‘Credit-plus’ approach for the extreme poor: A study on two selected areas of Bangladesh

Abstract

Bangladesh is one of the developing countries in the world. The total population is 164 million and about 35 percent people live in poverty among them 17 percent are extreme poor. These extreme poor are excluded from financial and other social services provided by govt. and NGOs due to lack of diversification of microfinance services. Under these circumstances, BRAC introduces ‘credit-plus’ approach which provides loan to the extreme poor in combination with other kind of non-financial services. The present study is qualitative in nature and case study method has been applied in the study. The main intention of the study is to know the extent of effectiveness of ‘credit-plus’ approach of BRAC to deal with the problems of extreme poor. Study findings reveal that this approach provides a social protection so that the extreme poor can join the mainstreaming microfinance programme. Study findings show that the extreme poor are the female headed households; mainly depend on wage labor, household work or begging and highly vulnerable to shocks. The extreme poor face severe vulnerabilities in livelihood like flood, drought, heavy rainfall, river erosion, frequent illness and malnutrition. In addition, they experience some stresses like payment of dowry, more dependent members in household, seasonal unemployment etc. These kinds of vulnerabilities affect the livelihood and therefore, it reduces their income opportunities that push them in food insecurity every year. Findings reveal that extreme poor have very few or no assets and have limited capabilities to engage in livelihood. During the vulnerability, the extreme poor adopt different livelihood strategies like, searching income opportunities outside the village, using their own savings and resources, selling goats, eggs and milk etc. Study findings reveal that BRAC’s ‘credit-plus’ approach helps them to improve their livelihood strategies. After joining the program, the lifestyle and livelihood strategies have been changed and now they are involved in small business, poultry and livestock rearing, cultivation of own land etc. Study findings also demonstrate that the extreme poor have very few livelihood assets especially social asset which is significant for their survival and sustainability. Apart from this, the extreme poor also do not have skills and they suffer from lack of self-esteem. Despite these, however, study findings also show that the extreme poor still face some limitations due to the short programme period, no significant difference in credit lending process, high interest rate etc. Therefore, to get better output from this approach, the credit lending process should be flexible and the duration should also be expanded. In addition, there is a need for a compassionate work force, continuous monitoring and supervision, good coordination among the involved officers and staffs for better implementation of the programme.