The Limitations of Microcredit for Promoting Microenterprises in Bangladesh

Economic Annals, Vol. 57(192), pp. 41-53, 2012

14 Pages Posted: 29 Mar 2017

See all articles by Md. Mahmudul Alam

Md. Mahmudul Alam

Universiti Utara Malaysia

Rafiqul Molla

International Islamic University Chittagong

Date Written: 2012

Abstract

Microcredit is regarded as a tool for poverty alleviation. A stereotyped delivery system is designed and used for promoting and serving survival and subsistence level economic activities, particularly for poor female clients. In Bangladesh its success has raised social expectations as to its potential as also a promoter of microenterprises, which are growth-yielding small businesses beyond subsistence level economic activity. The field survey shows that about 11.7% of the microcredit borrowers are this kind of potential or growing microentrepreneur. It also shows that microcredit’s standardised delivery system, particularly in respect of gender preference, loan size, loan disbursement, and repayment schedules, is a strong limiting factor in effectively serving the microenterprises, which require a more flexible credit package. Therefore a methodological modification is necessary to accommodate flexibility in the microcredit delivery system.

Keywords: Grameen Bank, microcredit, microenterprise, subsistence, poverty alleviation, stereotype

JEL Classification: O12, O29

Suggested Citation

Alam, Md. Mahmudul and Molla, Rafiqul, The Limitations of Microcredit for Promoting Microenterprises in Bangladesh (2012). Economic Annals, Vol. 57(192), pp. 41-53, 2012. Available at SSRN: https://ssrn.com/abstract=2942571

Md. Mahmudul Alam (Contact Author)

Universiti Utara Malaysia ( email )

Sintok, Kedah
Malaysia

Rafiqul Molla

International Islamic University Chittagong ( email )

College Road
Chittagong
Bangladesh

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