Abstract
Bangladesh is a pioneer and home of conceptualizing microfinance program. It has taken so many programs to reduce poverty and bring about socio-economic changes in the rural community. Since 1993, Muslim Aid UK, Bangladesh (MAB) is working with poor vulnerable people to improve their socioeconomic status through delivering interest-free microfinance in Bangladesh. This study is, therefore, aims to examine the economic impact of MAB microfinance program on borrowers’ household income and consumption expenditure. Towards the achievement of its objectives, this study used descriptive and statistical techniques. To assess the impacts, primary data were collected from 95 borrowers from Chittagong district of Bangladesh. The simple random sampling method was followed to select the borrowers’. Multiple Linear Regression model were used to analyze the data. The findings revealed that MAB borrower’s income and consumption expenditure increased after receiving the microfinance loan. Based on the results, the findings also revealed that amount of loan, loan sufficiency and religiosity had the most significant effect on income. In case of consumption expenditure, the amount of loan, tenure and loan sufficiency shown the significant effect.
Highlights
Microfinance is an economic development approach that involves providing financial services, through institutions, to low-income clients, where the market fails to provide appropriate services
This result revealed that, Muslim Aid Bangladesh (MAB) program overall increased borrowers’ expenditure capability. These findings indicated that MABs borrower’s income and consumption expenditures increased after receiving the microfinance loan
The five factors include; the amount of loan, training provided by microfinance institution, tenure with microfinance, loan sufficiency, and religiosity
Summary
Microfinance is an economic development approach that involves providing financial services, through institutions, to low-income clients, where the market fails to provide appropriate services. According to [1], microfinance is “The provision of small loans to help the poor and their families engage in production activities or develop microenterprises.”. The services provided by the Microfinance Institutions (MFIs) include credit saving and insurance services. Several microfinance institutions provide social intermediation services such as training and education, organizational support, health and skills in line with their development objectives. The microfinance came as a revolutionary approach to eradicating poverty in the poor society but it is still insufficient in many aspects to reduce the overall poverty level in Bangladesh [2]. According to [4], 40% of the populations are poor in terms of income poverty. Evidence shows that conventional MFIs do not fulfill the demand for the microfinance and their interest rates are very high [2, 5]
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