Title: The impact of the microcredit interest rate on capital creation in Bangladesh

Authors: Sheikh Ashiqurrahman Prince; Shivan Sanjay Patel; Tanmay Borman; Hamdan Sulaiman Al-Fazari

Addresses: Department of Management Studies, Bangabandhu Sheikh Mujibur Rahman Science and Technology University, Goplaganj-8100, Bangladesh ' Indian Institute of Management Rohtak, Haryana – 124010, India ' Department of Finance and Banking, Bangabandhu Sheikh Mujibur Rahman Science and Technology University, Goplaganj-8100, Bangladesh ' Faculty of Business, Sohar University, P.O. Box 44, PC 311, Sohar, Sultanate of Oman

Abstract: This research examined how micro-credit and its interest rate affect capital creation in Bangladesh. Theories and ideas from the literature review were applied, and variables to detect the knowledge gap were identified. The study's conceptual model was developed to resolve the gap, and the planned behaviour theory is used to explain the model. Using stratified random sampling, 364 clients' sample data were collected from a microfinance institution located in Lalmonirhat region, and AMOS graphics and PROCESS Macro in SPSS were applied to generate the results. The findings indicate that although microcredit generates capital, the excessive interest rates inhibit the creation of capital to the desired level in Bangladesh. The research extends the existing literature by demonstrating that the interest rate mediates the relation between micro-credit and its capital creation. The research findings will assist organisations and the government in enhancing poverty alleviation and rural employment policies and programmes in Bangladesh.

Keywords: microcredit; microcredit interest rate; capital creation; theory of planned behaviour; Bangladesh; poverty alleviation; three-pronged approach.

DOI: 10.1504/JGBA.2020.113125

Journal for Global Business Advancement, 2020 Vol.13 No.6, pp.706 - 731

Received: 31 Aug 2020
Accepted: 01 Sep 2020

Published online: 15 Feb 2021 *

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