Does Microcredit Increase Borrowers’ Savings? A Fuzzy Regression Discontinuity Design Approach

Microcredit has expanded rapidly in recent years but its effect at the household level is still controversial. This paper uses a unique dataset collected from 69 villages in Bangladesh during the period 2006-2007 to estimates the effect of participation in microcredit programs on household savings. A regression discontinuity design (RDD) is used to identify the credit effect. To justify the validity of RDD, we test the discontinuities in the conditional density of the forcing variable (in our case household land), as suggested by McCrary (2008). We do not find any substantial evidence of manipulation of forcing variable at the threshold to invalidate the RDD. Our results show that access to credit increases savings of the borrowers