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PDF_logo Contribution of Microfinance to the Gross Domestic Product (GDP) of Bangladesh

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Contribution of Microfinance to the Gross Domestic Product (GDP) of Bangladesh


Paper No:44

Author:Selim Raihan, S. R. Osmani and M. A. Baqui Khalily

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Pages:31

Microfinance has at this point spread throughout the length and breadth of rural Bangladesh, covering more than half of the rural population. As per a recent study, somewhere in the range of 55 percent of the rural households have taken microfinance at some stage in their lives, and almost 46 percent of households hold the status of current borrowers (as of 2010).With such huge expansion, microfinance is bound to have direct and indirect repercussion on the overall economy. Microfinance is believed to be contributing to the integration of the rural financial sector and stimulating the economy through microcredit and saving programmes. Our study found that the contribution of microfinance to GDP in Bangladesh in 2012 was between 8.9 percent and 11.9 percent depending on the assumption of the labor market. Furthermore, the contribution of rural microfinance to rural GDP in Bangladesh in 2012 was between 12.6 percent and 16.6 percent depending on the assumption of the labor market. However, such estimation is subject to underestimation due to two major reasons: (i) the model didn’t consider underemployment, and the labor market adjustments compensate some of the negative effects generating from withdrawing of MFI-capital; and (ii) the share of the rural GDP might be lower than 60 percent as very high urban income are not usually captured by household survey; and this would imply that the contribution of rural microfinance to rural GDP in Bangladesh would be higher than what we have reported here.

 
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