Impact of Microcredit Program on Women's Empowerment in Rural Bangladesh

Abstract: Background – This study is an attempt to explore the relationship between microcredit and the socio-economic empowerment of women in rural Bangladesh. Microcredit is simply the extension of a small amount of collateral-free institutional loans to jointly liable poor group members to generate employment and income enhancing activities. As it is too difficult for poor members to get loan from the formal credit institutions, Grameen Bank (GB) or other Non-Government Organizations (NGOs) provide small loans to vulnerable groups of the society by which they are expected to empower over his counterparts. Research questions – RQ1: How does micro-credit affect different indicators of women empowerment in the rural areas of Bangladesh? RQ2– Is the impact different from the male counterparts in the sample households? Purpose – This study is an effort to find the impact of microcredit on a number of indicators of women’s empowerment in the rural areas in Bangladesh. Methodology – Quantitative Regression Techniques such as Ordinary Least Square (OLS) and Instrumental Variable (IV) method have been applied to get the relationship between microcredit and women empowerment. Conclusion – Applying nationally representative cross-section survey data, Bangladesh Integrated Household Survey (BIHS) 2015, this thesis is intended to find the causal linkage between microcredit and women empowerment’s with different dimensions of women’s decisions are taken as empowerment indicators: production, resources, income, leadership, savings and time. The analysis has been conducted at the household level. The study assumes that women empowerment is endogenous. After controlling for endogeneity in the estimation by using an instrumental variable (IV) ‘distance to the market’ this study finds a significant relationship between microcredit and different dimensions of women’s empowerment. Participation in the microcredit program is found to be significant in explaining some of the outcome indicators of empowerment for the sampled households.