Household and Intrahousehold Impact of the Grameen Bank and Similar Targeted Credit Programs in Bangladesh

Abstract

This paper is one of several World Bank papers examining the sustainability and household and intrahousehold impact of credit programs for the poor in Bangladesh. The aim of the paper is to develop a method for estimating the costs and benefits of group-based credit programs and to determine under what conditions group-based credit programs are sustainable. Household outcome measures include school enrollment of boys and girls the labor supply of women and men the asset holdings of women recent fertility and contraceptive use consumption and the anthropometric status of children. Findings indicate that credit to women was more likely to influence 7 out of 8 outcome behaviors than credit to men (3 out of 8). Three credit programs are evaluated: Grameen Bank the BRAC and the BRDBs RD-12. The methods include a comparison of ordinary least squares and complex econometric methods using a quasi-experimental design. The comparison served to highlight the importance of accounting for endogeneity in evaluating credit programs in order to avoid mistaken conclusions drawn from naive estimates. Findings indicate that credit was a significant determinant of household behavior. Credit in the Grameen Bank program had the greatest positive impact on outcomes associated with household wealth and womens status. Grameen Banks credit to women had the largest impact on girls schooling womens labor supply and total household expenditure. Grameen Banks credit to men had the largest impact on fertility. Womens credit from the BRBD had the largest impact on boys schooling and the value of womens assets. Credit did not impact on the anthropometric status of children. The effect of credit programs on contraceptive use was measured differently in the two methods. Also the naive method underestimated the effect on increasing total household expenditure. Policy should consider that the credit program empowered women decreased poverty and had beneficial effects from credit given to men.