Microcredit As A Tool For Rural Development: A Case Study Of Malaysia

Abstract

Malaysia is a prosperous country in Southeast Asia with two distinct geographical sections separated by the China Sea. Because the country has one of the lowest poverty rates of any developing country with 5.1 per cent of its population living below the poverty line, microcredit projects which are typically aimed at poverty alleviation, have not grown as rapidly as in other developing countries. However, microcredit and microfinancing lead to the growth of the microentrepreneur class in both rural and urban areas. Historically, of the 11 economic sectors of Malaysia, four sectors, namely Agriculture, forestry and fisheries; Mining and quarrying; Construction; and Wholesale and retail trade, hotels and restaurant did not grow at the rate of other economic sectors. A significant amount of economic activities of these four sectors take place in rural Malaysia. This was confirmed by the results of a Shift-Share analysis conducted by the author for the period of 2000-2005 and later compared with similar statistics for 2010. Using these results and comparing the success of microcredit in other developing countries, a case is made for sustained investment in microenterprises throughout rural Malaysia in the four sectors noted above.