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Friday, May 20, 2022
DHAKA, Feb 24 2011 (IPS) - Twenty-one years ago, Munni Akter and her husband Shafiuddin could hardly afford two meals a day.
“I was almost lost and had no skill to earn. But a neighbour told me that Brac lent money for small businesses for which they required no guarantor,” 37- year-old Munni recalled.
“My husband and I wasted no time and appeared at the local Brac office to borrow money. Soon we found ourselves with some money to start vending on the streets and make profit,” Munni added.
From the initial 5000 taka (40 dollars) she borrowed in 1990, her business has grown. Today, Munni has a small factory on the first floor of her two- storey concrete home in Dashkkhin Krinshnapur in Savar making sweetened puffed rice which is sold as far as 300 km southeast to the port city of Chittagong.
She employs 26 workers, and after paying labour, electricity and other costs, she has a clean profit of 1,000 dollars.
Millions of poor women like Munni have used loan money to successfully run their own businesses and free themselves from the curse of poverty, thanks to microfinance institutions like Brac.
Founded and introduced in the late 1970s, microfinancing is Bangladesh’s success story. Recent studies suggest that over 11 million Bangladeshis have benefited from borrowings, making the country the global leader in the successful use of microfinance programmes.
Getting a loan from a microfinance institution (MFI) is hassle-free and client- friendly. These MFIs knock on the doors of their clients and require no formal paperwork. Anyone who lacks skills or assets will qualify for a beginner’s loan that can lead to an advanced stage and bigger loans.
In Munni’s case, after her first 5,000-taka loan, she took several more and successfully used them to expand her business selling sweetened puffed rice.
Since Munni paid back all her loans on time, she qualified for a second stage of borrowing known as Progoti where the borrower need not belong to a group. She was able to secure a loan of 450,000 taka (6,342 dollars) in three phases, the last tranche given in March 2010.
Despite debates about the differences between “getting out of poverty” and “staying out,” numerous studies have revealed that this Bangladeshi invention designed for the poor has worked. More than 40 other countries now replicate the Bangladeshi microfinance models.
MFIs offer small loans at reasonable interest rates of up to 18 percent yearly, mostly to women who would not qualify for conventional loans.
Take the case of Urmi Begum and Raxmi Rani Dey. Being street beggars, no bank or moneylender would have loaned them money. But they managed to borrow from Bangladesh’s third largest microfinance institution, Association for Social Advancement (ASA) in Rajshahi district, some 300 km northwest of the capital.
Using the loan from ASA, they both set up small grocery shops in local markets.
“Now that I have paid back loans, the tin-shed-shop belongs to me, since June 2010. I make between 100 and 150 taka a day from selling vegetables, enough to look after my disabled husband and two sons,” said Rani.
To help them start or improve small-scale businesses, women who participate in the microfinance programmes are organized in groups known as samity.
Each groups consists of about 20 to 30 members, and meets once a week or once a month to discuss various issues. The members also guarantee each other’s loans.
The group meetings are also an opportunity to educate women on various aspects of business. The women are also taught to save, which is an important part of microfinancing.
“In my group, a few of my fellow colleagues did not save money to repay loans, and so they had difficulties seeking fresh loans,” said 40-year-old Sultana Razia, who runs a small dairy farm selling 36 litres of milk everyday.
Rezia started with a small, risk free loan of 120 dollars, and was trained on how to become a successful dairy farmer. After four years, Rezia is the only supplier of fresh milk in her neighbourhood in Madrashapara in Savar. She has repaid all loan installments and often lends money from her profit to her employees.
Most of the MFIs have good loan recovery rates ranging from 85 to 98 percent.
This is because majority of the MFIs also run advocacy and capacity-building programmes on the proper use of borrowed money and savings.
Today, microfinance, combined with health, education and other rights-based advocacy programmes, has significantly contributed to an increase in female enrolment in schools and colleges.
In many parts of the country, surveys show that over 90 percent of girls from borrower-families attend school, compared to less than 60 percent from non-participants of microfinance programmes.
More than 2,000 MFIs work with the poorest of the poor in Bangladesh. The lion’s share of the MFI’s activities is in big NGOs like microfinance founder Grameen Bank, Brac, and ASA and similar institutions.
According to Palli Karma Sahayak Foundation (PKSF), the body which disburses and monitors all loans to its partner organizations (POs), it disbursed 1.5 billion dollars to 195 POs from 1990 up to November last year.
“Microfinance has substantially helped improve the quality of life of the poor in Bangladesh,” said Dr Salehuddin Ahmed, former Bangladesh Bank Governor and also former managing director of PKSF, an apex body of more than 250 microfinance institutions.
Salehuddin, who took part in several major researches on microfinance in Bangladesh, told IPS, “The impact of successful borrowings is evident. Wages, employment, food security, coverage in health, education, sanitation and other basic needs have increased many times in the rural areas.”
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