BANGLADESH RESEARCH PUBLICATIONS JOURNAL

ISSN: 1998-2003, Volume: 12, Issue: 1, Page: 71-77, January June 2016
Review Paper

IMPACT OF MICRO-FINANCE IN POVERTY ALLEVIATION OF

BANGLADESH: AN EMPIRICAL STUDY ON GRAMEEN BANK
*Sunny Biswas1and A. K. M. Moniruzzaman2
Sunny Biswas and A. K. M. Moniruzzaman (2016). Impact of Micro-Finance in Pov erty Allev iation of
Bangladesh: An Empirical Study on Grameen Bank. Bangladesh Res. Pub. J. 12(1): 71-77. Retriev e
from http://www.bdresearchpublications.com/admin/journal/upload/1410110/1410110.pdf

Abstract
Micro-finance became a new phenomenon in the present world due to its
recognition as an efficient weapon to fight against poverty. Recently a
tremendous success has been displayed to eradicate pov erty using micro-credit
loan by Micro Finance Institutions (MFIs). However, reducing poverty is more
successful in rural areas than in urban areas because of its random access in
remote places. Grameen Bank showed significant positiv e impact in household
lev el activ ities of marginalized people.
Sav ing capacity of (75%) women
increased, household improv ement of more than Tk. 25000 made by 39%
members, after taking loan 26.67% women can spent in between Tk. (2001-3000),
in rural area diet condition improv ed 75%, Decision making power of women
increased by 96.55% after micro credit intervention. So, this paper explored
Grameen Banks activities and the way it assists enormously to develop the liv ing
standard of the poor and vulnerable people in Bangladesh.

Key words: Microfinance approach, GB-Grameen Bank, Basic needs, efficient weapon,
micro-credit.
Introduction
Bangladesh is a densely populated country and the amount of population is 161 million
(IMF 2012) with a density of 1,033.5 inhabitants in per square kilometer. Moreover, recurrent natural disaster such as flood, erosion and storm gives more trouble to the country.
Hence, people are losing their lives and shelter. Despite the frequent natural catastrophe
hit in the country, Bangladesh has witnessed magnificent development. 1990s, poverty
which was 57% jump down to 40% in 2012 and average GDP growth (Joint staff advisory
note. 2005) increased over the last six year was6%. Among the micro-finance
organizations in Bangladesh, Grameen bank is in a leading position who is trying to
develop poor as well as venerable people providing micro-loans without requiring any
collateral or mortgage. Its aim is to send poverty to museum from each and every part of
Bangladesh. However present Grameen replication is administered all over the world(M.
Y. 2006, December 10) and dedicated to create poverty free world. Bangladesh is the
pioneer adapter of the microfinance modern concept in the world. Actually, Grameen
Bank has been helping the poor particularly the women in a community. Grameen Bank
is serving 8.39 million borrowers (GB. January, 2013) with Tk. 833577.47 million in loans.
Grameen Bank is dominating in microfinance market of Bangladesh in outreach,
outstanding loans, savings, and efficient selected delivery mechanism. They offer microcredit, savings and social services to the poor who were deprived from such access
offered by conventional banks. Grameen Bank has been able to demonstrate the
effectiv eness of microfinance programs towards sustainable development for the rural
poor in Bangladesh. The present study contributes to the literature on diverse
microfinance approaches. The study may lead to further methodological improvement of
the microfinance institutions in Bangladesh and elsewhere. Microfinance practitioners and
policy makers might gain better understanding on existing microfinance approaches in
Bangladesh and can think or re-think for adaptation.

*Corresponding Author's Email: biswas.sunny1987@gmail.com

1 BBA, MBA Jagannath University; HR officer Good Neighbors Bangladesh.
2 Professor Dr, AKM Moniruzzaman, Department of Management Studies, Jagannath University Dhaka

Biswas and Moniruzzaman

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Methodology
The study was conducted during 25/01/2013 to 28/02/2013 (please mention the time
period of research conducted) in Keraniganj Upazila of Dhaka district, Tungipara Upzila of
Gopalgonj district and its surrounding areas in four branches of GB (Kolatia branch,
Tungipara branch, Baultoli branch, Ulupur branch and GB head office). The study used
both primary and secondary sources of data. The primary sources of data was obtained
from direct observation, interview schedules, focus group discussions and key informant
interview, such as members of Grameen Bank (GB), management staff and employees of
Grameen Bank at the main office and at 4 branches and 40 respondents were selected
randomly to get information among them 33 were rural respondents and remaining7 were
semi urban respondents. each branch. A case study design is used in the study. The study
has used two groups of samples namely, experimental group and control group. Control
group was used to avoid the problem of intervening variables (variables that are affecting
the output of the research other than independent variables). This control group is
randomly selected from the list, which would be clients of the GB in the near future or
incoming clients. Experimental groups are randomly selected from the list of GB active
clients. The sample frame of the study is the entire people found in the list of GB.
Probability sampling technique or simple random sampling is used in the study. Direct
observation wasmade in Kolatia branch, Tungipara branch, Ulupur branch and Baultoli
branch. This method helped to observe the real im pact of GB intervention on poor clients.
Interview schedules were used to collect information from households on various aspects
of impact dimensions. Before applying it, the questionnaire was tested for its validity by the
coordinator of GB of international and training department. The interviews were
administered on randomly selected activ e clients and incoming clients to answer
questions regarding their situation before they took the loan based on their memory and
after taking the loan. As 97 percent member of GB are female (Yunus 2005) so only
female participants were interviewed. Discussions with key informants such as some clients
of GB, employees, branch managers and GB officials were conducted to collect
qualitative information. Secondary data were obtained from documents, reports, journals,
proceedings, bulletins, Internet, periodicals, various books and other relevant materials.
Grameen Bank head office library was used to review several related literatures. Grameen
Bank official website, and various PDF file on micro credit was helpful to complete the
research properly.All the branches (2567) of GB have almost similar characteristics.
Therefore, each branch has equal chance to be selected. From four branches three
branches (Tungiparabranch, Baultoli branch, Ulupur branch) were deliberately selected
by considering the recent political situation and time constraints. The second stage is
selection of sample respondents from the selected branches. The study is focused on
selecting samples from each area equally. To manage the research within the given time
and limited budget, a total of 40 samples were selected using random sampling. Among
these samples, 10 were incoming clients and 30 were active clients. Response from these
active clients are illustrated in result and discussion section.
Results & Discussion
Household income and savings
As indicated in table-1 the large majority of households (95.84%) had source of income
before they took the loan, while few households (4.16 %) hadnt any source of income.
When the respondents were asked on why there is change in income, because most of
them (54%) expanded the existing business, few of them (25 %) started new business and
the remaining (8%) a family member managed to get a job. However, significant number
of the households reported that their income decreased due to poor production, poor
sales (market problem), lost of job, and other reasons. The positive impact of micro
finance is more pronounced in rural households than urban households. Most of the
respondents reported that their main source of saving is business profit. The large majority
of the respondents (75 %) have increased their overall savings capacity. On the other
hand, some of the respondents (14.58%) complained that their overall savings have shown
no change and even showed a decreasing trend (10.42 %). The findings of the survey
revealed that households income has increased and their source of income diversified as
well as their savings increased due to the loans provided by Grameen Bank.
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Table 1. Change of household income and saving before and after the loan (valid n=30)
%
Description

Indicators

Have source of
income before the
loan

Yes

SemiUrban (6)
100

No

Reason for increment

Reason for decrement

Rural (24)

Total

91.67

95.84

8.33

4.16

Business expansion
Start new business
Got a job
Income from other sources
(please specify)
Agriculture, fisheries &
poultry
Poor production
Poor sales
Lost job
Other reason

66.67
16.67
16.67
-

41.67
33.33
16.66

54.17
25
8.33
8.33

8.33

4.17

50
33.33
16.67

50
33.33
16.67

25
41.67
16.66
16.67

Decreased
No change
Increased

16.67
16.67
66.66

4.17
12.5
83.33

10.42
14.58
75

The overall savings

trend

House ownership and improvements

The results reveal that most of the households (87.5%) had their own houses before the
loan. However, 37.50 % of the households liv e in medium and good houses, while 62.5 %
live in poor houses after the loan. Some households (39.58%) brought improvements on
their houses, which cost more than Tk. 25000. However significant number of households
(60.42%) did not bring improvements on their houses which cost more than Tk. 25000.
Improvements are mostly made on repairs of houses. Few households (25%) expanded
their houses. Based on the response from households, it is possible to say that GB has to a
limited extent a positive im pact on housing improvements of its clients. Nevertheless, the
impact is not significant.
Table 2: House ownership and housing improvements (valid n=30)
Ownership and status
Have your own house
Quality of the house at
present
Improvements on houses
more than tk. 25000
Kind of improvements on
houses

Indicators
Yes
No
Poor
Medium
Good
Yes
No
Repair
Expansion
Sanitation
Other

Semi-Urban (6)
88.33
16.67
66.67
33.33
66.67
33.33
16.67
33.33
50
-

%
Rural (24)
91.67
8.33
58.33
29.17
12.5
12.5
87.5
16.67
16.66
62.5
4.17

Average
87.5
12.5
62.5
31.25
6.25
39.58
60.42
16.67
25
56.25
2.08

Household expenditure
Table-3 shows that above 20 % of active clients spent not more than Tk.2000 per month
before taking loans. 50 % of incoming clients (control group) spent a less than Tk. 2000 per
month. After taking the loans from GB, the percentage of activ e clients whose average
monthly expenditure was less than tk.1000 and between Tk.1001 to Tk. 2000 remained
same. As indicated in the table, the level of average monthly expenditure of active
clients shifts from the lower expenditure category to the next higher expenditure
category after taking loans. In comparison to the control groups more than 50 % of active
clients had an average monthly expenditure of above Tk. 2000 after taking loans, while
only 50 % of incoming clients had an average monthly expenditure of above Tk. 2000.
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Biswas and Moniruzzaman

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From the results, it is safe to conclude that loans make a difference in increasing
household expenditure. However, after taking loans, the contribution of other family
members increased in bearing expenditure. This is an implication of provision of credit
increases the income generating capacity of the households.
Table 3. Households Expenditure of activ e clients and incoming clients (n=40)
Active clients(30)

Expenditure

Indicators

Average monthly
Expenditure (tk.)

Bearer of expenditure

Incoming
Before loan (%) After loan (%) clients (%)

1000
1001 to2000
2001to 3000
3001 to 4000
4001 to 5000
>5000
Myself
Other family
member
Me and family
Relatives

30
20
20
16.67
13.33
62.5

20
30
26.67
10
10
3.33
50

25
25
23.33
13.34
11.67
1.66
56.25

12.5

33.33

22.92

16.67
8.33

16.67
-

16.67
4.16

Household diet
The responses of experimental and control groups about their diet condition are indicated
in table - 4. The large majority of respondents both in experimental and control groups
reported that their household had eaten meals at a minimum of three times in a day. Less
insignificant number of households reported that their families take meals less than three
times a day. Few respondents reported that the frequency of taking meals in a day
increased after they took the loan from GB. The incidence of food shortage in the last 12
months was negligible which occurred for less than 7 months. Three forth of active clients
reported that there is an improvement in their household diet and one forth responded
that there was no change in their household diet after taking loans. Respondents were
asked why their household diet was improved. 66.67 % of households said that the diet
improvement came from the provision of loans by GB, while the minority (33.33 %)
responded that GB program did not improve their overall household diet. The general
trend in household diet condition is improved after GB program. Most of active clients
secured themselves from food shortage, while 77% of incoming clients secured themselves
from food shortage in the last 12 months. From the results, it is possible to conclude that GB
micro finance program have a positive impact on households diet condition.
Table 4: Households diet condition (n=40)

Diet

Number of
meals in a day

Food shortage
during the last 12
months
Diet
improvement
due to GB
program

Indicators

Once
Twice
Three times
More than 3
times
Yes
No
No answer
Yes
No

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Active clients(valid n=30)

Before loan %
After loan %
Semi
Rural
Semi
Rural
Urban24
Urban 6
24
6
4.17
33.33
8.33
33.33
4.17
66.67
83.33
50
61.67
4.17

16.67

4.17

100

8.33
91.67

66.67

75

33.33

25

Incoming
clients(n=10)
Semi
Rural
Urban
9
1
44.44
100
55.56
100

22.22
77.78

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75

Household access to education

The result of the study reveals that school attendance is better before the loan than after
the loan in active clients and it is lower than the incoming clients school attendance.
88.89 % of activ e clients reported as there is an increase in school attendance at present.
However, about 91.67 % of active clients have indicated that GB program increased their
access to education. On the other hand about 8.33 % of the respondents reported that
GB program didnt increase access to education. Although some of the respondents
indicated a positive change, the majority revealed that GB program hadnt positive
impact on households educational access.
Table 5: Household educational access
Incoming clients
(n=10)

Active clients(valid n= 30)

Indicators

Responses

Presence of
school age
children
Number of
children
attending school
GB program
increases access
to education

Yes

Before loan
After loan
Semi
Rural %
Semi
Rural %
Semi
Rural % Urban %
Urban%
Urban %
100
95.83
100
77.78

No
1 to2
3 to 4
5 to 8
Yes

12
7
2

4.17

22.22

60
36
12

8
7
6
100

20
45
43
91.67

1
2
-

14
16
6
-

8.33

No

Household health and access to medical facilities

The result reveals that about 83.33 % and 79.17% of activ e and incoming clients,
respectively, didnt have sickness or injury incidences in their household in the last 12
months. However, sickness or injury incidence was higher (20.83 %) in active clients than
incoming clients (11.11 %). Incidence of sickness was slightly higher in rural clients than
urban clients. Almost all the respondents (active and incoming clients) had medical
treatment. This implies that they had the capacity to pay medical expenses. All medical
expenses were covered from business profits in the case of active clients and control
groups. About 83.33% of active clients and 100% of incoming clients reported that there
were no changes in their overall access to medical facilities in the last 12 months. The
findings of the study reveal that GBs intervention didnt improve access to medical
treatment and overall health conditions of clients.
Table 6: Health status of households (n=40)

Indicators
Any sickness in the
household during
the last 12 months
Did you get
medical treatment
Source of money
for medical
expenses

Responses

Active client (valid

n=30)

Incoming client
(n=10)
Urban %

Rural %

11.11

79.17

100

88.89

66.67
33.33
100

91.67
8.33
50

100
100

100
55.56

20.83
29.17

44.44

Yes

Urban %
16.67

Rural %
20.83

No

83.33

Yes
No
Business
profit
From friends
Others

Empowerment of women
About 71.26 percent of respondents reported that, the decision to take the loan is jointly
made by the husband and wife. Joint decision-making is better in rural household
(66.66%) than semi-urban households (75.86 %). Besides, 13.50% of the respondents
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Biswas and Moniruzzaman

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reported that only the wife makes the decision on the loan. About 76.43% of
respondents indicated that the decision to use the loan and 59.48% to use the business
profit is jointly made by the husband and wife, while only wife makes 23.57% of loan
usage and 15.23% of business profit decision. No one reported that husband as the only
decision maker on the loans in the household both in semi-urban and rural households.
This indicates that women have at least equal or more power than their husbands in the
decisions on the loan. Out of the total sample respondents, more than 96.55%
confirmed that the participation in GB program raised their confidence in decisionmaking. Similarly about 96.55 % of respondents reported that they have higher level of
self-confidence after taking the loan. The findings of the study revealed that GB
program enhanced womens participation in decision-making and increases their
self-confidence.
Table 7: Empowerment of married women in decision making (valid n=35)
Indicators
Decision maker to
take the credit
Decision maker on
the usage of loans
Decision maker on
the use of business
profit
Do loan
experience add
confidence in your
decision making

Responses

Semi-Urban % - 6 Rural % - 29

Total

Husband and I
Mostly I
Only I
Husband and I
Mostly I
Only I
Husband and I
Mostly I
Only I

66.66
16.67
16.67
66.66

75.86
13.8
10.34
86.2

71.26
15.24
13.50.
76.43

33.33
33.33
66.67

13.8
68.97
17.24
13.79

23.57
59.48
25.29
15.23

Yes

100

93.1

96.55

Discussion
Access to microfinance provides better chance of involving in farm, non-farm & micro
and small enterprises activities. As the result of this households could increase and diversify
their income, ensure food security and reduce poverty. At the household level im pact of
microfinance was measured by net increase in household income, savings, asset
accumulation, housing conditions, expenditure, diet, education, health condition and
improved decision making capacity (empowerment).According to the research
conducted by Appleton (2003) cited in Assefa (2004), education can lift people out of
poverty. The returns from investing in education are on the average lower but the return in
income increment is much higher for those with higher levels of education. However
Intervention of Grameen Bank (GB) did not show a positive im pact on improving access
to education and medical facilities. Poverty and poor health have bi-directional
relationship in which poor health leads to poverty and poverty leads to poor health
conditions. Apart from lack of financial resources to pay for health services, food, clean
water and good sanitation, the poor also suffer from poor health facilities (Daniel, 2004).
Thus, provision of financial services to the poor may improve access to medical facilities
and improve the health conditions of the poor.GB program has a positive impact on
enterprise expansion, increasing job opportunities of the household members and the
community, increase in production and net profit. More than half of respondents
confirmed that their enterprise expansion increased employment opportunities for their
families.
Conclusion
Grameen Bank has shown an encouraging growth in its operation and outreach.
However, the impact is more pronounced in rural households than semi-urban households.
Micro credit program has also raised the households asset ownership. Ownership of assets
in all interviewed clients has increased after the program. The average monthly
expenditure of active clients shifted from the lower category to the next higher category
after joining GB program. Almost half of active clients indicated that their diet condition
have improved due to GB interventions.. GB program has a positive im pact on enterprise
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Micro-Finance in Poverty Alleviation of Bangladesh

77

expansion, increasing job opportunities of the household members and the community,
increase in production and net profit. Most of respondents indicated that their overall
saving has been increased and developed their saving habit. Thus, microfinance
intervention has a positive impact at the household and enterprise levels. This implies that
microfinance institutions specially GrameenBank has an important role in poverty
reduction.
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Kajang, Daniel. R. (n.d.). Organization and Management of Health Services in Nigeria:
1960-2004. Abuja, Nigeria
M. Y. (2006, December 10). Noble lecture presented at the Nobel Prize ceremony. Lecture
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