Microcredit, enhancement of entitlement and alleviation of poverty : an investigation into the Grameen Bank's role in Bangladesh
In developing countries, especially in Bangladesh, poor people are excluded from the formal financial sector credit services through the collateral requirement to receive a loan. Informal financial sector sources, especially moneylenders, are exploitative in nature. Therefore, poor people do not receive the minimum amount of capital, which is required to start any income generating activity, from either of the financial sector sources. The Grameen Bank initiated the microcredit programme in Bangladesh around 1976, to alleviate the poverty of poor households through providing them with the minimum amount of capital as credit without collateral and exploitation. The present study evaluates the impact of microcredit on the poverty of borrowing households. Both quasi-experimental as well as non-experimental designs have been formulated to achieve the objective. The survey-design covers one group of households (programme households), which have already received more than one loan, and another group of households (comparison households), which have just joined the programme. This study goes beyond earlier studies by developing a comprehensive framework, which covers income, consumption, assets, basic-needs, living standards, entitlement, poverty, and poverty risk of households, for assessing the impact of microcredit on the poverty of borrowing households. This study uses both subjective as well as objective measures of poverty for determining the poverty status of households. The present study compares income, consumption, basic-needs, some proxies for living standards, poverty, and poverty risk of programme households with those of comparison households to assess impacts of microcredit. On the basis of the results obtained, the study argues that microcredit increases income, consumption, expenditure, and assets of borrowing households. Through increasing income and assets, microcredit enhances entitlement of borrowing households. Microcredit also improves fulfilment of basic-needs and living standards of borrowing households. Finally, this study argues that microcredit reduces poverty risk and alleviates poverty of borrowing households significantly.