Practices of microfinance and poverty reduction in Bangladesh

Abstract

Microfinance institutions (MFIs) use repayment rates as a benchmark for their success, a practice often criticized for using strict repayment practices. This chapter focuses on participatory research of four leading MFIs in Bangladesh to reveal what repayment strategies are applied by the MFIs and how the borrowers cope with such strategies. Also investigated are the socioeconomic and psychological impacts of these strategies on the borrowers. Findings reveal that the MFIs use kinships, gender and social norms, and culture of shame, threat, and expulsion as repayment mechanisms, with damaging consequences on social capital and economic autonomy. Repayment pressure also brings mental stress, low self-esteem, and gender-based humiliation, violence, and subordination. The study implies that MFIs enforce exploitative repayment strategies that are responsible for dependency and persistent poverty.