1. The objective of the study is to undertake a rapid assessment of the socio-economic impact of microcredit program on PKSF borrowers. The Palli Karma Sahayak Foundation (PKSF) has been implementing microcredit program through its Partner Organizations (POs) since 1990. The loan from IDA of US$105 million to PKSF was made effective in October 1996 and so far PKSF disbursed about $60 million. Since the beginning of IDA assistance, PKSF’s credit program increased by about 2.75 times, i.e. number of borrowers increased from 442,000 to 1.2 million. To study the sustained impact of PKSF’s microcredit program, time series Monitoring and Evaluation Study (MES/impact study) of IDA credit has been subcontracted to the Bangladesh Institute of Development Studies (BIDS) and the final findings will be available at the end of the project period. The rapid impact study has provided inputs to the Midterm Review (MTR) of the project.

Methodology

2. A short survey was conducted mainly to focus on the indicators reflecting the changes of economic conditions due to microcredit intervention. Twenty six (26) small and medium Partner Organizations (SM-POs) of the Palli Karma Sahayak Foundation (PKSF) were selected out of 143 active POs to investigate the socio-economic impact of the microcredit borrowers. A total of 675 borrowers, 25 borrowers from each of the POs, who received loans for 4 times or more were interviewed to gather their opinions related to various socio-economic issues. The names and working areas of the sample POs are given in Table 1.

Demographic characteristics

3. All 675 sample borrowers are women and married (Table 2). On an average these members have been associated with POs for the last 6 years (Table 3). The borrowers have an average family size of 5.25, similar to national average, and 69% of the families fall in 4-6 members categories (Table 4). The members are relatively young, the average age is 36 years and 71% of them are up to 40 years of age (Table 5). The average number of children per family are 3.8 compared to a national Total Fertility Rate (TFR) 3.93 for women with ‘no education’¹ . Currently 80.59% of borrowers have 0 to 4 children. But nationally 73% of currently married women have 0-4 children² , that is, the borrowers have less number of children compared to national average.

Investment by the members

4. The sample borrowers received an average of 4.61 loans. Forty two percent (42%) of the sample borrowers received more than 4 loans. At the beginning borrowers’ loan sizes are small and gradually received higher loans. The average value of first loan was Taka 2,188 and 61% of the borrowers received up to Taka 2000 as their first loan. But the current loan size, on an average, is Taka 7472 and 30% of the borrowers received loan more than Taka 8000. Only, less than 1% (6 out of 675), of the borrowers still received loan of Taka 2000. (Table 7).

5. The areas of investment by the borrowers have been observed to be more or less same over the time. The most common area of investment has been small trade, about 34.81 of borrowers invested in small business (petty trade and shops), this was marginally lower (33%) in case of first loan. The second preferred investment in case of first loan was poultry rearing. There has been slight shift in investment activity. Currently, cattle fattening has been the second investment choice followed by leasing of land and improvement in housing (Table 8). It appears that the types of microcredit activity remained static, resulting virtually no change in the areas of investment in rural economy. Diversification of activities by designing innovative credit delivery system will be crucial for microcredit’s sustainability. Otherwise, it may result in saturation of activities, leading to fall in demand and economic viability.

Impact of microcredit

6. The impact of microcredit has been assessed in the following manners: firstly, to study the impact of microcredit opinions of the borrowers were gathered regarding the benefits or contributions of microcredit on:
(a) the income of the family,
(b) the nutrition, clothes, housing conditions, sanitation, and
(c) the land ownership; secondly, the borrowers were asked to categorize the conditions of current housing and that of before joining PO and the contribution of microcredit on the change; thirdly, borrowers evaluated their overall current family status in terms of economic and social conditions and compared that with the status before joining the PO; and finally, an attempt was made to estimate the value of assets formed by the borrowers after joining the PO based on their opinions and compared that with their current debt to find their net worth.

7. It should be noted that qualitative information were mainly gathered in the study. At the same time all the positive impacts mentioned by the borrowers may not be entirely attributed to microcredit because the family members are also engaged in other activities and have other sources of income. However, borrowers believe that net positive benefits were derived from microcredit and it opened up the opportunity for them to accumulate some assets.

8. Overall assessment of impact of credit program:

The assessment of impact of credit program by sample borrowers are as follows (Table 9):

income has increased for 97.93% of borrowers and 1.78% reported no change. Only 2 borrowers (0.34%) reported fall in income;

improvement in quality and quantity of food intake by the family members have been reported by 88.59% of borrowers;

improvement in clothing has been reported by 87.85% of borrowers;
improvement in housing conditions has been reported by 75.26% of borrowers;
improvement in child education has been reported by75.41% of borrowers;
improvement in sanitation condition has been reported by 68.74% of borrowers; and
improvement in quality of life has been reported by 94.96% of borrowers.

9. Change in land ownership: Increase in land ownership is an important indicator of improvement in economic conditions of a poor family. 28.44% of sample borrowers reported that they could increase their land ownership. They acquired on an average 30.56 decimals of land, significant for a poor family (Table 9). Nationally, 55.23% of rural households own less than 49 decimal of land and 36.46% own land between 5-49 decimals³ . By acquiring on an average 30.56 decimals of land 28.44% of borrowers could bring them within this group of rural population.

10. Changes in Housing conditions: A significant improvement in quality of housing of borrowers’ has been reported. Housing conditions have been classified in 4 categories: (a) thatched house (jhupri), (b) house with wall and roof made of sub-standard materials, (c) house where wall is made of sub-standard material and roof with CI sheet and (d) wall and roof both made of CI sheet. Ownership of categories (a) and (b) has been decreased from 36.7% to 4.6% and 30.4% to 15% respectively. As a result, the ownership of the houses of categories (c) and (d) have increased from 25.6% to 44.3% and 7.3% to 36% respectively. This shows a marked improvement in quality of living conditions of the borrowers. (Table 10A) The current housing characteristics the borrowers are better than the national housing characteristics in rural areas. Nationally in rural areas, 75.2% households have jute/bamboo/mud (sub-standard material) as wall material and 31.8% households have similar sub-standard material as roofing material. But in case of borrowers, only 15.11% households have such materials for roof and wall. Nationally only 12.2% households have tin as wall material whereas the 36.00% borrowers have tin as wall and roof, significant improvement than the national characteristics (Table 10B)⁴ .

11. Self-evaluation of family conditions: Microcredit interventions have been able to significantly reduce food deficit of the borrowers. This has been assessed based on self-evaluation made by the surveyed borrowers. The number of families having food deficit (and other incidental expenses) have been reduced from 82.22% to 9.63% over a period of 5 to 6 years. This was evaluated by seeking information on their family conditions based on six (6) categories: (a) Chronic deficit throughout the year (b) occasional deficit, (c) no deficit (d) adequate, (e) surplus for children education and other purposes, (f) surplus for investment after covering all expenses. Currently only 0.59% and 9.04% reported that they had chronic and occasional deficit during the year respectively. But these figures were 38.07% and 44.15% before joining the PO. On the other hand, currently 77.33% [summation of categories of (d), (e) and (f)] the families have either ‘adequate’ or better condition compared to 4.75% before joining the PO. (Table 11)

12. Formation of asset and current debt: Borrowers perceived that accumulation of family assets largely attributed to the surplus of income from microcredit. About 87% borrowers formed some kind of physical asset while the remaining 13% borrowers reported that they could not form any asset after joining the PO. The average value of asset per person was Taka 30,934. But the average value of current debt per borrower is Taka 4,140, i.e. average networth of Taka 26,794. (Table 12). These 584 borrowers formed 1154 types of assets, i.e. each borrower could form more than one type of assets. The average value of different types of asset is Taka 11,916. The most common asset is livestock as reported by 316 borrowers (54.1% of borrowers who could form physical assets and 27.38% of total number of assets). The second type of asset is the purchase of land as reported by 171 borrowers (29.28% of borrowers and 14.82% of total assets). This is followed by construction/improvement of house as reported by 156 (26.71% and 13.52% of total assets) borrowers. There are other types of asset like poultry birds, agricultural equipment, sewing machine, rickshaw/van etc. representing 44.28% of total number of assets (Table 13).

Services of POs

13. Common services of POs: Skill training provided by POs to the borrowers is limited. Only 32% of the borrowers mentioned that they received any kind of skill training. (Table 14). This is because costs of providing skill training are prohibiting for POs, unless subsidized from other donors assistance programs. However, all POs provide basic orientation as a core activity before starting credit. However, not all POs provide same services as skill training. Most of the borrowers (95.7%) reported that they received social awareness training.

14. Other services: Some POs implement other programs like sanitation, family planning, agriculture development. About 19.11% of total borrowers reported that they had received other services, 9.78% received sanitation and 7.4% received family planning service, 8.1% received support for agriculture, for example, seed and technical assistance for vegetable cultivation. (Table 15)

15. Demand for additional services: Borrowers indicated that POs should provide additional services mainly in two areas: increased loan and skill training. These are pre-requisite for microenterprise development. Of the 675 borrowers, 44.4% asked for larger loans. This shows additional demand for credit. This has been followed by demand for skill training by 39.3% borrowers. Other areas of requests were for lowering the rate of interest, adult education, relief, loan for tubewell (Table 16).

16. Conclusion: The rapid impact survey is conclusive to suggest that microcredit interventions have been able to improve socio-economic standing of microcredit borrowers. There has been quantitative change in terms of increase in income, increase in land ownership, accumulation of assets, while qualitative changes reflected in better housing condition, improved education of children, accumulation of skills and better health and sanitation practices. It is quite clear that there are avenues to further improve the status of poor. For example, level of skills of the borrowers can be further improved. This is not happening because of costs involved in such training which POs cannot effort. Borrowers also demand more services, in terms of financial service and extension of facilities to improve their quality of life. This, however, cannot be met by microcredit intervention alone. Some other social interventions may help meeting these need.

Table 1: Basic data of the PO

Table 2: Gender and civil status of respondents

Table 3: Association with the PO and number of times borrowed

Table 5: Age of borrowers

Table 8: Income generating activities of sample borrowers

Table 9: Impact of microcredit