The Limits of Microcredit— A Bangladesh Case

This paper outlines results of a study on microcredit's impact on recipient livelihoods in rural Bangladesh. It draws insights from interviews conducted with a group of landless laborers in Arampur, a village in Northern Bangladesh.

Advocates of microcredit state that it helps recipients break cycles of poverty, reduces dependency on charity, and empowers women. However, interviews with Arampur respondents reveal that:

• Loan officers are exploitative, and resort to violence to collect installments;
• Microcredit produces dependency on additional loans trapping respondents in deepening debt cycles;
• Respondents often use loans for consumption purposes;
• Women are more often conduits to, rather than end users of, credit. They bear the risk of the loans, but do not directly benefit from them.

If microcredit is to play a constructive role in breaking cycles of poverty in rural areas, it must be revisited from the perspective of recipients and communities. Donors and practitioners must:

• Reevaluate metrics for success;
• Ensure that other critical services are in place in communities where MFIs operate;
• Engage in sustained dialogue and build partnerships with communities to better address recipient needs.