This paper examines the effect of group-based credit for the poor in Bangladesh, by gender of participant, on participating household’s mix of agricultural contracts (quantities of land sharecropped and rented), and the supply of agricultural labour which takes the form of own-cultivation as opposed to agricultural wage labour. The group-based microcredit programmes examined provide production credit for non-agricultural activities to essentially landless and assetless rural households. Landless cultivators are more likely to have their contractual choices shaped by credit market constraints than others. On a priori grounds it is important to distinguish credit effects by gender of participant. Male programme credit, if properly monitored, should induce men to substitute away from supplying agricultural labour and contracting for agricultural land to supplying the non-agricultural labour required by the non-agricultural self-employment activity financed by the microcredit programme. Programme participation by women, who are otherwise much less involved in income-generating activities, diversifies the sources of household income not merely by the type of activity undertaken but also across individuals within the household. These outcomes that permit households to choose higher return but riskier agricultural contracts.

Econometric analysis of a 1991/92 household survey provides strong evidence that participation in these group-based microcredit programmes substantially alters the mix of agricultural contracts chosen by participating households. In particular, both female and male participation induces a significant increase in own-cultivation through sharecropping, coupled with a complementary increase in male hours in field crop self-employment and a reduction in male hours in the wage agricultural labour market, consistent with its presumed effects in diversifying income and smoothing consumption. Female credit effects are larger than male credit effects in increasing sharecropping and in reducing male wage labour and increasing agricultural self-employment, as predicted.