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Microcredit and poverty alleviation

15 June 2004, 18:00 PM
LETTERS TO THE EDITOR
By A K Al-Quaderi, Dhaka
15 June 2004, 18:00 PM
. PHOTO: STAR
The innovative, widely publicized microcredit system for poverty alleviation has not been universally acclaimed as a wonder. According to the supporters of microcredit system, it is a form of banking for profit earning. In terms of percentage of credit recovery, this is a very successful modern banking exercise. Very few of even those who do not like the NGO culture, disagree on this point. But the actual help reaching the needy small creditors also worries general people and even governments. Added to this is the worry that monetary aid through microcredit does not benefit the poorest of the poor. So the actual extent of poverty alleviation cannot be significant.

Recent research on microcredit and its so called 'success' carried out recently in Bangladesh by qualified experts has revealed the fact that the best beneficiaries of microcredit are not the real have-nots but those living above the poverty line (vide interview conducted and broadcast by BBC about a month ago).

Even Amartya Sen, the Noble Laureate economist, openly admits that the index of success, in conventional economic terms, of microcredit does not reveal the actual micro-economic picture. Therefore we should not have complacence about the success of the microcredit system.

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According to the Bangladesh researchers, providing small loans does not solve the problems of the real poor. Instead of cash credit, they prefer to have new jobs.

Application of "technology for human welfare' would provide the most effective means of helping the poorest of the poor who form the bulk of the disadvantaged people in the third world.