Does Microfinance Really Benefit the Poor? Evidence from Bangladesh

Drawing from Bangladesh the pioneer of the microfinance movement and the home of large-scale microfinance operations, the paper uses panel household survey data to assess whether or not microfinance really benefits the poor. It identifies the participants of a micro- finance program and their characteristics; and assesses the impacts of microfinance on short-term and long-term welfare indicators of program participants,as well as all participants in a local economy. Exploring policy dimension, it questions whether microfinance is indeed a "real" help to the poor. It argues that microfinance is only an instrument among a large number of poverty reduction strategies that policymakers must pursue to reduce poverty. The paper concludes that:

• What micro- finance can do for the poor depends on the poor 's ability to utilize what microfinance offers them;
• Programs make a difference to poor participants by raising per capita income and consumption as well as household net worth;
• The welfare impact of microfinance is also positive for participating and nonparticipating households;
• The programs have spillover effects on the local economy,but the impacts are very small;
• It is also well established that microfinance programs reach an overwhelming majority of the poor and women to whom formal financial institutions are inaccessible;
• As the majority of microfinance clients are poor,the survival question of microfinance is linked with the dynamics of poverty.