Foster, Greer and Thorbecke Class of Poverty Measures to Assess the Role of Rural Microenterprises in Poverty Reduction in Bangladesh

Due to diminishing trend of cultivable land and some other realities, microenterprises are increasingly being popular among rural marginalized and impoverished people of Bangladesh as a means of their livelihood and a way to reduce their poverty. In this context, these enterprises require assessment of their economic activities and their contribution to rural economy particularly the assessment of their role in poverty reduction. Therefore, we assess the impact of rural microenterprises in poverty reduction providing quantitative measures of poverty in terms of various indices using Foster, Greer and Thorbecke (FGT) class of poverty measures. This study also provides the classification of households according to poverty status. The case-control study design has been employed in the present study. Case and control groups have been respectively defined as rural households that own and don’t own microenterprises as their main sources of income. Some socioeconomic indicators at a certain level have been considered as matching criteria. The households satisfying all these matching criteria are the eligible ones for the study. A sample of 360 households (180 cases and 180 controls) have been selected applying two stage sampling design, where primary sampling units (villages) have been selected following standard systematic probability proportional to size sampling and the secondary sampling units (households within the village) have been selected by systematic random sampling. From the findings, it is evident that, in respect of upper poverty line, the incidence of poverty is over 1.5 times in control than in case households, while the depth and severity of poverty are 2 times more in control than in case households. On the other hand, in respect of lower poverty line, the incidence of poverty is about 2 times in control than in case households, whereas the depth and severity of poverty are nearly 2.5 times more in control as compared to case households. This indicates that much lower poverty remains in the households that own microenterprises as compared to their counterpart. Consequently, it is concluded that rural microenterprises play a considerable role in poverty reduction. Our findings suggest that policies in favour of developing more new microenterprises and enriching the existing ones would help to reduce the poverty in Bangladesh. To promote new micro-entrepreneurs in rural areas, policy makers should take some motivational programs like financial support, technical support, training on entrepreneurship development etc.