WASHINGTON, DC — Nearly 2 million Bangladeshi households involved in microfinance — including almost 10 million family members, on net — rose above the US$1.25 a day threshold between 1990 and 2008. These figures were released in a report by the Microcredit Summit Campaign today.
A survey of more than 4,000 Bangladeshi households, led by Sajjad Zohir of the Dhaka-based Economic Research Group, found that a dramatic number of families moved out of poverty between 1990 and 1997, but that a massive flood in 1998 and the food and fuel crisis of 2008 were the likely cause for millions of families to fall below the $1.25 a day threshold during that later period. Even with these setbacks, on net nearly 10 million people rose above poverty.
The Microcredit Summit Campaign report closely mirrors the findings of official country-level research in Bangladesh with the national Household Income and Expenditure Survey (HIES) estimating that 10.62 million Bangladeshis left hardcore poverty between 1990 and 2005. Zohir, the report’s author writes, “[O]ur estimate seems quite in line with the national level poverty findings.”
“While the Bangladesh survey was not designed to assign causality, it is very significant that the number of microfinance clients who left poverty closely links to the national data on poverty reduction,” said Microcredit Summit Campaign Director Sam Daley-Harris. “The majority of poverty in Bangladesh is in rural areas and so are the majority of microfinance clients.”
This good news comes during a difficult time for the microfinance sector. In recent years, microfinance programs have seen growing questions about their effectiveness. Several randomized controlled trials (RCTs) matched microfinance clients with control groups and showed no movement out of poverty in the group receiving the microloans. But these studies, touted for their rigor, have been met with questions of their own.
“Two of the problems I have with the RCTs that have been done to date are that they haven’t studied programs that are known for their deep commitment to ending poverty, and they typically cover a 12- to 18-month period, which is too short a time for real change to take place,” said Chris Dunford, President of Freedom from Hunger. “We have to remember that not all microfinance programs are the same. This new study from Bangladesh includes a large number of clients from BRAC and Grameen Bank, two Bangladeshi institutions known for their groundbreaking efforts to end rural poverty.”
Another setback for microfinance came in the wake of a tremendously successful initial public offering (IPO) in 2010 by SKS, an Indian microfinance program based in the state of Andhra Pradesh. Soon after the IPO’s success, serious charges began to emerge in the state about microfinance borrowers taking on multiple loans and too much debt, coercive collection practices by microfinance staff and even suicides spurred by these challenges.
“There are quite a few people who believe that microfinance has lost its way,” said Alex Counts, President and CEO of Grameen Foundation. “This Bangladesh survey reminds us that, even in the most difficult circumstances, major progress can be made. Bangladesh is not the ‘bottomless basket case’ that then-U.S. Secretary of State Henry Kissinger called it 35 years ago. It is instead a teacher to the rest of the world, with its civil society leading the way.”