Factors Determining the Credit Accessibility by the Small-Scale Entrepreneurs: A Case of Handloom Weaving in Bangladesh

Abstract

This study examines the determinants of access to credit by the handloom weavers in Bangladesh. Using the multistage sampling technique, the primary data for the analysis were collected from 311 randomly selected handloom weavers from Sirajganj district of Bangladesh during July to December 2015. The data are analyzed by using the Logit model. The model identifies several individual, household, community, and institution-specific factors as the significant determinants of credit access. Among them, family size, farm size, work experience, saving and the flexibility in the terms and conditions of loan use increase the probability of credit access by the handloom weavers whereas the risk aversion attitude and the distance between the Microfinance Institutions (MFIs) from the commune reduce such possibility. Therefore, this study suggests that respondents should utilize the joint effort of the available family members in this labor-intensive business while undertaking rational decisions enhanced through the skills and capabilities acquired over the years. They should maintain a sufficient amount of saving to prove them eligible in repaying their credit. From the institutional perspective, it is suggested that the MFIs should provide adequate financial and non-financial services to its clientele as per their needs. Borrowers’ easy accessibility to the institutions should also be ensured. In doing so, they should open up more branches in the villages so that the door to door services are available to the borrowers. It is expected that these recommendations will help in improving the credit access by the handloom weavers in Bangladesh.