The Impact of Microcredit on the Living Standard of Loan Takers: A Study in Naogaon District, Rajshahi

Abstract

Microcredit is considered as an effective tool to improve the living standard of the poor. However, several empirical studies pointed out negative outcomes of microcredit as well. The primary objective of this study is therefore to investigate the impact of microcredit on the living standard of the loan receivers in terms of consumption expenditure. Raninagar and Kaliganj unions of Naogaon district, Rajshahi were chosen as the study areas for this study. Primary data was obtained through a structured questionnaire and was used for the quantitative analysis using the STATA software. In this study, 50 loan receivers from the two unions were selected as the sample size of the population. Ordinary Least Square (OLS) regression method is employed to examine the impact of microcredit on the monthly consumption expenditure of the loan receivers. Among the loan receivers, the study shows that 54% of the them are female, the majority of them fall into 50 & over age group, and 28% of their education level is SSC. The econometric result of this study has found statistically significant impact of microcredit loan on the monthly consumption expenditure of the loan receivers (p=0.049). In addition to this, saving and income of the loan receivers were also estimated as statistically significant. Based on the findings the study recommends micro finance institutions to increase the volume of the loans and offer saving services to the loan receivers in the study area. Further, the study recommends extended research to be carried out with a larger data set in the study area.