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A Cost-Effectiveness Analysis of the Grameen Bank of Bangladesh

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Author Info
Mark Schreiner (Washington University in St. Louis)

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Abstract

In the next ten years, advocates of microfinance organizations (MFOs) will seek more than $20 billion to provide small loans to 100 million of the poorest families worldwide. In the United States, the newest federal budget proposes a 159-percent increase in the about $200 million spent per year on domestic microfinance. Most of the excitement for the promise of microfinance in the United States has been sparked by reports of the success of the Grameen Bank of Bangladesh. Was Grameen a good use of scarce funds earmarked to help the poor? For the time frame of 1983- 96, I find that the present worth of benefits of Grameen exceeded the present worth of costs ($16.4 million) as long as the average member got more than $8 worth of surplus per year of membership. This result is robust to assumptions about opportunity costs. Given the documented impacts of Grameen, my guess is that benefits did in fact exceed costs. Grameen seems to have been a good way to help the poor. Still, one good MFO does not a microfinance crusade make, and most MFOs in the United States and worldwide do not perform as well as Grameen. CEA is an inexpensive tool to help to inform the judgement of whether a given MFO is a good way to help the poor.

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Paper provided by EconWPA in its series Development and Comp Systems with number 0109007.

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Date of creation: 05 Sep 2001
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Handle: RePEc:wpa:wuwpdc:0109007

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Related research
Keywords: Cost-effectiveness analysis; microfinance; bank management; self-sustainability;

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Find related papers by JEL classification:
H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
N3 - Economic History - - Labor and Consumers, Demography, Education, Income, and Wealth

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References listed on IDEAS
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.:
  1. Ghatak, Maitreesh & Guinnane, Timothy W., 1999. "The economics of lending with joint liability: theory and practice," Journal of Development Economics, Elsevier, vol. 60(1), pages 195-228, October. [Downloadable!] (restricted)
    Other versions:
  2. Bhatt, Nitin & Tang, Shui-Yan, 1998. "The problem of transaction costs in group-based microlending: An institutional perspective," World Development, Elsevier, vol. 26(4), pages 623-637, April. [Downloadable!] (restricted)
  3. Conlin, Michael, 1999. "Peer group micro-lending programs in Canada and the United States," Journal of Development Economics, Elsevier, vol. 60(1), pages 249-269, October. [Downloadable!] (restricted)
  4. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI). [Downloadable!]
  5. Conning, Jonathan, 1999. "Outreach, sustainability and leverage in monitored and peer-monitored lending," Journal of Development Economics, Elsevier, vol. 60(1), pages 51-77, October. [Downloadable!] (restricted)
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Cited by:
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  1. Prabal Roy Chowdhury, 2003. "Group-lending: Sequential financing, lender monitoring and joint liability," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 04-10, Indian Statistical Institute, New Delhi, India. [Downloadable!]
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  2. Flore Gubert & François Roubaud, 2005. "Analyser l’impact d’un projet de Micro-finance : l’exemple d’ADéFI à Madagascar," Working Papers DT/2005/14, DIAL (Développement, Institutions & Analyses de Long terme). [Downloadable!]
  3. Prabal Roy Chowdhury, 2004. "Group-lending with sequential financing, joint liability and social capital," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 04-23, Indian Statistical Institute, New Delhi, India. [Downloadable!]
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