Assessing the Poverty and Vulnerability Impact of Micro-credit in Bangladesh: A case study of BRAC

Presents the main argument that micro-credit contributes to mitigating a number of factors that contribute to vulnerability, whereas the impact on income-poverty is a function of borrowing beyond a certain loan threshold and to a certain extent contingent on how poor the household is to start with.

This argument is illustrated by

• complementing the existing literature with some empirical analysis of household survey data collected in Bangladesh in 1995. Consumption data from households is used to show that the largest effect on poverty arises when a moderate-poor BRAC loanee borrows more than 10000 taka ($200) in cumulative loans.
• A number of pathways by which micro-credit can reduce vulnerability, namely by strengthening crisis-coping mechanisms (the 1998 flood in Bangladesh is used as a case study), building assets and ‘empowering’ women are discussed. Data from women are used to construct sixteen ‘female empowerment’ indicators and the empirical analysis that follows suggests that micro-credit has the greatest effect on female control over assets and also on her knowledge of social issues controlling for a host of other characteristics

[adapted from author]