Credit and the rural poor: The changing policy environment in Bangladesh

Abstract

AbstractThis paper reviews the changing policy environment as regards credit for development in rural Bangladesh. The experiences of a range of both successful and failed formal credit interventions in rural areas are employed to reflect upon the adequacy of the currently dominant analytical approach, (Rural Financial Markets) to credit for development. The importance for the rural poor of the quality of access to credit is stressed and the political economy of access is examined. Nevertheless, the ‘Rural Financial Market’ analysis has directed recent credit policy shifts in Bangladesh, and the paper moves on to consider the implications of this for development organisations/projects seeking to work with the formal banking system. A typology of the forms of relationship between projects and the banking system is introduced and a case study of proposals for a line of credit for a production and employment generation programme is presented. This case study seeks to explore the possibilities of restructuring the access situation with respect to formal credit given the current policy environment. The paper concludes by raising some of the broader consequences of the policy changes for the rural development strategies in Bangladesh.