EFFECT OF CREDIT ON GDP AND POVERTY: BANGLADESH PERSPECTIVE

Abstract

ABSTRACT In Bangladesh, credit can play a very important role in achieving expected economic growth. This research has been conducted to investigate the disbursement of credit status, impact of credit on Gross Domestic Product (GDP), Agricultural GDP, and poverty reduction in Bangladesh. To achieve the objectives of this research Grameen Bank, BRAC, ASA and Bangladesh Krishi Bank were selected. Because, these three NGOs are the largest credit organizations in Bangladesh and Bangladesh Krishi Bank (BKB) is the largest government agricultural loan distributor in Bangladesh. Data on loan disbursement amount, number of member, number of village covered and number of branch were collected from the above NGOs and GOs. Total 39 years data on GDP, Agricultural GDP and poverty trend were collected from Bangladesh Bureau of Statistics (BBS) and Household Income and Expenditure Survey (HIES). Descriptive statistics were used to investigate the overview of credit trend, GDP, Agriculture GDP and poverty trend. After necessary testing, fixed effect model was performed to evaluate the impact of credit on GDP, Agricultural GDP and poverty reduction. Result shows that amount of credit has positive and significant effects on GDP, Agricultural GDP and loan amount is negatively associated with poverty. An increase in the number of branches of different area leads to an increase in the number of member, which then corresponds to an increase in the loan disbursement amount. It can be concluded that government and NGO‘s credit should be expanded for increasing GDP and reducing poverty.