00 to 2.40 to 1.80 to
Above 2.40 Lac 1.80 Lac 1.20 Lac
Count
13
4
4
7
Degree/
% within
Hons
48.8% 13.8% 13.8% 24.1%
YFI
Count
9
7
4
5
HSC
% within
31.0% 24.1% 13.8% 17.2%
YFI
Count
3
6
5
3
Education SSC
% within
11.5% 23.1% 19.2% 11.5%
YFI
Count
0
7
3
5
Class 5
% within
.0%
35.0% 15.0% 25.0%
YFI
Count
2
3
2
5
No
Educatio % within
12.5% 18.8% 12.5% 31.2%
n
YFI
Count
27
27
18
25
Total
% within
22.5% 22.5% 15.0% 20.8%
YFI
Table 6: Education & Yearly Family Income Cross Tabulation

Total
Below
1.20 Lac
1
3.4%
4
13.8%
9
34.6%
5
25.0%
4
25.0%
23
19.2%

29
100.0
%
29
100.0
%
26
100.0
%
20
100.0
%
16
100.0
%
120
100.0
%

In Table-7, the study shows the frequencies of family members of the respondents. This study
shows that the biggest portion of the respondents are aware about the population problem, thats
why 3-2 persons families represent 25% of sample, however 20.0% are 8 persons or above and
rest of the 20.8% are represents 7-6 members families. Mostly there are some population
problems that exist in those micro-financed families.

40

Family Members
Frequency
Percent
8 persons or Above
24
20.0
7 to 6 persons
25
20.8
5 to 4 persons
27
22.5
3 to 2 persons
30
25.0
1 persons or Nil
14
11.7
Total
120
100.0
Table 7: Family Members Frequencies

Cumulative %
20.0
40.8
63.3
88.3
100.0

Table-8, classifies the respondents according to non-institutional sources borrowing. This study
shows that many of my respondents (32.5%) are not taken loans from non-institutional sources
(ex: relatives and landlords etc) in last 1 year. That means MFIs affiliations are increasing
among the poor people to borrow money from them.
Taken Loan from Non-Institutional Sources
Frequency Percent Valid Percent Cumulative Percent
Above 5 Times
11
9.2
9.2
9.2
5 to 3 Times
31
25.8
25.8
35.0
Less than 3 Times
25
20.8
20.8
55.8
Not Applicable
39
32.5
32.5
88.3
No Answer
14
11.7
11.7
100.0
Total
120
100.0
100.0
Table 8: Non-Institutional Sources Borrowing

Table-9 classified the respondents in terms of their move towards MFIs offices regarding loan(s).
This study shows that many of the respondents (70.0%) went to the MFIs office to get loan(s).
Here the study shows that percentages of women (73.4%) are more than men (68.0%) towards
MFIs office regarding loan(s).

41

Loan collection frequencies * Gender Cross-tabulation

Gender
Total
Male
Female
Count
7
3
10
10 Times Above
% within Gender
9.3%
6.7%
8.3%
Count
17
11
28
10 to 8 Times
% within Gender
22.7%
24.4%
23.3%
Count
16
6
22
7 to 4 Times
% within Gender
21.3%
13.3%
18.3%
Count
11
13
24
3 to 2 Times
% within Gender
14.7%
28.9%
20.0%
Count
24
12
36
Don't Know
% within Gender
32.0%
26.7%
30.0%
Count
75
45
120
Total
% within Gender
100.0%
100.0%
100.0%
Table 9: Loan collection frequencies & Gender Cross Tabulation
Table-10 classified the respondents in terms of their preference towards loan(s) duration. This
table shows that most of respondents are prefer loan(s) of 3 to 2 years categories, where 5 to 4
years categories loan are preferred by 22.5% respondents. Interesting matter is that 21.7% of my
respondents are not informed about their re-payments schedules.
Re-Payments Schedules
Frequency Percent Valid Percent

Cumulative
Percent

5 or More than 5
17
14.2
14.2
14.2
years
5 to 4 years
27
22.5
22.5
36.7
3 to 2 years
34
28.3
28.3
65.0
1 or Less then 1 year
16
13.3
13.3
78.3
Don't Know
26
21.7
21.7
100.0
Total
120
100.0
100.0
Table 10: Loan Re-Payment Schedules Frequencies
Actually those people who dont know about their repayment schedules regarding their loan(s),
they are used by others to take loan(s) from MFIs.
42

4.3 Results of the Regression Analysis for Hypothesis One

The hypothesis is: Social issues, handled by MFIs through microfinance program, influence
social-economic development of the borrowers.
In this regression analysis independent variables are social issues which have been measured by
Q-8, Q-9, Q-10, Q-11, Q-12, Q-15, Q-16 and Q-27 and dependent variable is Social-Economic
Development of the respondent. The social issues have been converted into a summated variable
to test the regression model. In this case, this summated variable has been named as Social
Issues.

ANOVA b
Model
Regression
Residual
Total

Sum of
Squares

df

Mean Square

Sig.

33.081
89.911
122.992

1
118
119

33.081
.762

43.415

.000a

a. Predictors: (Constant), Social Issues

b. Dependent Variable: Social-Economic Development
Table 11: Regression Analysis between social issues and social-economic development

Coefficients a
Model

Unstandardized
Coefficients
B

(Constant)
Social Issues

Standardized
Coefficients

Std. Error
-.165
1.066

.337
.162

Sig.

Beta
.519

a. Dependent Variable: Social-Economic Development

43

t
-.491
6.589

.624
.000

Table

Model

Unstandardized
Coefficients
B

(Constant)
Economic Issues

Standardized
Coefficients

Std. Error
-.336
.979

Sig.

Beta

.592
.246

.344

-.567
3.975

12:

.572
.000

a. Dependent Variable: Social-Economic Development

Regression Analysis between social issues and social-economic development
The relationship is positive, reflecting a positive correlation (.519) between the predictor and the
criterion. This means that the higher the standard of the social issues as supported by the MFIs,
the higher the overall social-economic development of the poor people. The significance score of
0.000 shows that the results support the hypothesis < 0.01.
4.4 Results of the Regression Analysis for Hypothesis Two
The hypothesis is: Economic issues, handled by MFIs through microfinance program, influence
social-economic development of the borrowers.
In this regression analysis, independent variables are economic issues which have been measured
by Q-17, Q-18, Q-19, Q-21, Q-24a, Q-24b, Q-24c, Q-24d, Q-24e, Q-25 and Q-26 and dependent
variable is Social-Economic Development of the respondent. The economic issues have been
converted into a summated variable same as before to test the regression model. In this case, this
summated variable has been named as Economic Issues.
ANOVA b
Model
Regression
Residual
Total

Sum of
Squares
14.523
108.468
122.992

df

Mean Square
1
118
119

14.523
.919

F
15.799

Sig.
.000a

a. Predictors: (Constant), Economic Issues

b. Dependent Variable: Social-Economic Development
Table 13: Regression Analysis between economic issues and social-economic development

44

Table 14: Regression Analysis between economic issues and social-economic development
The relationship is positive, reflecting a positive correlation (.344) between the predictor & the
criterion. This means that higher standard of the economic issues, higher the social-economic
development of poor people. The significance score of 0.000, shows that the results support the
hypothesis < 0.01.

CHAPTER FIVE
45

Findings and conclusions

The goal of this research was to study the impact of microfinance on reduction of poverty among
the microfinance borrowers of Chandpur area through improvement of social standards and
increasing economic power of poor in the society. I tried my best to do so and end up some
results regarding it. Based on those statistical models, some important conclusions and findings
are delivered below.
5.1 Findings
Based on the results of the study, the following important findings are stated so that government
and concerned authorities can increase the social-economic development of those poor people.

Along with the saving and credit facility other employment oriented training programs
should also be introduced to the poor people in order to boost up their economic
productive ability. Special emphasis should be given on agricultural training since
majority of the people are dependent on agriculture.

Literacy rate among poor people is found very low therefore there is a need to provide
literacy program to people.

Effective network among the various MFIs groups need to be emphasized so that
members can learn from other successful developed groups.

Participation of the local people should be ensured throughout the process of resource
identification, capacity building, planning, program implementation, and monitoring and
impact assessment.

The MFIs should implement different (gender, education & employment etc) balanced
approach in programs and policies for achieving sustainable social and economic
development.

MFIs introduce different roles that ensure women contribution and their multiple roles in
the social and economic development.
46

5.2 Scope for Further Research

The current study was based on small sample size taken from only few villages of Chandpur
district of Bangladesh. Therefore, the results cannot be generalized to other district of
Bangladesh. Further research done on a bigger scale with large sample size could shed light on
how microfinance activities affect the average social-economic development of Bangladesh.
The current study did not consider the reasons of motivation to join the microfinance program.
Another area that has not been investigated is the difficulties that the borrowers face to repay the
loan. These areas deserve to be studied by future researchers in the field.
There is also another field, which is neglected in our study that the supply gap of MFIs. Actually,
to what extent the MFIs are capable to deliver their service to the poor people. Further research
could be conducted in this area and for finding the reasons for the gap between demand and
supply in terms of microfinance services.
5.3 Conclusion
A multi-disciplinary approach to study the problems of the poor is needed to understand the
complex socio-economic system of the poor and device the means of helping them. There is a
definite need to raise awareness throughout the country to the ability and potentiality of poor and
also to encourage them to come forward. All development programs should be made balance
from a different social & economic perspective. Now-a-days Microfinance becomes the only
way for the poor people to get economical independence. Microfinance is considered as a tool
for socio-economic development of the country, so microcredit lenders (various MFIs) should
consider about the high interest rate that has to pay by the poor which is really become burden
for them and should take it in their consideration to charge relatively lower interest rate.
As was explained in the analysis section, cross-tabs analysis states that social issues and
economic issues are positively correlated with social-economic development of the poor. If the
social issues developed, then there will be a positive impact on financial situation of the family.
Henceforth, increase in economy as well as social issues is mostly associated with the social47

economic development because income, savings, social respect, educational experiences,

employment opportunities & other most important social & economic issues are interrelated. The
linear relationship among these social & economic components was also found in my study.
To sum up, it can be noticed from our overall analysis that there is significant impact of
microfinance activities on improvement of the living standard of the family not only in economic
term but also in social term.

References
48

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Dhakal D.K. et.al, 2002: SAARC Finance Seminar on Micro Credit Operations, Dhaka,
Bangladesh, Micro credit Summit, 1997.
Yunus, M. (2011), Wrong turn for microcredit, International Herald Tribune, January de SousaShields, M. and Frankiewicz, C. (2004), Financing micronance institutions: the context for
transitions to private capital, Micro Report No. 32Accelerated Microenterprise Advancement
Project USAID.
Farrington, T. and Abrams, J. (2002), The evolving capital structure of micronance
institutions, working paper, Inter-American Development Bank, Washington, DC.
Fehr, D. and Hishigsuren, G. (2006), Raising capital for micro nance: sources of funding and
opportunities for equity nancing, Journal of Developmental Entrepreneurship, Vol. 11, pp.
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Counts, A. (2005), The future for micronance investment, Micronance and Capital Markets
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Basu, P. and Srivastava, P. (2005), Scaling-up micronance for Indias rural poor, World Bank
Policy Research Working Paper No. 3646, The World Bank, Washington, DC.
Conger, L. (2003), To market, to market, Microenterprise Americas Magazine, September 30,
pp. 22-5.
Jansson, T. (2003), Financing micronance, Sustainable Development Department Technical
Paper Series, Inter-American Development Bank, Washington, DC.
Shahid Khandker, (2001) Does micro-finance really benefits the poor? Evidence from
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Reduction, Asian Development Bank, Manila, 5-9 February 2001.
Fallavier, P. (1998), Developing Micro-Finance institutions in Vietnam, Thesis (MSc.),
University of British Columbia, Vancouver, Canada, pp. 15-18
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for Law & Economics Working Paper Series, University of Michigan Law School, p. 271.

49

Khan, M.A. and Rahaman, M.A. (2007), Impact of Microfinance on Living Standards,
Empowerment and Poverty Alleviation of Poor People: A Case Study on Microfinance in the
Chittagong District of Bangladesh, Master Thesis, Department of Business Administration,
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Annual Report (2014), PROSHIKA
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Reports (2008) Bangladesh Bureau of Statistics

Appendix-A
Regression Analysis (H1):

50

Variables Entered/Removed
Coefficients a
Model Variables
Variables
Method
Unstandardized
Standardized
Entered
Removed
Coefficients
Coefficients
Model
a
1
Social Issues
Enter
B
Std. Error
Beta
a. All requested variables entered.
(Constant)
-.165
.337
b. Dependent Variable: Social-Economic
Social Issues
1.066
.162
.519
Development
a. Dependent Variable: Social-Economic Development

Sig.

-.491

.624

6.589

.000

Model Summary
Model

.519a

Adjusted R
Square

R Square
.269

Std. Error of
the Estimate

.263

.873

a. Predictors: (Constant), Social Issues

ANOVAb
Model
1

Sum of
Squares

df

Mean Square

Regression

33.081

33.081

Residual

89.911

118

.762

122.992

119

Total

a. Predictors: (Constant), Social Issues

b. Dependent Variable: Social-Economic Development

Regression Analysis (H2):

51

F
43.415

Sig.
.000a

Variables Entered/Removed
Model Variables Entered
1

Variables
Method
Removed

Economic Issues a

Enter

a. All requested variables entered.

b. Dependent Variable: Social-Economic
Development

Model Summary
Model

R Square

Adjusted R
Square

Std. Error of
the Estimate

.344a

.118

.111

.959

a. Predictors: (Constant), Economic Issues

ANOVA b
Sum of
Squares

df

Mean Square

Sig.

Regression

14.523

14.523

15.799

.000a

Residual

108.468

118

.919

Total

122.992

119

Model

a. Predictors: (Constant), Economic Issues

b. Dependent Variable: Social-Economic Development
Coefficients a
Model

Unstandardized
Coefficients
B

Standardized
Coefficients

Std. Error

(Constant)

-.336

.592

Economic
Issues

.979

.246

a. Dependent Variable: Social-Economic Development

52

Sig.

Beta

.344

-.567

.572

3.975

.000

Appendix - B

Size

Categor
y

Numb
er of
MFIs

Very
Large
Large

5 lacs or
more
1 to 5
lacs
10,000 to
1 lac
Less than
10,000

Mediu
m
Small
Total

20
127
545
697

Numbe
r of
membe
rs
140705
91
459277
1
492826
0
152206
8
251136
90

Number
of
borrow
ers
1136131
4
3637530

Employ
ees

3364775

23580

1060388

9582

194240
07

109628

51514
24952

Loan
reserve
(Million
Tk)
166695.
11
51876.1
9
49804.7
6
13641.9
4
282018
.00

Saving
s
(Million
Tk)
69225.5
8
21132.4
0
11702.2
3
4931.05
106991
.26

Source: Microcredit Regulatory Authority- MIS database- 2014.

Table-1: Partnership of the NGO-MFIs in the Micro-finance sector

based on the number of borrowers as of 2014.

53

Loan reserve of NGO-MFIs in the Micro-finance sector

Medium; 18%

Small; 5%
Very Large
Large

Large; 18%

Medium
Small
Very Large; 59%

Figure-1: Loan reserve of NGO-MFIs in the Micro-finance sector

based on the size of the firms

Savings of the NGO-MFIs in the Micro-finance sector

Small; 5%
Medium; 11%
Very Large
Large

Large; 20%

Medium
Very Large; 65%

Small

Figure-2: Savings of NGO-MFIs in the Micro-finance sector based on

the size of the firms

54

Questionnaire Sample

Investigators name

:.....................................................................

Borrowers name

:.....................................................................

District

:.....................................................................

Thana

:.....................................................................

Union

:.....................................................................

Village

:.....................................................................

House/Road

:.....................................................................

Interview Date

:.....................................................................

Start time

:.....................................................................

55

End time

:.....................................................................

Phone no.

:.....................................................................

Research Information
1)
2)
3)
4)
5)
6)
7)
8)

Borrowers age
: 20 or less/ 21-30/ 31-40/ 41-50/ above 50 years
Gender
: Female/ Male
Marital status
: Married/ Unmarried/ Divorced/ Widow/ Widower
Education
: Illiterate/ PSC/ SSC/ HSC/ Degree or Honors/ Masters
Family members
: 1 or none/ 2-3/ 4-5/ 5-7/ more than 7 person
Annual income
: Less than 1 lac/ 1-2 lacs/ 2-2.5 lacs/ 2.5-3 lacs/ more than 3 lacs
Income source
: Agriculture/ Trade/ Infrastructure/ Transportation/ Others
My residence is made by more or less modern instrument:
Completely agree/ moderately agree/ Disagree/ No comment

9) I drink water from safe sourcesCompletely agree/ moderately agree/ Disagree/ No comment
10) My previous food menu was not satisfactory
Completely agree/ moderately agree/ Disagree/ No comment
11) My present food menu is satisfactoryCompletely agree/ moderately agree/ Disagree/ No comment
12) I have lights in my house in the nightCompletely agree/ moderately agree/ Disagree/ No comment
13) I took my meals on a daily basisMore than 3 times/ 3 times/ 2 times/ 1 times/ No comment
14) I take my daily meals nowMore than 3 times/ 3 times/ 2 times/ 1 times/ No comment
15) My child regularly go to schoolCompletely agree/ moderately agree/ Disagree/ No comment
16) My child went to school regularlyCompletely agree/ moderately agree/ Disagree/ No comment
56

17) I have bank accountCompletely agree/ moderately agree/ Disagree/ No comment

18) Recently, I have taken loans from MFIsCompletely agree/ moderately agree/ Disagree/ No comment
19) Recently, I have taken loans from non-institutional sourcesCompletely agree/ moderately agree/ Disagree/ No comment
20) Recently, my total non-institutional loanMore than 5 times/ 5-4/ 3-2/ 1/ less than 1
21) I provided security in case of MFI/NI loansCompletely agree/ moderately agree/ Disagree/ No comment
22) Time to repay the loans5 years or more/ 5-4 years / 3-2 years / 1 year or less
23) Previously, I saved money regularlyCompletely agree/ moderately agree/ Disagree/ No comment
24) I save money regularly nowCompletely agree/ moderately agree/ Disagree/ No comment
25) Lone money has improved my socio-economic conditionCompletely agree/ moderately agree/ Disagree/ No comment

57