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PDF_logo Has Microcredit Helped the Rural Poor of Bangladesh? An Analytical Review of the Evidence So Far

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Has Microcredit Helped the Rural Poor of Bangladesh? An Analytical Review of the Evidence So Far


Paper No:23

Author:S. R. Osmani

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Pages:36

This paper reviews the evidence that has accumulated so far on the impact of microcredit on poverty in rural Bangladesh. The early studies on the impact of microcredit almost invariably found that microcredit had made a positive contribution not only in reducing poverty but also in a host of other economic and social dimensions. These studies soon came to be questioned, however, on the grounds of econometric methodology. It was argued, in particular, that various kinds of ‘selection bias’ vitiate their findings and lend an ‘upward bias’ to their estimates of the impact of microcredit. The possibility of ‘upward bias’ was especially damaging since it meant that the claim of a positive contribution of microcredit could no longer be credibly made. Later studies used sophisticated techniques to get rid of this bias; but while the earliest of this second generation studies continued to find positive contribution of microcredit, others soon began to question their findings, resulting in a prolonged and sometimes obscure debate on econometric methodology.

 
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