Bangladesh: Nationís Economy Developing with Micro Credit

Ali Hamid Khan


Bangladeshís economy is on a positive trend. It is growing and expected to maintain this trend to reach a stable position. IT and industrial growth are moving on the right track. Many areas including garments, livestock, tea and IT have developed enormously particularly in the last couple of years. The standard of living has improved in the last few years with a steady growth in employment. Bangladesh is gradually integrating with the world economy and the process will continue positively with the change of domestic and external circumstances. Trade with its neighbors is also maintaining a healthy balance.

Bangladesh offers passage to some landlocked regions so that they can have access to the sea and in this way can forge a partnership benefiting both Bangladesh and the regionís economies. Chittagong port is a natural outlet for some landlocked states. Intra-regional trade within SAARC countries constitutes only three percent of the total trade, while among ASEAN countries it is 25 percent and within the European Union 50 percent. To correct the imbalance in regional trade, SAFTA (South Asia Free Trade Agreement) is a milestone in the economic profile of SAARC. With SAFTA the member countries will bring down their tariffs step by step and this will help trade to grow equitably.

Bangladesh needs larger market access for its goods. This is an excellent opportunity for the countryís trade and a platform to sell its goods in the region, improving its share in the regionís trade. Over the past 25 years, the private sector has been creative and imaginative and has made the most of the available economic opportunities. They have invested in many areas, e.g. chemical fertilizers, basic engineering, pharmaceuticals, textiles, ceramics, tanneries, plastic, agriculture, agro products and in the readymade garment industry. Successive governments have emphasized export led industrial growth.

Providing credit and organizational support for the poor have been key elements of many NGOís approach to poverty reduction and improving livelihood. It is an accepted fact that resource-poor rural households need affordable credit to enhance household incomes. It is essential to incorporate the poor who constitute more than 60 percent of the population in the national drive to eradicate poverty, which is solely responsible for the slow development of the populationís potential, and efficacy.

Micro Credit Program

The Grameen Bank has developed a successful model of extending credit to poor households and has mostly the female members. The model is now being replicated in a large number of countries all over the world. The fundamental features of the model are: firstly, an organizational structure than ensures that clients belong to the economically and socially disadvantaged groups; secondly, a credit delivery system that is simple and adaptable to cater to the needs of the poor; thirdly, a built-in savings mobilization component that enhances self-reliance and provides cover against business risks and vulnerability from natural calamities; and a self-empowerment mechanism that provides women an opportunity to assert themselves in the household and the society.

The experience of the micro credit programs in Bangladesh and elsewhere demonstrate that reaching the poor with credit is not difficult. The poor utilize the credit for investment in activities that generate regular incomes, most of the loans are repaid on time, and the borrowing households continue to take larger loans and gradually improve their economic conditions.

Some borrowers turn into successful entrepreneurs generating employment for other poor people.

The NGOs operating the micro-credit program have also generated substantial employment for the educated workforce for servicing the program, which is a tremendous benefit for countries like Bangladesh which face the monumental task of providing employment for young people graduating from colleges and universities.

The micro credit program in Bangladesh may have generated employment for about 40,000 youths with Higher Secondary School certificates and for another 10,000 college and university graduates.

The Grameen Foundation uses micro finance and innovative technology to fight poverty and bring opportunities to the worldís poorest people. With tiny loans and financial services, the poor, mostly women, start businesses and escape poverty.

Ninety percent of micro-credit borrowers are women. Micro-credit borrowers have used the funds to start small grocery shops, set up trading activities, rear cattle and poultry, farm fish and start up businesses such as tailoring, rickshaw pulling and paddy husking, among other activities. Micro-credit has significantly helped improve their lives.

Limelight of Micro Credit

Recently micro credit has come into the limelight with Prof Muhammad Yunus receiving a Nobel Peace Prize. The concept of micro credit to the poor without any collateral is avant-garde and with this the banking sector has received a big jolt revolutionizing the concept of banking. The idea is to provide loans to the poorest of the poor who have no collateral and therefore no access to loan facilities.

This is an effort to bring them out of their abject poverty and help them to lead a normal life and to better the living conditions of the family by providing nutrition, education and developing their skills and potentialities to lead a developed life.  Now it has been accepted that economic emancipation and peace are interlinked.

To bring the majority of the people mired in abject poverty out of their deprivation and help them lead a developed and healthy life by being a partner in national development activities is the underlying idea of this method. Poverty leads to social malaise and malediction jeopardizing peace and stability whereby the economy in general suffers and the country plunges into disorder leading to deterioration of the overall conditions of the people. So, it is imperative to address this issue and there can be nothing better than reaching out to the people through micro credit and giving them access to knowledge and information to improve their conditions. Knowledge conflated with finance and information is the key to development. If we jettison this idea we are inviting more discontent and restiveness, which can lead to failure and uncertainty. Grameen Bank has today more than 6,500,000 subscribers who play a pivotal role in the mobility of finance and the movement of markets contributing to the growth in the socio-economic conditions and the improvement of family life. This will impact education positively and raise awareness regarding trade and other important dynamics, which are the integral parts of a developed society.

There are different NGOs working on this line. By providing financial support, they are not only improving their economic conditions but also contributing to bolstering their confidence, developing their personalities and changing their psyche and mindsets. These are no mean achievements.

In our country, the role of NGOs has been laudable and ground breaking.

They have helped the women to break out of their socio-cultural backwardness and male dominance to assert themselves and play a positive role in different strata of society.

They have succeeded in coming out of their narrow mindsets, confinements and walk shoulder to shoulder with the male members empowered by information, knowledge and finance provided by different organizations.

It has been seen that the borrowers make timely and fantastic repayments which amount to 97 percent that has belied the banking guideline that only people with collateral can be trusted and given loans.

They have proved to be better and more trustworthy with the loans.

The country is striving hard to eradicate hunger and chronic food insecurity, bringing down by half the number of people below the poverty line.

They are attaining primary education for all boys and girls and eliminating gender disparity in enrolment; reducing by 65 percent infant and under-five mortality rates; reducing malnourished children under five by 50 percent; reducing maternal mortality by 75 percent; ensuring reproductive health services to all; reducing social violence, especially against women and children and ensuring comprehensive risk management and environmental sustainability.

Bangladeshís track record is commendable.

The country has good performance in the area of sustained economic growth, reduction of income poverty, maintaining and increasing food security, enhanced disaster management capacity, admirable achievement in human development and promotion of key social sector and health outcomes.

The World Bank is satisfied with the progress and called it silent revolution. Bangladesh is one of the fastest growing countries in its income group.

It is one of only 18 countries in the world whose growth over the past two decades exceeded the industrialized countriesí longterm average growth rate of two percent.
[Courtesy: Korea Times]

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