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A Cost-Effectiveness Analysis of the Grameen Bank of Bangladesh

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  • Mark Schreiner

    (Washington University in St Louis, USA)

Abstract

Reports of the success of the Grameen Bank of Bangladesh have led to rapid growth in funding for microfinance. But has the Grameen Bank been cost-effective? This article compares output with subsidy for the bank in a present-value framework. For the timeframe 1983-97, subsidy per person-year of membership in Grameen was about $20, and subsidy per dollar-year borrowed was about $0.22. Although the article does not measure consumer surplus for Grameen users, the evidence in the literature suggests that surplus probably exceeds subsidy. The Grameen Bank - if not necessarily other microlenders - was probably a worthwhile social investment. Copyright Overseas Development Institute, 2003.

Suggested Citation

  • Mark Schreiner, 2003. "A Cost-Effectiveness Analysis of the Grameen Bank of Bangladesh," Development Policy Review, Overseas Development Institute, vol. 21, pages 357-382, May.
  • Handle: RePEc:bla:devpol:v:21:y:2003:i::p:357-382
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    References listed on IDEAS

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    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.
    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.
    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.
    4. Hashemi, Syed M. & Schuler, Sidney Ruth & Riley, Ann P., 1996. "Rural credit programs and women's empowerment in Bangladesh," World Development, Elsevier, vol. 24(4), pages 635-653, April.
    5. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI).
    6. 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.
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    Cited by:

    1. repec:ilo:ilowps:464322 is not listed on IDEAS
    2. Serra, Renata. & Botti, Fabrizio., 2011. "Walking on a tightrope : balancing MF financial sustainability and poverty orientation in Mali," ILO Working Papers 994643223402676, International Labour Organization.
    3. John Weiss & Heather Montgomery, 2005. "Great Expectations: Microfinance and Poverty Reduction in Asia and Latin America," Oxford Development Studies, Taylor & Francis Journals, vol. 33(3-4), pages 391-416.
    4. Chowdhury, Prabal Roy, 2005. "Group-lending: Sequential financing, lender monitoring and joint liability," Journal of Development Economics, Elsevier, vol. 77(2), pages 415-439, August.
    5. Esayas Bekele Geleta, 2014. "Social Capital as Collateral: Banking on the Poor," American Journal of Economics and Sociology, Wiley Blackwell, vol. 73(1), pages 108-125, January.
    6. repec:dau:papers:123456789/4391 is not listed on IDEAS
    7. Ahmad Nawaz, 2010. "Performance of Microfinance: The Role of Subsidies," Working Papers CEB 10-008.RS, ULB -- Universite Libre de Bruxelles.
    8. Islam, Jamal & Mohajan, Haradhan & Datta, Rajib, 2012. "Aspects of microfinance system of Grameen Bank of Bangladesh," MPRA Paper 50691, University Library of Munich, Germany, revised 27 Mar 2012.
    9. MkNelly, Barbara & Kevane, Michael, 2002. "Improving Design and Performance of Group Lending: Suggestions from Burkina Faso," World Development, Elsevier, vol. 30(11), pages 2017-2032, November.
    10. Weiss, John & Montgomery, Heather & Kurmanalieva, Elvira, 2003. "Micro finance and poverty reduction in Asia: what is the evidence?," MPRA Paper 33140, University Library of Munich, Germany.
    11. 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.
    12. Zahra, Shaker A. & Gedajlovic, Eric & Neubaum, Donald O. & Shulman, Joel M., 2009. "A typology of social entrepreneurs: Motives, search processes and ethical challenges," Journal of Business Venturing, Elsevier, vol. 24(5), pages 519-532, September.
    13. 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 et Mondialisation).
    14. Shakil Quayes & Baqui Khalily, 2013. "Efficiency of Microfinance Institutions in Bangladesh," Working Papers 19, Institute of Microfinance (InM).

    More about this item

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy

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