Essays on Microcredit in Rural Bangladesh

This thesis is a collection of three essays on Bangladeshi microcredit. One of the essays examines the effect of microcredit on the cost of crime. The other two analyze the functioning mechanism of microcredit programs, i.e. credit allocation rules and credit recovery policy. In Essay 1, the demand for microcredit and its allocation rules is studied. Microcredit is claimed to be the most effective means of supplying credit to the poorest of the poor in rural Bangladesh. This fact has not yet been examined among households who demand microcredit. The results of this essay show that educated households are more likely to demand microcredit and its demand does not differ by sex. The results also show that microcredit programs follow different credit allocation rules for male and female applicants. Education is an essential characteristic for both sexes that credit programs consider in allocating credit. In Essay 2, the focus is to establish a link between microcredit and the incidence of rural crime in Bangladesh. The basic hypothesis is that microcredit programs jointly hold the group responsibility which provides an incentive for group members to protect each other from criminal gang in order to safeguard their own economic interests. The key finding of this essay is that the average cost of crime for non-borrowers is higher than that for borrowers. In particular, 10% increase in the credit reduces the costs of crime by 4.2%. The third essay analyzes the reasons of high repayment rate amid Bangladeshi microcredit programs. The existing literature argues that credit applicants are able to screen out the high risk applicants in the group formulation stage using their superior local information. In addition, due to the joint liability mechanism of the programs, group members monitor each others economic activities to ensure the minimal misuse of credit. The arguments in the literature are based on the assumption that once the credit is provided, credit programs have no further role in ensuring that repayments are honored by the group. In contrast, using survey data this essay documents that credit programs use in addition organizational pressures such as humiliation and harassment the non-payer to recover the unpaid installments. The results also show that the group mechanisms do not have a significant effect in recovering default dues.

Consumption in Rural Bangladesh : Households, Lifestyles, and Identities

Bangladesh, often better known to the outside world as a country of natural calamities, is one of the most densely populated countries in the world. Despite rapid urbanization, more than 75% of the people still live in rural areas. The density of the rural population is also one of the highest in the world. Being a poor and low-income country, its main challenge is to eradicate poverty through increasing equitable income. Since its independence in 1971, Bangladesh has experienced many ups and downs, but over the past three decades, its gross domestic product (GDP) has grown at an impressive rate. Consequently, the country s economy is developing and the country has outperformed many low-income countries in terms of several social indicators. Bangladesh has achieved the Millennium Development Goal (MDG) of eliminating gender disparity in primary and secondary school enrollment. A sharp decline in child and infant mortality rates, increased per capita income, and improved food security have placed Bangladesh on the track to achieving in the near future the status of a middle-income country. All these developments have influenced the consumption pattern of the country. This study explores the consumption scenario of rural Bangladesh, its changing consumption patterns, the relationship between technology and consumption in rural Bangladesh, cultural consumption in rural Bangladesh, and the myriad reasons why consumers nevertheless feel compelled to consume chemically treated foods. Data were collected in two phases in the summers of 2006 and 2008. In 2006, the empirical data were collected from the following three sources: interviews with consumers, producers/sellers, and doctors and pharmacists; observations of sellers/producers; and reviews of articles published in the national English and Bengali (the national language of Bangladesh) daily newspapers. A total of 110 consumers, 25 sellers/producers, 7 doctors, and 7 pharmacists were interviewed and observed. In 2008, data were collected through semi-structured in-depth qualitative interviews, ethnography, and unstructured conversations substantiated by secondary sources and photographs; the total number of persons interviewed was 22. -- Data were also collected on the consumption of food, clothing, housing, education, medical facilities, marriage and dowry, the division of labor, household decision making, different festivals such as Eid (for Muslims), the Bengali New Year, and Durga puja (for Hindus), and leisure. Qualitative methods were applied to the data analysis and were supported by secondary quantitative data. The findings of this study suggest that the consumption patterns of rural Bangladeshis are changing over time along with economic and social development, and that technology has rendered aspects of daily life more convenient. This study identified the perceptions and experiences of rural people regarding technologies in use and explored how culture is associated with consumption. This study identified the reasons behind the use of hazardous chemicals (e.g. calcium carbide, sodium cyclamate, cyanide and formalin, etc.) in foods as well as the extent to which food producers/sellers used such chemicals. In addition, this study assessed consumer perceptions of and attitudes toward these contaminated food items and explored how adulterated foods and food stuffs affect consumer health. This study also showed that consumers were aware that various foods and food stuffs contained hazardous chemicals, and that these adulterated foods and food stuffs were harmful to their health.

Farm productivity and efficiency in rural Bangladesh: the role of education revisited

This article reassesses the debate over the role of education in farm production in Bangladesh using a large dataset on rice producing households from 141 villages. Average and stochastic production frontier functions are estimated to ascertain the effect of education on productivity and efficiency. A full set of proxies for farm education stock variables are incorporated to investigate the ‘internal’ as well as ‘external’ returns to education. The external effect is investigated in the context of rural neighbourhoods. Our analysis reveals that in addition to raising rice productivity and boosting potential output, household education significantly reduces production inefficiencies. However, we are unable to find any evidence of the externality benefit of schooling – neighbour's education does not matter in farm production. We discuss the implication of these findings for rural education programmes in Bangladesh.

Subjective well-being and relative poverty in rural Bangladesh

This paper revisits the debate over the importance of absolute vs. relative income as a correlate of subjective well-being using data from Bangladesh, one of the poorest countries in the world with high levels of corruption and poor governance. We do so by combining household data with population census and village survey records. Our results show that conditional on own household income, respondents report higher satisfaction levels when they experience an increase in their income over the past years. More importantly, individuals who report their income to be lower than their neighbours in the village also report less satisfaction with life. At the same time, our evidence suggests that relative wealth effect is stronger for the rich. Similarly, in villages with higher inequality, individuals report less satisfaction with life. However, when compared to the effect of absolute income, these effects (i.e. relative income and local inequality) are modest. Amongst other factors, we study the influence of institutional quality. Institutional quality, measured in terms of confidence in police, matters for well-being: it enters with a positive and significant coefficient in the well-being function.

Intergenerational wealth mobility in rural Bangladesh

Unique residential history data with retrospective information on parental assets are used to study household wealth mobility in 141 villages in rural Bangladesh. Regression estimates of father–son correlations and analyses of intergenerational transition matrices show substantial persistence in wealth even when we correct for measurement errors in parental wealth. We do not find wealth mobility to be higher between periods of a person's life than between generations. We find that the process of household division plays an important role: sons who splinter off from the father's household experience greater (albeit downward) mobility in wealth. Despite significant occupational mobility across generations, its contribution to wealth mobility, net of human capital attainment of individuals, appears insignificant. Low wealth mobility in our data is primarily explained by intergenerational persistence in educational attainment.

Poisoning the mind: Arsenic contamination of drinking water wells and children's educational achievement in rural Bangladesh

Bangladesh has experienced the largest mass poisoning of a population in history owing to contamination of groundwater with naturally occurring inorganic arsenic. Prolonged drinking of such water risks development of diseases and therefore has implications for children's cognitive and psychological development. This study examines the effect of arsenic contamination of tubewells, the primary source of drinking water at home, on the learning outcome of school-going children in rural Bangladesh using recent nationally representative data on secondary school children. We unambiguously find a negative and statistically significant correlation between mathematics scores and arsenic-contaminated drinking tubewells at home, net of the child's socio-economic status, parental background and school specific unobserved correlates of learning. Similar correlations are found for an alternative measure of student achievement and subjective well-being (i.e. self-reported measure of life satisfaction), of the student. We conclude by discussing the policy implication of our findings in the context of the current debate over the adverse effect of arsenic poisoning on children.

What determines religious school choice? Theory and evidence from rural Bangladesh

This paper looks at the determinants of school selection in rural Bangladesh, focusing on the choice between registered Islamic and non-religious schools. Using a unique dataset on secondary school-age children from rural Bangladesh, we find that madrasah enrolment falls as household income increases. At the same time, more religious households, and those that live further away from a non-religious school are more likely to send their children to madrasahs. However, in contrast to the theory, we find that Islamic school demand does not respond to the average quality of schools in the locality.

Comparison of fecal indicators with pathogenic bacteria and rotavirus in rural Bangladesh groundwater

Groundwater is routinely analyzed for fecal indicators but direct comparisons of fecal indicators to the presence of bacterial and viral pathogens are rare. This study was conducted in rural Bangladesh where the human population density is high, sanitation is poor, and groundwater pumped from shallow tubewells is often contaminated with fecal bacteria. Five indicator microorganisms (E. coli, total coliform, F+RNA coliphage, Bacteroides and human-associated Bacteroides (HuBacteroides)) and various environmental parameters were compared to the direct detection of waterborne pathogens by quantitative PCR in groundwater pumped from 50 tubewells. Rotavirus was detected in groundwater filtrate from the largest proportion of tubewells (40%), followed by Shigella (10%), Vibrio (10%), and pathogenic E. coli (8%). Spearman rank correlations and sensitivity-specificity calculations indicate that some, but not all, combinations of indicators and environmental parameters can predict the presence of pathogens. Culture-dependent fecal indicator bacteria measured on a single date did not predict bacterial pathogens, but annually averaged monthly measurements of culturable E. coli did improve prediction for total bacterial pathogens. F+RNA coliphage were neither correlated nor sufficiently sensitive towards rotavirus, but were predictive of bacterial pathogens. A qPCR-based E. coli assay was the best indicator for the bacterial pathogens, rotavirus and all pathogens combined. Since groundwater cannot be excluded as a significant source of diarrheal disease in Bangladesh and neighboring countries with similar characteristics, the need to develop more effective methods for screening tubewells with respect to microbial contamination is necessary.

Impact of seasonality-adjusted flexible microcredit on repayment and food consumption : experimental evidence from rural Bangladesh

The mismatch between credit repayments and income seasonality poses a challenge for microfinance institutions (MFIs) working in developing countries. For instance, in northern Bangladesh, income and consumption downfalls during the lean season after the transplanting of major paddy crops are a serious threat to a household's economy. Poor landless agricultural wage laborers suffer the most owing to this seasonality as they face difficulties in smoothing their consumption. However, in designing microcredit products, MFIs do not usually provide flexibility or seasonal adjustment during the lean season. This is mainly because MFIs are afraid that such flexibility might break the repayment discipline of borrowers, resulting in higher default rates. We thus conducted a randomized controlled trial in 2011-12 in northern Bangladesh to empirically test whether seasonality-adjusted flexible microcredit leads to an increase in repayment problems for MFIs as well as whether it can increase and stabilize consumption of borrower households. Our results suggest no statistically discernible difference among the treatment arms in case of default, overdue amount, or repayment frequency. On the other hand, we find no positive impact of repayment flexibility on immediate food consumption during the period of seasonality, except for in-kind full moratorium treatment group. After a year of initial intervention, however, we see positive changes in food intake during the lean season. Thus, our preliminary results are in favor of seasonality-adjusted flexible microcredit.

Impact of electrification on children's nutritional status in rural Bangladesh

We offer micro-econometric evidence for a positive impact of rural electrification on the nutritional status of children under five as measured by height-for-age Z-score (HAZ) in rural Bangladesh. In most estimates, access to electricity is found to improve HAZ by more than 0.15 points and this positive impact comes from increased wealth and reduced fertility, even though the evidence for the latter is weak. We also analyze the causal channels through the local health facility and exposure to television. We find no evidence for the presence of the former channel and mixed evidence for the latter.

DVD-based distance-learning program for university entrance exams -- RCT experiments in rural Bangladesh

In contrast to the remarkable progress in developing countries in improving primary education, access to higher education in many countries remains limited, especially in rural areas where the quality of education is inadequate. We evaluate a DVD-based distance-learning program in rural Bangladesh, targeted at students aiming to take university entrance tests. We conducted two experiments: one to evaluate the effect of the distance-learning program and the second to determine the demand and price sensitivity. Our first experiment shows that the DVD-based distance-learning program has a considerable positive effect on the number of students passing entrance exams. This effect does not depend on cognitive scores, but does depend on non-cognitive attributes, indicating the importance of commitment, which is imposed through our program. In the second experiment, we offered a random subsidy to interested participants. The uptake decision is price-sensitive, although the price sensitivity is not correlated with students' past academic performance or their socio-economic status, suggesting that increasing the price should not disproportionately exclude poor students.