The Effectiveness of the Government Rural Social Services Microcredit Programme in Bangladesh

Abstract

The aim of this article is to measure the economic impact of Rural Social Services (RSS) microcredit programme on its participants. Multistage random sampling method was applied to select total 1,008 beneficiary respondents (households) and 504 control respondents (households) from Bangladesh. The propensity score matching (PSM) technique was applied to analyse the outcome of RSS micro-credit interventions. The results show that there were statistically significant differences in income, food expenditure, and non-food expenditure between the programme and non-programme participants. The result of this survey also reveal that after taking RSS loan, 4.34 per cent graduated from category A to B, and 8.41 per cent graduated from category A to C. On the other hand, 30.43 per cent loan takers graduated from category B to C. This result proves that RSS loan helps a certain number of families uplift their income position. The study suggests to further focus on knowledge and skills development of the poor people.

Literature review on effect of microfinance institutions on poverty in South Asian countries and their sustainability

“…In 2005, an analysis of 2,599 households from 87 villages revealed that women’s borrowings increase income (Khandker, 2005). Harunur and Bhuyan (2020) reported similar results in the year 2020. Participation in the initiatives taken by MFIs in Bangladesh led to an increase of 8% of self-employment hours of the 2,500 households (Ghulam Hussain et al , 2019).…”

“…There is also another side to the microfinance sector in the nation, which presents an alternative view. Harunur and Bhuyan (2020) reported a significant difference in economic and social welfare amongst different categories of poor, primarily due to the difference in the amount of borrowings. Moreover, a 10% increase in borrowing in Sri Lanka helps the customers improve their consumption by a meagre 1% (Khandker, 2005).…”

The impact of government microfinance program on poverty alleviation and job creation in a developing economy

“…Even those women who were not beneficiaries of microfinance loans were more than twice empowered simply because they lived in the area where microfinance operated (Goldberg, 2005). This suggests positive spillovers for program and non-program participants in the areas where microfinance operates (Bhuyan & Islam, 2020). In a similar study, Wellalage and Thrikawala (2021) discovered that women are typically discriminated against when it comes to access to financial services, loans, and credit, necessitating the provision of a mechanism to empower women in facilitating microfinance loan applications and loan approvals for females and female-owned firms.…”

Casualisation of Labour as Coping with Cyclone Aila: Peasants’ Perception in the Sundarbans Area of Bangladesh

“…The function of these small groups was to provide moral support to each other and encourage others in the group to repay their loans with interest in a timely manner. Microcredit institutions in Bangladesh usually form Karmadal (working group) from the target beneficiaries to provide loans and training and also to generate savings from those groups, which is the basic foundation of distributing loans among poor people in Bangladesh (Bhuyan et al, 2018;Bhuyan & Islam, 2020). The individuals who were given loans were also given NGO passports indicating the size of their original debt, the repayments of capital and interest.…”