Are microcredit participants in Bangladesh trapped in poverty and debt ?
AbstractThis paper addresses whether microcredit participants in Bangladesh are trapped in poverty and debt, as many critics have argued in recent years. Analysis of data from a long panel survey over a 20-year period confirms this is not the case, although numerous participants have been with microcredit programs for many years. The results of the analysis suggest that participants derive a variety of benefits from microcredit: It helps them to earn income and consume more, accumulate assets, invest in children's schooling, and be lifted out of poverty. This is not to say that non-participants have failed to progress over the same period. Both participants and non-participants have gained as the economy has grown; however, the rates of poverty reduction have been higher for participants. Testing the net effect of microcredit programs requires applying an econometric method that controls for why some households participated and others did not, conditional on their initial characteristics. In addition, the method must control for time-varying, unobserved heterogeneity that affects everyone over time, albeit in possibly different ways. The paper's econometric estimates show significant welfare gains resulting from microcredit participation, especially for women. They also show that the accrued benefits of borrowing outweigh accumulated debt. As a result, households'net worth has increased, and both poverty and the debt-asset ratio have declined.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6404.
Date of creation: 01 Apr 2013
Date of revision:
Rural Poverty Reduction; Debt Markets; Banks&Banking Reform; Poverty Monitoring&Analysis;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-20 (All new papers)
- NEP-DEV-2013-04-20 (Development)
- NEP-MFD-2013-04-20 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Britta Augsburg & Ralph De Haas & Heike Harmgart & Costas Meghir, 2012. "Microfinance at the margin: Experimental evidence from Bosnia and Herzegovina," IFS Working Papers W12/15, Institute for Fiscal Studies.
- Asadul Islam, 2011.
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- Mark M. Pitt & Shahidur R. Khandker & Omar Haider Chowdhury & Daniel L. Millimet, 1998. "Credit Programs for the Poor and the Nutritional Status of Children in Rural Bangladesh," Working Papers 98-4, Brown University, Department of Economics, revised 16 Jan 1998.
- Boonperm, Jirawan & Haughton, Jonathan & Khandker, Shahidur R., 2009. "Does the village fund matter in Thailand ?," Policy Research Working Paper Series 5011, The World Bank.
- Kevane, Michael & Wydick, Bruce, 2001. "Microenterprise Lending to Female Entrepreneurs: Sacrificing Economic Growth for Poverty Alleviation?," World Development, Elsevier, vol. 29(7), pages 1225-1236, July.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The Art of Pointless and Misleading Microcredit Impact Evaluations
by guestxborders in governance across borders on 2013-05-29 10:23:03
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