Alberto Ciancio, Giulia Grignani

Computer Science and Simulation for Economics

Project work on

"Microcredit in Bangladesh."


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view/download model file: microcredit_in_bangladesh.nlogo


Our model simulates a small and simple economy in Bangladesh where it is possible to activate a microcredit programme. We focus on the comparison between a static economy without a microfinance institution and a dynamic economy with a bank and the possibility to obtain loans and so to improve the quality of life in Bangladesh.


The model begins with an economy of 100 women endowed with a random initial wealth. Most of them stay at home to work, so they can survive (earning the bare minimum to face everyday household expenses). The remaing part works getting loans for essential facilities from money-lenders; so they earn more than the housewives, but the instalments are very high and they still remain poor.
When the Microcredit button is on, a bank and a banker are created. The banker goes round randomly and prevails upon the women to raise a loan and guiding them to the bank. The probability that he meets them is sufficiently high to involve all the women in the short run. At the beginning, the bank has got a limited quantity of reserves; when a woman reaches it, she receives a loan only if some reserves are available.
In the original microcredit model, the loans are given to groups of five women who form an autonomous fund; we have assumed that every woman represents one of these groups.
After getting the loan, a woman can start a little activity through a fixed investment (such as the purchase of a cow, a plough or a tractor), then she goes to the field to work and to accumulate wealth. The labour productivity increases ongoing, but it depends on the fixed investments.
When the women start to pay the instalments, the bank reserves increase and also those, who originally were unemployed, become borrowers and workers.

The patches are:
- white if they represent the bank
- green if they represent the field
- blue if they represent the flooded field
- orange if they represent the essential facility market

The turtles are:
- pink if they are women who have not yet received a loan
- yellow if they are borrowers
- blue if he is the banker
- dark-green if they are soldiers during the coup d’état

The graphs show:
- the number of women (pink curve: total number; yellow curve: number of borrowers)
- the economy variables (black curve: amount of the bank’s reserves; orange
curve: amount of women’s debts; light-blue curve: amount of women’s wealth)


Click to the buttons to:
- set-up: it initialises the model’s variables (without a microcredit
- go: it starts a forever simulation
- step: it starts with one cycle of simulation
- microcredit: it creates the bank and the banker

Use the sliders to pick the initial settings for the model and see what happens to the economy.
- modify the interest rate that the bank has fixed at 10% until a maximum of 50%
- modify the number of women that has been fixed at 100 until a maximum of 300 women
- modify the value of the fertility of the patches of the field that is originally at 50% until a maximum of 100%
- modify the intensity of the coup d’état that has been fixed at 30% until a maximum of 100%. (only if the golpe switch is on)
- modify the intensity of the flood in the case of a natural disaster that has been fixed at 55 until a maximum of 110 (only of the natural disaster switch is on)

Check the values of the monitors while changing the previous economic and demographic variables:
- total number of women still alive in the economy
- number of borrowers
- amount of the bank’s reserves (in USD)
- amount of women’s wealth (in USD)
- amount of women’s debts (in USD)
- amount of women’s insolvency (in USD)

Switch on one of the two exogenous events and see what changes in economy:
- Golpe (coup d'état), it creates three soldiers who prevent the women from working, from paying the instalments and so from accumulating wealth
- Natural-disaster, it creates some blue patches (flooded) in the field that are less productive than those green (normal) and so it takes the women more time to accumulate wealth and pay the instalments


Firstly, the economy without a microcredit finance institution is not dynamic, few women die, but they do not increase their wealth and the economy remains stable.
Than, the women can survive and eventually become richer only under certain economic, demographic, political and environmental conditions. How many women are allowed to survive in order to provide a sustained economic growth?
From the bank point of view, it has limited reserves available which set the possibility to work for the women. If they become insolvent, they cannot snuff their debts and so they disappear because they are not anymore relevant for the bank.
In addition, the role of the market is very important because, without a microcredit programme, the women are not able to buy the essential facilities, they are constrained to pay the usurers and the economy cannot grow. While with the microcredit, they can buy and own goods to work and improve their wealth.


Try to run the economy without the bank and the banker and try to change the economic and demographic values. The start again the simulation, but with the microcredit button activated and do the same experiments, comparing the different results.
Take care also of the time variable and observe how long does it takes the economy to reach an equilibrium or the women to die.


The model could be expanded with an analysis of the relationship between the amount of the bank's reserves and the wealth of women (the Grameen bank's clients are directly owners of 94% of the bank's capital).
Moreover, it could be possible to create the possibility to have children (increase of the demographic rate) when the women achieve a certain income.
Finally, it could be possible to promote foreign investments and trades, giving the possibility to the economy to continue in the direction of growth.


A previous students’ project work “Microcredit: a Micro Way for a Macro Challenge.” by L. Boetti, M. Bruno, G. Gili at


“The banker of the poor” by M. Yunus, 1998
“A world without poverty” by M. Yunus, 2008
“Understanding and Dealing with High Interest Rates on Microcredit” by N.A. Fernando, Asian Development Bank
“Microcredit Interest Rates in Bangladesh” by D.L. Wright and D.A.H. Alamgir, Donors’ Local Consultative Group on Finance