Fighting Poverty With Microcredit: Experience in Bangladesh (World Bank Publication)

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Summary: Group-based lending that works
Review: Three microcredit programs (Grameen Bank, BRAC and RD-12) are thoroughly discussed and evaluated as instruments for poverty reduction. With loan recovery rates higher than 90% for landless borrowers, group-based lending (that is, group guarantee to repay individual loans) is the key to substantial household economic improvement - 5% of participating households lift themselves out of poverty every year. Rigorous statistical analysis gives a wealth of information on household-level and village-level results in terms of consumption, household net worth, childrens' schooling and nutrition, production and income. The effects of men's and women's credit are evaluated separately throughout the book, giving some insight on the dynamics of Bangladeshi rural society. Statistical tables and methodological discussions are collected in the Appendix, leaving a main text that can be fully enjoyed even by readers with no statistics background. At the roots of this group-based lending approach is the vision and the determination of a Bangladeshi economics professor, Muhammad Yunus, who, over more than 20 years, has initiated and continuously improved microlending to the poor through the Grameen Bank. The story of Yunus' remarkable life is told in "Banker to the Poor: Microlending and the Battle against World Poverty" by Muhammad Yunus and Alan Jolis, from his childhood in Bangladesh and his student years in the U.S. to his return to Bangladesh and the subsequent Grameen initiative. Both books are fundamental reading for those of us who keep looking for encouraging signs in poor countries' development.