JICA Research Institute

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Working Papers

No.128 Transformation of Rural Bangladesh: Role of Infrastructure and Financial Institutions

This paper reviews the process of structural transformation and its consequences on the welfare of rural households in Bangladesh. We argue that public investments in roads, electricity, and financial institutions trigger structural transformation, which increases and diversifies rural incomes, raises consumption expenditures, reduces poverty, and increases educational achievements. Data analysis suggests that the average household income goes up by 10 percent and consumption expenditure by 4.7 percent as a result of one additional microfinance institution branch in a village. Grid connectivity and road investment also increase incomes and expenditures, and lower poverty. Analysis also shows that incomes increase more for non-farm sources than for farm sources as a result of infrastructure investments. These developments point to a structural transformation at play in rural Bangladesh.

Keywords: infrastructure investments, electrification benefits, road impacts, microfinance impacts, Bangladesh

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