Microfinance in Bangladesh: Emergence & Role in Our Economy


Microfinance is a banking service handed over to unemployed or low-income people or groups who would have no other access to economic services. Microfinance allows people to take on acceptable small business loans with safety and in a manner that is rational with ethical lending practices. 

Like other developing countries in this world, Bangladesh is also under microfinance services. In the 1970s, the first microfinance sector was established in Bangladesh. This sector has been working to develop Bangladesh’s economy since then. 

The microfinance sector is very important for the growth of Bangladesh’s economy. After establishment, this sector’s main goal was decreasing rural poverty by providing micro-credit loans for non-agricultural activities such as small businesses, raising livestock, and poultry. Now the range has widened and more than 32 million members are using it per year. 

1. Creating Job Opportunity: As Bangladesh is a developing country, many people of Bangladesh are jobless. They are well qualified but lack of job opportunities has made them jobless. In this case, microfinance helps a lot. Microfinance provider organizations give them loans which they use to create their own business for them. 

2. Improving Skills And Market Opportunities For The Poor: Credit alone is not sufficient to increase production, help rising incomes and decrease poverty. Some market saturation remains in the microfinance sector, which could also prompt decreasing returns. So in addition to credit, lower-income populations need skills training and better marketing networks to expand their non-agricultural activities into more profitable sectors. Using this microfinance, people trained themselves for the work. They make themselves skillful by completing different types of training.    

3. Lower Interest Rate: The interest rate of microfinance is much lower than other moneylenders. But there is still some way to reduce more. Many people are not able to pay the interest. So lowering the interest rate will increase the number of poor people who will be able to pay the interest. If they take this program, their lifestyle will change. Their unemployment problem will disappear and they can even make jobs for others. 

4. Encouraging More Competition: The microfinance-providing organizations are now spreading all over Bangladesh. As a result, many people are using this to build up their businesses. As the number of users is increasing, the microfinance providing organizations are also increasing. In this process, there will be no poverty in the future. So the competition needs to get stronger. 

5. Farmer’s Aid: As far as we know, a microfinance-providing company generally doesn’t work in the agricultural sector. But the problem is Bangladesh is an agricultural country. Most of the rural people’s livelihood depends on agriculture. Most of them are poor. They really need financial help. While other countries’ microfinance-providing companies don’t work in the agricultural sector, many Bangladeshi companies work in this sector. They provide loans for poultry farms, agricultural tools, etc. 

6. Women Empowerment: Major microfinance role lies in the empowerment of women. When the first microfinance sector was established in Bangladesh, most of the women were the main customers. They gave them loans and took a little bit of interest. Women usually sat idly in their house in the village. After getting those loans they use them to buy some things and use those to make products and sell them in the market. In this way, women’s empowerment gets started in the villages. 

The microfinance sector has been doing well since its inception. This sector is helping in poverty alleviation as well as the economic growth of the poor people. Those people who lived a very hard life are now having a better life. If the microfinance sector works well then it’s a matter of time that the poverty rate will decrease to 0%! 




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Written By, 

Md. Istiak Ahmed
Faculty Of Business Studies 10th Batch
Department Of Management
Session: 2019-2020
Mawlana Bhashani Science And Technology University, Santosh, Tangail.

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