Academic journal article Alternatives: Global, Local, Political

The Impact of Microcredit on the Poor in Bangladesh

Academic journal article Alternatives: Global, Local, Political

The Impact of Microcredit on the Poor in Bangladesh

Article excerpt

This article presents a comparative overview of the most relevant findings from studies of the impact of microcredit institutions like the Grameen Bank and BRAC in Bangladesh. It first evaluates the evidence on economic impacts, which suggests that the vulnerability of bank members has been reduced even if there is no consensus about whether the two institutions also reduce poverty. It then considers the social impact, especially in relation to the situation of poor women and to various spill-over effects in different spheres of social and economic life. Keywords: microcredit, development, Bangladesh, Grameen Bank, BRAC.


Since the 1990s, alleviating poverty has been the top priority in international development. Within this framework, various initiatives have already been taken. One particular strategy in tackling poverty that has caught the attention of many aid donors and nongovernment organizations (NGOs) is the provision of small loans through microcredit programs. Bangladesh, one of the poorest countries in the world, is the cradle of this "microcredit movement." Grameen Bank in Bangladesh enjoys international fame, and its model has been replicated in countries all over the world. Likewise, the Bangladesh Rural Advancement Committee (BRAC) is showing success as one of the largest NGOs in the world. Both have generated an international wave of interest and have been the main source of inspiration for the Microcredit Movement, which was launched in 1997 as a "global movement to reach 100 million of the world's poorest families, especially the women of those families, with credit for self-employment and other financial and business services, by the year 2005." (1)

Grameen Bank and BRAC have received a lot of attention not only from development agents but also from academics. They have been criticized for their neoliberal developmentalism, (2) their social control and disciplinary imperatives, (3) and the subsidized system of lending that they apply. (4) Others look at them from the perspectives of a growing space for civil society, (5) or the emergence of a social economy, or a third sector. (6) The question of whether these two organizations truly improve the situation of their members in a sustainable way has also been discussed intensively.

This article gives an overview of the research findings on this issue. More specifically, it deals with the impact of Grameen Bank and BRAC on the economic and social situation of the poor. These two topics have been discussed in many studies. Most studies focus on the results and impact of microcredit institutions at the level of the individuals concerned (the members, clients, or customers), their immediate environment (the household or the village), or their region or district. Very few studies compare their findings with those gathered by others. This article gives a comparative overview of the most relevant findings. The wider impact of these microcredit institutions on society at large has been subject to some debate, but so far no comprehensive research has been done on this matter. We nevertheless present some of the existing findings that give us an idea of what might be the effect of microcredit institutions on society.

Before examining the main findings of impact analyses, we briefly outline the organizational structure of both Grameen Bank and BRAC.

Genesis, Organization, and Practice: An Overview

The roots of Grameen Bank and BRAC go back to the early 1970s, when, after the independence of Bangladesh from Pakistan, a huge influx of refugees caused a severe famine. It is in this context that Grameen Bank and BRAC started their programs.

Table 1 sets out briefly the main similarities and differences between the two institutions and their programs. BRAC started as a relief organization, but gradually extended its services to include education, skills training, and, eventually, microcredit. …

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