The New Nation - Internet Edition

A RESEARCH study conducted by two professors of economics reveals that the micro-credit though acclaimed worldwide hardly contributes to improving the conditions of the poor in Bangladesh. According to a recent newspaper report, the state is responsible 'for nurturing poverty by allowing many organisations to cash in on the poor people's plight'. The findings of the study of the two researchers of Rajshahi University made the startling revelation that micro-credit has rather 'increased the overall indebtedness' of the poor in 75 per cent cases. Micro-credit has not changed the condition of 77 per cent of the recipients and failed to ensure land ownership of 76 per cent and failed to bring food security to 64 per cent. The study titled 'Role of Micro-credit in Poverty Eradication' covered Nilphamari district in the northern region. The researchers said that micro-credit programme 'nurtures poverty by continuing the vicious cycle of poverty capitalising on the vulnerability of the poor.'

According to the media report, only 23 per cent of the micro-credit recipients can bear the pressure of loan repayment installments and the remaining 77 per cent just fail to become successful due to the high rate of interests charged by the lenders as pointed out by another economist while speaking on the occasion. He claimed the interest rate ranges from 28 to 38 per cent. 'Poverty is inherent in our policy, our culture. We have seen politics using poverty and profiteering by sustaining it,' the Jahangirnagar University Vice-Chancellor observed as chairman at a session of the biennial conference of the Bangladesh Economic Association recently where the research study was presented. Most of the micro-finance institutions have become profitable since micro-credit has proven to be a good business, it was pointed out. Micro-credit alone is not a panacea for poverty, as social transformation is required through process for any such drastic change and poverty alleviation.

Another research work, 'A Case Study of Grameen Bank and BRDB' has found that the benefits derived from micro-credit have 'not helped the recipients to cross the below-poverty line'. The amounts of credit taken by the recipients were not enough to generate effective income as in most cases, micro-credit helped in generating part-time self-employment that contributed little to poverty alleviation. The researchers, however, underlined the need for effective monitoring and assessment of utilisation of loans disbursed by the micro-credit organisations so that the beneficiaries could get the training necessary and generate income. It was recommended by the researchers that an amount of Tk 50,000 ceiling on micro-credit should be relaxed so that the recipients could undertake viable income generating projects to get out of poverty. Both the credit providers and the government should immediately bring down the unusual interest rates micro-finance organisations are charging, much higher than the commercial banks do, as the participants raised serious objections at the conference and demanded effective remedial steps.