Deconstructing Financial Inclusion and Exclusion in the Development Discourse: Case Studies of Microfinance Operations in Rural Bangladesh

Abstract

This study seeks to contribute to the critical research on financial inclusion, specifically microfinance (with a focus on microcredit), by exploring the uses and operations of microfinance in two communities in rural Bangladesh. In the case of the community with good socio-economic and access conditions, even rich people who did not need loans were strategically involved by a MFI (Microfinance Institute) through a saving program and locally shared informal rules. On the other hand, while the poorest were financially excluded, most of the financially included were repeatedly included and excluded due to the rejection of members with overdue repayments or the withdrawal of services by some MFIs in another community with poor conditions. One of the factors for such microfinance operations was fierce multilevel competition among MFIs, local branches, and fieldworkers driven by the emphasis on financial sustainability of MFIs. The discourse and dichotomy of financial inclusion/exclusion ignores the two groups’ impermanent status and obscures structural inequalities that are required to overcome the demarginalization of the poor.