Does Access to Microcredit Lead to Agricultural Productivity Gains? Evidence from Bangladesh

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I analyze data from a 1991—92 field survey of rural Bangladeshi households to determine the effect of access to microcredit on agricultural productivity in rural areas. I argue that rural farmers with access to microcredit should only realize productivity gains if they are credit-constrained. I find that, relative to people who had no opportunity to join a microcredit program, access to a microcredit program does not lead to direct productivity gains for farmers of either transplanted Aman rice or a high-yield variety of Aman rice. Only access to a Grameen Bank microcredit program is associated with a lower cost of sharecropping—defined as the share kept by the landlord multiplied by the sharecropped proportion of the total land cultivated by the farmer—while access to BRAC (previously the Bangladesh Rural Advancement Committee) and Bangladeshi Rural Development Board programs are not. Only access to a Grameen program leads to significant productivity gains when considered jointly with a reduction in sharecropping-costs. The results suggest that access to microcredit does not lead to direct improvements in agricultural productivity.
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