Microfinance Programs and Social Capital Formation: The Present Scenario in a Rural Village of Bangladesh

Saharia Kanak and Yoshiaki Iiguni


Microfinance has been regarded as one of the most viable tools for poverty alleviation and socioeconomic development with developing countries in recent years. Many of the Non-Governmental Organizations (NGOs) in Bangladesh, currently working as Microfinance Organizations (MFOs) - including the Grameen Bank, Bangladesh Rural Advancement Committee (BRAC) and PROSHIKA-have established innovative microfinance programs that have provided financial services to millions of poor people in the country. Although the main focus of all microfinance programs is income-generation for the poor, one of the important outcomes is believed to be the creation of social capital. In this qualitative study, we investigated the present scenario of social capital formation mainly through the microfinance program of BRAC in a rural village of Bangladesh. The study results suggest that a microfinance program does not essentially create effective social capital unless enforced by the microfinance organization. Social capital formation through microfinance programs largely depends on well-designed social capital building strategy of the respective microfinance organization and its actual implementation in the grass-root level.