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Dynamic effects of microcredit in Bangladesh

Author

Listed:
  • Khandker, Shahidur R.
  • Samad, Hussain A.
Abstract
This paper uses long panel survey data spanning over 20 years to examine the dynamics of microcredit programs in Bangladesh. With the phenomenal growth of microfinance institutions representing 30 million members with over $2 billion of annual disbursement over the past two decades, it is important to understand the dynamics of microcredit expansion and its induced impact on household welfare. A dynamic panel model is used to address a number of issues, such as whether credit effects are declining over time, whether market saturation and village diseconomies are taking place, and whether multiple program membership, which is rising as a consequence of microcredit expansion, is harming or benefiting the borrowers. The paper's results confirm that microcredit programs have continued to benefit the poor by raising household welfare. The beneficial effects have also remained higher for female than male borrowers. There are diseconomies of scale caused by higher levels of village-level borrowing, especially for male members. Multiple program membership is also growing with competition from microfinance institutions, but this has rather helped raise assets and net worth more than it has contributed to indebtedness.

Suggested Citation

  • Khandker, Shahidur R. & Samad, Hussain A., 2014. "Dynamic effects of microcredit in Bangladesh," Policy Research Working Paper Series 6821, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6821
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    References listed on IDEAS

    as
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    2. Zelu, Barbara Ama & Iranzo, Susana & Perez-Laborda, Alejandro, 2024. "Financial inclusion and women economic empowerment in Ghana," Emerging Markets Review, Elsevier, vol. 62(C).
    3. Padmavathi Koride & Anjula Gurtoo, 2019. "A Comparison of Borrowing and Default Behaviour Between Men and Women," Studies in Microeconomics, , vol. 7(2), pages 189-209, December.
    4. Anjali Kumar & Sushma Narain & Swizen Rubbani, 2015. "World Bank Lending for Financial Inclusion," World Bank Publications - Books, The World Bank Group, number 21796.
    5. Balasubramanian, Pooja & Ibanez, Marcela & Khan, Sarah & Sahoo, Soham, 2024. "Does women's economic empowerment promote human development in low- and middle-income countries? A meta-analysis," World Development, Elsevier, vol. 178(C).
    6. repec:hal:wpaper:hal-03538199 is not listed on IDEAS
    7. Rahul Nilakantan & Deepak Iyengar & Samar K. Datta & Shashank Rao, 2021. "On Ethical Violations in Microfinance Backed Small Businesses: Family and Household Welfare," Journal of Business Ethics, Springer, vol. 172(4), pages 785-802, September.
    8. Ewura‐Adwoa Ewusie & Samuel Kobina Annim & William Brafu‐Insaidoo, 2021. "The density of microfinance institutions and multiple borrowing in Ghana: Are rural borrowers vulnerable?," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(8), pages 1217-1237, November.
    9. Rodrigo de O. Leite & Jamil Civitarese, 2019. "Microfinance for women: Are there economic reasons? Evidence from Latin America," Economics Bulletin, AccessEcon, vol. 39(1), pages 571-580.
    10. Andrew J. Mirelman & Antonio J. Trujillo & Louis W. Niessen & Sayem Ahmed & Jahangir A.M. Khan & David H. Peters, 2019. "Household coping strategies after an adult noncommunicable disease death in Bangladesh," International Journal of Health Planning and Management, Wiley Blackwell, vol. 34(1), pages 203-218, January.
    11. Nudrat Faria Shreya, 2021. "Are Two Sources of Credit better than One?: Credit Access and Debt among Microfinance Clients in Bangladesh," Studies in Economics 2103, School of Economics, University of Kent.
    12. Iddrisu, Abdul Malik & Danquah, Michael, 2024. "The financial inclusion agenda: Examining the role of conventional banks in deepening access to formal credit," Economic Systems, Elsevier, vol. 48(2).
    13. Khan, Md Faisal Abedin & Uddin, Md Sazib & Giessen, Lukas, 2021. "Microcredit expansion and informal donor interests: Experiences from local NGOs in the Sundarbans Mangrove Forest, Bangladesh," World Development Perspectives, Elsevier, vol. 21(C).
    14. Phan, Chung Thanh & Sun, Sizhong & Zhou, Zhang-Yue & Beg, Rabiul & Ramsawak, Richard, 2023. "Does productive microcredit improve rural children's education? Evidence from rural Vietnam," Journal of Asian Economics, Elsevier, vol. 84(C).
    15. Chantal Hervieux & Annika Voltan, 2018. "Framing Social Problems in Social Entrepreneurship," Journal of Business Ethics, Springer, vol. 151(2), pages 279-293, August.
    16. Omika Bhalla Saluja & Priyanka Singh & Harit Kumar, 2023. "Barriers and interventions on the way to empower women through financial inclusion: a 2 decades systematic review (2000–2020)," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-14, December.
    17. Md Akther Uddin & S. M. Sohrab Uddin, 2021. "Microfinance and Debt Trap: An Ethnographic Evidence From a Village in Bangladesh," International Journal of Asian Business and Information Management (IJABIM), IGI Global, vol. 12(3), pages 1-11, July.
    18. Donou-Adonsou, Ficawoyi & Sylwester, Kevin, 2017. "Growth effect of banks and microfinance: Evidence from developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 44-56.
    19. Ahmed, M. & Gautam, M. & Sen, B., 2018. "Waves of Change: Understanding Ascent, Descent and Persistence of Poverty in Rural Bangladesh," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277340, International Association of Agricultural Economists.
    20. 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.
    21. Hyun, Junghwan & Uddin, Azad, 2016. "Heterogeneous lending behaviors and gross loan flows in developing economies," Economic Modelling, Elsevier, vol. 55(C), pages 359-372.

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    Keywords

    Banks&Banking Reform; Labor Policies; Economic Theory&Research; Debt Markets; Science Education;
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