Questioning Bangladesh's Microcredit

The microcredit (MC) program of Bangladesh has been a well-known success story for generation of self-employment, and poverty alleviation. Variants of this MC model are being implemented in more than 60 different countries of the world. It has become almost a universal antidote for poverty especially from 2006 when Professor Muhammad Yunus- the founder of the Grameen Bank (GB) and the bank itself shared the Nobel peace prize. Although the GB is the pioneer of MC program in Bangladesh, there are many other non-governmental organizations (NGO)s that offer the same program in Bangladesh in different forms and names. The providers of MCs claim that the overwhelming majority of the borrowers are using the loan funds profitably for productive purposes, repaying the loans and interest regularly, and thus improving their socio-economic conditions steadily. The findings of the present study are somewhat contrary and disturbing to the claim of the MC programs. This study finds that a bulk of the MC is borrowed for non productive purposes. About one quarter of the borrowers use the credit exclusively for consumption and debt repayment purposes. Nearly half of them use the credits entirely for investment purposes. For all, the return on investment is very meager. About two-third of the borrowers, on average have an impressive 83% net return on investment available for payment of interest and dividend in addition to the principal. But in case of as high as one third of them, average return on investment is not enough even to cover the most minimum or tolerance level of wages for family labors, let alone paying any interest and making any profit after keeping aside the principal.