Towards Understanding the Mismatch between Micro and Macro Level Effects of Microcredit: Causes and Imperatives

One of the most deeply rooted problems of Bangladesh is poverty, and one of the richest experiences the country has is in poverty alleviation exercises. Current microcredit based poverty alleviation programmes emerged in the dispiriting backdrop of the failure of Comilla Model and IRDP (Integrated Rural Development Program)1. Received wisdom from the failure of these development initiatives has been that the cost and risk of lending to poor are too high. So any initiative of poverty alleviation through disbursing credit to the poor is doomed to failure. This is one of the main reasons for euphorically accepting the microcredit programmes which have proven ability to reach poor individuals, particularly the women, that have been difficult to reach through alternative approaches. The microcredit programmes of the country have also been acclaimed for their anti-poverty impacts. Advocates who lean left highlight the TDOttom-up' aspects, attention to community, focus on women, and most importantly, the aim to help the under-served. Those who lean right highlight the prospect of alleviating poverty while providing incentives to work to non- governmental leadership (Morduch 1999). Huge amount of money has been given to the Microfinance Institutions (MFIs), not only by donors but also by the government. In a resource- scarce country like Bangladesh, government's allocation to MFIs has crowding out effects on other sectors.