Unintended Consequences of Micro-Credit in Bangladesh: An Evaluation from Human Security Perspective

Hasan Mahmud

doi:10.5539/ass.v4n10p127

Abstract

With the objective of evaluating the performance of micro-credit and its impact on poverty reduction in Bangladesh from a human security perspective, this paper identifies three unintended, yet fundamental, consequences: the exclusion of the hardcore poor from the program, producing hardcore poverty through irresponsible operation and the erosion of the value of charity. Embracing the norm of human security in micro-credit would be helpful in addressing these counter-consequences. This would require NGOs to redesign micro-credit operation in order to include all the poor, to develop social safety nets for the borrowers so that they are not pushed downwards in times of lose, and to identify alternative sources of fund so that the NGOs can continue providing charitable welfare services for the poor.

Highlights

Micro-credit program, the Grameen Bank model in Bangladesh, has become enormously popular in the development discourse owing to its apparent success in poverty reduction
The objective of this paper is to evaluate the performance of micro-credit and its impact on poverty reduction in Bangladesh from a human security perspective
Special attention is given to the unintended consequences of micro-credit operations with an aim to propose few practical solutions in order to improve micro-credit’s capacity in poverty reduction and ensuring human security

Summary

Introduction

Micro-credit program, the Grameen Bank model in Bangladesh, has become enormously popular in the development discourse owing to its apparent success in poverty reduction. The greatest accolade for micro-credit has come about with the declaration of ‘Nobel Peace Award-2006’ which is given jointly to Dr Muhammad Yunus and Grameen Bank for micro-credit’s contribution in poverty reduction and world peace. Human security perspective, has recently identified poverty as a root cause behind various kinds of deprivation that lead to terrorism and violence. Special attention is given to the unintended consequences of micro-credit operations with an aim to propose few practical solutions in order to improve micro-credit’s capacity in poverty reduction and ensuring human security. Since all the NGOs in Bangladesh by and large follow Grameen Bank’s micro-credit model, the analysis is primarily based on Grameen Bank and its micro-credit operations

Theoretical Framework

Producing Hardcore Poverty

Elimination of Charity from Social Welfare

Findings

Conclusion and Recommendations