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The Macro Impact of Microfinance in Bangladesh: A CGE Analysis

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  • Raihan, Selim
  • Osmani, S. R.
  • Khalily, M. A. Baqui

Abstract

A lot has been written on the impact of microfinance on poverty and well-being at the household level, but little is known about its macro impact. The present paper makes a pioneering attempt to estimate the macro impact of microfinance in Bangladesh. The expansion of microfinance constitutes an important dimension of financial development, which can affect the real economy through multiple channels. The present paper examines how microfinance has affected the gross domestic product (GDP) of Bangladesh by operating through a number of such channels – viz., capital accumulation, productivity improvement, and reallocation of capital and labor among different sectors. A static computable general equilibrium (CGE) model has been used in order to capture these transmission mechanisms. The study estimates that microfinance has added somewhere between 8.9 percent and 11.9 percent to the GDP of the country depending on the assumptions made about the working of the labour market. The contribution to rural GDP is even higher – between 12.6 and 16.6 percent. There is scope to refine these estimates further in future research by including additional transmission mechanisms and employing a dynamic version of the CGE model.

Suggested Citation

  • Raihan, Selim & Osmani, S. R. & Khalily, M. A. Baqui, 2017. "The Macro Impact of Microfinance in Bangladesh: A CGE Analysis," Conference papers 332868, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332868
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    References listed on IDEAS

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    2. Md. Sarowar Khaled & Kittinan Maliwan & Juntakan Taweekun & Abul K. Azad & K. M. Zahidul Islam, 2024. "Effects of Energy Consumption, GDP and Microfinance on Sustainable Poverty Reduction: Evidence from a Developing Economy," Sustainability, MDPI, vol. 16(19), pages 1-20, September.
    3. Anupam Das & Leanora Brown & Adian McFarlane, 2023. "Asymmetric Effects of Financial Development on CO 2 Emissions in Bangladesh," JRFM, MDPI, vol. 16(5), pages 1-18, May.
    4. Dairo Ayiber Estrada & Ana María Yaruro-Jaime & Felipe Clavijo-Ramírez & Laura Marcela Capera Romero & Jairo Gómez, 2023. "The Development of Microcredit in Colombia," Books, Banco de la Republica de Colombia, number 2023-isbn:9786289511222 edited by Asomicrofinanzas & Banco de la República, August.
    5. Dioum, Sokhna Bousso, 2024. "Pauvreté et microfinance dans l’espace de la CEDEAO : un cluster macroéconomique appliqué [Poverty and microfinance in the ECOWAS region: an applied macroeconomic cluster]," MPRA Paper 121581, University Library of Munich, Germany.

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