Impact of microfinance of IBBL on the rural poor's livelihood in Bangladesh: an empirical study

Abstract

Purpose -This paper describes a scheme which aims to alleviate rural poverty by providing small and microinvestment to the agricultural and rural sector for generating employment and to raise the income of the rural poor. Design/methodology/approach -To assess the impact of rural development schemes on rural poor's livelihood, primary data were collected from 1,020 clients working across the country. Multistage random sampling method was followed to select the clients. Tabular, graphical, and econometrical methods were followed to analyze the data. Findings -Results show that household income, productivity of crops and livestock, expenditure, and employment had increased significantly due to the influence of invested money. Results of the Logit-model showed that clients' socio-economic factors like age, number of family members in farming, total land size and clients' ethics and morals had a positive and significant influence on household income. Practical implications -Client's opined that the microinvestment program had provided them with the opportunity to perform their economic activities in a more organized way, leading them to the higher quality of life and also develops their awareness towards health care, proper sanitation, and drinking safe water. Originality/value -The paper recommends the replication of this program in other rural areas of the country with the increment of investment size, demand-led effective training on different income generating activities and monitoring on more shariah compliance of the investment mode.

Effect of Household Factors on Repayment Ability among Islamic Microfinance Borrowers in Bangladesh

“…Research from conventional microfinance find that consumption is always the first priority of poor households. The empirical result of this study also finds evidence that household consumption increases with household income, confirming the results of Rahman and Ahmed (2010) who find that with the increased income, consumption also increased in households with RDS borrowers.…”

“…According to the borrowers' opinion, several reasons including the asset based Islamic loan and non-financial assistance are responsible for the increased income of households. Noipom (2014), Shirazi (2012), Rahman and Ahmed (2010) Finally, in the demographic section, borrowers were asked for their opinion of Islamic principles of RDS and its rebate (incentive) system. Among the sample borrowers, 96.58% of borrowers replied that they have no problem with the Islamic principles, teaching or financing system of RDS.…”

“…Khandker (2005) finds that borrowers' expenditure for food purposes increased significantly compared to non-borrowers. Since borrowers spend a major part of their income for food (Rahman & Ahmed, 2010), it is found by Agbola et al (2017) that per capita food expenditure differs significantly between borrowers and non-borrowers. The health of the members of borrower's household is found to have improved as the borrowers spend their income for treatment or health purposes (Agbola et al, 2017;Samer et al, 2015).…”

“…The studies available in Islamic microfinance show that after having access to Islamic microfinance programs, household incomes increase significantly (Noipom, 2014;Shirazi, 2012;Rahman & Ahmed, 2010). According to Chen and Dunn (1996), access to credit adds resources to the households and this increases household activities that results in increased household income as well as household assets, consumption, and investment.…”

“…Consumption is the first priority of poor household and increased after access to microfinance program (Mahjabeen, 2008) as large part of increased income spent for household consumption (Rahman & Ahmed, 2010). For measuring household consumption this study focuses on nutrition consumption and meal quality.…”