The impact of the microcredit interest rate on capital creation in Bangladesh

Abstract

This research examined how micro-credit and its interest rate affect capital creation in Bangladesh. Theories and ideas from the literature review were applied, and variables to detect the knowledge gap were identified. The study's conceptual model was developed to resolve the gap, and the planned behaviour theory is used to explain the model. Using stratified random sampling, 364 clients' sample data were collected from a microfinance institution located in Lalmonirhat region, and AMOS graphics and PROCESS Macro in SPSS were applied to generate the results. The findings indicate that although microcredit generates capital, the excessive interest rates inhibit the creation of capital to the desired level in Bangladesh. The research extends the existing literature by demonstrating that the interest rate mediates the relation between micro-credit and its capital creation. The research findings will assist organisations and the government in enhancing poverty alleviation and rural employment policies and programmes in Bangladesh.