The impact of microcredit on poverty and women's empowerment : a case study of Bangladesh

The microcredit program in Bangladesh is a unique innovation of credit delivery designed to enhance the income generating activities of the poor. Its uniqueness is reflected in its collateral-free group-based lending strategy. The program extends small loans to poor people, mainly women, for self-employment activities thus allowing clients to achieve a better quality of life. This program is regarded as a very exciting anti-poverty tool for the poorest, especially for women. This study investigates the impact of microcredit on economic indicators as well as consumption behaviour of the borrowers. It further analyses the impact of microcredit on women’s empowerment. Primary data has been collected from the borrowers of two major microcredit institutions in Bangladesh. Alongside the borrowers, data have also been collected from non-borrowers of the same village to compare the impact between borrowers and control group. The empirical work has used sophisticated econometric techniques. Five different econometric methods - OLS, 2SLS, Probit, Tobit and SURE estimators - have been applied to the sample data of this study. The most important finding indicates that microcredit programs are effective in increasing borrowers’ income, assets and consumption but it is more pronounced towards high income borrowers than low income borrowers. It further finds that microcredit programs are empowering for women