Effects of credit on national and agricultural GDP, and poverty: a developing country perspective

A developing country's economy, such as Bangladesh's, mainly focuses on agriculture, and credit plays a vital role in economic development and poverty alleviation. Therefore, this study aims to narrate the effects of credit on the national Gross Domestic Product (GDP), agricultural GDP, and poverty. Forty-three years' data (from 1976 to 2018) on credit, GDP, and poverty are collected from different secondary sources, whereas four prominent credit disbursement organizations are considered for this study. A fixed-effect model is employed to reveal the effect of credit. The study finds that credit has significant positive effects on both national and agricultural GDP. An increase in the amount of loans, number of loanees, and number of banks' branches indicate an increasing number of people getting access to finance, which would increase their production-related activities and eventually contributed to increasing GDP. The study also finds that credit has a significant favorable effect on poverty alleviation. The findings highlight the importance of credit in Bangladesh and other emerging economies to flourish the economy and ease poverty. Therefore, the study suggests that financial institutions should expand their credit programs for rural entrepreneurs and farmers to ensure sustainable rural development as well as economic development.