Micro-finance as a source of economic empowerment of rural women in Bangladesh

Bangladesh, the land of micro-finance, is the model for other countries in the world since micro-finance has brought a revolutionary change in the rural financial system of the country. This revolutionary change enhanced women empowerment in a true economic sense. It has become possible to move out rural women of extreme poverty, malnutrition, and social sub-ordinance.

The present population of Bangladesh is around 163 million and 65% people live in rural areas. In addition to that women are  the half of this huge population. The government as well as other policy makers stepped forward with the aim of making rural development as a cornerstone of national development. They have also taken an initiative to enforce development activities based on gender equality. To achieve these goals, micro-finance should play a prominent role along with digitalization, education accessibility, and social awareness.

The concept of micro-finance was first introduced by Nobel prize winner Professor Muhammad Yunus through his organization called Grameen Bank. Rural women can borrow money from this organization and start their own poultry, dairy farm, agricultural business, etc. Md. Rustam Ali, a project associate in National Service Project of Bangladesh, wrote an excellent overview regarding rural women empowerment from micro-credit. There is a branch of Grameen Bank near his workplace. He observed that women with very little education are allowed to take a credit in the range of 2000 Bangladeshi Taka (BDT) to 100000 BDT (1 USD = 80 BDT approximately). And most of these women used their loan amount to buy farm animals, taking other people’s land for cultivation by some mutual agreement, purchasing household tools for safe keeping own house or even building a house for the extreme cases as well, marrying their children off etc. They became important policy makers in their own homes due to their financial contribution to the family.

One of the participants of that branch of Grameen Bank, Momtaz Begum, she took  a loan for establishing a small business. Her husband works on a daily labour basis to others agricultural farm. He can manage work on the harvest times. So it was hard enough to manage a family consisting of six members. Momtaz Begum came forward to feed her family as well. She worked as a housekeeper but it was really hard to manage because her youngest son was only a six-month baby. So she decided to start a business by her own. She took a loan of 20000 taka from Grameen Bank, it was the happening of two years ago. She bought a rickshaw for her husband that he could earn money in the period of no work in agricultural farms. With the rest of the money, she set up a grocery shop.Her eldest son can help her in the shop after his school. Momtaz hard days are passing away.

The main finding is that women are now contributing to the family beside their counterparts in Bangladesh. It is especially good news for rural women they come from their cocoons. Micro-finance system at least makes hopes for them that they can lead for their own as well as for the society. Once they were subordinate, discriminated, and treated as an inferior part of the society. At present, they have proved that they have the same potentiality, capability, worth and courage as men. It is the Grameen Bank and the legendary Professor Yunus who made the imagination with an enthusiastic functioning.

It is a good news for Bangladesh that she is now treated as a  role model throughout the world for enhancing women capability by the micro-finance system.

References
Kumar,D., Hossain,A., & Gope, M.C. (2013). Role of Micro Credit Program in Empowering Rural Women in Bangladesh: A Study on Grameen Bank Bangladesh Limited. Asian Business Review.3, 4,114-120.
Grameen Bank, Banking for the Poor. The web page of Grameen Bank.
http://www.grameen-info.org/

Special thanks go to Mr. Ali, I asked him to give some information about this issue. His cordial assistance gives me a clear understanding and informative function to write this blog.

7 thoughts on “Micro-finance as a source of economic empowerment of rural women in Bangladesh

  1. in my opinion, Micro-finance modalities is more heterogeneous, like the cultures of different countries is different, the same system that might be effective in Bangladesh, might not be effective in Nigeria because of the disparities in culture, no doubt, MFI (Micro finance Institutions) request less collateral than commercial banks do require, but it the fact that these micro finance institutions are also in for business and profit oriented should not be taken for granted, a proper regulation and involvement of NGOs is crucial for the consumers to be given a conducive loan obligation. In addition, Over 3,300 micro finance institutions reached 133 million clients with a micro-loan in 2006. 93 million of the clients were among the poorest when they took their first loan. 85 percent of these poorest clients were women.- Micro credit Summit Campaign Report 2007

    Micro-finance is very important for economic development especially in rural communities as it provides financial inclusion, however, it should be regulated properly

    Uchegbulam Ezechimere Obinna

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      1. Hi Seun,
        I will like to first of all draw your attention to Islamic Banking, where a zero interest rate is charged for loans (you can read more about this),
        Second of all, NGOs like Bill and Melinda gates foundation that provide credit support, you can have a read up here: http://www.gatesfoundation.org/Media-Center/Press-Releases/2009/11/$30-Million-Credit-Support-Agreement-to-Secure-$300-Million-in-Charter-School-Facility-Financing

        Futhermore, if banks have to give loans to poor people, especially women who have no property rights that can be used as a collateral, there is a huge risk of default, so that is a no go area, despite these MFIs offering easy access to credit, most of them are often risk averse and will only give loans to (for example) a farmer with a small piece of land that can easily go to the farm and get some produce to take to the market, than giving a loan to a poor woman with no land (but has the intention to buy this products and sell for profit (I hope you understand this illustration), so even though MFIs can provide credit to low-income individuals, this is not entirely true as some people might be left out, that is why SHG and NGOs are involved, this guys dont care about profits or returns, so they are willing to take maximum risk (but they have limited funds)

        You can read this for more info: http://www.researchersworld.com/vol2/issue4/Paper_23.pdf

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  2. I can fully understand your praise of micro finance and the changes it has brought about in rural areas in Bangladesh as this is also the case in Cameroon. In my opinion this model can be applied across various countries regardless of the cultural differences for those that use this financial route are most often women as was mentioned. A survey carried out by UN Womenwatch establishes the fact that the roles occupied by women in different rural areas are closely similar if not identical in most developing countries as they play a key role in supporting their households and communities in achieving food and nutrition security as well as generating income thus improving rural livelihoods and the overall wellbeing in their societies. This is done by their contribution to agriculture and rural enterprises which intend helps stimulate the rural economies. To further merge these similarities is the fact that the opposition which the face from the society are similar.

    Thus the success of the micro finance in Bangladesh goes to show how this is helping to shape and change rural economies due to the availability of such funds and I also agree on the need for tightened regulations so as to avoid instances like the collapse of CONFINEST, a then major player in the Micro finance sector in Cameroon in 2011 which greatly affected the trust of shareholders and investors in micro finance funds (Fotabong. 2012).

    Hedwig Angwi Asaa

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  3. What is the cost for the women to apply this loan? do they need to provide any mortgage or is the loan rate quite higher than the normal one? As if the cost is too high, the benefit brought by this project will be limited.

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  4. The importance of capital to commence a start up or remedy a situation need not be over emphasized.Millions of people worldwide wallow in squalor as access to much needed credit for potential investments is far fetched.The developing world is hardest hit with Africa the most lagging behind.The taboo of providing much desired financial assistance to the poor was rinsed away by the grameen bank in Bangladesh escalating the concept of micro credit.Whether this has really impacted on the livelihoods of millions in this country and actually gotten them out of rotten poverty is yet to be empirically tested.But the general idea of prof.Yunus is quiet appealing.Providing the poor with financial credit will go along way to improve their lives be in in farm investments or opening small businesses like retail shops.If this has succeeded in Bangladesh,it may be due to institutional fairness of the system to operate a financial institution and the cultural aspects tied to the people who receive the credit.But providing credit alone may not be enough to sweep away misery as most poor people lack basic training in running businesses.
    In some parts of the world,like in Sub Saharan Africa,bureacratic bottleneck, high handling and other institutional failures have made it almost impossible for a successful regime of micro credit.This have left most of the poor and vulnerable with no option than teaming up together in monthly contributions which rotate among members.The collector of the monthly contribution can then use it for any investment.In specific cases these groups consisting mainly of women get some help from Non governmental organisations with training in handi craft such that they can open up their own businesses upon completing training.Interested domains include but not limited to hairdressing, cookery, fashion, modern agric practices, sewing.

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