Inside Productivity of Microcredit in Bangladesh: A Surgical Analysis

Microcredit typically refers to petty collateral-free credits given to groups of poor members in the society for their socioeconomic emancipation. It is claimed to be an effective tool for enhancing income of the poor primarily through creation of self-employment opportunities for them in a variety of small economic activities. However, in this survey of microcredit borrowers in Bangladesh it is found that when self-employed family labor is paid wages at market rate, under the framework of economic-profit counting, economic productivity of credit for about 48 % of the borrowers is not enough to support payment of any interest. Similarly its social productivity in terms of job creation and women’s empowerment at family level is also found to be low and marginal. Even then about 90% of the borrowers prefer taking microcredit from microfinance institutions (MFIs) even at exorbitantly high interest rate, ostensibly to avoid compromising their socio-political rights and potentials at the hands of the local moneylenders or friends and relatives if credits are obtained from them. They see microcredit as a means of socio-political empowerment of the economically weak and underprivileged members of the society. As such they regard it as a more credible social than economic program.