Micro-Credit as a Tool for Poverty Reduction in Bangladesh

Abstract

Poverty has remained a global phenomenon and has defied various endeavors at curbing it especially in developing countries. The high and unacceptable number of people within its grip around the world gave it a pride of place as one of the major goals of Millennium Development Goals (MDGs) adopted in 2000. Poverty alleviation was a prime target of the MDGs and micro-credit was recognized as a veritable tool for tackling it. Since the 1970s, especially during the new wave of microfinance in the 1990s, micro-credit has come to be seen as an important development policy and a poverty reduction tool.  In this paper, we examined empirically the effect of micro-credit on poverty alleviation in Bangladesh using secondary data.  The results of the study show that poverty level is still high among the rural populace; but those that have access to micro-credit seems to have managed better than those who have no access to micro-credit. In other words, access to micro-credit has positive but not significant impact on poverty alleviation among the rural populace. The study recommends that government should intensify effort in its recent financial inclusion strategy to ensure that the rural populace has greater access to micro credits. Government should also ensure that interest rate on micro credits are affordable, the terms of the credits flexible and the conditions attached to the credit well liberalized.

Keywords: Microcredit, Microfinance, Poverty, Eradication, Challenge.