A Comparative Analysis of Microfinance in Socio- Economic Development: Evidence from Chittagong

Abstract

The concept of Islamic microfinance is comparatively newer to the conventional microfinance system in Bangladesh. When the conventional microfinance system has its own benefits, the Islamic microfinance system provides some benefits too. There are borrowers who are taking loans from conventional microfinance system and there are borrowers who take the capital for investment from Islamic microfinance system. The purpose of the study was to find out the key differences between the two systems and how the institutions are impacting the socio-economic standard of their beneficiary. In this study, we have used qualitative analysis to carry out a comparative analysis between the two systems in Chittagong, Bangladesh. To reach a conclusion on the standard of living of the borrowers, we divided the data into four main sectors that are: income, expenditure, basic necessities and savings. We looked into the economic condition of the borrowers before and after taking the loans from the institutions. The questionnaire aimed to know their food habits, child’s education, and availability of well-built toilet, income sources and health care facilities before and after they took loans from both types of microfinance institutions. As per our key findings, it turned out that the borrowers of conventional microfinance system had better socio-economic development because they communicate with their borrowers better than the Islamic microfinance institution and the Islamic microfinance institutions are not operating properly due to lack of understanding in the concept of Islamic microfinance in terms of Sharia law. The results are discussed elaborately below.