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The Impact of Microcredit on Household Welfare: Evidence from Bangladesh During the COVID-19 Pandemic

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  • Mohammad Raied Arman
  • Narayan Das
  • Sakib Mahmood
  • Semab Rahman
  • Khandker Wahedur Rahman

Abstract

The onslaught of COVID-19 and the subsequent economic fallout have exacerbated world inequality, with the poor bearing a disproportionate brunt of the pandemic. In this paper, we investigate whether access to credit—in the form of microloans—cushioned the blow induced by COVID-19 and increased poor households’ welfare. In particular, we use survey data on microloan borrowers in Bangladesh to examine how access to microfinance affected its clients during the COVID-19 crisis. We employ a difference-in-differences (DID) methodology to compare borrowers who received loans after the outbreak of the pandemic with borrowers who did not. Our results suggest that receiving microloans increases business earnings, food security, as well as food expenditure. These effects are primarily driven by borrowers of business-focused loans, while the impact of the loans focused on poverty reduction is muted.

Suggested Citation

  • Mohammad Raied Arman & Narayan Das & Sakib Mahmood & Semab Rahman & Khandker Wahedur Rahman, 2026. "The Impact of Microcredit on Household Welfare: Evidence from Bangladesh During the COVID-19 Pandemic," Journal of Development Studies, Taylor & Francis Journals, vol. 62(2), pages 286-307, February.
    • Handle: RePEc:taf:jdevst:v:62:y:2026:i:2:p:286-307
    DOI: 10.1080/00220388.2025.2515883
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