Microfinance Growth and Poverty Reduction in Bangladesh: What Does the Longitudinal Data Say?

Investigating the impact of microcredit programs on household income and poverty
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This paper analyzes the extent of poverty reduction accrued by MFI participants and the economy as a whole as a result of an overwhelming expansion of microfinance portfolio in Bangladesh in the recent past. It tries to verify if the growth in microcredit portfolio has led to higher income and expenditure growth and consequently poverty reduction over the study period.The paper's analysis is based on three groups of data sets. The first one is from the published statistics by Credit and Development Forum (CDF), Institute of Microfinance (InM), and Grameen Bank. This data contains the program level statistics at national level for various years. The second data set comes from Household Income Expenditure Survey (HIES) for 2000, 2005 and 2010. The third data set comes from a three-period panel surveys spanning over 20 years (from 1991/92 to 2010/11). Findings include:

  • Microcredit program participation improves total household and nonfarm income, and lowers extreme poverty;
  • Nonfarm income grew for more for non-participants than for participants;
  • Actual reduction in extreme poverty in rural Bangladesh during 2000-2010 is 16.8% points. Extent of poverty reduction due to microcredit intervention accounts for over 9% (1.8 over 16.8) of the total poverty reduction;
  • Despite the significant progress in poverty reduction, urban-rural disparity remains a concern after all these years.

About this Publication

By Khandker, S. R. , Samad, H. A.