Microcredit and the Economic Development of Bangladesh

Topics: Microfinance, Poverty, Microcredit Pages: 17 (5193 words) Published: March 17, 2012

Microcredit and Economic Development of Bangladesh

Submitted To:

Mahmood Hasan
Course Instructor
BUS 251
Section - 7
BBA Program
School of Business
North South University

Submitted By:

Munasif Hassan
ID No: 1010235030

Mosharaf Hossain
ID No: 1010245030

MD. Helal Alam
ID: 1010228030

Mofizul Haque Chowdhury
ID: 1030697030

Page No.
1. Executive Summary4
2. Introduction5
3. Micro credit6
4. Three C’s of microcredit7
5. History8
6. Micro credit delivery models9
7. Clients of microcredit12
8. Microcredit in economic development13
9. Impact of microcredit on poor people15
10. Economic condition of Bangladesh17
11. Microcredit in Bangladesh19
12. Challenges of microcredit22
13. Conclusion23
14. Reference24
15. Appendices25

The most important finding in the last two decades in the world of finance did not come from the world of the rich or the relatively well-off. More important than the hedge fund or the liquid-yield option note was the finding that the poor can save, can borrow (can indeed decide on loans to fellow poor), and will certainly repay loans. This is the world of microfinance. The interest in microcredit or microfinance has burgeoned during the last two decades: multilateral lending agencies, bilateral donor agencies, developing and developed country governments, and non-government organizations (NGOs) all support the development of microcredit. A variety of private banking institutions has also joined this group in recent years. As a result, microcredit services have grown rapidly during the last decade, although from an initial low level, and have come to the forefront of development discussions concerning poverty reduction. World over, microcredit has proved to be an important tool to reach the poorest people. It is the social mandate and the holistic development approach to reach the poorest that will enable them to sustain and repay the loans.

The word "microcredit" did not exist before the seventies. Now it has become a buzz-word among the development practitioners. In the process, the word has been imputed to mean everything to everybody. No one now gets shocked if somebody uses the term "microcredit" to mean agricultural credit, or rural credit, or cooperative credit, or consumer credit, credit from the savings and loan associations, or from credit unions, or from money lenders. The concept of microcredit differs from country to country. Some of the defining criteria used include- size - loans are micro, or very small in size target users – micro entrepreneurs and low-income household utilization - the use of funds - for income generation, and enterprise development, but also for community use (health/education) etc. Most terms and conditions for microcredit loans are flexible and easy to understand, and suited to the local conditions of the community.

With the increasingly gap between rich and poor in the developing countries, poverty has become one of the greatest concerns of people. How to alleviate poverty has become a significant issue. Microcredit is one of method to combat poverty. According to Woller & Woodworth (2001), microcredit is a program extends small loans to those in poverty designed to develop self-employment and provide financial and social services to very poor people. It has now become an important informal tool in the Third World economy. Compared with other financial methods, the emergence of microcredit is a main effective way to combat poverty. Situation has been getting better in many developing countries such as Bangladesh.

Microcredit or microfinance is generally very small loans or microloans for those people living below the poverty level. It is designed to encourage entrepreneurship. People who cannot meet even the most minimal...
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