Bangladeshi MFI Clients Crossing the Poverty Threshold

In a recent study prepared for the Microcredit Summit Campaign, the Economic Research Group conducted extensive survey work in Bangladesh to assess the number of microcredit clients who crossed the US$1.25 a day poverty threshold from 1990 to 2008.

The study does not attempt to assess causality between micocredit and poverty alleviation. Instead, poverty scorecards developed from household income and expenditure surveys in different years were administered to estimate the poverty likelihoods of different groups of MFI clients differentiated by time of first loan and geographical location.

Here are some key findings from the study:

• The microcredit sector in Bangladesh grew at around 10 percent per year over more than a decade.
• Two-thirds of the non-metropolitan population had one or more MFI loans.
• On average, 62 percent of first-time entrants were below the poverty threshold (defined as the national currency purchasing power equivalent to US$1.25 a day).
• Almost 74 percent of the new microcredit clients during 1994-97 were below the threshold at the time of their entry.  The corresponding figure declined sharply to little more than 57 percent during 1998-2000, which followed a long-lasting flood. Interestingly though, more of the early entrants crossed the threshold while in the latter entry period (1998-2000), the non-poor borrowers were more likely to slide below the threshold. On the whole, therefore, the net progress was undermined – only around nine percent of the borrowers currently residing in the non-metropolitan areas had crossed the threshold.
• Almost 25 percent of those below the threshold at the time of entry into microcredit programs were found to have crossed the threshold, while almost one-fifth of those above the threshold had slid below the reference point.
• Many borrowers had migrated to urban areas and microcredit is believed to have often facilitated their mobility to areas with better opportunities. A survey of metropolitan slums finds that one-fourth of these households had crossed the threshold.
• Leaving aside the microcredit clients entering the programs from metropolitan areas, a total of 9.43 million people had crossed the threshold on net between 1990 and 2008.

You can read the full report at the Microcredit Summit Campaign.

• Asia
• Bangladesh
• Finance
• Microfinance
• Poverty Reduction
• Social Performance
• Vulnerable
• Very Poor
• Evaluation
• Impact Assessment
• MFI
• Financial service providers
• Households
• Financial Inclusion