Demystifying Nonparticipation in Microfinance: Case for Bangladesh

Abstract

The purpose of this study was to evaluate the factors affecting nonparticipation of the rural poor in MFIs in Bangladesh. To this aim, the study investigated the measurement and predictive structure of decomposed multiple components of attitudes (fear and preference), subjective norms reference (religious leaders, spouse and friends) and perceived behavioral control (PBC) (resources, knowledge and illness) in the domain of microfinance and its nonparticipation. The study postulated eight factors from the microfinance literature which are modeled together in examining nonparticipation of the rural poor in MFIs in Bangladesh. Data were collected based on stratified random sampling procedure through face to face interview from the respondents of 280 nonparticipating rural poor from six major areas of Bangladesh. The Structural Equation Modeling (SEM) along with AMOS was employed in analyzing data. Among the eight variables only four variables such as fear of getting into risk of loan, individual preference of taking loan, insufficient resources and ill-health or vulnerability to crises were appeared statistically significant for influencing the poor villagers’ intention to participation in MFIs in rural arena. Besides, intention and all the three constructs of PBC were found statistically significant to directly influence the participation behavior of the rural poor in Bangladesh.

Keywords: Microfinance, MFIs, Barriers of participation, Rural poor, Bangladesh