A Cost-Effectiveness Analysis of the Grameen Bank of Bangladesh

Reports of the success of the Grameen Bank of Bangladesh have led to rapid growth in funding for microfinance. But has Grameen been cost-effective? This paper compares output with subsidy for Grameen in a present-value framework. For the time frame 1983-97, subsidy per person-year of membership in Grameen was about $20, and subsidy per dollar-year borrowed was about $0.22. Although the paper does not measure consumer surplus for Grameen users, the evidence in the literature suggests that surplus probably exceeds subsidy. Grameen—, if not necessarily other microlenders, —was probably a worthwhile social investment.