Impact of Urban Microfinance on Livelihood Strategies of Borrower Slum Dwellers in Dhaka City

Abstract

This is a Master of Philosophy (M.Phil.) thesis that has been prepared to fulfill the requirement of Master of Philosophy (M.Phil.) degree. The aim of this study is to examine the impact of urban microfinance on livelihood strategies of borrower slum dwellers of Dhaka, Bangladesh (with primary and secondary data). The primary data was collected through a structured questionnaire on a total of 200 sample slum households (100 borrowers and the 100 non-borrowers) of three slums (Korail, Jurain and WASA Colony slum) of Dhaka city by a systematic random sampling). Besides, Key informant interview (KII) was a part of data collection in this field survey. In addition, the relevant secondary datawere collected from different recent publications of national and international institutions. Besides, different books, articles, reports, brochures, magazines and newspapers have been reviewed to prepare this report. This study uses econometric techniques of the Instrumental variable (IV) regression model, the Probit model, and the difference in differences (DID) model to analyze the data by econometric software Stata.13. However, the findings of the study state that the overall impact of urban Microfinance on its borrower is mixed (positive or no impac for some indicators ). The result of Instrumental variable (IV) regression model states that the microfinance borrowing has significant positive impact on the income (at 5% level of significance) the borrowers. The income of borrowers is estimated to be .181 taka higher than the non-borrowers. Besides, the borrowing of microfinance loan ( ) has the significant impact (at 10% level of significance) on the non-food consumption expenditures of the borrowers. The nonfood consumption expenditures of borrowers is estimated to be .205 taka higher than the non-borrowers. On the contrary, microfinance loan has no significant impact on the food consumption expenditures of the borrowers. The results of Difference in differences (DID) model have been estimated of 200 samples for different categories such as income, expenditure, asset value, savings, and housing and utility expenditure changes respectively. The key finding (DID) is that urban microfinance has a statistically significant positive impact on some income or expenditure variables such as savings (at the 1% level of significance), educational expenditure (at the 5% level of significance), and transportation expenditure (at the 1% level of significance), but not with regards to all the income and expenditure variables. The Probit analysis illustrates that the probability of changing occupations of the microfinance borrowers is statistically significantly (at the 1% level of significance) higher compared to the case of the non-microfinance borrowers. Only 20% borrowers and 4% non-borrower respondent have secondary occupation. Besides, Microfinance also improved the Housing and utilities (gas, electricity) conditions of the 93% borrowers and water and sanitation conditions of the 95% borrowers. Moreover, Microfinance borrower successfully crossed the poverty line and presently, no families are found below the poverty line. Before receiving Microfinance, 1% borrower was extremely poor (less than $1.25 income per day) and 33% borrower was moderately poor (less than $2 income per day). Conversely, presently, no families are found below the poverty line. This paper recommends to take different steps and policies lead by the Government and MFIs. For example, slum development program, rehabilitation program, charity and donations, motivate the religious and business group to participate in the development of slum people, includes the slum under the coverage of social safety net programs, reduction of the lending interest rate and increasing the saving interest rate, provide adequate time for investment and taking special policies for extremely poor people. Though it has some limitations, this study will be informative, insightful and beneficial for enthusiastic learners, researchers, Microfinance institutions, Microfinance borrowers, Microfinance experts and Microfinance regulatory authority. This study highlights the household’s information roster of 200 borrowers and nonborrowers. Also information regarding education, gender, occupation, income, expenditures, asset value, Microfinance services, interest rate, role of microfinance to improve the living condition, open comments about microfinance, and so more. The results of this study are consistent with the earlier research findings. Hope thatthis study would encourage the microfinance institutions (MFIs) to expand their activities among the urban slum dwellers to obtain positive changes in the livelihood strategies of them.