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Local Economy
The effectiveness of the 28(1) 85–98
! The Author(s) 2012

microcredit programme Reprints and permissions:

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in Bangladesh DOI: 10.1177/0269094212466036

lec.sagepub.com

M Twyeafur Rahman
University of Strathclyde, Glasgow, UK

Hafiz TA Khan
Middlesex University, London, UK

Abstract
Since 1978, ASA has worked with poor vulnerable people to improve their socioeconomic status
through delivering microcredit programmes in Bangladesh. This study aims at examining the
effectiveness of the ASA microcredit programmes. It finds that ASA plays an important role in
increasing the socioeconomic status of its beneficiaries and that there is a significant positive effect
of the duration of involvement with ASA. Further, the effectiveness of the microcredit programme
decreases with lack of sufficient amount of loans and training provision.

Keywords
anti-poverty programmes, ASA, Bangladesh, beneficiaries, development, evaluation, logistic
regression, logit models, microcredit, microfinancial institutions, poverty, rural poverty

Introduction microcredit programme through its adoption

of the group approach2 to fight against pov-
According to the Grameen Bank (2009), erty (Morduch, 1999). Microfinancial institu-
microcredit is a special type of financial ser- tions (MFIs) have provided financial services
vice for people who are underprivileged, to poor people through the group approach
unemployed, and unable to provide collateral on the basis of trust and personal relation-
to access the traditional banking system. The ships between staff and borrowers, although
term ‘microcredit’ refers to programmes they take into account the income sources
which provide small loans and other financial
services without any sort of collateral for Corresponding author:
Hafiz TA Khan, Department of Economics and
empowering women, supporting self-employ-
International Development, Middlesex University
ment, and raising awareness (Daley-Harris, Business School, Middlesex University, The Burroughs,
2006; D’Espallier et al., 2011). The Hendon Campus, London NW4 4BT, UK.
Grameen Bank1 created a new type of Email: [email protected]

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86 Local Economy 28(1)

and inventories of households, for example stand for Association for Social
bicycles, rickshaws, furniture, electric goods Advancement, but it is currently known by
(Fernando, 2005). The objectives of the its acronym ASA which means ‘hope’ in
group approach include encouraging savings, Bengali. Over the past few years, a large
improving the debt collection rate and the number of MFIs have been established
creation of platforms for providing training both locally and nationally in Bangladesh.
to borrowers so that they may gain confi- Today ASA has spread its operations to all
dence in tackling problems such as domestic parts of the country and has also been
violence, oppression, injustice, and illegal expanding activities gradually to some
divorce (Zohir et al., 2001). Microcredit pro- other parts of the world in a way similar
grammes also target small and medium enter- to that of the other large NGOs in
prises (SMEs) for developing the Bangladesh. Although Bangladesh is the
socioeconomic status of poor people and pioneer in microcredit programmes, the evi-
easing the unemployment problem. It is not dence from Bangladesh regarding their
only widely known as a supportive pro- effectiveness is as yet inconclusive.
gramme for the poor but is also strongly Thus extensive research is necessary to
believed to be a successful programme assess the effectiveness of the microcredit
model that has managed to pull tens of thou- programme. Huge numbers of poor people’s
sands out of poverty. lives are touched by it, but there are other
The main research objective of this study reasons for assessing the impact of the
is to explore the views of borrowers towards microcredit programme. MFIs obtain
the microcredit programme in order to funds from bodies such as the International
evaluate the effectiveness of the programme. Fund for Agricultural Development
It focuses on the impact of the borrowers’ (IFAD), the European Union (EU), the
socioeconomic characteristics, including Asian Development Bank (ADB), the
income, living status, repayment, business United States Agency for International
skill, technical skill, social awareness, and Development (USAID), and the
child education, and how the effectiveness Department for International Development
of the programme correlates. (DFID). In addition, a recent study con-
Bangladesh has become well known to ducted by the CGAP (Consultative Group
the international community because of its to Assist the Poor) has revealed a growth
programmes and activities. Grameen Bank, rate of 15% for the world’s leading microfi-
BRAC International Ltd, PROSHIKA nance providers over the last five years. They
and ASA are world-renowned non- are also making double the profit of the com-
governmental organizations (NGOs) based mercial banks. Moreover, according to the
in Bangladesh, and have played important Second Poverty Alleviation Microfinance
roles. ASA is focused only on microcredit Project (2007), the World Bank has dis-
programmes, whereas Grameen Bank and bursed $15 m for the years 2008 and 2009
BRAC International have provided other in Bangladesh. Recently, the Government
services such as health, education, and vari- of India has expressed great concern over
ous types of awareness programmes along the activities of MFIs and is thinking about
with the microcredit programme. Although introducing an ordinance for cutting the
there is no basic difference among these interest rate charged, requiring borrowers
three organizations in terms of disbursing to make monthly repayments instead of
loans, to undertake this research we have weekly (Banyan, 2010). Exploring the experi-
selected ASA, since it only focuses on ence of beneficiaries in the micro financing
microcredit programmes. ASA used to activities in Bangladesh is a timely exercise.

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Rahman and Khan 87

The following section provides a little world (Forbes, 2007). ASA has been per-
more background on ASA and offers a forming well, although its memberships
review of some of the existing literature on declined to under six million in 2009
the activities of MFIs. The section after that whereas Grameen Bank managed to reach
introduces the methodology used in this around eight million in the same year
study. The final sections set out results (Figure 1).
and policy recommendations. The microcredit programme appears to
be an effective tool for reducing poverty
Context and background that increases income, production and sav-
ings among the poor people in Bangladesh
ASA international (ASAI)3 was formed to (Halder and Mosley, 2004; Latif, 1994;
assist microfinancing services around the Matin and Hulme, 2003; Rahman and
world with funds from commercial and pri- Khandker, 1994). It has played an import-
vate investors. Under the banner of Green ant role in reducing poverty, in promoting
Field Operation, ASAI helps providing gender equality, human rights, and legal
funds and technical assistance for MFIs to aid, and in disaster management and land
alleviate poverty globally. For this purpose, reforms (World Bank, 1996). Studies have
Catalyst microfinance investors (CMI),4 a also revealed that the microcredit pro-
limited liability company incorporated gramme has enhanced women’s socio-
under the laws of Mauritius, having economic status by increasing their
US$125 m, invests in different countries mobility, decision-making ability, social
around the world through ASAI. awareness, education, and scope of employ-
Gradually, ASA is extending a cost-effective ment (Datta, 2004; Pitt et al., 2003; Ullah,
and sustainable model for microfinance 2004; Zaman, 2001). Marguerite Robinson5
activities across the world. At present it pro- (1997: 41) stated that: ‘Credit is a powerful
vides technical assistance in The tool but only for those borrowers who have
Philippines, Cambodia, Sri Lanka, India, the ability to use it properly and repay it on
Pakistan, Nigeria, Ghana, Afghanistan, time’.
and China (ASA, 2008). Khandker (2005) assessed the impact of
In 2009, ASA had almost five and a half microcredit programme in Bangladesh by
million members in Bangladesh of which using panel data from a household survey
71% were women. It operates in 3011 for the years 1991–1992 and 1998–1999.
rural and 283 urban branches in the coun- It was found that the poverty rate reduced
try. In 2010, ASA reported that the out- by 20% during the period and microcredit
standing loan amount (principal) in contributed to half of the reduction.
Bangladesh was US$343 m and that the However, Khandker expressed concern
rate of recovery was 99.59%. ASA charges over the impact of the microcredit pro-
an interest rate of 12.5% (flat rate) on its gramme. As the amount of loan granted is
lending (ASA, 2010). On 3 June 2008, the generally very small, the borrowers on the
Financial Times (London) and International whole have failed to boost growth where the
Finance Corporation (IFC) jointly awarded growth of the economy overall is very low.
ASA the FT Sustainable Banking Award Recent studies show that the microcredit
under the category ‘Banking at the Bottom programme has a positive impact on the
of the Pyramid’, for its cost-effective and economy (Bruhn and Love, 2009; Kaboski
sustainable model (ASA, 2008). In 2007, a and Townsend, 2009). In the programme
survey in the US-based Forbes Magazine areas, business ownership and employment
found that ASA was the top MFI in the rates have also increased. Moreover,

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88 Local Economy 28(1)

Figure 1. Number of members in millions.

Kaboski and Townsend (2005) concluded (Khan, 2003). Matin (1997) has explored
that MFIs with effective policies had concerns about the debt trap of Grameen
assisted asset growth, consumption smooth- Bank borrowers. Borrowers of this institution
ing, and occupational mobility. Their study are compelled to sell their land or borrow
showed that ‘The Million Baht Village’ from other sources if they fail to repay
microcredit programme increased benefici- weekly instalments. This could happen, for
aries’ income and consumption but example, if funded projects did not generate
decreased future assets (Kaboski and enough income to pay the instalments. On
Townsend, 2009). the other hand, Osmani (2007) did not find
Despite some considerable development any evidence of such a debt trap after infor-
and achievements by the MFIs, their activ- mal discussion with the borrowers.
ities have been under threat from officials, the Zohir et al. (2001) found a significant
business community, religious groups, polit- positive correlation between group function-
icians, local muscle power, and fundamental- ing and group members’ performances. The
ists (Karim, 2004; White, 1999). Criticisms success of a microfinancial organization
have been concerned with the use of a high depends on the group formation that brings
interest rate, the possession of money and joint liability among the group members
power without accountability, the alleged especially through peer selection, peer moni-
embezzlement of foreign funds, and involve- toring, and peer pressure (Godquin, 2004).
ment in local and national politics and Loan recovery is expected to increase
profit-making business ventures. MFIs’ through social ties and homogenous groups
accountability is not clear in Bangladesh because they facilitate peer monitoring
and an accountability system to clients still (Besley and Coats, 1995). Moreover, Zeller
suffers from a number of deficiencies (1998) has found that there are positive

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Rahman and Khan 89

effects of group lending which results in reduce sales fluctuations. Sharma and
higher repayment. Earlier studies have Zeller (1997) have shown that ASA,
emphasized the effectiveness of peer selection BRAC, PROSHIKA provide training activ-
and group homogeneity in leading to higher ities in different areas such as entrepreneur-
repayment rates (Ghatak, 1999 and Zeller, ial skill development, managing micro
1998). An empirical study on 128 credit enterprises, shop keeping, crafts produc-
groups from Grameen Bank, ASA and tion, general awareness, family planning
BRAC in Bangladesh by Sharma and Zeller activities, and so forth. However, Karlan
(1997) suggested that variation of assets and Validivia (2007) warned that the pro-
owned by the group members, even if it is grammes were losing some clients due to the
little different in terms of land owned, has a duration of meetings that took place every
negative impact upon the group. Sharma and week, putting people off from seeking fur-
Zeller (1999) confirmed that ASA maintained ther loans. It is claimed by Langer et al.
the following criteria regarding their pro- (1999) that more than 90% of programmes
spective borrowers’ selection: in the US focus on training activities,
having transferred from an earlier focus
(1) land owned by the borrowers is less on loans. By contrast, developing countries
than one half acre; like Bangladesh, Indonesia, and Bolivia
(2) monthly income is not over TK1200; used to focus on training but they are cur-
(3) people sell labour for at least 200 days rently focusing more on loans (Schreiner
in a year. and Woller, 2003). Servon (2001) has
revealed that some fund providers prefer
It is evident that ASA, BRAC, to pay for the loans rather than training
PROSHIKA are mainly targeting those but some of them still provide training to
people who are landless or almost landless their borrowers in order to get funds from
households that are the poorest of the poor donors. Schreiner and Morduch (2001) have
(Sharma and Zeller, 1999). Yunus6 (1999, disclosed four reasons for avoiding training
cited in Karlan and Validivia, 2007: 140) activities in developing countries:
stated that:
(1) most of the businesses are relatively
I firmly believe that all human beings have
an innate skill. I call it the survival skill. simple and lenders expect borrowers to
The fact that the poor are alive is clear know about their businesses;
proof of their ability. We do not need to (2) borrowers will blame lenders’ training
teach them how to survive. So rather than programmes in case of project failure –
waste our time teaching them new skills, we so lenders may face problem of getting
should try to make maximum use of their regular instalments from borrowers;
existing skills. Giving the poor access to (3) it does not necessarily follow that an
credit allows them to immediately put into efficient lender would be an efficient
practice the skills they already know. trainer; and finally,
(4) training programmes incur some extra
Karlan and Validivia (2007) have found costs for the lenders.
that training is useful for microcredit in
terms of high repayments rates and client
retention. After receiving training, partici- Data and methods
pants are able to show greater business
knowledge, including keeping records of Earlier studies have applied a logit model in
their businesses, and are also able to order to assess the effects of the microcredit

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90 Local Economy 28(1)

programme, especially on social awareness rate was made possible by the hard work
and the empowerment of women, and of the interviewers as well as support from
found positive impacts (Mahmud et al., the targeted women borrowers sampled for
2007; Zaman, 2001). This study is based interview.
on a primary dataset that had been initially We summed up the respondent points for
collected for studying microcredit pro- the nine Likert-Scale questions that were
grammes and ASA activities in asked to measure the effectiveness of the
Bangladesh. Respondents were selected programme. The maximum and minimum
from ASA beneficiaries who had been scores were 45, if respondents strongly
involved in the microcredit programme for agreed with the nine statements, and
at least three years. The questionnaire nine if respondents strongly disagreed
design included a five-point Likert Scale (Table 1). We considered that borrowers
(Adams et al., 2007; Dawes, 2008) which who scored at least 90% from the nine
was used to explore beneficiaries’ attitudes Likert-Scale questions believed that their
towards their welfare under the ASA’s welfare had improved as a result of the
microcredit programme. Respondents were microcredit programme hence ‘improved
given five options to reveal their opinion beneficiaries’ were coded as 1, other-
from ‘strongly agree’ (5 points), ‘agree’ wise ¼ 0. Beneficiaries’ improvement wel-
(4 points), ‘neither agree nor disagree’ fare was defined as those who had
(3 points), ‘disagree’ (2 points), and improved their income, economic status,
‘strongly disagree’ (1 point). business and technical skills, and whose
Borrowers were asked questions about assets had grown after joining the pro-
incomes, training, economic status, repay- gramme. Also taken into account were atti-
ments, business skills, technical skills, tudes towards the contribution the ASA
social awareness, and children’s education. programme had made to improved welfare.
Borrowers from the Noakhali and Comilla The four selected independent variables
districts of Bangladesh were targeted and were:
the survey was undertaken in September
2009. Prior to conducting the interviews (1) time with the ASA (AgeASA);
approval was sought and granted from the (2) sufficient amount of loan provided by
President of ASA as well as their research the ASA (Loansufficiency);
division. It should be mentioned that enor- (3) training provided by the ASA
mous support was received from District (Provtraining), and
Officers of Noakhali and Comilla regions (4) involvement with other NGOs or credit
during the survey. Two neighbouring dis- organization (OtherNGO).
tricts were chosen for the study because of
their cultural similarity to each other. Details of the dependent and independent
Proper training was given to the inter- variables are presented in Tables 1 and 2
viewers on various aspects of data collec- respectively. To understand the effects of
tion. The questionnaires were subsequently the independent variables on beneficiaries’
checked by field supervisors as well as improvement we employed both bivariate
rechecked by data entry operators. There as well as multivariate analyses. For bivari-
were 166,243 borrowers in the two districts. ate analysis we carried out cross-tabulations
In total 400 questionnaires were distributed for the dependent variable with the inde-
randomly among borrowers and finally pendent variables and performed Chi-
397 respondents were interviewed success- square tests for associations. Finally, the
fully (nearly 99%). The high response logit model was built using all the

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Rahman and Khan 91

Table 1. Descriptions of survey questions used for constructing the dependent variable (improvement
in beneficiaries’ welfare).

Measurements/categories

Neither
Strongly agree nor Strongly
Descriptions agree Agree disagree Disagree disagre

Do you think that microcredit programme of ASA 169(42.6) 204(51.4) 16(4.0) 7(1.8) 1(0.3)
has helped you to improve your family status
through generating income? (INCOME)
Do you think that the ASAs training programme 114(28.7) 216(54.4) 40(10.1) 24(6.0) 3(0.3)
is effective due to the project implementation?
(TRAINING)
Do you think that you have improved your living 150(37.8) 208(52.4) 18(4.5) 20(5.0) 1(0.3)
status after joining this programme in terms of
accommodation, food, clothing etc? (LIVING
STATUS)
Do you think that you are able to pay weekly 160(40.3) 217(54.7) 16(4.0) 2(0.5) 2(0.5)
instalments from the income of your current
project? (REPAYMENT)
Do you think that your Business operating skills 106(26.7) 226(56.9) 45(11.3) 16(4.0) 4(1.0)
have been increased after joining this pro-
gramme? (BUSINESS SKILLS)
Do you think that your Technical operating skills 75(18.9) 183(46.1) 103(25.9) 31(7.8) 5(1.3)
have been increased after joining this pro-
gramme? (TECHNICAL SKILLS)
Do you think that ASA has helped you to raise 116(29.2) 241(60.7) 24(6.0) 13(3.3) 3(0.8)
your social awareness? (SOCIAL AWARENESS)
Do you think that you have been able to send 112(28.2) 192(48.4) 69(17.4) 19(4.8) 5(1.3)
your children to school after joining this
programme? (CHILD EDUCATION)
Do you think that it is useful to stick to this 177(44.6) 193(48.6) 16(4.0) 7(1.8) 4(1.0)
programme for the betterment of your
financial position? (CONTINUE TO THIS
PROGRAMME)

Note: 5 ¼ Strongly Agree, 4 ¼ Agree, 3 ¼ Neither Agree nor Disagree, 2 ¼ Disagree, 1 ¼ Strongly Disagree, Percentage
values are in parenthesises; N ¼ 397.

independent variables: Results and discussions

 
pi
ln As discussed earlier, as the beneficiary’s
1  pi improvement is constructed by a set of
¼ 0 þ 1 AgeASA þ 2 Loansufficiency socioeconomic characteristics, a preliminary
þ 3 Provtraining þ 4 OtherNGO analysis will help to understand the depend-
ent variable (Table 1). The results indicate
Where Pi ¼ the probability that benefici- that a vast majority of borrowers expressed
aries’ welfare improved, and i (i ¼ 1, . . . , 4) positive attitudes towards the ASA micro-
are the coefficients are to be estimated. credit programmes. The highest proportion

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92 Local Economy 28(1)

Table 2. Descriptions of independent variables and their test of significance with the dependent
variable.

Test of association with

dependent variable

Independent Measurements/ Frequenc Chi-square

variables Descriptions categories (N ¼ 397)y Percent value p-value

AgeASA How long have 1 ¼ 3 to 5 years 191 48.1 14.107 0.001

you been involved 2 ¼ 6 to 8 years 111 28
in ASA? 3 ¼ over 9 years 95 23.9
Loansufficiency Is the loan amount 1 ¼ Yes 187 47.1 12.671 0.001
sufficient for your 2 ¼ No 210 52.9
project
Provtraining Does ASA provide 1 ¼ Yes 117 29.5 2.578 0.067
you with any 2 ¼ No 280 70.5
training activity?
OtherNGO Are you involved in 1 ¼ Yes 169 42.6 10.811 0.001
any other NGO? 2 ¼ No 228 57.4

of respondents reported that they do mostly have been involved in various organiza-
agree with all the selected dimensions used tions in terms of saving money, receiving
here to capture the dependent variable. training, or receiving formal education.
In this section we discuss the findings of For those reasons, borrowers are asked to
the open-ended questions regarding over- find out how many borrowers enjoyed cred-
lapping involvement in NGO programmes, its from other organizations apart from
sufficient loan amount, and training ASA at the same time. However, it is a
programmes. matter of concern that 42.6% of borrowers
may have been involved in another
Are the borrowers overlapping? organization.

Borrowers were asked whether they had

been involved in any NGO or credit organ- Was the loan amount sufficient?
ization other than ASA. Overlapping is
believed to be very common among bor- Why did borrowers approach different
rowers and is a serious problem in pro- MFIs for loans? We believe that if one
gramme activities. This is because organization failed to provide the amount
borrowers who get involved in more than of money a borrower needed then the exist-
one credit organization might not be able ing borrowers were bound to get involved in
to repay loans and they will not be able to different MFIs to meet their need. That is
turn up to weekly meetings either. The why we asked borrowers whether the loan
study has revealed that a majority (57.4%) amount was sufficient for their project.
of borrowers are solely involved in ASA. It was found that 52.90% of borrowers
The term ‘involvement’ refers to the vari- thought that they were not getting a suffi-
ous purposes of involvement in another cient amount for their project from the
organization other than receiving credit. ASA. We strongly believe that this is the
For instance, borrowers of ASA may main reason for overlapping.

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Rahman and Khan 93

Is the training programme effective? beneficiaries’ betterment (p < 0.001). Third,

borrowers’ betterment and OtherNGO are
We know that training helps people to found to be associated to each other
become more efficient. Karlan and (p < 0.001). This can be explained by the
Validivia (2007) claimed that borrowers fact that ASA does not provide a sufficient
are able to show better business knowledge amount of money to a majority to bor-
after receiving training. Considering the rowers, therefore a number of them are
importance of training activity, borrowers bound to go to the other credit organiza-
were asked whether ASA provided any tions to make up their cash requirements.
training activity or not. This study found Moreover, other NGO involvement may
that 70.50% of borrowers did not receive be associated with lower socioeconomic
any training from this credit organization. status which otherwise tends to lower
It is reasonable to conclude that ASA was outcomes.
moving away from the training activity, and The chi-square test did not show a strong
there is an important question as to why association between training (Provtraining)
ASA was not providing more training and borrowers’ betterment. This unexpected
given that almost 70.50% of borrowers finding may be due to confounding effects
thought that training was necessary. This of other variables. The effect of training is
concern has arisen elsewhere: for example, dealt with in the multivariate analysis.
a study by Schreiner and Woller (2003) It should be borne in mind that a large
raised concerns that in developing countries number of borrowers responding to this
like Bangladesh, Indonesia and Bolivia, survey were not in a training programme.
programmes were focused on loans rather
than training. Multivariate analysis

Bivariate analysis Multivariate analysis allows us to provide

the effects of each predictor while control-
Cross-tabulations were carried out between ling for all remaining variables in the model.
dependent and independent variables to test The results of the logit model (logistic
for associations (Table 2). The chi-square regression) are depicted in Table 3. It has
test performed for the association between been found that all four predictors are sig-
beneficiaries’ betterment and length on the nificantly related with the dependent vari-
programme (AgeASA) was found to be sig- able which indicates that the selection of
nificant (p-value ¼ 0.001), and indicates variables is appropriate and the fitted
that time in ASA has a positive impact model is adequate.
on beneficiaries’ betterment. Second, this ASA has been working with poor people
study examined whether or not borrowers over the last three decades. We can say that
received a sufficient amount of money for poor people stick to ASA for improving
their project. Beneficiaries needed a suffi- their overall livelihood and status. The dur-
cient amount of money to run their projects ation with ASA (AgeASA) variable is found
smoothly, and eventually a successful pro- to be significant and positively related with
ject could help borrowers to continue the dependent variable. In other words, a
their weekly repayments whilst meeting shorter duration with ASA has less likeli-
their daily living needs. The chi-square test hood of improving beneficiaries’ status as
performed between beneficiaries’ better- compared to respondents who are involved
ment and loan sufficiency implied that for a relatively longer period. For example,
Loansufficiency is associated with those who were involved in ASA for

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94 Local Economy 28(1)

Table 3. Results of the logistic regression analysis showing the extent of the effects of selected
correlates on beneficiaries’ improvement.

Parameter Standard Wald Significance

Variables estimate error value p value

AgeASA
3–5 years 1.048 0.291 12.985 0.000
6–8 years 0.919 0.318 8.344 0.004
9 years or more (ref.)
Loansufficiency
Yes 0.604 0.219 7.619 0.006
No (ref.)
Provtraining
Yes 0.518 0.245 4.474 0.034
No (ref.)
OtherNGO
Yes 0.627 0.219 8.195 0.004
No (ref.)

Note: ref. stands for reference group.

3–5 years were found to have a 64.9% means that those who have ASA training
ðe1:048  1Þlower chance of improving are likely to have a 67.8% (e0:518 ¼ 1:678,
their livelihood as compared to those who p < 0.05) higher chance of being improving
were involved for nine years or more. livelihood.
It means that beneficiaries are able to Finally, overlapping in the microcredit
improve their socioeconomic status through programme is a big concern because it is
prolonged involvement with the ASA believed that if the beneficiaries get involved
microcredit programme. with two or more microfinancial organiza-
Generally speaking, poor people have tions they would not be able to repay their
limited access to traditional credit facilities. weekly instalment. It has been found that
However, it is very important to get enough OtherNGO has a significant negative effect
money from the loan provider to run a pro- on the dependent variable which implies
ject successfully. ASA gives a certain that involvement with two or more micro-
amount of loan to beneficiaries on the credit organizations reduces the chances of
basis of their capability of taking a loan. improving livelihood or overall wellbeing.
In this study, the independent variable This indicates that those who are also
called Loansufficiency is found to have a involved with other NGOs are 53.4% less
positive significant effect on beneficiaries’ likely to have improved their overall liveli-
improvement. It means that those who are hood (e0:627 ¼ 0:534, p < 0.01).
granted a sufficient loan are found to have
e0:604 ¼ 1:83times or 83% (p < 0.01) higher
likelihood of improving their livelihood as Conclusions and policy
compared to those who do not get a suffi- recommendations
cient ASA loan.
The logit model finds that training The article uses a primary source of data set
(Provtraining) has a significant positive for the first time to test the effectiveness of
effect on a beneficiary’s improvement. This ASA microcredit activities. ASA has been

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Rahman and Khan 95

trying to raise the socioeconomic status of for training programmes who are inefficient
their borrowers since its inception. It has and have no knowledge of running projects.
been shown that a huge number of bor- Lastly, we should not regard microcredit
rowers are involved in several MFIs at the programmes in a similar way as traditional
same time. Thus the question remains: ‘Why credit practices where the main purpose is
they are involved in more than one credit profit. Microcredit programmes deal with
organizations?’ This study indicates that poor people. Therefore, ASA should widen
borrowers are poor and do not have suffi- practice and strategy from a preoccupation
cient education. One should realistically with loans and repayment to include skills
think about the level of skill of these bor- development.
rowers to run independent businesses after There remain gaps in our understanding
receiving loans from an organization. of various aspects of microcredit pro-
The importance of training is confirmed grammes. It is necessary to establish the rea-
by the finding in Table 3. The findings gen- sons why highly educated people are not
erally help us to conclude that the ASA being included in the programmes. We do
programme is effective in increasing the not fully understand why some people
socioeconomic status of its beneficiaries. improve their socioeconomic status by
The longer the period of involvement in being included in the programmes whilst
ASA the better is the overall livelihood of others do not and precisely how long bor-
beneficiaries, confirming the findings of ear- rowers need to stick to the programme in
lier literature. However, it is found that the order to improve their living status.
effectiveness of the programme suffers from
an insufficient amount of loan provided by Funding
the ASA. This suggests that ASA should This research received no specific grant from any
increase the size of loans. We would recom- funding agency in the public, commercial or not-
mend reviewing the ceiling of the loan for-profit sectors.
amount every two years.
Bangladesh is an agricultural country and Acknowledgements
most of its people are engaged in different The authors would like to thank Mr Shafiqual
kinds of farming. Poor people are not up Haque Choudhury, Founder and President of
to date with current technological innov- ASA for providing all sorts of cooperation
ations and production processes. They from the organization ASA. We are thankful to
depend on traditional methods of cultivation the District Managers of ASA in Comilla and
which result in lower yields than those avail- Noakhali who helped us in data collection. We
able through advanced methods. This study also gratefully acknowledge the useful comments
has found that training would increase the and suggestions of the editors and anonymous
effectiveness of the microcredit programme. reviewers.
Training should be provided on the basis of
the borrower’s geographical location and Notes
previous experiences. However, ASA is a
1. Grameen Bank is a leading microfinancial
financial institution, not a training provider,
institution in Bangladesh.
so we would recommend ASA’s District 2. This is a method to bring the targeted people
Officers liaise with the Local Office of the under one umbrella to operate microcredit
Department of Youth Development,7 under activities in a cost-effective manner.
the Ministry of Youth & Sports Bangladesh, 3. ASA International is registered in Mauritius.
for various aspects of training for its bor- 4. Catalyst Microfinance Investment Company
rowers. ASA should select those borrowers (CMIC) is managed by ASA and Sequoia, a

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96 Local Economy 28(1)

Netherland-based company. Bill Gates D’Espallier B, Guerin I and Mersland R (2011)

Foundation invested $25 m and a Dutch Women and repayment in microfinance: A
Pension Fund named ABP, private investors global analysis. World Development 39(5):
behind this joint venture. 752–772.
5. Marguerite Robinson is an advisor of several Fernando LJ (2005) Intoduction. Microcredit
MFIs including Bank Rakyat of Indonesia. and empowerment of women: Blurring the
6. Dr M. Yunus is the founder and ex-managing boundary between development and capital-
director of Grameen Bank, Bangladesh. ism. Microfinance: Perils and Prospects.
7. Department of Youth Development provides Abingdon: Routhledge, pp. 1–36.
vocational/skill development programme for Forbes (2007) The Top 50 Microfinance
the age group 18–35 for gaining employ- Institutions. Available at: http://www.forbes.
ment/self-employment. com/2007/12/20/microfinance-philanthropy-
credit-biz-cz_ms_1220microfinance_table.html
(accessed 15 October 2012).
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