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BRAC Microfinance Programme, Bocconi University and Stockholm University planned to conduct a follow up/midline survey to evaluate the impact of providing vouchers that make loan repayment more flexible for eligible Dabi and Progoti borrowers. The specific aims of this study were to test the impact of introducing a flexible grace period of two months on microfinance borrowers’ repayment behaviour and other related outcomes, as well as the demand for Progoti loans among small and medium sized businesses. The study was conducted among 700 respondents in 21 districts of Bangladesh. The direct and indirect effects of the new loan contract were evaluated through a cluster randomized control trial methodology.

This follow-up survey was conducted 15-16 months after the launch of the new contracts in the treatment branches. By this time, one loan cycle was over in both treatment and control branches. The firms in both the eligible borrower sample and the representative firm sample were revisited in this research and were asked the same questions as in the baseline. The panel data on the two samples of firms at baseline and follow-up was used to identify the direct effects on eligible borrowers and the indirect effects on other firms in the locality. By comparing outcomes of the eligible clients who are offered the flexible contract (i.e. eligible firms in treatment branches) to eligible clients in control branches, the causal impact of the flexible loan contract on targeted firms was identified.

To identify the selection effects that the introduction of the flexible loans may have the representative sample of firms were used to estimate the likelihood of becoming a borrower as a function of treatment status and baseline characteristics. Also, by comparing outcomes (e.g. repayment behaviour, business profits) of new borrowers in treatment and control branches, indirect effects of the treatment were tested.

Theme: Poverty and Vulnerability

Research Method: Quantitative

Project Status: Accomplished

Starting Year: 2016

Donor: Stockholm University; Bocconi University; BRAC Microfinance Programme

Study Area: Dhaka, B.Baria, Hobigonj, Kishoregonj, Munshigonj,  Narayangonj, Chandpur, Comilla, Feni, Narail, Magura, Khulna, Bagerhat, Barisal, Zhalokathi, Tangail, Kustia, Natore