Demystifying Nonparticipation in Microcredit: A Population-Based Analysis

Given the current popularity of microcredit schemes as a means of poverty alleviation, their accessibility to the poorest is of obvious concern. This paper examines a targeted microcredit program in Bangladesh to assess its coverage among the poor, and to identify program- and client-related barriers impeding participation. A population survey of over 24,000 households reveals that although three-quarters are eligible for microcredit, less than one-quarter participate. Rates of participation in microcredit are higher among poorer households. Multivariate analysis identifies lack of female education, small household size and landlessness as risk factors for nonparticipation, based on a 7% random sample of this population. The implications of these findings for poverty alleviation policies and programs are discussed.