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Microcredit expansion and informal donor interests: Experiences from local NGOs in the Sundarbans Mangrove Forest, Bangladesh

Md Faisal Abedin Khan, Md Sazib Uddin and Lukas Giessen

World Development Perspectives, 2021, vol. 21, issue C

Abstract: The growth of microcredit has been widely acknowledged, and it possesses significant potential for alleviating poverty. In microcredit functioning, non-governmental organizations (NGOs) intend to utilize available resources for facilitating poor people’s income-generating activities. Theory affirms that donors-NGO relationships mostly depend on informal interests apart from implementing formal development programs. In practice, NGOs tendency evolves for growing financial self-reliance over time with microcredit expansion. Donors assume and admit NGOs’ functions and rely only on financial statements and performance reports rather than on-field activities. There is a considerable debate whether the donors’ formal and informal interests drive the microcredit system, even though agreements exist with NGOs for running development projects in their respective localities. This paper examines the causes of microcredit expansion, with the aim of finding any causal link, if present, between the independent variables—local people’s financial status and available financial support from the NGOs—and the dependent variable, microcredit expansion. Considering the ecological and socio-economic importance of the Sundarbans Mangrove Forest (SMF), the activities of an NGO close to it are the focus of this study since local people’s livelihoods depend largely on the SMF’s natural resources. Following a qualitative research approach with quantitative elements, content analysis of the on-field collected documents about microcredit and projects of the selected NGO were carried out. Information on organizational interests were extracted following informal open-ended interview with the NGO officials and local borrowers. The results indicate that the expansion of microcredit depends on its high demand due to the local people’s economic condition and the availability of financing sources. The analysis observes that the financing from donors and government sources acts informally as seed money for microcredit operations, which have established long-term expansion through handling large contributory funds from borrowers’ savings. Although donors’ formal interests are promoting local people’s alternative income-generating activities beyond the resources of the SMF, donors acknowledge microcredit expansion as part of their informal interest in carrying out future activities with the local NGOs. Since the dependency of NGOs’ activities on donors’ priorities is evident, it would be worthwhile to study further how NGOs’ policy interests are reshaped in sustaining microcredit businesses by the changing funding preferences of donors.

Keywords: Microcredit functioning and expansion; Microcredit financing; NGOs’ role; Donors’ informal interests; The Sundarbans Mangrove Forest of Bangladesh; Local people’s livelihood (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.wdp.2021.100295

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