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The Effects of Microfinance Programs on Recipients’ Livelihoods in Rural Bangladesh

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Abstract

Despite the widespread use of microfinance programs since the early 1990s, there is little empirical research on the effects of microfinance on recipients’ livelihoods in rural areas. We therefore compared the effects of governmental and non-governmental microfinance on livelihood and empowerment in rural Bangladesh. Data were collected in two phases from the same 300 microfinance beneficiaries and 200 control respondents using face-to-face interviews. Both descriptive and inferential statistics (propensity score matching, Rosenbaum bounds, and ordinary least squares) were used for analysis. Fixed effects instrumental variable estimates were also designed to minimize spillover effects. Microfinance significantly contributed to different livelihood and empowerment dimensions to ultimately improve livelihoods, with the greatest improvements seen in non-governmental rather than governmental microfinance recipients.

Résumé

En dépit de programmes de microfinance très répandus depuis le début des années 1990, il existe peu de recherches empiriques sur les effets de la microfinance sur les moyens de subsistance des bénéficiaires dans les zones rurales. Nous avons donc comparé les effets de la microfinance gouvernementale et non gouvernementale sur les moyens de subsistance et l'autonomisation dans les zones rurales du Bangladesh. Les données ont été collectées en deux phases auprès des mêmes 300 personnes qui bénéficient de programmes de microfinance et auprès de 200 répondants témoins, par le biais d'entretiens individuels en face-à-face. Des méthodes statistiques descriptives et inférentielles (méthodes d’appariement par score de propension, des limites de Rosenbaum et des moindres carrés ordinaires) ont été utilisées pour l'analyse. Les estimations des variables instrumentales à effets fixes ont également été conçues pour minimiser les effets d'entraînement. La microfinance a contribué de manière significative à différentes dimensions des moyens de subsistance et de l'autonomisation pour finalement améliorer les moyens de subsistance, sachant que les plus grandes améliorations sont constatées chez les personnes qui bénéficient de programmes de microfinance non-gouvernementaux, plutôt que gouvernementaux.

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  1. Professor, Department of Agricultural Extension & Info. System, Sher-e-Bangla Agricultural University, Sher-e-Bangla Nagar, 1207, Dhaka, Bangladesh

    Mohummed Shofi Ullah Mazumder

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Appendix

Appendix

Spillover Effects of Microfinance

Table 10 shows the results of spillover effects of microfinance on GO and NGO non-participants. Although in every case/variable the spillover effect (microfinance program effect on non-participating respondents) was non-zero, the effects were very small and did not significantly influence the observed changes in non-recipients’ livelihood and empowerment conditions in any dimension. The highest level of significance for a spillover effect was observed in non-participants’ housing conditions in both GO (p < 0.539) and NGO (p < 0.676) areas, both statistically insignificant. The lowest level of significance was observed in non-participant respondents’ freedom from family violence in both GO (p < 2.312) and NGO (p < − 1.895) areas. Minimization of attenuation and downward bias appears to have been adequate (Table 10).

Table 10 Spillover effects of microfinance on non-participant respondents’ livelihoods and empowerment
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Family, Social and Political Empowerment: At a Glance

Data presented in Table 11 indicates total changes in family, social and political empowerment based on each indicator counted by summing-up total unit-free scores of each group of respondents. In summary, Table 11 shows that the changes in economic indicators were comparatively greater in NGO respondents, while GO respondents made greater changes in family and social and the political sector. Similarly, microfinance respondents showed greater effects than non-recipients in a majority of the empowering issues (Table 11).

Table 11 Distribution of GO and NGO microfinance and non-microfinance (control group) respondents according to their overall family, social, and political empowerment level (score) in 2010 and 2012
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Mazumder, M.S.U. The Effects of Microfinance Programs on Recipients’ Livelihoods in Rural Bangladesh. Eur J Dev Res 34, 1383–1418 (2022). https://doi.org/10.1057/s41287-021-00425-w

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