Bangladesh Microfinance Country Profile

Publication Date: Jan 2006
Published by: Asia Resource Centre for Microfinance (ARCM)
Document Type: Other

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Overview of microfinance sector in Bangladesh

This profile discusses the characteristics of microfinance in Bangladesh. It describes the need for microfinance, looking at the key role that microfinance institutions (MFIs) have played in poverty alleviation in Bangladesh.

The paper then discusses the development of the microfinance sector in Bangladesh, and examines:

• The different phases of MFI development;
• The transformation of non-government organizations from relief organizations to development organizations and MFIs;
• Experimentation with different credit models;
• The success of the group-targeting model;
• The movement of microfinance towards the mainstream.

It then describes the competition in the microfinance market, and elaborates on:

• Challenges such as:
  • Lack of resources;
  • MFIs’ preference for larger loan sizes that lead to the exclusion of the poorest;
  • Increase in client-base versus sustainability of MFIs.
• Regulation and governments initiatives, exploring:
  • The lack of regulation in the Bangladeshi microfinance sector;
  • The role of the Bangladeshi Central Bank in regulation;
  • The growing focus on MFI financial accountability and regulatory framework.
• Practices in terms of services such as credit, savings, insurance and social services, training, counselling, marketing and institution building;
• Innovations such as:
  • Introduction of flexible repayment schedules;
  • Lowering first loan levels;
  • Combining food aid with microfinance and training.

The paper also lists the providers, categorizing them into four major groups – microfinance non-government organizations (NGOs), specialized institutions, banks and administrative divisions.

It concludes by discussing the sources of funds for MFIs in Bangladesh.