Micro level banking means Microcredit system refers to programs that are poverty focused and that provide financial and business services to very poor persons for generation of self-employment and income. Credit is a powerful instrument to fight poverty. The role of micro-creditin reducing poverty is now well recognized all over the world .The idea that microlevel banking or microfinance helps poor people build businesses, increase their income and exit poverty has turned into a global movement, so called ‘microfinance revolution’, to fightagainst poverty over the last three decades.
Poverty is a global issue. Despite changes in development paradigms in the last half of the 20th century, the promise to bring wellbeing to all human being remained unfulfilled. As it stands, more than 100 million children of primary school age have never stepped inside a class room, out 29000 children die each day from largely preventable malnutrition and disease and more than 1.2 billion people in the world are struggling to survive. The Khandker (1998) study goes on to define poverty in terms of consumption. “In a country such as Bangladesh, poverty can be calculated based on nutritional requirements. According to the Foodand Agriculture organization, daily consumption of 2,112 calories is required to remain above the poverty line. The cost of meeting this requirement can be calculated by pricing various food items andadding a 30% allowance to cover the cost of nonfood items (Hossain and Sen 1992).
3. POVERTY AND MICROFINANCE :
There is an on going debate whether credit alone or credit plus is needed for poverty reduction. There are views that credit alone on its own is inadequate to fight poverty. The need for other services is also important in this respect. Such views, although, do not negate the role of credit, fail to appreciate the role of credit on its own merit. Nobody says that credit alone is cure for all. Most of the practitioners believe that credit plays a vital role as an instrument of intervention for a poor person to discover her potential and to stride for better living. Muhammad Yunus advocates that Credit is a human right. Once this right is established, the entitlement to other
rights for leading a dignified life becomes easier. It empowers to break the vicious cycle of poverty by instantaneously creating self-employment and generating income. When in the ultimate analysis nothing can be said to be panacea, by overemphasising that micro-credit is not a panacea is in a sense overreacting and underestimating the role of credit as an instrument to combat poverty. Micro-credit is itself a very powerful tool. But if it is combined with others, it is definitely moreempowering.How micro-credit can reduce poverty may better be understood by understanding conceptually the mechanisms by which financial services can affect the lives of
the poor. It is important to consider the fulfillment of basic needs (food, clothing, shelter, health, education and psychological well-being), the means to achieve welfare at present and in the future, social networks and empowerment and vulnerability to risk.It is known that poor people live in a high risk and vulnerable conditions. Their ability to take advantage of opportunities that will lead to increasing their income or economic status, to protect themselves against risks of crises, and to cope with these when they occur is very important.
Bangladesh, the birthplace of microfinance, is credited with the largest and most vibrant microcredit sector in the world. Bangladesh has recorded a modest 4-6 % growth within a stable macroeconomic framework in recent years. The poverty trend has shown a consistent decline in poverty incidence over the years, especially in rural areas. However, aggregate poverty rates still
remain dauntingly high. According to the estimates based on the Household Income and Expenditure Surveys (HIES) of the Bangladesh Bureau of Statistics, poverty head count ratio declined from 58.8 % in 1991 to 48.9 % per cent in 2000 and it further declined to 40.0 % in 2005. So poverty has declined on average just above one percentage point a year since the 1990s.
Microfinance has proven to be an effective and powerful tool for poverty reduction. Like many other development tools, however, it has insufficiently penetrated the poorer strata of society. The poorest form the vast majority of those without access to primary health care and basic education; similarly, they are the majority of those without access to microfinance.
While there is no question that the poorest can benefit from primary health care and from basic education, it is not as intuitive that they can also benefit from microfinance, or that microfinance is an appropriate tool by which to reach the Millennium goals. Microfinance has been extensively examined over the past 10 to 15 years, and the resulting literature is now very large. A focused review of the literature was conducted to evaluate recent publications regarding the impact of microfinance on poverty reduction.
I. Micro-credit Impact:
a) economic Social and impacts :
- § Evidence shows the positive impact of microfinance on poverty reduction as it relates to the first six out of seven Millennium Goals.
- § While the quality of many studies could be improved3, there is an overwhelmin amount of evidence substantiating a beneficial affect on:
- Increases in income (Wright 2000; UNICEF 1997; Khandker 2001, 1998)
- Reductions in vulnerability (Wright 2000, Zaman 2000; McCulloch and Baulch2000) .
There are fewer studies with evidence on health, nutritional status and primary schooling attendance, but the existing evidence is largely conclusive and positive (Wright 2000).
b) Reduce Poverty :
There is extensive evidence that microfinance has a positive impact on the first Millennium Goal: that the number of people living in extreme poverty(defined as those living on less than $1 per day) will be reduced by half between 1990 and 2015.
There are fewer studies examining the effects of microfinance on the other Millennium Goals, but what evidence exists generally indicates a positive impact.
The literature confirms that most microfinace programs do not serve the poorest. However, there are some institutions that do, and the evidence indicates that the poorest can definitely benefit from microfinace in terms of increased incomes, and reduced vulnerability.
There is also evidence to support the premise that it is possible for a microfinance institution to serve the poorest and also achieve financial sustainability.
c) Evidence for a Reduction in Poverty:
A follow-up survey done in 1998/1999 included the households from the previous survey (1991/1992—on which the conclusions in the book Fighting Poverty with Microcredit: Experience in Bangladesh are based), new households from the same villages, new households from new villages in old thanas, and three more thanas are surveyed.
“Microfinance participants do better than non-participants in both 91/92 and 98/99 in per capita income, per capita expenditure, and household net worth. The incidence of poverty among participating households is lower in 98/99 than in 91/92, and lower than among nonparticipating households in both periods.” 
The impact of microfinance on poverty alleviation has recently gained a prominent position on the microfinance agenda. Donors, practitioners, and academics are realizing that microfinance institutions (MFIs) must concern themselves with more than their ability to reach institutional self sufficiency. The ability to reach and to demonstrate a positive impact on the poorest is now becoming a core principal in poverty-focused financial institutions.
The 1999 Microfinance Summit Meeting of Council, for example, set out a hard-hitting agenda, with key note papers calling on MFIs to meet the challenge of targeting and reaching the poorest (Simanowitz, et al., 1999)  and to develop systems for measuring their impact on their clients (Reed & Cheston, 1999).
Wright provides a comprehensive review of the research to date looking at the case for providing appropriate, quality financial services for the poor, and outlining the principles and methods that could/should be followed to design quality Microfinance Systems.
- II. Economic impact of Microcredit :
- Hossain (1988) “Grameen Bank members had incomes about 43% higher than the target group in the control villages, and about 28% higher than the target group nonparticipants in the project villages”.
- World Bank in collaboration with the Bangladesh Institute of Development Studies, and cited by Hashemi and Morshed (1997) showed that the Grameen Bank not only “reduced poverty and improved welfare of participating households but also enhance household’s capacity to sustain their gains over time.”
“Khandker (1998) estimates that for every 100 taka lent to a woman, household consumption increases by 18 taka…Moderate poverty falls by around 15% and ultra-poverty by 25% for households who have been BRAC members for up to three years controlling for other factorsaccording to the author….Morduchpoints out a problem with this analysis. He notes that the assumption of perfect targeting which underlies Khandker’s selectivity correction is flawed given the fact that in the data set 30% of households were above the eligibility threshold. Using an alternative approach to correct for selectivity, Morduch finds no evidence of increases in consumption (and therefore reduction in poverty) using the same data.”
Household income of families with access to credit is significantly higher than for comparable households without access to credit. Poor households that have had access to microfinance services show significant increases in asset accumulation, providing them with both a safety net against misadventure as well as resources for self-help investments. In creased household income improves nutrition, and improves the probability that poor children from poor families will go to school.
There were staff of seventy-eight and had already made close to 67,000 loans, averaging $750 per loan. Arrears were around 2 percent.
“Microcredit views each person as a potential entrepreneur and turns on the tiny economic
engines of a rejected portion of society.”
“The majority of 1997 participants (67%)(7 % reported a decrease and 23% said no change
felt that their incomes had ‘increased’ or ‘increased greatly’ since they joined the Credit with
Education program…There was no significant difference between the baseline and follow-up periods in participants’ own nonfarm monthly profit when compared to nonparticipants and residents in control communities. However, when pooling women’s own nonfarm income with general household nonfarm income, the 1997 participants’ monthly estimated profit was significantly higher than the pooled nonfarm income earned by residents of control communities. In 1997, the media monthly nonfarm profit for the participant sample was 2.5 times more than the profit earned by the nonparticipants and more that 5 times the profit earned by the residents in the control communities.”
Measures the varying effects of three microcredit programs (Grameen, BRAC and RD-12) on participants (male and female), as well as the impact on the local economy. Effects consider cumulative borrowing, thus reflecting both the impact of credit and the duration of program participation. Microfinance reduces poverty by increasing per capital consumption among program participants and their families. Poverty reduction estimates based on consumption impacts of credit show that about 5 percent of program participants can lift their families out of poverty each year by participating and borrowing from microfinance programs.
Microcredit programs also help smooth consumption, as well as the seasonality of labor
supply. Targeted credit also improves the nutritional status of children. The nutritional impact of credit is especially large for girls, and the impact is larger for loans made to women. Microcredit had a significant and positive impact on schooling, especially for boys.
At the participant level, borrowing had a positive impact on:
Per capita expenditure for women (and for men in the RD-12 program)
- Net worth with the impact much stronger for women
- Children’s schooling, especially for boys (for girls, the only statistically significant
increase was found in the Grameen program)
- Children’s nutritional status—women’s credit had large and statistically significant
impact on height and arm circumference, and men’s credit had a positive impact on
girl’s body mass index (but not on boy’s).
At the village level, borrowing had a positive impact on:.
??Production—value of annual production of program villages was more than twice
that of non-program villages
??Income—differences in income between program and non-program villages were
due largely to differences in non-farm income (Grameen and BRAC increased
average household income from different sources; RD-12 impact on aggregate
income was not statistically significant, but it did increase farm income by 62%
without a corresponding growth in rural non-farm income.)
??Employment—increased for Grameen Bank villages (because of large increases in
self-employment in non-farm activities)
??Wages—“Among the three microcredit programs, only Grameen Bank (GB) had a
positive and significant impact on rural wages…Given that GB operates in poorer
villages, the wage increase is a clear sign that GB contributed to the growth
of the village economy”( Khandker,1998 page 54)
- School enrollment—BRAC increased village level school enrollment rates
- Fertility—net impact of Grameen was to lower recent fertility by 13%
The effect of microcredit programs on village-level poverty reduction is somewhat smaller.
Overall only 1 percent of rural households can free themselves from poverty each year through microcredit. Moreover, some of this reduction may result from income redistribution rather than income growth.
“The village-level effects of microcredit were also studied. All three programs had significant impacts on production, increasing average household output in villages by about 50%. Grameen Bank and BRAC also had positive impacts on average household income. Only Grameen Bank had a positive and significant impact on rural wages, increasing wages at the village level by about 21%.”
- Men’s Credit—Only men’s credit from Grameen Bank had a statistically significant
effect in increasing contraceptive use among 14-to 50-year-old women in participating
- Women’s Credit—from any of the three programs reduced the use of contraceptives
among participants. Further statistical analysis suggests that this is because women who join microcredit programs have already been using contraceptives more than observationally equivalent women.
III. Impact on mother and Children’s Nutrition:
The increase in net farm monthly income (revenue minus costs) was $36 for participants, $18 for non-participants (note: non-participants became participants after the initial 3 year study was complete thus negating the possibility of a self-selection bias as to the type of women who choose to participate in microcredit programs) and $17 for control group residents.
Participants tended to be engaged in a greater diversity of income-generating activities than nonparticipants.
80% of the participant sample had secondary work as compared to only 50% of the
non-participants and 60% of the control group.
Despite involvement in their loan-financed activities, participants did not wean their children anyearlier than did non-participants.Children of participants also experienced significantly greater improvement in feeding frequency as compared to the children of the two non-participant groups.
“Women frequently mentioned that what influenced them most as to what income-generating activities they might undertake was whether they had working capital or could get the necessary inputs on a credit basis.”
Repayment rate: 98.7 %. Cost recovery within 3-5 years of start up.
Impact study on 370 mother-one-year-old-child pairs for baseline in 1993.
Follow-up 1996 for 300 mothers subdivided in 3 groups of 100:
- CWE for at least one year
- in CWE community but who hasn’t joined
- in a non CWE community
Correction for self-selection bias.
- IV. Nutritional Results:
- Diarrhea prevention: CWE mothers delayed very significantly in giving water to newborns, by almost 3 X.
- Women’s income more than doubled.
- CWE mothers are 2,5 X more confident about counseling other mothers about health care for the children. This extends benefits of CWE to non-participants.
- Positive and significant impact on Height for Age in favor of CWE children.
- No improvement of BWI (body/weight index) in the women.
- Number and duration of periods with less food more than halved in CWE.
81 % cost recovery in 6 months.
“This combination of positive impact and financial sustainability make Credit With Education a strategy with exciting potential for widespread and sustainable impact on child survival”
Using a per capita income that would support minimum daily intake of 1800 calories to establish a poverty line, Todd ranked her 40 Grameen Bank women and 22 control women. Only 15.0% of the Grameen group was classified as ‘Extremely Poor’ compared to 54.5% of the control group. Comparatively, 57.5% of the Grameen women and only 18.2% of the control group were ranked as ‘Not Poor’. (The remaining women were classified as ‘Moderately Poor’.)
Children of the Grameen women were found to be more healthy than the control group’s children on all three indicators–measures of height and weight for age and weight for height. Height for age:
Grameen children aged one to five years were ranked at 91% (short but not stunted) of the standard (when set against the NCHS) while the control group were ranked at 88% (stunted). Weight for height: Grameen children average 90% of the NCHS reference (normal) while the control group measure 85% (wasted). Weight for age: Grameen children were 76% of NCHS reference weights while control group measure 68% of NCHS.
- V. Impacts on Income :
Grameen households had incomes that were 43% higher than target group households in control villages and 28% higher than those of non-participants in Grameen villages. The income increase was greatest for the absolutely land-less and marginal landowners.
- a. Credit and Saving:
While there is a large body of literature on savings, and a huge amount of research on credit, there are very few studies that compare the impacts of the two. Also, it should be noted that there is very limited evidence of a developmental impact of savings alone. One study (Fruman, 1998) that did examine the issue of savings-first as compared to credit-first, was looking at the impact of each on the microfinance institution, rather than on the client. A second study, (Chen and Snodgrass, 1999) did compare impact on clients, and the evidence suggested that borrowers had higher median incomes and spent more on food. Beyond these studies, the remainder of the research discussed savingsfirst only in the context of microfinance institutions at which clients are required to save for a short period of time (for example, 3 months) before being allowed to take out a loan. This sense of savings-first contrastsmarkedly with Fruman’s analysis of savings-first institutions in which the organization’s lending capital must first be saved by the potential borrowers. Most studies agree that there is a great demand for voluntary savings products. However, a number of studies also agree that there are still a number of unresolved regulatory and management concerns for the safety and security of savers’ funds.
In the 1980’s, when Grameen Bank replications began to be tested in Africa using
primarily donor funds to provide credit to a wide number of solidarity group members, a heated debate was generated over the strengths and weaknesses of the “savings-first approach” and the “credit-first approach”.
- b. Contrasting Approaches: Savings-first vs. Credit-first:
Advantages – Savings First
- Information advantages lead to effective screening/monitoring
- Internal source of funds creates repayment incentive
- No loan targeting
- Voluntary savings
- Bank/client relationship developed first as depositor
Advantages – Credit First
- Rapid set-up possible through use of donor funds and technical assistance
- Large initial outreach
- Rapid expansion
- Avoid high transaction costs associated with savings
- May use groups to overcome information asymmetries
Disadvantages – Savings First
- Only targets middle-income entrepreneurs and does not reach very poor people
- Requires much more time to establish because it is necessary to first establish trust,educate participants, and allow for adequate time to build savings
- Problems associated with the internal management of funds can arise such as liquidity management, voting inequities, physical security of funds, corruption
- Voluntary savings are costly to collect, especially when the transactions are small and
Disadvantages – Credit First
- Inefficient and unstable due to reliance on donor funding
- Not required to develop into formal financial intermediaries
- Governance structure is generally weak because leadership answers to donors rather than
directly to clients, depositors and borrowers.
Several clear advantages of savings-first institutions can be identified. Often, savings-first
programs operate in close-knit communities thus facilitating screening and monitoring of clients. Rather than granting loans ad hoc to everyone in a village, the savings-first programs are selective in deciding who is credit-worthy. The creditworthiness of potential borrowers is established through information advantages present in the community and also through the depositor relationship with the bank. Because funds are internally generated, a strong incentive exists to repay loans since ones’ friends and neighbors will be upset if they lose their savings.
Robinson’s criticism of the ‘poverty-lending approach’:
1. “Institutions are not sustainable primarily because their interest rates on loans are too low
for full cost recovery.”
2. “This approach does not meet the demand among the poor for voluntary saving
“Compulsory savings as a condition for obtaining a loan and the collection of voluntary savings
reflect two completely different philosophies. The former assumes that the poor must be taught to save and that they need to learn financial discipline. The latter assumes that the economically
active poor already save in a variety of forms; what is required for effective savings mobilization is that the institution learns how to provide instruments and services that are appropriate for local
demand. BRI’s 6:1 ratio of savings accounts to loans, compared with Grameen’s 1:1 ratio,
highlights the difference between requiring compulsory savings from members and
mobilizing voluntary savings from the public.” Grameen Bank and still do with most smaller programmes in the Asia Pacific, compulsory
savings were an added cost of capital to borrowers, hidden from scrutiny because of the way they were described and handled within the accounting systems of providers (also Versluysen 1999).
c. Savings first or credit first:
The growth of outreach for sustainable poverty reduction is contingent upon the dynamic growth of self-reliant institutions. The essence of self-reliance of the poor and their institutions is local resources:
- Savings deposited and accumulated by the poor in local financial institutions are the basis of self-financing and household risk management;
- Savings mobilized by local financial institutions are the main source of growth of funds and bring independence from external subsidies and interference.
Savings are a liability of the institutions collecting them, but an asset of the poor depositing them. In contrast, loans are assets of the institutions providing them, but a liability of the poor acquiring them. Yet, the priority of one over the other savings first or credit first is a pragmatic, not an ideological, issue. The crucial criterion is the rate of return: savings first is more appropriate in subsistence agriculture and low-return activities; credit first is more appropriate in high-return activities. A household is the setting of complex, interlinked low- and high-return activities: savings-driven investments in low-yielding activities may generate the start-up capital for creditfinanced activities with high returns. These, in turn, may generate profits and savings to be plowed back into low-return activities, including subsistence agriculture. IFAD’s help speeds up the savings-and-credit cycle, with growing amounts of both. This may result in an increasing share of self-financing in security-oriented households, but in a larger share of external financing in entrepreneurial households.
VI. Combination of Microfinance and Other Development Tools :
“Reversing the downward spiral will require a comprehensive approach. Isolating individual development targets would be mistaken, since sustained progress in any one area depends on advances in all areas. Improving access to education without parallel advances in public health will produce sub-optimal outcomes for an obvious reason: sick and poorly nourished children do not make successful students. Similarly, increased household income is the single biggest factor in determining the rate of improvement in health and education status, pointing to the need for economic growth to be placed at the centre of poverty reduction policies.” 
Lipton has recently argued for anti-poverty resources to be allocated across sectors on the
basis that a concentration on a single intervention mechanism, say credit, is much less effective in poverty reduction than simultaneous credit, primary health, and education work, even if this entail narrowing geographical focus. The particular combinations that will be most effective will depend on the nature of poverty in a specific context. “
- VII. Microfinance and other Social Welfare Programs :
Khandker concluded that microcredit programs were more cost-effective in delivering financial services than state-controlled agricultural development banks. Furthermore, he concluded that microcredit is more cost-effective than formal rural financial intermediation, targeted food interventions and rural infrastructure development projects in Bangladesh.
He concludes this by comparing cost benefit ratios (social costs incurred for each unit of
financial services provided) among these interventions in Bangladesh listed in Table 1. Food intervention program benefits include the food allocated to program participants and the increase in consumption resulting from the program. Program costs are from program
documents. Cost benefit ratios are based only on food allocation from published documents. Infrastructure cost benefit estimates are based on the cost of developing paved roads or electrifying villages and average income gains of 13% per upgraded village.
Table 1 Cost benefit ratios for poverty interventions (Khandker 1998) .
two estimates from
Table 1 data indicates the following:
- Only the Grameen Bank program with female borrowers provided more benefits than costs (cost benefit ratio less than unity).
- Untargeted basic infrastructure development at the village level was more cost effective than most other interventions.
- Banglad eshi banks were (at least at the time the Khandker study was completed) less cost effective than other forms of interventions.
- The figures for BRAC are likely too high; BRAC claims that the costs included expenses related to its education program.
VIII. Microfinance and Basic Health Care :
According to WHO 
- Infectious diseases are responsible for almost half of mortality in developing countries.
These deaths occur primarily among the poorest people because they do not have access to the drugs and commodities necessary for prevention or cure. Approximately half of infectious disease mortality can be attributed to just three diseases
- HIV, TB and malaria. These three diseases cause over 300 million illnesses and more than 5 million deaths each year. None of these diseases has an effective vaccine to prevent infection in children and adults. In addition to suffering and death, these diseases penalize poor communities, as they perpetuate poverty through work loss, school drop-out, decreased financial investment and increased social instability –creating sizeable social and economic costs.
- For example, Africa’s GDP would be up to $100 billion greater if malaria had been eliminated years ago.
- For malaria: it is estimated that $1 billion a year is required to make a real difference. But the pay-off could be as much as $3-12 billion a year in terms of a boost to the combined GDP of countries in sub-Saharan Africa.
- In the case of TB, $1 billion spent on drugs could mean that 70% of new cases could be treated, resulting in a 50% reduction in mortality over the next 5 years
- But, when a country has a healthcare budget of less than, for example, $50 per capita, the costs of the tools needed to fight TB, malaria and HIV are prohibitive. Many of the world’s poor people live in countries with very low budgets for health care.
There is ample evidence to support the positive impact of microfinance on poverty reduction as it relates to fully six out of seven of the Millennium Goals. In particular, there is overwhelming evidence substantiating a beneficial effect on income smoothing and increases to income. There is less evidence to support a positive impact on health, nutritional status and increases to primary schooling attendance. Nevertheless, the evidence that does exist is largely positive.
Microfinance is an instrument that, under the right conditions, fits the needs of a broad range of the population—including the poorest—those in the bottom half of people living below the poverty line. While there will be people in this group who will not be suited for microfinance because of mental illness, etc., the exclusion of this small percentage of the population will likely not be a limiting operational issue for MFIs.
Empirical indications are that the poorest can benefit from microfinance from both an economic and social well-being point-of-view, and that this can be done without jeopardizing the financial sustainability of the MFI. While there are many biases presented in the literature against extending microfinance to the poorest, there is little empirical evidence to support this position. However, if microfinance is to be used, specific targeting of the poorest will be necessary. Without this, MFIs are unlikely to create programs suitable for and focused on that group.
1. Pollin, R. (2007) Microcredit: False Hopes and Real Possibilities. Foreign Policy Focus,
available from http://www.fpif.org/fpiftxt/4323.
2 .Khandker, Shahidur R. 1998. Fighting Poverty with Microcredit: Experience in Bangladesh. Oxford University Press, Inc. New York.
3. Buss, Terry. 1999. Microenterprise in International Perspective: An Overview of the Issues. Journal of Economic Development. 1 (1) www.spaef.com/sample.html
4. Simanowitz, Anton. 2000. Client Exit Surveys: A Tool for Understanding Client Drop-Out.
Journal of Microfinance. 2 (1)
5.Khandker, Shahid. 2001. Does Micro-finance Really Benefit the Poor? Evidence from Bangladesh. Paper delivered at Asia and Pacific Forum on Poverty: Reforming Policies and Institutions for Poverty Reduction held by the Asian Development Bank. Manila.
6. Buss, Terry. 1999. Microenterprise in International Perspective: An Overview of the
Issues. Journal of Economic Development. 1 (1) www.spaef.com/sample.html
7. Wright, Graham A. N. 2000. Microfinance Systems: Designing Quality Financial Services for
the Poor. Zed Books Ltd. London & New York, and The University Press Limited, Dhaka.
8. Yunus, Muhammad. November 1999. The Grameen Bank. Scientific American. 281(5) p. 114- 119.
9. MkNelly, Barbara and Christopher Dunford. 1999. Impact of Credit with Education on Mothers and Their Young Children’s Nutrition: CRECER Credit with Education Program in Bolivia. Freedom from Hunger Research Paper No. 5. Freedom from Hunger. Davis, CA.
10.MkNelly, Barbara and Christopher Dunford. 1998. Impact of Credit with Education on others and Their Young Children’s Nutrition: Lower Pra Rural Bank Credit with Education Program in Ghana. Freedom from Hunger Research Paper No. 4, Freedom from Hunger, Davis, CA.
11 . Todd, Helen. 1996. Women at the Center. Westview Press, Inc. Colorado
12.Ahmed, Salehuddin 2003; “Microcredit and Poverty New Realities and Issues”,
Journal of Bangladesh Studies, USA.
13. Ahmed, Salehuddin and M.A. Hakim (Ed.), 2004; “Attacking Poverty with
Microcredit”, Palli Karma -Sahayak Foundation (PKSF)/The University Press Ltd.
14.Bangladesh Institute of Development Studies (BIDS), 2001; “Final Report on BIDS
Study on PKSF’s Monitoring and Evaluation System (MES)”, October, Dhaka.
15.Credit and Development Forum (CDF), “Microfinance Statistics, Various Volumes”,
16Grameen Bank, “Annual Reports of Various Years”, Dhaka.
17. Khandker, Shahidur, 1998; “Fighting Poverty with Microcredit- Experiences in
Bangladesh”, The University Press Ltd. (UPL), D haka.
18. Microcredit Summit Campaign, 2003; “State of the Microcredit Summit Campaign
Report 2003″, Washington D.C.
19.Ministry of Finance, “Bangladesh Economic Review”, Various Years, Dhaka.
20. Palli Karma-Sahayak Foundation (PKSF), “Annual Reports of Various Year s”,
21. Palli Karma -Sahayak Foundation (PKSF), 2003; “Report of the International Seminar
on Attacking Poverty with Microcredit”, Dhaka.
22. Smith, Adam, 1937; “An Inquiry into the Nature and Causes of the Wealth of
Nations”, Edwin Cannan (Ed.), the Modern Library/Radom House Inc., New York.
23.Fruman, Cécile and Julia Paxton. May 1998. Outreach and Sustainability of Savings-First vs. Credit-First Financial Institutions: A Comparative Analysis of Eight Microfinance Institutions in Africa. http://www-esd.worldbank.org/sbp/may/compeng.htm
24. Robinson, Marguerite. 2001. The Microfinance Revolution: Sustainable Finance for the Poor. World Bank. Washington.
25. Oxfam GB Policy Department for UNICEF. August 1999. From Unsustainable Debt to Poverty Reduction: Reforming the Heavily Indebted Poor Countries Initiative.
26. Lipton, M. 1996. Successes in Antipoverty. International Institute of Labour Studies. Geneva.
27. Johnson, Susan and Ben Rogaly. 1997. Microfinance and Poverty Reduction. Oxfam. UK and Ireland.
 The poor tend to have limited access to services from formal financial institutions in less developed countries due to, for example, (i) the lack of physical collateral of the poor; (ii) the cumbersome procedure to start transaction with formal banks, which would discourage those without education from approaching the banks; and (iii) lack of supply of credit in the rural areas related to urban biased banking networks and credit allocations. asically the microfinance or mocrocredit system of banking . ”
 As price differences were observed between villages, the poverty-line level of consumption varied from village to village. Village cost of living indices were used to establish Tk 5,270 per person per year as the cutoff for moderate poverty. Any household in which per person consumption was less than 80% of Tk 5,270 (Tk 3,330) was defined as living in extreme poverty (see Khandker and Chowdhury 1996).” (p. 55)
 Over the past three decades, the development community has been increasingly interested in microfinance as an approach for reducing poverty, supporting gender equity, encouraging more equitable income distribution, developing the private sector and promoting participatory development. Access to modest financial services and other forms of microenterprise support are key strategies to reduce poverty
– providing the poor with opportunities for self-reliance through entrepreneurship and stabilizing the livelihoods of the poor during difficult times. Microfinance is one of many tools to reduce poverty, and CIDA has supported microfinance development since its inception in 1968. Microfinance figures prominently within CIDA’s policy framework as a programming mechanism to meet CIDA’s priorities – most directly in private sector development, but in other areas as well such as basic human needs and the integration of women in development.
 Millennium Goals: #1—Reduce the proportion of people living in extreme poverty by half between 1990 and 2015 (defined as people living on less than $1/day). #2—Enroll all children in primary school by 2015. #3—Make progress towards gender equality and empowering women by eliminating gender disparities in primary and secondary education by 2005. #4—Reduce infant and child mortality rates by two-thirds between 1990 and 2015. #5—Reduce maternal mortality ratios by three-quarters between 1990 and 2015. #6—Provide access for all who need reproductive health services by 2015. #7—Implement national strategies for sustainable development by 2005 so as to reverse the loss of environmental resources by 2015.
 See Khandker, Does Micro-finance Really Benefit the Poor? Evidence from Bangladesh,2001,page 11.
 See Simanowitz,. June 1999 Paper presented to the Microfinance Summit Meeting of Councils, Abidjan, Cote d’Ivoire.
 see Reed. June 1999. Measuring transformation: Assessing and improving the impact of microcredit. Paper presented to the Microfinance Summit Meeting of Councils, Abidjan, Cote d’Ivoire.
 See ( Wright, 2000. Microfinance Systems: . Zed Booksltd,page 14-16)
See Hossain, M. 1988. Credit for the Alleviation of Rural Poverty: The Grameen Bank in Bangladesh. Research Report No. 55. IFPRI. Washington DC.
 See Hashemi 1997. “Grameen Bank: A Case Study”. In Who Needs Credit? Poverty and Finance in Bangladesh (eds) G.D.
 See Morduch, 1998, Does Microfinance Really Help the Poor: New Evidence from Flagship Programs in Bangladesh page 3.
 Microfinance programmes have facilitated the graduation of poor households clients to a status where commercial sectors of developing countries, banks especially, are able to meet the needs of the poor for credit, savings services, insurance, money management advice and financial planning. Versluysen states that some of the clients of, and BancoSol, BRI, PRIDE, whose clients belong to the moderate and upper poor, achieve astonishing upward social mobility for to the point that they rise above poverty and can offer work to others. In BrancoSol as a whole, branches were covering 107 percent of their operating and financial costs in 1995.
 seeVersluysen, Defying the Odds: Banking for the Poor. Kumarian Press Connecticut. p. 41-44, 224-227.
 Yunus, Muhammad. November 1999. The Grameen Bank. Scientific American. 281(5) p. 114-119.
see MkNelly1999. Impact of Credit with Education on Mothers and Their Young Children’s Nutrition , Research Paper No. 5. Freedom from Hunger. Davis, CA page 28-39.
 See Khandker,1998. Fighting Poverty with Microcredit page 60 and 148.
 . The nutritional status of participants’ one-year-old children—both in terms of weight-for-age and height-for-age—was also significantly improved between the years relative to the children of residents of control communities. Relative to non-participants or control community residents, participants reported significantly greater positive change in a variety of the health/nutrition practices promoted by the education component of the program. E.g. giving newborns colostrums; introducing liquids and first foods closer to the ideal age of about 6 months; rehydrating children who had diarrhea by giving them either ORS or home liquids etc.
. seeMkNelly1998. Impact of Credit with Education on others and Their Young Children’s Nutrition: Paper No ,4;page no20.
 . Todd, Helen. 1996. Women at the Center. Westview Press, Inc. Colorado,page no 37-38.
. Perhaps the most important advantage of savings-first microfinance institutions is that they encourage voluntary savings. The use of internally generated funds results in a cautious approach to lending and attention to sustainability. These institutions are compelled to increase profitability through sound banking practices, reduction of operating costs, and appropriate loan screening and monitoring. Most importantly, by offering voluntary savings, these institutions are providing a much desired financial service to the poor who rarel y have the possibility to earn a positive return on their savings in a safe and liquid account.
 See Robinson, 2001. The Microfinance Revolution, World Bank.(page no 93-94).
 See Oxfam, UNICEF. August 1999 Unsustainable Debt to Poverty Reduction.
 . see Lipton, M. 1996. Successes in Antipoverty( page 14).
 See Khandker, Shahidur R. 1998. Fighting Poverty with Microcredit: Experience in Bangladesh ( page133-144)