The Theory and Practice of Microcredit

Microfinance and Vulnerability to Seasonal Famine in a Rural Economy: Evidence from Monga in Bangladesh

“…In the context of microfinance in Bangladesh, it is widely discussed in the literature that MFIs use land ownership of potential borrowers as a screening mechanism (for a discussion, see Mahmud and Osmani (2017)). Following Grameen Bank, most MFIs in Bangladesh, at least in principle, use less than half an acre (50 decimal) of land ownership as an eligibility criterion, ostensibly to target the poor.…”

“…(1) Introduction Microfinance programs have become an integral part of the anti-poverty strategies in many developing countries over the last four decades. While proponents argue that microfinance has improved the lives of millions of poor people (especially women) by providing access to credit without collateral, the critics have raised serious doubts about its efficacy as a poverty alleviation tool and as a broader development strategy (for recent surveys of the literature, see Armendáriz and Morduch (2010), Banerjee (2013), Mahmud and Osmani (2017) Although the initial focus of the literature on microcredit had been on the implications of missing credit market and the potential effects of relaxing binding credit constraint on household outcomes, it is now well appreciated that microcredit may at least partially be filling in for other missing markets. 3 Microcredit in many cases works as an imperfect substitute for missing insurance and consumer credit markets.…”

Socio-Economic Progress with Poor Governance: How are Amartya Sen’s Thoughts Relevant for Contemporary Bangladesh?

“…The rapid expansion of microcredit programmes may also have been a contributing factor by promoting social interactions and mobility for rural women. Besides the economic impact of microcredit on poverty, the mobilisation of women’s credit groups may have led to non-economic gains through enhanced female agency, empowerment and mutual support, thus creating the social environment for other development interventions to work better (Mahmud, 2002a, Mahmud & Osmani, 2016).…”

Microfinance and Vulnerability to Seasonal Famine in a Rural Economy: Evidence from Monga in Bangladesh

“…MFIs use land ownership of potential borrowers as a screening mechanism (for a discussion, see Mahmud and Osmani (2017)). Following Grameen Bank, most MFIs in Bangladesh, at least in principle, use less than half an acre (50 decimal) of land ownership as an eligibility criterion, ostensibly to target the poor.…”

“…While proponents argue that microfinance has improved the lives of millions of poor people (especially women) by providing access to credit without collateral, the critics have raised serious doubts about its efficacy as a poverty alleviation tool and as a broader development strategy (for recent surveys of the literature, see Armendáriz and Morduch (2010), Banerjee (2013), Mahmud and Osmani (2017)). …”