Role of microfinance in alleviating Covid-19 induced poverty in Bangladesh
NGOs initially conducted their activities through relief activities to assist in the rehabilitation and livelihood of war-affected people. At present, national and international NGOs are implementing multifaceted social development programmes.
Coronavirus disease-19 (Covid-19) has made the world upside down. In December 2019, the coronavirus was first detected in Wuhan, Hubei Province, China.
It was detected in Bangladesh in March 2020. As of today, that is, till May 2021, for a period of one year and three months, this disease has changed the whole world including Bangladesh from all aspects. Worldwide infection and death rate by Covid-19 are increasing day by day.
Covid-19 has made our familiar world unfamiliar in all respects. It has also changed the way people live. There have already been many studies on the social, economic, political, health, and psychological impact of this disease. Considering only from the financial point of view, the impact of this disease is greater all over the world including Bangladesh.
According to various statistics, about two and a half crore people in Bangladesh have become poor again in these15 months. The actual number is probably even higher.
Microfinance can play an effective role in tackling the poverty of this huge poor population. In particular, microfinance managed by non-governmental organizations (NGOs) can play an effective role.
Because, we know that in the post-independence period, NGOs started extensive activities to improve the socio-economic condition of the poor in this country.
NGOs initially conducted their activities through relief activities to assist in the rehabilitation and livelihood of war-affected people. At present, national and international NGOs are implementing multifaceted social development programs.
Microfinance activities are one of them. Although there is criticism of microfinance activities, a number of studies at home and abroad have shown that it plays a significant role in alleviating the poverty of the poor. Thus, it can be said that microfinance will be able to play an effective role in the current poverty situation.
According to an article published in April 2020, more than 700 organizations (most of them NGO-MFIs) across the country have provided microfinance worth over Tk 150,000 crore to around 30 million poor, destitute, and low-income people to alleviate poverty.
These people have gained self-reliance by using microfinance in production-related activities such as poultry farms, dairy farms, small cottage industries, vegetable gardens, fish farming, small businesses, shops, etc., as well as they were emerging as a supporting force in domestic production.
As a result, a large portion of the households who were poor and destitute were able to reduce poverty status. In addition to self-employment, many of them created employment opportunities for others. With microfinance loan, they became self-sufficient by producing vegetables including poultry, cattle, fish, etc.
May be mentioned that a large section of the rural and urban poor in Bangladesh are deprived of access to institutional (especially state and commercial banks) credit facilities. Their only source is borrowing money from private institutions or individuals.
Most of them borrowed money from NGO-run microfinance and various private financial service providers. Through microfinance they have not only alleviated poverty financially, they were also in the circle of the social awareness programs.
They have been aware of family health, child education, safe water, and sanitary latrine use, etc. They have become socially dignified. Above all, financial well-being has given them the opportunity to establish themselves as ‘human being’ and all these has been made possible through the proper use of microfinance.
According to another published article, Bangladesh’s microfinance sector has developed with about 33 million beneficiaries. Assuming five members in each beneficiaries’ family, the total population receiving microfinance services is about 150 million, which is 83 percent of the total population of Bangladesh. About 2.5 million workers are working in the microfinance sector and they are providing livelihood support to about 12.5 million people of their families.
It has been proved that it is possible to improve the living standards of the disadvantaged poor people of Bangladesh by creating necessary financial and social initiatives. The role of NGOs and microfinance institutions in promoting women’s development and rights in rural and urban slum areas, financing small and medium enterprises, providing assistance in going abroad through providing necessary loans has been recognized and established.
And so the sector that is considered as a role model in the economic and social progress of post-independence Bangladesh is the NGOs and microfinance institutions of this country.
Despite all this, there is still some ambiguity among the mass people about the activities and accountability of microfinance institutions.
In Bangladesh, NGO-MFIs are regulated by a government regulatory body namely Microcredit Regulatory Authority (MRA). In addition to the MRA, another government agency Palli Karma-Sahayak Foundation (PKSF) is also partially controlled the NGO-MFIs. So, NGO-MFIs have accountability.
There are also various development projects conducted with the help of different foreign donor agencies. Organizations that implement such projects have to submit regular reports and get clearances from the NGO Affairs Bureau under the Prime Minister’s Office for this purpose.
In all cases, NGO-MFIs have to submit annual audit reports. They also have to submit regular reports to the income tax office. In this multifaceted and rigorous accountability structure, there is little chance for mismanagement in the microfinance sector.
So, the misconception that microfinance institutions are lending and taking service charges at their own whim is completely unfounded. Compared to other countries in the world, microfinance institutions in Bangladesh are now much more accountable and under government control.
However, we still know that some unregistered organizations cheat their beneficiaries, but their number is very low and it has come down due to strict surveillance.
In the light of the personal experience of the last decade and a half, I can say that there is no precedent for anyone to be disadvantaged by microfinance. There may be a few exceptions. Rather, the loan money has been invested in income-generating activities. Supervision of microfinance officers has played an important role in this regard.
Many of the borrowers have overcome their poverty and become self-reliant with microfinance. Families who could not eat three meals a day can now eat three meals a day.
They can send their children to school, get the necessary health care when they are sick, many have benefited from the proper use of their loan money, have developed houses, and have also become the owners of movable and immovable property. Most of the households have electricity connections.
They have television for entertainment and even many families have been seen using the fridge. Thus, it can be said for sure that the poor will be able to overcome their poverty through the proper use of microfinance. In this case, it is needed to have a proper work plan and to keep the regular flow of loans for the beneficiaries.
The poverty rate has risen again as the poorest and most vulnerable people have been affected by the Covid-19 Pandemic. In this situation, we think that it is possible to tackle and overcome the poverty situation through the proper use of microfinance and by bringing the newly created poor people under the microfinance scheme.
The Government of Bangladesh has allocated incentive packages for microfinance institutions. As a result, microfinance institutions have started disbursing microfinance among the poor at a low service charge. In addition to providing loans, they are also raising awareness about coronavirus disease among beneficiaries.
In Bangladesh, almost 85 percent of people are working in the informal sector. This huge population has all experiences, qualifications, and skills. But Covid-19 has broken their financial foundation.
In this situation, it has become necessary to strengthen microfinance activities for this large portion of the poor people. They can engage them in the production process through using microfinance and gradually they will be able to overcome their poverty situation.
Therefore, it is strongly believed that microfinance will play an effective role in alleviating the poverty of the poor people who have become poor due to Covid-19. In this case, the government’s policy support and financial incentives are needed.
ছাড়া আরও পড়ুনঃ
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