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Assessing the impact of micro-credit on poverty and vulnerability in Bangladesh

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  • Zaman, Hassan

Abstract

The author examines the extent to which micro-credit reduces poverty and vulnerability through a case study of BRAC, one of the largest providers of micro-credit to the poor in Bangladesh. Household consumption data collected from 1,072 households is used to show that the largest effect on poverty arises when a moderate-poor BRAC loanee borrows more than 10,000 taka (U$S 200) in cumulative loans. Different control groups and estimation techniques are used to illustrate this point. The author discusses several ways by which membership in micro-credit programs reduces vulnerability - by smoothing consumption, building assets, providing emergency assistance during natural disasters, and contributing to female empowerment. The reduction in female vulnerability in a patriarchal society is illustrated using 16 female empowerment indicators developed from data on 1,568 women. The results suggest that micro-credit's greatest impact is on the set of indicators relating to female control over assets and knowledge of social issues. The author also argues that micro-credit's impact on poverty and vulnerability can be strengthened if credit is provided jointly with other financial (savings and insurance) and non-financial (legal education, food relief) interventions.

Suggested Citation

  • Zaman, Hassan, 1999. "Assessing the impact of micro-credit on poverty and vulnerability in Bangladesh," Policy Research Working Paper Series 2145, The World Bank.
    • Handle: RePEc:wbk:wbrwps:2145
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    References listed on IDEAS

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    1. Ravallion, Martin & Wodon, Quentin, 1997. "Poor areas, or only poor people?," Policy Research Working Paper Series 1798, The World Bank.
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