The Impact of Microfinance on Consumption in Bangladesh

Abstract

Given that Bangladesh is the birth place of microfinance, the number of MFIs as well as their members and borrowers increased dramatically in the last 40 years. Empirical studies provide evidence that microcredit borrowers experience higher consumption, better lives and lower poverty through more income-generating activities. The current paper estimates the impact of microfinance on consumption in Bangladesh. It explores the specific effects of microcredit on food and nonfood consumption. The data used is generated from Household Income and Expenditure Survey (HIES) 2010 conducted by Bangladesh Bureau of Statistics (BBS). The paper finds that microcredit borrowing increases consumption. Microcredit borrowers have been estimated to have 121 Taka higher weekly food consumption and 34 Taka higher nonfood consumption than non-borrowers.

Keywords: microfinance/microcredit, consumption, poverty, Bangladesh