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A Cost-Effectiveness Analysis of the Grameen Bank of Bangladesh

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  • Mark Schreiner

    (Washington University in St. Louis)

Abstract

In the next ten years, advocates of microfinance organizations (MFOs) will seek more than $20 billion to provide small loans to 100 million of the poorest families worldwide. In the United States, the newest federal budget proposes a 159-percent increase in the about $200 million spent per year on domestic microfinance. Most of the excitement for the promise of microfinance in the United States has been sparked by reports of the success of the Grameen Bank of Bangladesh. Was Grameen a good use of scarce funds earmarked to help the poor? For the time frame of 1983- 96, I find that the present worth of benefits of Grameen exceeded the present worth of costs ($16.4 million) as long as the average member got more than $8 worth of surplus per year of membership. This result is robust to assumptions about opportunity costs. Given the documented impacts of Grameen, my guess is that benefits did in fact exceed costs. Grameen seems to have been a good way to help the poor. Still, one good MFO does not a microfinance crusade make, and most MFOs in the United States and worldwide do not perform as well as Grameen. CEA is an inexpensive tool to help to inform the judgement of whether a given MFO is a good way to help the poor.

Suggested Citation

  • Mark Schreiner, 2001. "A Cost-Effectiveness Analysis of the Grameen Bank of Bangladesh," Development and Comp Systems 0109007, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpdc:0109007
    Note: Type of Document - Adobe Acrobat 3.0; prepared on Windows 98; to print on Adobe Acrobat 3.0; pages: ; figures: Included in pdf file
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    References listed on IDEAS

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    More about this item

    Keywords

    Cost-effectiveness analysis; microfinance; bank management; self-sustainability;
    All these keywords.

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy

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