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Microfinance and Poverty Reduction:Evidence from a Longitudinal Household Panel Database

Author

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  • Razzaque, Mohammad A

    (Associate Professor, Department of Economics , Dhaka University)

Abstract

The effectiveness of microfinance in reducing poverty remains a subject matter of academic as well as policy interest. Assessment of microcredit interventions is often flawed by the shortcomings associated with the data and empirical methodologies employed that fail to tackle such issues as non-random participation and self selection of programme participants influenced by their unobserved characteristics. This paper makes an attempt to overcome these problems by making use of a unique longitudinal panel household database on Bangladesh. The empirical results seem to provide strong evidence of positive impact of microfinance as the cumulative household borrowing is found to be significantly and positively influencing household per capita income and asset-holding and inversely related to the probability of a household’s falling below the poverty line. The results imply that if all the eligible non-participant households are brought under micro finance, the poverty headcount ratio for this group would fall by seven percentage points. There is also the evidence of smaller microfinance institutions being more effective in anti-poverty programmes.

Suggested Citation

  • Razzaque, Mohammad A, 2010. "Microfinance and Poverty Reduction:Evidence from a Longitudinal Household Panel Database," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 33(3), pages 47-68, September.
    • Handle: RePEc:ris:badest:0499
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    References listed on IDEAS

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    1. Mark M. Pitt & Shahidur R. Khandker, 1998. "The Impact of Group-Based Credit Programs on Poor Households in Bangladesh: Does the Gender of Participants Matter?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 958-996, October.
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    Cited by:

    1. Mathilde Maîtrot & Miguel Niño-Zarazúa, 2017. "Poverty and wellbeing impacts of microfinance: What do we know?," WIDER Working Paper Series 190, World Institute for Development Economic Research (UNU-WIDER).
    2. Álvarez-Gamboa, Javier & Cabrera-Barona, Pablo & Jácome-Estrella, Hugo, 2023. "Territorial inequalities in financial inclusion: A comparative study between private banks and credit unions," Socio-Economic Planning Sciences, Elsevier, vol. 87(PA).
    3. Mathilde Maîtrot & Miguel Niño-Zarazúa, 2017. "Poverty and wellbeing impacts of microfinance: What do we know?," WIDER Working Paper Series wp-2017-190, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    Microfinance; Poverty Reduction; Household Panel Database;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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