The effect of microcredit on socio-economic outcomes

This study attempts to use empirical evidence to understand the effect of participation in micro credit programs on the socio-economic outcomes of women borrowers. It was accomplished by comparing primary data from a cross section study of two borrower groups belonging to BRAC microfinance. The study empirically evaluates whether those that hold microcredit register improvement in socioeconomic outcomes of their businesses, households, and social development. The outcomes assessed include average profits for businesses registered for loan benefits, household average monthly expenditure, household savings, household expenditure on children’s education and health as well as social factors that indicate empowerment of women like participation in household decision making and community leadership. The study also extends to assess the role of microcredit helping borrowers to cope with financial shocks arising from effects of the COVID 19 pandemic. The study finds that access to microcredit has a positive effect on profits of businesses registered for credit benefit, household savings and empowerment of women as measured by their participation in household decision making. The study also finds that microcredit has a positive effect in helping households cope with financial shocks, but the benefits of microfinance are offset by detrimental effects where tight loan repayment cycles lead to sale of household assets.