Reducing Poverty and Sustaining Growth: A Microfinance Approach

Reducing Poverty and Sustaining Growth: A Microfinance Approach

Nabila Nisha (North South University, Bangladesh) and Afrin Rifat (North South University, Bangladesh)
DOI: 10.4018/978-1-5225-2081-8.ch003
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Abstract

Microfinance institutions have been effective rural banking channels that extended financial services to low-income individuals, particularly women in developing country settings. Since its inception, microfinance has evolved as an economic development approach and has grown to enormous scale in Bangladesh, with a reported approximate 23 million borrowers in a country of roughly 150 million people. These numbers reveal the highest population saturation of microfinance in any country. However, with the maturity of the microfinance market in recent years, competition has subsequently increased among various financial and non-financial institutions. Against this backdrop of intense competition, this chapter aims to focus on the current institutions of Bangladesh that has made the microfinance service almost a sole option for the downtrodden segment of the low-income society. In particular, various approaches of microfinance and its operational structure by these institutions including the challenges and attributions of a dynamic micro credit concept will be highlighted.
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Background

Microfinance is generally known as a sustainable means of poverty alleviation leading to lasting, holistic development, particularly in the settings of developing countries. It has evolved from the time of its inception as an economic development approach that benefits the financially disadvantaged people, like those with low and unstable incomes, little or no land/assets and low social status in rural and urban areas (Maanen, 2004). The main idea behind microfinance is to provide these people with credit and other financial services of very small amounts so that they can raise their income levels and improve their living standards (Khalily, 2004). The concept of microfinance is a trial and tested one which believes that the involvement of lending-repayment process with different socio-cultural activities can result in the empowerment and social development of the overall community, especially the women (Yunus, 1998). Microfinance has also been viewed as a sustainable finance option and an effective rural banking channel for the unbanked population of developing countries.

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