Microcredit as a Tool for Women Empowerment: 
The Case of Bangladesh

By Kaniz Fahmida Ahmed (k.f.ahmed@lse.ac.uk)
Development Studies, London School of Economics

Microcredit has come a long way. Professor Yunus, Managing Director of Grameen Bank, promoted it in 1974 in Jobra, a village in Chittagong of Bangladesh, and it has spread all over the world.  The strength of microcredit lie in its ability to organize idle women into a productive workforce with their proven creditworthiness. It is believed that 25 million people worldwide are now using microcredit to undertake income-generating or self-employment activities; of these, 90% are women. Microcredit has not only made women more productive, it has also empowered them. As a result women are now integrated into socio-economic activities, contributing to family income and decision making and exercising more control over their fertility, which allows them to take better care of their children.

Microcredit is an important financial instrument to generate economic activity. About 1,200 microfinance institutions (MFIs) are now operating in Bangladesh. They are extending credit to about 8 million people, of whom 90% are women. The borrowers are mostly self-employed, and they are involved in numerous income generating activities. In addition, these MFIs have created employment for about 70,000 people, about 20% of who are female. The industry has so far extended a total credit of Tk. 66,566 million (US$1.4 billion), of which Tk. 18,164 million remains outstanding in the field. Microfinance has been very effective in mobilizing savings from the poor borrowers. The net savings of the borrowers is Tk. 5,216 million. Currently the members’ savings meet about 20% of the total revolving fund. Microcredit claims a high recovery rate from the borrowers, over 95%.

Overall, the impact of microcredit has been very positive. The main benefits of microcredit can be enumerated as follows: (a) it has increased family income and quality of life, and as women represent 90% of the borrowers, their contribution is noteworthy; (b) it has promoted saving habits among poor women borrowers; (c) it has raised awareness and empowered women to contribute to various socio-economic activities; and (d) it has motivated women to take an active role in the political sphere of Bangladesh.

The household expenditure survey of Bangladesh (1994/1995) shows that the overall incidence of poverty in Bangladesh during 1984 to 1992 decreased from 52% to 50%. The off-farm activities in rural areas have made a large contribution to this.  A World Bank survey conducted for the mid term review of the Poverty Alleviation and Microfinance Project among 675 microcredit borrowers shows that there has been positive change in the economic and social status of the surveyed borrowers. The survey showed that income has increased for 98% of borrowers; 89% of the borrowers accumulated new assets and 29% of borrowers have purchased new lands either for homestead or for agriculture; food intake, clothing and housing conditions have improved for 89%, 88% and 75% borrowers respectively; sanitation conditions have improved for 69% of borrowers; and child education has improved for 75% of borrowers. These improvements have mainly been accomplished due to an increased level of self-employment of women. A paper written by Bangladesh Institute of Development Studies (BIDS), entitled “The Allocation of Women’s Time in Rural Areas: The Role of Microcredit (1999)” for the Polli Karma Shahayak Foundation (PKSF), sponsored by the World Bank, reveals that membership in MFIs has a significant influence on women’s time allocation decisions in poor households to the extent that women’s labor time in self-employment has increased. Hence, participation in a microcredit program has a beneficial effect on household welfare by increasing women’s income contribution to the household.

Microcredit’s contribution in terms of capacity building, awareness raising and empowerment is notable. A World Bank paper of South Asia External Affairs cites an example from BRAC (a large NGO with over 2 million microcredit borrowers) regarding a female borrower on child marriage and dowry issues: “Don’t marry off your child until she is 18,” says Arjuna. “Child marriage can be fatal for her health. She can die from it. Childhood is for education and growing.” Arjuna further said, “I myself was a victim of child marriage. I am an 18 year old but looking much older. When I was married off to my 30 years old husband, I was only a child of 11. My parents also had to pay a Tk. 10,000 dowry to my father-in-law. I know very well what torment can mean to be a wife when you yearn for love of your parents. I wept the whole day before I was sent off to my father-in-law’s home. My own parents had to sell their everything to pay the dowry.” Arjuna has four daughters; she thinks paying a dowry is a crime and will not marry her daughters until they are 18 years old.

A survey conducted by ASA (a large MFI with 1.5 million borrowers) among 1200 women microcredit borrowers in 1998 conclusively shows that the borrowers’ capacity has increased; their awareness has improved and the women are now empowered in economic and social matters (Diagram below).

Women have become aware about their political rights and microcredit has helped build their awareness. Increasingly, female microcredit borrowers are participating in local politics and development activities. In the 1997 Union Parishad (the grass-roots level administrative unit of the country) election, about 4,483 women participated in the election of 4,283 Unions. Out of this, 110 women were elected as members, and, of these, 20 women were elected Union Parishad Chairmen.

Microcredit is not merely an instrument for credit extension to the poor borrowers. It is a movement to emancipate the poor--especially women--to alleviate their poverty, improve their quality of life, and build their capacity and awareness and to integrate them economically and socially into the mainstream of the economy. The benefits of microcredit go beyond the quantifiable ones, there are other benefits, which are not seen, but are evident in the socio-economic transformation of rural Bangladesh.

Further Reading:

Besley, T. (1995) “How does market failure justify interventions in rural credit markets”.

Bangladesh Institute of Development Studies (BIDS) (1999)  “The allocation of women’s time in rural areas:  the role of microcredit."

Bangladesh Election Commission (BEC) (1997) Statistics of elected Union Parishad Members, Bangladesh Election Commission Office, Shere-Bangla  Nagar, Dhaka.

Coleman, B. (1999) “The impact of group lending in Northeast Thailand.” Journal of development economics, Vol. 60 (1) Oct 1999: 105-141

Goetz, A. and  R. Sen Gupta (1994):  “Who takes the credit? Gender, power and control over loan use in rural credit programmes in Bangladesh”. Working paper. Brighton, England: Institute of development studies, University of Sussex.

Khandokar. R. S. and Pitt, M. M (1996) : “Household and intrahousehold impact of the Grameen Bank and similar targeted credit programmes in Bangladesh”. World Bank discussion papers .

Morduch. J (1998) : “The microfinance revolution”.  Mimeo, Harvard University.

World Bank (1999)  : Mid term review of the Poverty Alleviation and Microfinance project.   World Bank, Dhaka.