Targeted Credit Programs and Rural Poverty in Bangladesh Book

This paper is one of several papers produced as a research output under the research project, " Credit Programs for the Poor: Household and Intrahousehold Impacts and Program Sustainability. " One of the project ' s objectives was to develop a methodology to estimate the costs and benefits of group-based credit programs. It included identifying program effects on household and individual outcomes as well as analyzing the women ' s participation in these credit programs and the ensuing effects on household and intrahousehold outcomes by gender. Another of the project ' s objectives was to analyze the financial and economic efficiency of the credit programs, which depend on resource-intensive group formation and monitoring. The aim was to estimate the cost structures of the programs and examine how the programs operate and whether and under what conditions such group-based credit programs are sustainable. This paper discusses the influences of targeted credit interventions on poverty among program participants and non-participants living in program areas, in comparison with poverty situations of households living in non-program areas. The discussion is based on the household data collected from 1,800 households randomly drawn from both program and non-program areas of Bangladesh. Data analysis shows that it takes about five years for poor program participants to rise above the poverty line and eight years for them to reach the level where they no longer take loans from a targeted credit program. The results also show that targeted programs have helped program beneficiaries to invest increasingly in non-farm rather than farm resources, clearly denoting a structural shift from traditionalfarm activities in rural Bangladesh. Policy interventions may be needed to use the superior skills of the participants who graduate from these targeted programs to create more dynamism in the rural economy.