Shahid Khandker and Hassan Zaman, senior economists at the World Bank, recently reviewed published studies such as The World Bank’s 2008 Poverty Assessment and the records of Palli Karma-Sahayak Foundation (PKSF), a government-backed microfinance funder, an effort to determine the role that microfinance has played in the economic development of Bangladesh since the 1970s.
Citing this research, Dr Khandker and Dr Zaman posit the following: (1) the reduction in poverty is greater in areas where microfinance increased most rapidly, (2) microfinance accounts for a 1.6 percent reduction in poverty levels amongst microfinance clients per year, (3) microfinance programs have spillover effects on non-clients and (4) noncredit interventions by microfinance institutions (MFIs), such as those related to health and education, raise self-employment profits in rural Bangladesh by 125 percent [1].
Despite these positives, Khandker and Zaman conclude that “microfinance is not a panacea and will clearly not eliminate all poverty in any country [1]” and that “the potential of microfinance can be best exploited by recognising the lessons from careful impact evaluation studies, and by incorporating micro-finance programmes into Bangladesh’s overall poverty-reduction strategy [1].”
By: Alexandra Pattee, Research Associate
About Palli Karma-Sahayak Foundation (PKSF): The Palli Karma-Sahayak Foundation (PKSF) was established by the government of Bangladesh in 1990 with the intent to alleviate poverty through generating employment opportunities. PKSF disburses funds to microfinance institutions (MFIs) to implement development programs. Since its establishment in 1990, PKSF disbursed BDT 454 billion (USD 6.15 billion) to 8.6 million borrowers.
[1] The Daily Star, “The impact of microfinance”, http://www.thedailystar.net/newDesign/news-details.php?nid=177457
MicroCapital.org Article, March 29, 2010, “Finance Minister of Bangladesh Argues Few Escape Poverty Due to Microfinance, High Interest is Main Challenge Facing Country’s Microfinance Industry”, https://www.microcapital.org/microcapital-brief-finance-minister-of-bangladesh-argues-few-escape-poverty-due-to-microfinance-high-interest-is-main-challenge-facing-country?s-microfinance-industry/
MicroCapital.org Article, November 29, 2007, “NGOs, MFIs Suspend Loan Repayment for Sidr Cyclone Victims in Bangladesh, Provide Microcredit Loans for Solar Panels”, https://www.microcapital.org/microcapital-story-ngos-mfis-provide-suspend-loan-repayment-for-sidr-cyclone-victims-in-bangladesh-provide-microcredit-loans-for-solar-panels/
MicroCapital’s Microfinance Universe: Palli Karma-Sahayak Foundation (PKSF), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Palli+Karma-Sahayak+Foundation+%28PKSF%29
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
Similar Posts:
- MICROFINANCE PAPER WRAP-UP: “Impact of Microcredit on Household Consumption and Assets in Nepal;” by Shalik Ram Pokhrel
- MICROCAPITAL BRIEF: Jeff Flowers to Lead FINCA Impact Finance
- MICROCAPITAL BRIEF: Grameen Crédit Agricole Foundation Loans $3.2m to Faten for Microfinance in Palestine
- MICROCAPITAL BRIEF: ResponsAbility Invests $40m in Equity in eFishery of Indonesia for Technology Helping Fish, Shrimp Farmers with Feeding, Water Quality, Documenting Sustainable Practices, Market Linkages
- MICROCAPITAL BRIEF: Fintech Kacha Gets Regulator Approval to Roll Out Mobile Money App in Ethiopia
