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The Benefits and Costs of Microfinance: Evidence from Bangladesh

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  • Matthieu Chemin

Abstract

Using the latest developments from the evaluation literature, namely the technique of matching, this paper shows a positive, but lower than previously thought, effect of microfinance on expenditure per capita, supply of labour, and level of school enrolment for boys and girls. For instance, participants spend 3 per cent more on average than non-participants in control villages. This paper also takes into account repayment delays to calculate the cost of credit provision. It shows how a better investigation at the individual level of the benefits brought and the cost borne could help microfinance institutions to better select their customers. JEL Classification : C14, D10, G21, I38, O12, O16

Suggested Citation

  • Matthieu Chemin, 2008. "The Benefits and Costs of Microfinance: Evidence from Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 44(4), pages 463-484, April.
  • Handle: RePEc:taf:jdevst:v:44:y:2008:i:4:p:463-484
    DOI: 10.1080/00220380701846735
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    References listed on IDEAS

    as
    1. Dean Karlan & Jonathan Zinman, 2010. "Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts," Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 433-464, January.
    2. repec:pri:rpdevs:morduch_microfinance_poor is not listed on IDEAS
    3. Jonathan Morduch, 1998. "Does Microfinance Really Help the Poor? New Evidence from Flagship Programs in Bangladesh," Working Papers 198, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
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    Citations

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    Cited by:

    1. Morduch, Jonathan & Ravi, Shamika & Bauchet, Jonathan, 2013. "Substitution Bias and External Validity: Why an Innovative Anti-poverty Program Showed no Net Impact," CEI Working Paper Series 2013-02, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    2. Pitt, Mark M. & Khandker, Shahidur R., 2012. "Replicating replication : due diligence in Roodman and Morduch's replication of Pitt and Khandker (1998)," Policy Research Working Paper Series 6273, The World Bank.
    3. repec:eee:labeco:v:47:y:2017:i:c:p:75-95 is not listed on IDEAS
    4. Erhardt, Eva Christine, 2017. "Microfinance beyond self-employment: Evidence for firms in Bulgaria," Labour Economics, Elsevier, vol. 47(C), pages 75-95.
    5. Trabelsi, Mohamed Ali & Chichti, Jameleddine, 2011. "Les Institutions de Microcrédit et la Lutte Contre la Pauvreté : L’initiative d’Enda Interarabe en Tunisie
      [Microcredit Institutions and the Battle Against Poverty: The Pan-Arab Enda Initiative in
      ," MPRA Paper 77019, University Library of Munich, Germany, revised 2011.
    6. Bah, El-hadj & Brada, Josef C. & Yigit, Taner, 2011. "With a little help from our friends: The effect of USAID assistance on SME growth in a transition economy," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 205-220, June.
    7. Nargiza Alimukhamedova & Randall Filer & Jan Hanousek, 2015. "The Importance of Geographic Access for the Impact of Microfinance," CESifo Working Paper Series 5433, CESifo Group Munich.
    8. repec:bla:devpol:v:35:y:2017:i:5:p:645-657 is not listed on IDEAS
    9. Kazushi TAKAHASHI & Takayuki HIGASHIKATA & Kazunari TSUKADA, 2010. "The Short-Term Poverty Impact Of Small-Scale, Collateral-Free Microcredit In Indonesia: A Matching Estimator Approach," The Developing Economies, Institute of Developing Economies, vol. 48(1), pages 128-155.
    10. 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).
    11. Hisaki KONO & Kazushi TAKAHASHI, 2010. "Microfinance Revolution: Its Effects, Innovations, And Challenges," The Developing Economies, Institute of Developing Economies, vol. 48(1), pages 15-73.
    12. Asad K. Ghalib & Issam Malki & Katsushi S. Imai, 2012. "Microfinance and its role in household poverty reduction: findings from Pakistan," Global Development Institute Working Paper Series 17312, GDI, The University of Manchester.
    13. Dieudonné Bleossi Dahoun & Olivier Manlan & Cosme Vodonou & Saint-Martin Mongan & Damien Mededji & Janvier P. Alofa, 2013. "Microcrédit, pauvreté et autonomisation des femmes au Bénin," Working Papers PMMA 2013-13, PEP-PMMA.
    14. Vuong Quoc, Duy, 2011. "Are households’ poverty levels in Mekong Delta of Vietnam affected by access to credit?," MPRA Paper 35412, University Library of Munich, Germany.
    15. Hermes, Niels & Lensink, Robert, 2011. "Microfinance: Its Impact, Outreach, and Sustainability," World Development, Elsevier, vol. 39(6), pages 875-881, June.
    16. Maren Duvendack & Richard Palmer-Jones, 2012. "High Noon for Microfinance Impact Evaluations: Re-investigating the Evidence from Bangladesh," Journal of Development Studies, Taylor & Francis Journals, vol. 48(12), pages 1864-1880, December.
    17. Deininger, Klaus & Liu, Yanyan, 2013. "Economic and Social Impacts of an Innovative Self-Help Group Model in India," World Development, Elsevier, vol. 43(C), pages 149-163.
    18. Hosaki Kono, 2011. "Economic Integration and Poverty," Chapters,in: The Economics of East Asian Integration, chapter 16 Edward Elgar Publishing.
    19. Duvendack, Maren, 2010. "Smoke and Mirrors: Evidence of Microfinance Impact from an Evaluation of SEWA Bank in India," MPRA Paper 24511, University Library of Munich, Germany.
    20. repec:eur:ejmsjr:400 is not listed on IDEAS
    21. Shahidur R. Khandker & Hussain A. Samad, 2013. "Microfinance Growth and Poverty Reduction in Bangladesh: What Does the Longitudinal Data Say?," Working Papers 16, Institute of Microfinance (InM).
    22. Awaworyi Churchill, Sefa & Korankye Danso, Jeffrey & Appau, Samuelson, 2015. "Microcredit and Poverty Reduction in Bangladesh: Beyond Publication Bias, Does Genuine Effect Exist?," EconStor Preprints 123722, ZBW - German National Library of Economics.
    23. Duvendack, Maren & Palmer-Jones, Richard, 2011. "The microfinance of reproduction and the reproduction of microfinance: understanding the connections between microfinance, empowerment, contraception and fertility in Bangladesh in the 1990s," MPRA Paper 32384, University Library of Munich, Germany.
    24. Dan Brockington & Nicola Banks, 2014. "Exploring the Success of BRAC Tanzania’s Microcredit Programme," Global Development Institute Working Paper Series 20214, GDI, The University of Manchester.
    25. Khandker, Shahidur R & Samad, Hussain A, 2016. "Bangladesh’s Achievement in Poverty Reduction: The Role of Microfinance Revisited," Working Papers 114, JICA Research Institute.

    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D10 - Microeconomics - - Household Behavior - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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