Bangladesh is one of the world's poorest countries, position third after India and China in the extent of poverty. The population is predominantly rural, with about 85 per cent of its 135 million people living in rural areas. For their livelihoods rural people depend largely on the land, which is both fertile and extremely vulnerable. Most of the country is made up of flood plain, and while the alluvial soil provides good arable land, large areas are at risk because of frequent floods and cyclones, which take lives and destroy crops, livestock and property. In Bangladesh poverty has many dimensions. The poor in Bangladesh have not only low income but they also lack access to basic needs such as education, health, clean drinking water and proper sanitation. The latter undermines and limits their capabilities and their opportunities to secure employment, results in their social exclusion and exposes them to exogenous shocks. Then the vicious cycle of poverty is accentuated when government structures exclude the most vulnerable from the decision making process.
Below have a statistics about poverty in Bangladesh
GNI per capita, Atlas method (current US$) (2006)
Total population (million) (2006)
Rural population (million) (2006)
Number of rural poor (million, approximate) (2006)
Rural population below the poverty line (%) (2000)
Population living below $1 a day (%)
Population living below $2 a day (%)
Population living below the national poverty line (%) (2000)
Income share held by lowest 20% (2005)
Women and Development in Bangladesh
Typically, Bangladeshi girls grow up with limited access to education, which further impedes their capability to earn a living, often forcing them to seek employment in the informal sector. In the formal sector, women's work is concentrated in the garment industry and in service sector jobs such as teachers, lawyers, public service, nongovernmental organizations (NGOs), and others (Asian Development Bank, 2001). Women in Bangladesh increasingly play an important role, especially in the informal sector. Some examples of informal sector work include selling groceries in roadside shops, working as domestic help, scavenging, and, in the construction industry, grinding bricks (Asian Development Bank, 2001). NGOs play a very important role in the lives of Bangladeshi women by generating employment opportunities through micro credit programs, providing training to augment skills, increasing literacy levels and awareness about their rights, and thus attempting to transform the traditional roles of women in society (Asian Development Bank, 2001; Ulvila and Hossain, 2002; Hunt and Kasynathan, 2001; Feldman, 2003). In spite of these efforts to improve the status of women in the last three decades, women continue to face discrimination in the areas of health, nutrition, access to education, employment, and political participation.
Bangladeshi society is deeply rooted in tradition and stereotypes of dependent women. According to Jahan (1995), male domination and subordination of women are the underlying tenants of the country's social structure. The basic unit of the social structure is the family, which sets roles for men and women. Men have the economic control and therefore are the decision makers. Women's lives in such a traditional patriarchal Muslim society are dominated by a highly restricted social structure. Although women contribute to the family income, often their efforts are not valued. Women are responsible for all domestic work, which is time consuming and exhausting. Their role is associated with family, and as such, biological reproduction and nurturing are of paramount importance. In Bangladesh, the average age of women's first marriage is 16, and the median age of first birth is 18 (Adolescent Health, 2007). Based on existing research'(Khan, 1999; Hadi, 2005; Salway, Jasmin and Rahman, 2005), women in Bangladesh have limited choices compared to men because women are viewed as needing protection by men. In Islamic societies, women are considered to be in need of protection throughout their lives which is provided by a male member of the family: father, husband, brother, or son. In most instances women have little contact with the outside world, with men playing the intermediate role between the women and the environment outside of home. This creates a dominance-dependency relationship between men and women (Salway, Jasmin, and Rahman, 2005).
In many developing countries, parents see little economic value to educating girls. Daughters have greater value to parents when they help with household chores and take care of younger siblings. The decision about female education is also influenced by social norms of sexuality and marriage. Parents in many south Asian countries are reluctant to allow their daughters to travel to school and come in contact with the boys or be taught by male teachers. The lack of education results in unequal power relations between females and males, which, in turn, deprive women of decision-making. In Bangladeshi society, the male children are more highly valued because they are expected to provide for and carry on the family name. Girls are considered to be temporary members (Asian Development Bank, 2001) until they are married and leave the natal home. This influences a family's willingness to allocate resources toward their education, especially when resources are scarce, and restricted access to education leads to high unemployment rate among Bangladeshi women. Further, the heavy burden of household work presents another challenge to their participation in the labor force.
In summary, although Bangladesh is an extremely poor country and all its citizens suffer as a result of that condition, fundamentally, the women and children bear most of the poverty burden.
The Need for Micro-Financing for poverty & women empowerment
According to Khandker (1998), the alleviation of poverty requires various measures. The most important being those, which increase the income and employment opportunities of the poor, enabling them to enhance their living standards providing the poor with access to financial services is one of the many ways to increase their income and productivity.
Binswanger and Landell-Mills (1995) states that a constraint in relation to supplier's .i.e. Private Banks excludes the poor because small transactions are unprofitable. Providing financial services to the poor and women is not easy. Many borrowers are not credit worthy and don't have profitable projectors. Thus, that the need for micro financing is an undeniable fact. According to Yanor, Benjamin and Pipren (1997), the issue that should be raised in this context is the importance of the informal sector in Least Developing Countries economy and its constraint to develop by lack of credit. On top of that, Salad vine and checkering (1991) confirmed this fact by noting that the informal sector¡¨ which contributed about 35% to 65% and 20% to 40% to employment and GDP in most Least Developing Countries respectively is forced by lack of credit. Micro financing programs are developed to fill this gap. The rural poor in Least Developing Countries are in desperate needs of credits, microfinance programs are supposed to make available this credit needs and keep the poor to increase their living standard. Lack of saving and capital make it difficult for many poor people who want jobs in the formal and informal sectors to become self employed and to undertake productive employment generating activities, providing credit seems to be a way to generate self-employment opportunities for the poor.
Micro credit is defined as a credit provided to ‘poor' free of collateral (the only collateral is the “peer” collateral) through institutionalized mechanism. This credit is made available ‘as and when' needed, at the doorstep of the client (Bajwa, 2001). The major objectives of micro credit schemes are: (1) to stop exploitation of the poor caused by expensive informal credit; (2) to provide small loans to poor people at relatively lower cost as compared to accessible informal loans; (3) to finance economically and socially viable projects those cannot be financed otherwise; (4) to empower women within households as decision makers and in society through active economic participation; (5) to create maximum employment opportunities; (6) to create self sufficient and self-employed people and the most importantly; and (7) to reduce poverty, accelerate growth and improve the living standards on sustainable basis. (First Quarterly Report for FY05 on Role of micro credit in poverty alleviation).The impact of micro credit on poverty alleviation is so far found to be controversial in the literature. Several studies have found that micro credit program has a positive impact on eradicating poverty (Hossain, 1988; Khandker, 1998; Wahid, 1993; Yaron, 1994).
Khandker (2000) considers savings as an indicator and finds that this factor has an influence on eradicating poverty. He argues that credit programs do stimulate savings because micro credit borrowers make mandatory savings every week, which they are entitled to withdraw at the end of their membership. In addition, he finds micro credit program has a positive impact in generating not only voluntary savings but also additional savings among the borrowers. Apart from savings, it can be argued that there are other factors that may contribute towards eradication of such poverty. For example, income and accumulation of assets of the household may be considered as additional causal factors. It is likely that with the introduction of micro credit programs, borrowers may have better income, better savings and more assets. In this backdrop, it is necessary to analyze how these micro credit programs can influence income, savings and assets for the borrowers.
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.
Experience of Bangladesh
As far as developing countries are concerned, Bangladesh may be considered as the pioneer that started this financial innovation that provides loans to the poor especially to women engaged in self-employment projects allowing them to generate income and in many cases, begin to build wealth and eliminate poverty (Hulme and Mosley 1996; Yunus 1983; World Bank 1994). World Bank (Micro credit Summit 1997) classified the micro credit program in Bangladesh as one of the most effective anti-poverty tools for the poorest. The program extends small loans to unemployed poor people that are not bankable. These individuals lack collateral, stable employment and therefore cannot meet even the most minimum qualifications to gain access to formal credit. Several empirical studies support that credit market involvements improve both consumption and production of the poor via smoothing consumption and reducing constraints in production (Feder et al., 1988 and Foster, 1995).
It is often argued that the formal financial sector and informal financial sector in developing countries have failed to serve the poorer section of the community. Collateral, credit rationing, preference for high income clients and large loans, and bureaucratic and lengthy procedures of providing loan in the formal sector keep poor people outside the boundary of the formal sector financial institutions in developing countries. On the other hand, the informal financial sector has also failed to help the poor. Monopolistic power, excessive higher interest rates, and exploitation through under valuation of collaterals and high interest rates have restricted the informal financial sector to providing credit to poor people for income generating and poverty alleviation purposes (Bhaduri (1983); Rao (1980); Bardhan (1980); Ghosh (1986); Ghat et. al. (1992). Removing gender inequity and empowering of the women has been a cherished goal of the NGOs and many other development organizations in Bangladesh. Microfinance has definitely created an impact on the women borrowers. A good number of studies have revealed the extent to which microfinance has contributed to women's empowerment. Results of one study suggested that microfinance's largest impact has been on the set of indicators relating to female control over assets and knowledge of social issues (Zaman, 1999: 1-13). The dynamics of social, economic, political, cultural and environmental forces contrive in a manner that it separates the rich from the poor, strong from the weak, haves from the have-nots and favor those in a better position.
One of the most successful countries often mentioned in the development of microfinance is Bangladesh. For instance, BRAC which was established as a challenge to existing collateral-based financial system has a promising result. It operates exclusively for the poor on the promise that rural people, who won too little land, support themselves as farmers, can never the less make productive use of small loans and repays them on time. BRAC also promotes social development by making the poor responsible to individually and socially. Such intermediation improves productivity and income of the poor. This, in turn, also improves their loan payment rate and hence contributes to the BRAC's financial Viability. As the result it is the most successful credit program for poor and this may be seen from the outreach status and loan recovery so that BRAC's loan recovery rate has consistently remained above 90 percent Pit and Khandker (1998).
The main argument in this research is that micro-credit contributes to mitigating a number of factors that contribute to vulnerability, whereas the impact on income-poverty is a function of borrowing beyond a certain loan threshold and to a certain extent contingent on how poor the household is to start with. This argument is illustrated by complementing the existing literature with some empirical analysis of household survey data collected in Bangladesh in 2007. Consumption data from 1072 households is used to show that the largest effect on poverty arises when a moderate-poor BRAC loaner borrows more than 10000 taka ($200) in cumulative loans.Microfinance, according to Otero (1999,) is “the provision of financial services to low-income poor and very poor self-employed people”.Over the decades of the 1980s and 90s many poverty alleviation programmes have been implemented in Bangladesh by BRAC. Evaluations of such programmes such as the poverty alleviation programme,have traditionally looked at their success in increasing the income levels of participants but less at the wider goals of human well-being.. Similar impacts were also found in other areas such as expenditure patterns, family planning practices and children's education.(Chowdhury, A. M. R. and A. Bhuiya. (2004).The existing evidence on the impact of micro-credit on poverty in Bangladesh is not clear-cut. There is work that suggests that access to credit has the potential to significantly reduce poverty (Khandker 1998); on the other hand there is also research which argues that micro-credit has minimal impact on poverty reduction (Morduch 1998).Despite disagreement on specific definitions of levels of poverty, there is a general agreement amongst the experts that microfinance is not for everyone. Many of them told that industrial skills and ability are necessary to run a successful micro-enterprise and not all-potential customers are equally able to take on debt. Hulme and Mosley (1996,) in a comprehensive study on the use of microfinance to combat poverty, argue that well-designed programmes 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 borrower's 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). However, they also show that when BRAC provided credit to very poor households, those households were able to raise their incomes and their assets (1996). 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 situation improves. Littlefield, Murduch and Hashemi (2003) state that access to BRAC 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. 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 wasn't there previously. From studies of the BRAC they show that clients of these programs suffered from significantly fewer beatings from their husbands than they did before they joined the BRAC. However, in a separate study of a BRAC project Chowdhury and Bhuiya (2004,) 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.
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