Microfinance refers to very small loans that are provided to the destitute people of least developed and developing countries to alleviate poverty by engaging them in productive activities. This tiny loan is provided without any collateral to those who do not have access to the formal financial institutions like banks. Over time, the scope of microfinance has been expanded by including micro savings, micro insurance, micro enterprise and other micro financial services into it. The emergence of microfinance concept is in Bangladesh, and more than one thousand registered NGOs are presently working over there for alleviating poverty through microfinance operations (Shamsuddoha, M. 2004). Out of them BRAC (Bangladesh Rural Advancement Committee) is one of the largest micro financer institutions. I have got a little working experience in the micro credit section of this organization. It is expected to obtain data and information easily required for my dissertation being a Bangladeshi and having a relationship with BRAC. That's why I have chosen this title. Moreover, I have eagerness to pursue advanced research on the same issue in future.
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Microfinance is considered to be an effective means of poverty alleviation and an approach to empower the destitute people especially rural women who lead their lives through without any economic and productive work. Because prevailing social customs of Bangladesh act against poverty alleviation by defying participation of women in various anti-poverty programmes. In my study, I shall emphasize to measure the efficacy of microfinance operations i.e. to what extent microfinance operations is effective to eradicate poverty and empower destitute people. In other word, if there is any positive correlation between the microfinance operations and improvement in livelihoods. A number of NGOs and government organizations have been operating microfinance operations for long time in Bangladesh. A village where BRAC, one of the most famous NGOs, has been conducting its microfinance operations will be selected as a sample area and all primary data are expected to be collected by survey from there.
Though microfinance is contemplated as an effective tool of poverty alleviation and empowerment of the destitute people, however, it is frequently observed that the fortune of the beneficiaries is as like as before, even it is learnt from media that some participants have committed suicide or they are hiding to escape from pay loan back taken from different microfinancer institutions. These scenarios reflect quite opposite views of microfinance success. In view of these types of scenarios, I feel that it is quite relevant to pursue my research on microfinance operations.
I shall use "before and after" scenario analysis method to measure impact of microfinance operations on the livelihood of the beneficiaries. In other word, I shall emphasize on comparison the socio-economic condition of beneficiaries before and after joining in microfinance operations and try to work out degree of changing the socio-economic status.
Empirical research will be conducted to measure impact of microfinance operations, where all primary data relating to socio-economic status of the beneficiaries will be gathered from field survey. In this case, empirical research is appropriate, because microfinance operations are independent variables that affect livelihood of beneficiaries which is known to be dependent variable.
Two groups will be involved in my research domain to be known as primary and secondary group. The primary group is the destitute people of a village of Bangladesh who are prime and only clients of microfinance especially poor women who do not have access to formal financial institutions. The secondary group may include the micro financer institutions especially BRAC who provides funding for the programmes. The tentative time frame of primary data collection is on middle of February, 2009.
2. Dissertation Background
"With an estimated 1.3 billion people of the world (approximately one third of the world's population) living on incomes of less than $1 a day" (Ahmed, S., 2004). Obviously, they are living under the poverty line and microfinance has emerged as a panacea of poverty alleviation among the poor people. "Many achievements are claimed about the impact of microfinance programmes, and an outside observer cannot but wonder at the range of diversity of the benefits claimed" (Ahmed, S., 2004). As mentioned earlier that many scenarios reflect quite opposite views of microfinance success, so there is a contrariety view noticeable about the success of microfinance operations. In my research I would like to explore the fact and this is the reason to choose this subject area.
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Now-a-days microfinance concept has been magnified including other micro services alongside micro credit like micro savings, micro insurance, micro enterprise and other micro financial services. Moreover, currently microfinance operations insist on changing the social attitudes of participants towards education, dowry free society, nutrition, women's participation in decision making etc. rather than only financial matters. That's why government of respective countries views of microfinance operations as strategic partner of development. At present most of the beneficiaries, even in some cases it is 100%, are rural destitute women, however at the introductory phase both men and women were under this programme equally.
Main references which are expected to be used in my study are enclosed in Appendix I (Further Reading)
At the very beginning, microfinance programme was limited within micro credit operation only and whole programmes were governed by few non-government organizations (NGOs). However, a number of micro credit programmes have been initiated by the state-owned (Nath, D.K. 2004) and private owned banking sectors alongside NGOs. In the introductory periods, micro financer institutions (MFIs) were thought of competitor of government and the programme was confined only giving tiny loan to the rural poor people but the other section of poor people who lived in urban area were ignored. Before two decades, microfinance programmes had not included other social development concepts except individual economic development. As a result, there was no chance to build up social capital rather than only financial capital.
Main references which are expected to be used in my study are enclosed in Appendix I (Further Reading)
3. Dissertation Aims and Objectives
The objectives of the proposed study are framed in the following terms:
To identify the socio-economic background of the microfinance beneficiaries and examining reasons of seeking microfinance facilities;
To measure impact of microfinance operations on the livelihood of beneficiaries and;
To recommend some guideline to implement the programmes more effectively.
It is my presumption to be faced some difficulties in the course of my dissertation. Some of these are identified as follows:
The study has to be accomplished within an estimated time of about three month is not enough for developing a new paradigm of microfinance operations.
Non-probability sampling design will be used to select a sample village to measure the socio-economic impact of microfinance operations, so the question of representativeness of the sample may arise while interpreting the result.
To the best of my knowledge, people who are expected to be sample respondents are mostly illiterate. It is presumable that due to their illiteracy, expected answers will not come out against the questionnaire as they are unable to fill up questionnaire by themselves.
In addition, bashfulness of women respondents in answering the questions could be another problem of the study, because most of sample respondents will be women and as per social custom of Bangladesh, they are reluctant to meet any male researcher which may cause inconvenient of access and availability of primary data.
It is presumable that all necessary statistical tools can not be used to interpret the findings because of limited time and lack of technical skill which may raise question of reality and pragmatism of the findings.
In light of difficulties mentioned above, the possible way of gathering accurate primary data is to be acquainted with the sample respondents before starting survey and in need, taking cooperation from local representatives. Sample size should be small considering limited time and inadequate usages of statistical tools, however only major statistical tools could be used. Being illiterate the respondent's questionnaires could be filled up by the surveyor on behalf of them.
There are many ethical issues involved with microfinance operations. Out of them three major issues are noteworthy - (a) high interest rate, 28% - 30% p.a., is charged on loan (Mahmud, W. 2003), (b) hidden charges and (c) too much pressure is exerted on the loanees if they are failed to pay their daily installment, which forces some of beneficiaries to commit suicide or hide themselves to escape from their pressure.
The individual measurable objectives of the study are to measure the following five variables.
Annual Income: Annual income of the respondents will be determined after joining microfinance operations and compare to that of before joining. Yearly income from different sources will be added together to obtain the total income.
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Yearly Employment: Yearly employment will be measured in terms of the days worked by respondents in a year and if there have new employment opportunities been created after joining microfinance operations will be considered as well.
Tangible Resources: Land holding and other major assets including livestock, poultry, house and modern amenities will be measured using "before and after" scenario method.
Contribution to family expenditure: Yearly contribution of the respondents to their family expenditure such as, for food, clothing, children's education, health care, nutrition and so forth that is meeting from their own income will be determined.
Savings: Total amount of money saved by the respondents during one year after meeting yearly expenditure from income will be determined.
The above mentioned measurable objectives have significant financial and non-financial implications. It is revealed from different researches that the participants of microfinance operations have been able to upgrade their socio-economic status by involving themselves into various poverty alleviation programmes. They have been able to deploy themselves into more productive works and better occupations which generate high income, create more employment opportunities, and change attitudes towards education, health care, nutrition and savings which are inevitable for the development of individual socio-economic condition as well as country's long-term sustainable economy.
4. Research Programme
In my dissertation, I shall emphasize to answer the following questions.
To what extent has microfinance operations been able to generate employment opportunities and to increase income level?
To what extent has microfinance operations been able to create self-awareness among the beneficiaries with regard to health care and nutrition?
To what extent has microfinance been able to change attitudes of beneficiaries towards education, decision making, saving?
"The quality of any impact assessment study relies heavily on the authenticity, robustness and integrity of the primary ingredient: data" (Ghalib, A.K. 2007). All primary data are expected to be collected through field survey by a questionnaire. With a view to collect primary data, a village will be selected using non-probability sample design where microfinance programmes have been operating for minimum five years long.
Several secondary data are expected to be used and collected from different books of microfinance, journal articles, official publications of microfinance institutions, internet etc.
The proposed study will be an empirical one and both primary as well as secondary data will be used in this research. It is expected that one village viz., Jaheedpur under Kumerkhali police station in Kushtia district of Bangladesh will be the sample area for collecting primary data. Field study is expected to be started in the month of February, 2009. For collection of primary data, about 200 loanees having minimum 4 years experience of microfinance operations will be selected by random sampling and interviewed with a semi-structured questionnaire, which includes two sections; first section consists of general information of respondents such as age, name, educational background, household-size etc. and reasons of joining microfinance programmes. In the second section, routine information will be collected regarding micro credit, and its economic return, resources owned by a respondent, contribution to his/her family expenditure and saving for measuring economic impact. Since the respondents are unable to fill up the questionnaire because of their illiteracy, I shall ask questions and fill up on behalf of them. Primary data collected will be tabulated and statistical measures such as tally, frequency distribution, range, mean, standard deviation, correlation and regression will be used in describing the variables.
It is expected to have the following outputs from my dissertation.
A brief idea about microfinance operations of BRAC and the socio-economic status of the participants.
Reasons why the poor people are participating in microfinance programmes.
Whether the participants have been able to upgrade their fortune after joining microfinance operations.
Whether microfinance operations have been able to grow self-awareness among the participants and change attitudes towards education, health care, nutrition, saving etc.
Overall the changes of poverty level of the participants after joining microfinance operations.