Abstract
This paper presents the consequences of ‘forced loan-recovery’, which is an unconstitutional technique allegedly practiced by most of the microfinance institutes (MFIs) in Bangladesh. An empirical study was carried out on the borrowers of three leading microfinance institutes namely, Grameen Bank (GB), BRAC and ASA. Data were collected from two poverty-plagued villages namely, Uttar Islampur and Ruhitpur of Munshiganj district. The mixed research methods were applied. Findings of this study demonstrate that most of the borrowers experience assorted problems on the day of loan repayment. If they fail to pay back the debt aright loan officers and their allies treat them raucously. In order to avoid such unpleasant situations, insolvent borrowers tend to make multiple auxiliary loans and payback the previous ones. As a result, they fall into the decoy of a borrowing-repaying cycle. Sometimes, over-indebtedness compels them to sell out their tangible assets. Thus, they become even poorer. Furthermore, borrowers use to experience discontented domestic and social lives due to such loan-collection techniques of the microfinance institutes.
Highlights
Over the past thirty years, microfinance (MF) has emerged as a viable development programme by providing small loans1 to the underprivileged people, who are written off by the commercial banks as being uncreditworthy and unprofitable (Armendáriz & Morduch, 2005; Yunus, 2017)
The main objective of this study is to investigate the consequences of forced loan recovery technique synonymously loan repayment pressure exerted by the microfinance institutes
All the 20 respondents were female, 15 of them were in the childbearing13 age and the rest five were in the menopausal age14
Summary
Over the past thirty years, microfinance (MF) has emerged as a viable development programme by providing small loans to the underprivileged people, who are written off by the commercial banks as being uncreditworthy and unprofitable (Armendáriz & Morduch, 2005; Yunus, 2017). Microfinance mainly assists the destitute rural women to scale up their economic conditions by creating selfemployment (Yunus, 2007) This provisional financing system is proven to have positive impacts on the poverty reduction, household wellbeing as well as sustainable development (Agbola, Acupan, & Mahmood, 2017; Doocy, Teferra, Norell, & Burnham, 2005). Microfinance seems coherent with the World Bank’s (WB) initiatives of promoting labour-intensive economic development, rendering basic social services, extending opportunities, enhancing empowerment, and strengthening security (Boer, 2001) This system works based on the principle of ‘diminishing marginal returns to capital’ that suggests, the percentage of return from the low investment is comparably higher than the high investment (Armendáriz & Morduch, 2005)
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