The role of micro-credit programmes in alleviating poverty in Bangladesh

  • Md Rahman

Student thesis: Doctoral Thesis

Abstract

Micro-finance institutions (MFIs) aim to reduce poverty by providing small loans to poor people. Governments and international agencies such as the World Bank are spending billions of dollars to increase the outreach of MFIs across the world. However, the empirical evidence of micro-credit on poverty reduction is mixed. Some of the studies claim that micro-credit has a positive impact on poverty reduction while some others find no impact. The purpose of this thesis is twofold. First, this thesis investigates the factors affecting the branch placement decision as well as branch density of MFIs in Bangladesh. Data, such as the presence of Grameen, BRAC and village market centre, were collected from all branches (2,936) of ASA Bangladesh and 2,936 non-ASA villages using a structured questionnaire. Secondary data on the rate of poverty and population were collected from the Bangladesh Bureau of Statistics. The findings reveal that there is no systematic relationship between the distance and branch placement. The results also suggest that ASA is highly likely to place a branch in a particular location where there is a branch of its competitors. ASA is less likely to place a branch in a village where there is a branch of a commercial bank. In addition, ASA is highly likely to place a branch in a village where the rate of poverty is high.Second, another goal of this thesis is to evaluate the impact of micro-credit on poverty in Bangladesh. Particularly, it aims to investigate the impact of micro-credit on the two dimensions of poverty: the incidence of poverty and average deprivation of poverty. To do this, primary data were collected from 2,598 households. Five types of households are included in the sample and these are: current borrowers, drop-outs, refused, pipeline borrowers and non-borrowers.With this data set, it aims to control for some biases that arise in the impact assessment of micro-credit. In particular, this study controls for the non-random programme placement and selection bias while estimating the impact. The results suggest that the incidence of poverty is the highest among drop-out borrowers and the lowest among the current borrowers. Drop-out borrowers have the highest average deprivation of poverty, while the current borrowers have the lowest. The empirical evidence suggests that micro-credit has a positive impact on poverty reduction in Bangladesh.
Date of Award1 Oct 2015
LanguageEnglish
Awarding Institution
  • University Of Strathclyde
SponsorsUniversity of Strathclyde
Supervisor (Supervisor) (Supervisor)

Cite this