Impact of microcredit on the educational expenditure of rural households in Bangladesh

Rural women borrowers in Bangladesh often face credit constraints due to limited access to formal financial institutions. To address this challenge, NGOs provide collateral-free microcredit, which may influence household income and expenditure patterns. This study draws on primary data collected from landless, marginal, and smallholder women borrowers in Manikganj district of Bangladesh to examine the impact of microcredit on household spending on education. The Propensity Score Matching (PSM) technique was applied to control for selection bias and estimate treatment effects. The findings reveal that access to microcredit had an insignificant effect on educational expenditure of the rural households. Possible reasons include relatively small size of the loans disbursed, low household income, and limited training received by borrowers. More effective outcomes could be achieved by integrating microcredit programs with skills training, promoting education through mass-awareness campaigns, and expanding income-generating opportunities in rural areas.