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The Impact of Microcredit Loans on School Enrolment in Bangladesh

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  • John Kandulu
  • Sarah Wheeler
  • Alec Zuo
  • Nicholas Sim

Abstract

Human capital investment, especially in education, is a well-known precursor of economic growth in developing countries. In recent years, there has been a proliferation of microfinance programmes, yet evidence on whether microfinance leads to increased educational investment is tenuous at best. We utilise a large-scale cross-sectional household dataset from Bangladesh and geospatial data to study how microcredit participation and increasing microcredit incomes – that is, the extensive and intensive margins of microcredit – affects the probability of children’s school enrolment. The causal influence of microcredit participation on enrolments was estimated by utilising the propensity score matching (PSM) technique – a quasi-experimental treatment effects model. Whilst microcredit participation, the extensive margin, did not significantly influence the likelihood of school enrolment for boys, it increased girls’ enrolment. Further, microcredit income, the intensive margin, had a stronger influence on girls’ and younger siblings’ enrolment than on boys’ and older siblings’ enrolment. Omission of spatial influences can overstate microcredit influence on enrolment; while not utilising PSM can underestimate the influence of microcredit participation on enrolment. Results suggest policies that focus solely on increasing microcredit participation, without increasing the amount of microcredit incomes accessed by households, may be less effective at improving child education outcomes.

Suggested Citation

  • John Kandulu & Sarah Wheeler & Alec Zuo & Nicholas Sim, 2020. "The Impact of Microcredit Loans on School Enrolment in Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 56(9), pages 1725-1744, July.
  • Handle: RePEc:taf:jdevst:v:56:y:2020:i:9:p:1725-1744
    DOI: 10.1080/00220388.2019.1703954
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    Cited by:

    1. Ajefu, Joseph B. & Massacky, Falecia, 2023. "Mobile money, child labour and school enrolment," Telecommunications Policy, Elsevier, vol. 47(10).
    2. Habimana, Dominique & Haughton, Jonathan, 2022. "Does Rwanda’s flagship microcredit programme boost agriculture and incomes?," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 17(3), September.

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