EFFECT OF MICROFINANCE ADOPTION ON RURAL HOUSEHOLD INCOME IN SELECTED UPAZILA OF KUSHTIA DISTRICT OF BANGLADESH

doi:10.46281/bjmsr.v3i1.954

Abstract

This present study aims at analyzing how microfinance affects household income of its participants as well as to find out the factors that influence the participants to adopt loan for which a logit model was applied. This study was run on three villages of Daulatpur Upazila of Kushtia district namely Khalishakundi, Malipara and Silimpur from which 350 respondents were chosen randomly. The result reveals that Age (p<0.05), household size (p<0.01) and credit amount (p<0.05) from microfinance had significant negative impact on average household income and spouse’s income had a positive sign with coefficient of 0.867 which was significant (p<0.01). Logit model expresses that average income, age of respondent and household size all had negative sign implying that an increase of one of them will discourage the respondents tending towards borrowing loans from microfinance which were also significant (p<0.01). This study also found several problems faced by the participants of microfinance such as high interest rate, delay of credit, rude behavior of representatives, short recovery time, influence of old members etc. as well as recommend the policy implication regarding them. JEL Classification Codes: G21, Q52, O18, D13

Highlights

Microfinance is the provision of savings, credit, deposit, insurance and repayment services to the low-income households to enable them to create employment opportunities and reduce poverty by starting their own businesses and generating income
Ln = Natural logarithm; Y = Monthly average income measured in taka; X1 = Age of the respondent measured in years; X2 = Adoption of microfinance loan by participant measured by dummy variable as 1 for adopt loan and 0 for otherwise; X3 = Education level of participant measured by years of schooling; X4 = Size of household measured in numbers; X5 = Spouse’s income measured in taka; X6 = Amount of credit measured in taka; X7 = Agricultural holdings measured in hectare
X1 = Average income of household measured in taka; X2 = Age of respondent measured in years; X3 = Educational level of the respondent measured by years of schooling; X4 = Household size measured in numbers; X5 = Land holdings by respondent measured in hectare; X6 = Availability of credit taken as dummies measured by 1 for easier to grant a loan compared to banks and 0 for otherwise. u was the stochastic disturbance term including all other factors that may affect the model and in equation (5), i represented number as 1,2,3,....,n

Summary

INTRODUCTION

Microfinance is the provision of savings, credit, deposit, insurance and repayment services to the low-income households to enable them to create employment opportunities and reduce poverty by starting their own businesses and generating income. The study found out that the microcredit programmes of ASA helps both rural and urban poor households to improve their standard of living by increasing income, expenditures, saving and poverty reduction. Microfinance has a significant positive impact on increasing household income label and reducing widespread poverty from the rural areas of Bangladesh and age, family member and loan amount role in household income determination (Basu et al, 2020). Despite higher loans to cumulative borrowing microfinance continues to reduce poverty among poor borrowers and increase per capita household consumption within the local economy for participation and non-participants (Khandker, 2005). Microfinance reduces poverty and increases consumption but microcredit borrowers have higher consumption than non-borrowers, besides microfinance influences the standard of living and property level

MATERIALS AND METHODS

AND DISCUSSION

Findings

CONCLUSION AND RECOMMENDATION