Effect Of Continuous Participation And Credit Intensity In Microcredit Program On Income Generation And Poverty Reduction In Rural Household Of Bangladesh

Bangladesh is one of the world’s poorest countries. The population is predominantly rural, with almost80percent of the population living in rural areas. Many people live in remote areas that lack services such as education, health clinics, and adequate roads, particularly road links to market. An estimated36percent of the population in rural areas live below the poverty line. Women are among the poorest of the rural poor, especially when they are the sole heads of their households. They suffer from discrimination and have few earning opportunities, and their nutritional intake is often inadequate. But recently rural women’s access to microcredit is increased significantly. One of the main causes of rural poverty in Bangladesh is the erratic and extreme climate and the fact that a large proportion of the country is low-lying and vulnerable to flooding. Many of Bangladesh’s rural poor people live in areas subject to extreme annual flooding, which can destroy their crops, homes and livelihoods. They often have to resort to moneylenders in order to rebuild their lives, which pushes them deeper into poverty. In practical aspect of this research location at Jessore district in Bangladesh, rural people are deprived from their basic needs from government as well as others Aid organization, most of those organizations come to front after massive natural disasters each and every year to support those affected people by giving them some money and foods for few days thereafter no more aid to survive. Meanwhile, microcredit program assist them to lead their betterment life, therefore, we have selected this research location as a case study to identify the impact of microcredit to alleviate poverty in rural Bangladesh and also developing countries. Many achievements are claimed about the impact of microcredit program for poverty alleviation; consequently, it is important to find out the impact of microcredit on income generation to reduce poverty and what is the effect of borrower continuity and credit intensity on microcredit to alleviate rural poverty?The concept of microcredit is deserved to claim the intellectual property right of Bangladesh. The microcredit program provides small loans to rural poor people with the purpose of eradicating poverty and it’s now become regular activities of all microcredit related organizations. All over the world, especially in Bangladesh, microcredit is a key program, which is replicated to reduce poverty. Consequently, studied required to explore the effect of microcredit program on rural household of Bangladesh to condense poverty and increase their living standards to be comparable with developed countries. This research investigates the effect of continuous and credit intensity of borrower on microcredit program to generate income and poverty reduction in rural household of Bangladesh. This is the first research work of impact study of continuing participation on microcredit program and credit intensity to reduce poverty in Bangladesh and its conceptualizes a new approach to effect of continuing participation on microcredit program and credit intensity those is aimed at sustainable to reduce poverty by improvement of HH income, consumption and living standard. The general objective of the study is to analyze the effect of microcredit program with respect to the intensity of borrower participation in the microcredit program and distinguish the continuing participant effects from the discontinuing participation. The focus is on understanding and empirically investigating the change of HH income level, food and non-food consumption and improvement of their living standard.A questionnaire is designed and three times repeatedly field survey was conducted to collect time series and panel data for the years2010to2013. The collected data is from four major microcredit organizations (GB, BRAC, ASA and BRDB) member. Among those organizations BRDB is the government microcredit organization and rest three are the Non-government microcredit organizations. There are some basic difference of commercial bank and NGOs to conduct microcredit program. The first issue is the interest rate and critics are saying that NGOs are charging high interest rate from the borrowers and as a result those borrowers are becoming poorer. They compare NGOs interest rate with those of commercial banks although the NGO credit approach is not directly comparable with that of a commercial bank. NGOs usually follow poverty lending approach, their target groups are mostly poor and the size of loan is small. Bank follows a conventional commercial approach, their target groups normally are well-off people and loan size is large.After collected respondents data, we have categorized three groups respondents in this study to investigate the impact of borrower credit intensity for condense poverty. Those respondents attained in microcredit program one time are categorized Group one. Group two consists of those respondents who participate two times discontinuously in that study period. The respondents participate in the program three times continuously are categorized Group three. To explore the economic impact of continuity and intensity of borrower participants on microcredit program for income generation to reduce HH poverty, the researcher has conducted a field survey from January2010to March2013at Jessore district in Bangladesh. This area is second position in Bangladesh in respect of poverty level because of each year floods and cyclones frequently causes severe damage to live and livelihoods, especially for the poor people. Many NGOs are working beside the GOs in this district and they are trying to uplifting the economic condition of the people. Here, the people of different classes both poor and rich are living with harmony. Some of the poor people are below the poverty line and extreme poverty line. The required primary data for the study is collected from500respondents of total eight Upazila in Jessore district and50respondents are selected at random basis from each Upazila. Among them we sorted out348borrowers into three groups (group one consist99participants, group two consist100and group three total149respondents) and100non-borrowers (never participate in microcredit program). In this study, there are six specific objectives. To figure out research findings following major parameters are taken in to consider respondents age, gender, profession, marital status, religion, family members information’s, head of the family, information about HH members employment, involvement with others organizations, family income, food and non-food consumption details, food sufficiency, information about land, use of land, HH financial condition before and after credit, financial contribution to the HH, enjoying facilities due participation in microcredit program, some general questions to get opinions of respondents for effectiveness of microcredit, credit details and some indicators to know respondents living standard before and after credit period also general elements for women empowerment.There was some hindrance to collect data. Actually, we may know rural people are not educated. Also they are not interested to answer all questions to match our satisfaction level therefore some information was eliminated and not incorporated in research model. The specific limitations are:findings of the continue evaluations may not provide reliable assessment of the overall impact of microcredit program due to short research period, lack of accurate information because some respondents might have experienced difficulties in understanding the context of some concepts in some cases and there was another problem we faced to collect data, in fact most of the respondent’s profession was farmer or labor also some are housewife so, when we went to those respondent’s houses to collect data that time they were not in the house due to they are in their own work so, sometimes we had arranged a group interviewed and its causes some biasness and repetition of information because they might be followed other respondent information in same group.The DID (DD) econometric model, PSM method, Pearson’s correlation and OLS method are applied to empirical analysis of assorted data, also Excel diagram, Z-test, T-test and percentage measurement are applied for comparative study and descriptive statistics of all participants in this study. The first specific objective is to analyze the impact of microcredit on generate HH income and it’s analyzed in chapter six in a DD regression estimate and OLS analysis. To know the effects of microcredit to improve the borrower living standard and women borrower empowerment we analyzed percentage measurement in chapter five and it is specific objective two. The objectives three is to investigate the effect of borrower credit intensity to improve household food consumption and food sufficiency, to evaluate this objective figure out a line chart of all three groups to know the comparison results of food consumption of those three groups, and for food sufficiency we used SSR theory to examine the HH food sufficiency whether positive or negative and both results and discussion presented in chapter five. The fourth objective is to distinguish the effect of continuity and discontinuity participation to microcredit program and its analyzed in chapter six by applied DD impact estimation theory. To ascertain the effect of continuing borrower on their income, food and non-food consumption, it is fifth objective and to test the hypothesis of this objective we used regression adjusted DD impact estimation model. The empirical OLS regression analysis is used to estimate the effect of intensity of borrower participation in microcredit for household income, food and non-food consumption, and its denoted as objective six.The overall demographic verdicts state that in all three groups young and middle aged members are more involved in microcredit program and mostly are female members. It is ascertained that significant number of members are formally educated in those three groups and they completed primary education as well as maximum are Muslim and married. It’s remarkable that the family and student size fall into level two to four and one to two respectively. In this study, its perceived that agriculture, small business and poultry sector are the main investment sectors to generate HH income. The HH food sufficiency ratio is positive level of all groups and among them comparatively group three members ratio is higher than others group also their total food consumption have significant difference in before and after credit period. The women’s empowerment is important vision of all microcredit organizations, therefore, most of the microcredit organizations serve credit program to women’s borrower. The same case also observed in our findings that most of the respondents are female, but their household head is male. In the specific point of women’s empowerment improvement in this study, the results depict that empowerment indicator like their power to take family decision is less than male in household even they don’t have any power to take family decision whereas, others two indicators like their personal and health care demand could be fulfilled. Result also shows that very less members have the chance to get recreation independently and in rural areas women’s face some problem due to their involvement with NGOs however, in this study we found participants are not facing gender, religious and social problem severely. The descriptive statistics of HH different types of food consumption estimation shows that food consumption increasing gradually from group one to three excluding the item of meat and fish in group three because of others items consumption increased significantly after the income generation. In terms of HH selling share of main crop, the findings illustrate that the participants of group one cultivated main crop selling percentages comparatively greater than others two group participants after family consumption.The OLS regression estimate indicate that all borrowers of those three groups income, food and non-food consumption are statistically significant and their living standard has improved in terms of length of borrower participation (credit intensity). Among all groups, it’s noticeable that group three borrowers impact indicators to reduce poverty are more effective than others two groups, but in some cases group one respondent’s indicators comparatively shows significant effect than others two groups. Consequently, to justify the specific significant effect of dependent variables of all respondents with independents variables we have applied Pearson’s Correlation analysis and the result shows that most of the variables are statistically significant.The results of DD income regression estimate demonstrate that overall, microcredit has significant impact on income level of those participants. The DD impact estimates indicate that the benefits from microcredit really more that proportionately with the duration of participation in a program. It is ascertained from this study that the DD estimation for continuing participation has gained percent for income and food consumption for continuous and discontinuous borrower, but continuous borrower gain percentage is more than discontinuous borrower. The DD regression impact estimation of income and food consumption indicates that the larger benefits are realized from continue participant than discontinue participant, also adjusted DD estimate demonstrate that continuous borrower HH income, food and non-food consumption has highest significant level than all participants.The PSM method is applied to eliminate selection bias of the respondents. Consequently, we have categorized matched and unmatched participants through PSM technique. The regression estimates of DD impact for all and continuous participants illustrate that matched sample of continuous participants income and food consumption increased and it’s greater than all participants. Therefore, these results suggest that treatment effect of microcredit is more for continuous borrower than all borrowers. Similar results also observed for all, continuous and discontinuous participation regression estimate, in which matched sample of continuing participant’s income and food consumption increased. Consequently, these results indicate those continuous borrowers are more benefited from microcredit program than discontinuous borrower. The comparative regression estimate of borrower intensity indicated that all sample of continuing participants generate more income than matched sample subsequently, their food and non-food consumption increased significantly.At present, hundreds of NGOs as well as government sector have been operating microcredit program as a strategy for poverty reduction. Meanwhile, there are many draw backs are still persist to conduct microcredit program in government and non-government sector. The government microcredit service providers still lack adequate capacities, including the required institutional and human resources. However, following are the specific limitations to operate microcredit program. As the microcredit movement matures, we get a clear idea of both its strengths and its limitations. To move forward, we need to be more effective, increase outreach, design products to include the poorest, and take any other measure needed to spread the poverty alleviation net wider, so that a significant decline in poverty takes place. However, there is a need to improve credit operations, especially at the wholesale level, and new challenges are emerging-to reach down to the poorest and up to the almost-poor marginal and small farmers, to provide a wider range of financial products, to support financial institutions, and to find new ways of combining credit with technical services. Finally, there is a need to invite participation by the poor themselves by giving them the greatest possible control over their own livelihoods and consulting them in the design of financial and technical support services. The success of government microcredit program have been relatively expensive and more complicated process than NGOs, but it’s praiseworthy in respect of their initiative action to conduct some government project about microcredit and poverty reduction. Rendering to the findings of this research, it is argued that there need proper policy to define and adopted investment sector for efficiently use borrowed money also need periodically supervision and monitoring to the borrowers to get effective outcomes of the microcredit. There is another prominent indication of this study that microcredit organizations need to be inspiring members to continue their credit so that they can cross poverty line and escape from poverty forever after a certain time because most of the borrowers stop to continue credit due to high interest rate and quickly repayment system. From this study it’s observed that significant number of borrowers invest their borrowed money to agriculture sector for rice cultivation and to get returns from this sector at least need minimum three to four months whereas, they need start repay money by45weeks installment to organizations after one week the date of take credit money. So, finally it recommended that organization should pay attention on to adopt proper investment sector based on socioeconomic condition of those areas, interest rate, repayment system and effective training program to generate more income of the HH to improve their life standard and come out from poverty forever.