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The Evolution of Micro credit Programs in Bangladesh

Micro credit is one of the ways of poor to acquire assets and to become productive. This kind of program was first attempted in 1976, when Professor Dr. Muhammad Yunus[1]. a Bangladeshi economics and first Nobel laureates, introduced an experimental project to best whether the poor were creditworthy physical collateral.
Using the mechanism, poor people become able to form groups to gain access to institutional credit. The mechanism also allowed credit to reach the poor, especially women. Post seven years of experiment, has idea taken formal shape as a bank with its own charter. In this way, Gramen Bank (GB)[2] was formally established in 1983.
The pioneer of the NGOs in Bangladesh is called Bangladesh Rural Advancement Committee (BRAC)[3] was established in 1972 as a charitable organization to help resettle households displaced during the 1971 war. BRAC’s founder F.H. Abed soon realized that relief simply maintained the status quo was inadequate to alleviate poverty. BRAC’s always focused on the reasons of rural poverty and try to develop a framework for poverty alleviations.
BRAC’s works with the delivery mechanisms of organizational imports, such as skills promotion and consciousness rising of consciousness,
When GB considers credit as the need of the poor to create and export self employment opportunities where as BRAC considers the poor need skills development and other organizational inputs.
It has never, at first, defined credit as a central instrument for poverty alleviation. Rather it believes that economic dependency on exploitative village economic structures is the ultimate cause of persistent poverty.
It has never, at first defined credit as a central instrument for poverty alleviation. Rather it beelines that economic dependency on exploitative village economic structures is the ultimate cause of persistent poverty.
Following the examples of GB and BRAC, the government of Bangladesh introduced a group based targeted credit approach based on the Comilla model of two their cooperatives which was designed and implemented by Akhter Hamid khan in the 1960s as the name of Bangladesh Academy for Rural Development. The idea involves organizing formers into cooperative societies in order to distribute modern inputs, such as high yielding crop varieties, fertilizer pesticides, irrigation and subsidized credit.
Following Bangladesh independence in 1971, the government adopted the Comilla model as the basis for national development as part of the integrated Rural Development program (IRDP). The Bangladesh rural development Board (BRDB) under the ministry of local Government was established in 1982 to replace the IRDP it was based on two tier cooperatives. Thus cooperatives provided members with skills development, training in group leadership and management and access to credit. Saving mobilization even was also a part of the program.[4]

[1] Muhammad Yunus, a U.S.-educated professor of economics started a similar experiment. Around 1974 during a famine in his native Bangladesh, Yunus discovered that very small loans could make a significant difference in a poor person’s ability to survive. In 1976, Yunus founded the Grameen Bank to make loans to poor Bangladeshis. Since then the Grameen Bank has issued more than ....5 billion in loans to several million borrowers-at the close of 2005 the number of outstanding loans is more than 4 million. In 2006, Yunus and the Grameen Bank were honored for this achievement with the Nobel Peace Prize.

[2] The Grameen Bank is a credit institution created to meet the financial needs of landless poor farmers of Bangladesh. The Bank started its operation in 1976 based on a concept visualized by professor Muhammad Yunus. Since its establishment, its establishment, the Grameen concept has been acclaimed internationally, as it has reversed conversed conventional banking practice by removing the need for collateral and created a banking system based on mutual trust, accountability and creativity. During its operation in Bangladesh for last 22 years, Grameen Bank has become the largest rural financial institution of the country having 128 branches which serves 38.500 villages and 2,300.000 borrowers. Grameen Bank model of rural financing has been replicated in 223 programs distributed in 58 countries of the world with the aim of poverty alleviation.

[3] BRAC is one of the largest non-governmental organizations of the country. Its most important programs include rural development imparting livelihood skill and providing micro-credit, non-formal education, health and social awareness programmes covering the entire country.
[4] Shahidur R. Khandker, Fighting Poverty with micro credit: Experience in Bangladesh, The University Press limited, Dhaka, 1999, P.17