All About Business

Topics: Microfinance, Poverty, Muhammad Yunus Pages: 4 (1076 words) Published: April 29, 2013
Micro credit in Bangladesh

Micro credit is a small size of loans that is given to the poor for self-employment. Today Bangladesh is called the land of micro credit revolution. The poverty of the world can be rooted out through effective micro credit program that was originated in a poor country like Bangladesh.

Definition of Micro Credit:
Conceptually, micro credit can be described as collateral free small loan offered to the poor to create self-employment in income generating activities based on group lending methodology. Micro credit can be broadly defined as program that provides credit for self-employment and other financial and business services including saving and technical assistance to the poor people.

Features of Micro Credit:
In the micro credit system, service providers go to the doorsteps of the poor based on the principle that the people should not go to the bank rather than bank should go to the people. The other important features of micro credit are: • Micro credit is given with minimum paperwork.

• Workers have to make regular visit to the borrower’s premises to offer advices and supervision. • Micro credit is collateral free.
• Small size of loan.
• All loans are to be paid back in installment on weekly or bi-weekly basis. • Micro credit is demand driven.
• 95 percent borrowers are poor women.
• Recovery rate is 90 percent.

History of Micro Credit: The micro credit is not a new thing in this country. The birth and evolution of micro credit have been enumerated below: Traditional Money Lenders: At early stage, people would borrow from conventional money lenders. Then the minnows of the Zemindars used to lend money to the subjects only to grasp their lands. Then the kabuliwalas were more interested in getting the interest than the capital. The Agriculture Debtors Act (ADA) and the Money Lenders Act (MLA) IN 1937 and 1938 respectively imposed restrictions on the activities of rural money...
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