How well does government microcredit serve the investment needs of small and medium enterprises? An impact analysis on handloom weavers in Bangladesh
South Asian Journal of Business Studies
ISSN: 2398-628X
Article publication date: 30 August 2021
Issue publication date: 9 May 2023
Abstract
Purpose
The purpose of this study is to empirically estimate the impact of a government microcredit program on the handloom weavers to promote small and medium enterprises (SMEs) in Bangladesh.
Design/methodology/approach
The data were collected from 311 handloom weavers from the Sirajganj District of Bangladesh from July to December 2015 using a multistage sampling technique. The analysis was conducted using a two-stage least squares regression model incorporating instrumental variables to control for the probable endogeneity problem associated with the study.
Findings
This study finds that government microcredit had no significant impact on borrowers' investment in their business, whereas credit received from multiple sources other than government credit had a significant negative impact. Additionally, literacy level, household assets and the number of operational handloom units positively affected investment, while the number of non-operational handloom units and distance negatively affected the investment.
Research limitations/implications
This study's findings are more specific for the selected case and may not be generalizable to all kinds of SMEs.
Practical implications
The policy implications are targeted at increasing loan size based on the number of operational handloom units to improve the performance of government and other microcredit programs to facilitate the growth of SMEs in Bangladesh.
Originality/value
This study specifically focuses on estimating the financial performance of government microcredit programs for SME development within the handloom industry, which has not been sufficiently explored in the literature.
Keywords
Acknowledgements
The research was conducted as a part of a doctoral study at the University of Hohenheim, Germany. The authors acknowledge the members of the Bangladesh Handloom Board and the respondents for their continuous support and cooperation during data collection. The authors would also like to thank Editage (www.editage.com) for English language editing.
Funding: This research was supported by the German Academic Exchange Service (DAAD) (grant number 91538050) under the scholarship program on development related Postgraduate courses in “Agricultural Economics, Bioeconomy and Rural Development”.
Citation
Parvin, M.T., Birner, R. and Nahar, A. (2023), "How well does government microcredit serve the investment needs of small and medium enterprises? An impact analysis on handloom weavers in Bangladesh", South Asian Journal of Business Studies, Vol. 12 No. 2, pp. 242-268. https://doi.org/10.1108/SAJBS-07-2020-0260
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited