Friday | 17 January 2025 | Reg No- 06
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Friday | 17 January 2025 | Epaper
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Exclusive Interview

Microcredit revolution reshaping rural life thru financial inclusion

MRA EVC tells

Published : Friday, 17 January, 2025 at 12:00 AM  Count : 42
Shamsul Huda
Microfinance is reshaping Bangladesh's socio-economic landscape, particularly in rural areas where traditional financial systems often fail to reach. Professor Dr. Mohammed Helal Uddin, Executive Vice Chairman (EVC) of the Microcredit Regulatory Authority (MRA), elaborated on the transformative power of microfinance in an exclusive interview to The Daily Observer. He highlights its role in reducing poverty, empowering women, and fostering economic independence at the grassroots level.

Speaking on the pervasive inequality in land ownership and asset distribution, Dr. Helal noted: "Discrimination-free societies are rare worldwide. In Bangladesh, asset inequality and uneven land distribution have created economic gaps that are difficult to bridge.

 However, these gaps can be minimized by providing financial support to marginalized communities. Microcredit enables people to start small businesses, generate income, and improve their living standards."

He underscores that traditional banking systems prioritize solvent individuals who can provide collateral, leaving those at the bottom of the economic pyramid underserved. "A significant portion of bank loans go to solvent recipients. Unfortunately, some misuse loans for purposes other than those declared, while others launder money or default willfully. This raises a critical question: What about the credit needs of the terminally underserved?"

To address this gap, the MRA promotes collateral-free microloans tailored to the needs of marginalized groups. "When terminal-level people receive microloans, they are empowered to build businesses and no longer depend on government safety net programs. Their children can access better education and healthcare, leading to intergenerational benefits. This small financial support has a ripple effect on overall community development," Dr. Helal explains.

According to the latest statistics, microcredit institutions in Bangladesh disbursed Tk2.75 trillion last year, demonstrating the sector's robust growth. Dr. Helal describes this as a testament to the effectiveness of microfinance in addressing poverty. Studies reveal that microcredit has reduced rural poverty by 10%, lifting 2.5 million people out of poverty. Furthermore, it has empowered women by providing them with financial resources, enabling them to contribute to household decisions and gain social recognition.

"Women in rural areas are often the most disadvantaged. By offering them small loans, microfinance gives them the means to start income-generating activities. This not only improves their economic situation but also enhances their role within families and communities," Dr. Helal observes.

While the benefits of microfinance are evident, the sector faces significant challenges. One major issue is the reliance on donor funding, which limits the ability of microfinance institutions to scale their operations. "To make microfinance more sustainable, we need lower-cost funding for these institutions.

This will enable them to offer loans at reduced interest rates, making credit more accessible to poor, unbanked individuals," he says.

Another area requiring improvement is the digitalization of microcredit processes. Dr. Helal emphasizes the importance of transparency and monitoring in ensuring equitable access to financial resources. "Digital systems can streamline microcredit distribution, reduce corruption, and enhance efficiency. However, these systems must be rigorously monitored to ensure they serve their intended purpose."

The MRA, which oversees more than 700 microfinance institutions in Bangladesh, has been instrumental in regulating and promoting the sector. Under Dr. Helal's leadership, the organization has focused on strengthening regulatory frameworks to ensure the sustainability and effectiveness of microfinance initiatives.

Looking to the future, the MRA aims to foster an environment conducive to financial inclusion. Dr. Uddin highlights plans to expand the reach of microfinance institutions, particularly in underserved regions. He also stresses the need for collaboration between government agencies, financial institutions, and non-governmental organizations to maximize the impact of microfinance.

"Empowering marginalized groups through financial tools is not just about addressing poverty; it's about creating a more equitable society," Dr. Heala concludes. "With continued focus and innovation, microfinance can remain a cornerstone of Bangladesh's socio-economic development."

As microfinance continues to grow and evolve, it holds the promise of transforming lives and communities across rural Bangladesh. By addressing challenges and leveraging opportunities, the sector can contribute significantly to building a more inclusive and prosperous nation.


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