The micro-credit finance can play a vital role in developing a country’s economy. In Bangladesh, the micro-credit institutions are working for socio-economic growth with international recognition. They provide loans to the rural people especially to the women in order to make them self-reliant. They can also be making the people conscious about children’s schooling, nutrition and family planning. By their loan about 5 percent people have been able to raise their deplorable condition above the poverty line.
Because of the inability and unwillingness of the banks to lend money to the poorer section of society. Micro-finance institutions are needed in Bangladesh. Micro-finance institutions aim at poverty reduction and the development of the standard of living in the country. An efficient banking system is important for economic growth. The effect of the micro-credit programs is that 5% of the program participants have risen above the poverty line. The poor people, especially the poor rural women are preferred by micro-finance institutions as prospective borrowers. The microcredit loan cycles are usually shorter than traditional commercial loans with terms from typically six months to a year with payments plus interest, paid weekly. Shorter loan cycles and weekly payments help the borrowers stay current and not become surprised by large payments. Clearly, the transaction-intense nature of weekly payment collections, often in rural areas, is more expensive than running a bank branch that provides large loans to economically secure borrowers in a metropolitan area.