Micro-credit And Rural Livelihood

The main objective of the dissertation was to determine the RDA-credit impacts onlivelihood improvement of the poor people in rural settings of Bangladesh and asses themicrofinance operating approach of RDA-credit with the reference of China and Bangladeshmicrofinance program. This study was conducted in Bangladesh and Shaanxi province, China.Present paper is descriptive in nature focusing on comparative features of selected MFIs. Withthese passionate outlooks, six microfinance institution (MFIs) were selected for criticalevaluation consisting four from Bangladesh and two from China. Center for Irrigation andWater Management (CIWM) under control of Rural Development Academy (RDA), GrameenBank (GB), Thengamara Mohila Sabuj Sangha (TMSS) and Association for SocialAdvancement (ASA) were chosen from Bangladesh while Xian Xinchang MicrocreditCompany (XMC) and Xian Dayang Huijin Microcredit Company (DHMC) were selectedfrom China as per the objective of the study. Meanwhile, primary data were collected fromRDA-credit clients and non-clients in the RDA project areas. The Focused Group Discussion(FGD) was adopted to gather information from clients and non-clients on the basis of researchobjectives.The study has adopted OLS and probit model to testify the significance level. The studyfinds positive impact of RDA-credit on clients’ household in respect to increase income,savings, consumption, assets position, household enterprise, and employment generation. TheOLS estimation represents participation in RDA-credit program was positively related withannual average income (as per the evident of positive coefficient) and OLS estimationdemonstrated statistically significant on participation of RDA-credit program. It establishedthat the average household income was determined by the participation of RDA-creditprogram and the participation had showed the way increase an average household income.The OLS result also presented that the annual income, savings, employment/days and assets/households were positively related which influenced by RDA-credit program. The result ofprobit estimation shows the relationship between probabilities in participating RDA-creditprogram on the influences of socio-economic variables. The positive coefficient of householdincome, savings, annual employed days per household, number of literacy and family size associated with positive impact of participation in RDA-credit program. It is depicted fromthis study that among various socio-economic variables, household income, annualemployment days/household and per household number of literacy were significantlyinfluenced in participating RDA-credit program. DMI Results depicted for credit taking,credit utilization and family planning DMI were largely dominated by women who receivedRDA-credits. This study also indicates that clients crop production, livestock, poultry, dairyand fisheries production increasing rate are higher than non-clients. This research investigatedthat in96percent RDA-credit members used sanitary facilities where only34.7percent non-client used sanitary facilities. On the other hand, after participating in the RDA-creditprogram98.7percent and96.3percent clients respectively told that water quality and medicalfacilities improved wherever non-clients improved rate not satisfactory. This result revealsthat participation in microcredit program has uplifted the better health affairs of theparticipants than non-participants. Based on present study, it can be commented thathouseholds who are enthusiastically engaged in RDA-credit program and efficiently investcredit in proper income generating activities can improve their livelihood.Although Bangladesh is the pioneer adopter of modern microcredit approach but thecredit mechanisms are not similar for all MFIs. Present thesis describes the credit mechanismsof Grameen Bank, Thengamara Mohila Sabuj Sangha, Association for Social Advancement,and RDA-credit in Bangladesh. This study finds all selected microfinance service providerstargeted poor clients but their clients selection process, service charge, credit allocation,priority to women, demand based credit, enterprise skill development and monitoring andsupervision are different. Every institution has its own justification for adopting distinctapproach. However, RDA-credit mechanism is considered to successful and sustainable asbecause it has ensured supervisory and educative credit which is not common in general. It isalso suggested to have mutual learning and cross fertilization among various microfinanceservice providers.This paper compares the experiences of microfinance institutions in China andBangladesh in the areas of the operating mechanism, outreach, sustainability and regularitystatus and draws lessons for future. Several variations found on operational mechanismbetween China and Bangladesh nevertheless the most observable differences were outreach,collateral status and regulatory status which have direct influenced on MFIs sustainability. Inthe region, the MFIs fare well in terms of financial sustainability as they earn profit on assetsand equity, covering a large amount higher cost levels by earning more from their loanportfolio. At the same time some of the Chinese poorest fail to participate in microcreditprogram for collateral system loan. In such a case, some level of subsidy may be necessary if they contribute to mitigating China’s growing income disparities. Nonetheless the lack offunds, limited service provisions and restrictive policy environment shackles the businessfrom further expansion; requiring urgent remedial steps for resolving existing obstacles andallowing these institutions to participate in China’s growth. This study conclusion is that a truedevelopment of microcredit in China can only occur if a credit plus approach is implemented.Therefore, this study proposes the creation of a new flexible type of institution, regulated by anew policy, autonomous from the other controlling authority in china.This research clarified the feature that can be learned and adopted for the futurebetterment of microfinance sector in Bangladesh and China. This study selected microfinanceinstitution works successfully in the village area where people living condition wereunderprivileged both Bangladesh and china. This study discovered eighteen basics criteriathat can be learned through different elements such as adaption, action research, replication,exposure visit, training workshop, dissemination and follow-up. This study selected basicscriteria are MFIs mission and vision, policy development, operating mechanism, flexibleterms and conditions, proper management, forming controlling act, product development,increases fund, collateral free credit, fixed interest rate, motivation and approach, educativecredit, supporting program, technical assistance, strengthening financial activities,partnership program, area approach and microfinance regulation. Product development,service mechanism and decentralized management structure provide big contribution forfuture in both countries. The selected MFIs can learn from each other’s through Controllinginstitute, product development, collateral free credit, fixed interest rate, educative credit,supporting program and regulation. The successful experiences of studied MFIs can be usedto other developing countries. The cross country knowledge can overcome the presentedcomplicatedness by adapting best elements.Finally, the study ascertained some challenges in Bangladesh and China which shacklemicrofinance sector for future development. MFIs in both countries should have an initiativeto exchange knowledge and disseminate innovation between government and MFIs to build asustainable microcredit intervention in own country and internationally. As, microcreditintervention significantly improves the livelihood of the rural poor. Therefore, this studysuggested that the government should come forward and take the opportunities offered by themicrofinance sector and extend market access and policy supports en route for a balanceddevelopment of this promising sector.