Does Micro-credit Program in Bangladesh Increase Household's Ability to Deal with Economic Hardships?
This paper examines the relationship between households' involvement in microcredit programs and their capacity to deal with economic hardships. It focuses on households involved in microcredit programs of Bangladesh Rural Advancement Committee (BRAC), Bangladesh.
The study tests the hypothesis that BRAC's credit programs contribute to increasing households' abilities to cope with economic hardships. It compares households that received loans from BRAC and those that did not receive loans from BRAC or any other institutional source. Study results show that:
- BRAC households were more able to obtain loans during times of crisis;
- BRAC households were able to resort to household savings, which is a positive coping mechanism, for dealing with crises;
- Non-BRAC households more commonly resorted to asset selling, which is a negative coping mechanism.
In both sets of households, about a third simply took on extra work, whilst another fifth were unable to do anything at all. Thus, even with involvement in a microcredit program, over half of sample households were too poor to cope with crises by applying any economic solutions other than taking on additional work.
