Use of the Formal and Informal Financial Sectors: Does Gender Matter? Empirical Evidence from Rural Bangladesh

This paper explores the relationship between the formal and informal financial sectors and gender. It states that:

• Evidence suggests that women use resources differently than men, spending more on human capital;
• Households in Bangladesh rely on both formal and informal sectors for access to money through credit and transfers;
• Many households rely on informal gifts and loans as part of their household income;
• Males rely almost entirely on informal credit and transfers, while females are relatively split in their dependence on the formal and informal sectors;
• Informal gifts and loans flow primarily between men in Bangladesh;
• Micro credit is the only source of credit for women and it is also an important source of formal credit for men:
  • More women received credit from micro credit organizations, but average loan sizes were larger for men than for women;
  • Men rely on government and non-government sources for credit, whereas these sources were unavailable for women.
• There was evidence that formal financial transactions were crowding out informal ones.

The paper concludes by stating that:

• There is plenty of scope for growth in the financial sector in Bangladesh;
• The finding that the formal sector might crowd out the informal sector has many policy implications;
• Additional research is needed to quantify the relationship between the formal and informal sectors by gender.