Abdul Bayes, a professor of economics at Jahangirnagar University in Bangladesh, recently argued in Bangladeshi newspaper The Financial Express that non-government organizations (NGOs) have improved the credit market in rural Bangladesh by increasing the use of microcredit from institutional sources as opposed to informal sources like friends, family members and moneylenders which may charge an “exorbitant rate of interest” [1].
Citing the national population census of 2001 and the agricultural census of 2008, Bayes posits that 60 percent of rural credit comes from institutional sources, much of this through NGOs, as compared to less than 30 percent two decades ago. Poverty has fallen from 70 percent to 48 percent among households accessing microcredit and from 57 percent to 40 percent among those not accessing credit. The use of microcredit proceeds has also changed from mostly consumption to more enterprise-related expenses like buying rickshaws, opening grocery shops or arranging small-scale trading operations. The author notes that farmers have not been choosing to access credit from NGOs for higher risk, crop-related activities because of the “loan recovery lust by NGOs.”
The author also attacks the argument that NGOs have made many of their borrowers “go broke.” Approximately one third of NGO members perceived that their economic condition has deteriorated over time, the same proportion as in control households. On the other hand, 46 percent of NGO members expressed that their economic condition has improved compared to 42 percent of the control group. Thus, concludes Bayes, the argument that NGO members are worse off than non-members is invalid.
By Nisha Koul, Research Associate
Sources and Additional Resources:
[1] The Financial Express, Bangladesh, Editorial, June 2011, “On rural credit market”, http://www.thefinancialexpress-bd.com/more.php?news_id=139967&date=2011-06-21
MicroCapital.org story, April 5, 2011, “MICROCAPITAL BRIEF: Shahid Khandker, Hassan Zaman Argue that Microfinance Has Advanced Bangladesh But Can Not Eliminate Poverty in Any Country”, https://www.microcapital.org/microcapital-brief-shahid-khandker-hassan-zaman-argue-that-microfinance-has-advanced-bangladesh-but-can-not-eliminate-poverty-in-any-country-2/
MicroCapital.org story, April 29, 2011, “MICROCAPITAL BRIEF: Moody’s Rating for Bangladesh Cites Microfinance Sector as Critical Player in Socioeconomic Development”, https://www.microcapital.org/microcapital-brief-moody%E2%80%99s-rating-for-bangladesh-cites-microfinance-sector-as-critical-player-in-socioeconomic-development/
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