FORCED LOAN-RECOVERY TECHNIQUE OF THE MICROFINANCE INSTITUTES IN BANGLADESH AND ITS IMPACT ON THE BORROWERS: AN EMPIRICAL STUDY ON GRAMEEN BANK, BRAC AND ASA

This paper presents the consequences of ‘forced loan-recovery’, which is an unconstitutional technique allegedly practiced by most of the microfinance institutes (MFIs) in Bangladesh. An empirical study was carried out on the borrowers of three leading microfinance institutes namely, Grameen Bank (GB), BRAC and ASA. Data were collected from two poverty-plagued villages namely, Uttar Islampur and Ruhitpur of Munshiganj district. The mixed research methods were applied. Findings of this study demonstrate that most of the borrowers experience assorted problems on the day of loan repayment. If they fail to pay back the debt aright loan officers and their allies treat them raucously. In order to avoid such unpleasant situations, insolvent borrowers tend to make multiple auxiliary loans and payback the previous ones. As a result, they fall into the decoy of a borrowing-repaying cycle. Sometimes, over-indebtedness compels them to sell out their tangible assets. Thus, they become even poorer. Furthermore, borrowers use to experience discontented domestic and social lives due to such loan-collection techniques of the microfinance institutes.