Case Study

Use of the Formal and Informal Financial Sectors: Does Gender Matter? Empirical Evidence from Rural Bangladesh

What is the relationship between formal and informal financial sectors and gender?

This paper explores the relationship between the formal and informal financial sectors and gender. It states that:

  • Evidence suggests that women use resources differently than men, spending more on human capital;
  • Households in Bangladesh rely on both formal and informal sectors for access to money through credit and transfers;
  • Many households rely on informal gifts and loans as part of their household income;
  • Males rely almost entirely on informal credit and transfers, while females are relatively split in their dependence on the formal and informal sectors;
  • Informal gifts and loans flow primarily between men in Bangladesh;
  • Micro credit is the only source of credit for women and it is also an important source of formal credit for men:
    • More women received credit from micro credit organizations, but average loan sizes were larger for men than for women;
    • Men rely on government and non-government sources for credit, whereas these sources were unavailable for women.
  • There was evidence that formal financial transactions were crowding out informal ones.

The paper concludes by stating that:

  • There is plenty of scope for growth in the financial sector in Bangladesh;
  • The finding that the formal sector might crowd out the informal sector has many policy implications;
  • Additional research is needed to quantify the relationship between the formal and informal sectors by gender.

About this Publication

By McKernan, S., Pitt,M., Moskowitz, D.
Published
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