microcredit in Bangladesh

8/10/2019 microcredit in Bangladesh

1/5

1 of 5

MICROCREDIT IN BANGLADESH

Introduction:

Microcredit programs in Bangladesh is implemented by NGOs, Grameen Bank, state-owned commercial

banks, private commercial banks and specialized programs of some ministries of Bangladesh government.In the microfinance sector as of June, 2013, total loan outstanding is around BDT 341 billion (including

Grameen Bank BDT 84 billion), savings BDT 226 billion, the total clients is 33 million (including 8.04million clients from Grameen Bank) that accelerates overall economic development process of thecountry. Credit services of this sector can be categorized into six broad groups: i) general microcredit forsmall-scale self employment based activities, ii) microenterprise loans, iii) loans for ultra poor, iv)

agricultural loans, v) seasonal loans, and vi) loans for disaster management. Loan amounts up to BDT

50,000 are generally considered as microcredit; loans above this amount are considered asmicroenterprise loans.

Licensing Status of the NGO-MFIs in Bangladesh:

The Microcredit Regulatory Authority (MRA) established by the Government in August 2006. At the firsttime MRA received applications from 4241 NGO-MFIs for licenses which the law makes mandatory for

all NGO-MFIs. At that time MRA has decided to issue licenses to MFIs which have more than 1,000

clients or minimum loan outstanding to BDT 4 million, subject to meeting institutional requirements.However, till May 2014, MRA had approved licenses in favor of 742 NGOs and canceled licenses of 44

NGOs. There are another 43 applications under process for a final decision although they are mostly

small organizations but with some potentiality to become viable in course of time. As of May 2014, 3456applications have been rejected. Recently MRA has invited new applications for obtaining license to

conduct microcredit activities among which 92 institutions have been given primary approval.

State of Microcredit in Bangladesh:In the backdrop of global double-dip recession and over-indebtedness crisis in microcredit sector in

several countries, Bangladeshs microfinance sector shows strong resilience and continues to contribute

towards enhancement of macroeconomic growth. Total outstanding loan of this sector (only licensedMFIs) has increased by 21 percent from BDT 211 billion in June 2012 to BDT 257 billion in June, 2013,

disbursed among 19.27 million poor people, helping them to be self-employed and accelerating overalleconomic development process of the country. The total savings has also increased by 24 percent fromBDT 75.20 billion in June 2012 to BDT 93.99 billion in June 2013 among 24.60 million clients.

TABLE-1: Basic Statistics of NGO-MFIs in Bangladesh

Particulars June, 2009 June,2010 June, 2011 June, 2012 June, 2013

No. of Licensed NGO-MFIs 419 516 576 590 649*

No of Branches 16,851 17,252 18,066 17,977 14,674

No. of Employees 107,175 109,597 111,828 108,654 110,734

No. of Clients (Million) 24.85 25.28 26.08 24.64 24.60

No. of borrowers (Million) 18.89 19.21 20.65 19.31 19.27

Amount of Loan Outstanding(BDT. Million )

143,134.03 145,022.66 1,73,797.60 211,283 257,010

Amount of Savings (BDT.Million)

50,610.04 51,362.93 63,304.44 75,206 93,990

*Total Licensed NGO-MFIs was 698 but only 649 submitted MIS report.

Source: MRA-MIS Database-2013


2/5

2 of 5

Table 1 shows the overall trend of microfinance statistics in Bangladesh. This sector has created direct job

opportunities for over 110,734 people at June 2013; 81 percent of them are male and 19 percent arefemale. The sector had outstanding loans of BDT 257 billion disbursed to 19.27 million borrowers, and

had accumulated BDT 93.99 billion as savings from around 24.60 million clients over 93 percent of

them are womenthrough more than 14,000 branches, by 649 NGO-MFIs licensed by MRA.

TABLE-2: Size-Wise Loan Outstanding and Savings Compositions (As of 30 June, 2013)

Categories Range of

Borrowers

No of

MFIs

No of

Borrowers

Total Loan

Outstanding(BDT

Million)

% of Total

Outstanding

No of

Savers

Total

Savings(BDT

Million)

% of

TotalSavings

Very Small Up to 1000 170135,130 1,831.37 0.71 183,504 538.48 0.57

1001-2000 165232,729 1,955.97 0.76 312,069 837.35 0.89

2001-6000 123436,916 3,962.65 1.54

579,7411,870.75 1.99

6001-10000 42322,254 3,765.44 1.47

404,9441,652.38 1.76

Small 10001-50000 105

2,374,418 26,809.01 10.43

3,202,366

9,792.37 10.42Medium 50001-100000

22

1,588,952 22,735.43 8.85 1,933,230 7,228.29 7.69Large 100001-

1000000

20

5,722,781 71,403.24 27.78 7,476,576 26,467.58 28.16Very Large 1000001 and

Above2

8,452,815 124,546.89 48.46 10,478,226 45,602.80 48.52Total 649 19,265,995 257,010.00 100 24,570,656 93,990.00 100


Table 2 shows the market scenario of NGO-MFIs in Bangladesh. The top two MFIs contribute around 50percent of total loan outstanding as well as savings of the microfinance sector in Bangladesh. Two of thelargest MFIs, viz., BRAC & ASA, are each serving over four million borrowers. There are a few more

developing fast. On the other hand the smallest 500 NGO-MFIs have contributed only 4.4 percent of totalloan outstanding and 5.2 percent of total savings. Institutional concentration ratio is highly skewed in

favor of large MFIs: just 22 institutions are in control of 77 percent of the market share while two largest

organizations have control of over 50 percent in terms of both clients and total financial portfolios.


3/5

3 of 5

TABLE-3: Market Share of Micro Enterprise Loan (Top MFIs) as of June, 2013

NGO-MFIs Total Number ofME Borrowers

Total NumberBorrowers

% of MEBorrowers

Total ME LoanOutstanding(BDT Million)

Total LoanOutstanding (BDTMillion)

% of MELoanOutstanding

BRAC 391,072 4,220,283 9.27 19,128.64 66,446.03 28.79

ASA 178,457 4,232,532 4.22 9,194.57 55,733.98 16.50

BuroBangladesh 39,630 950,234 4.17 187.45 12,999.58 1.44

TMSS 13,260 659,584 2.01 621.12 7,945.47 7.82

JagoroniChakraFoundation 35,428 330,995 10.70 1,067.96 6,835.08 15.62

Society forSocial Service 20,293 390,371 5.20 1,155.4 6,122.08 18.87

UDDIPAN 11,645 258,082 4.51 663.4 3,713.60 17.86

ShaktiFoundation 1,108 391,597 0.28 149.1 3,032.34 4.92

PadakkhepManobikUnnayan

Kandra 11,636 195,687 5.95 561.26 2,704.77 20.75

RDRSBangladesh 4,794 212,351 2.26 141.12 1,912.55 7.38

Top 10 MFIs 707,323 11,841,716 5.97 32,870.02 167,445.48 19.63

Total 649MFIs 953,717 19,265,995 4.95 67,168.33 257,010.00 26.13


Table 3 depicts the scenario of micro enterprise loan, i.e., loans above BDT 50,000 of different NGO-

MFIs in Bangladesh. It is observed that micro enterprise loan outstanding is BDT 67 billion which isaround 26 percent of total loan outstanding in which the top ten NGO-MFIs contributed around 48

percent. It also shows that BDT 67 billion is disbursed to 9.5 lakh borrowers which are only around 5percent of total borrowers. The table expresses that not only the top NGO-MFIs others are also runningmore than 50 percent ME loan programs of this sector.

Selected Indicators of NGO-MFIs in Bangladesh:

It is observed from table 4 that savings per member has been increasing over the years. In 2009 savingsper member was BDT 1,735 which stands at BDT 3,820 in 2013an increase to more than double within

the last five years. The loan outstanding per borrower also increased over the years and average growth

rate of loan outstanding per borrower is around 21 percent in 2013 compared to the previous year. Theloan outstanding per borrower has increased by more than 100 percent within the last five years. These

two indicators, savings per member (average saving size) and outstanding loan per borrower (averageloan size) increased over time perhaps due to the increase in the income level of the poor resulting in anincrease in their need for higher amount of loans from the MFIs. The ratio between borrowers to clients

(members) remained steady for the last few years, which is within 70 to 80 percent and the savings to

outstanding loan ratio has also been stable from 2009 to 2013. The number of members and borrowers per

branch has decreased over the years. This has been mainly due to rapid horizontal expansion of branchesin new geographical areas. It became more difficult for the newer MFIs to find new members because theolder and large MFIs already occupied a large client base. Substantial rate of increase in the sizes of loans


4/5

4 of 5

per borrower and savings per member has resulted in a rise in the total loan outstanding and savings in the

sector. Consequently outstanding loan and saving per branch has also increased almost twofold between2009-2013.The loan outstanding amount per branch stood at BDT 17.5 million whereas saving per branch

stood at 6.41 million in 2013.

TABLE-4: Selected Indicators of NGO-MFIs in Bangladesh

Particulars June '09 June '10 June '11 June '12 June '13

Savings per member

(BDT)

1,735.52 2,097.83 2,494.49 3,052.18 3,820.73

Outstanding loan perborrower (BDT)

6,188.01 7,558.92 8,807.69 10,941.63 13,337.31

Borrower to client

(member) ratio

78.90% 78.00% 78.80% 78.37% 78.33%

Savings to

Outstanding loanratio

35.50% 35.60% 35.90% 35.59% 36.57%

Borrower per

Branch

1,036 1,115 1,093 1,074 1,072

Member per Branch 1,312 1,429 1,388 1,371 1,368

Outstanding loan per

branch (MillionBDT)

6.41 8.42 9.63 11.75 17.51

Savings per Branch

(Million BDT)

2.28 2.99 3.46 4.18 6.41


Fund composition of the Microfinance sector in Bangladesh:

The sector is broadly financed by the following types of sources: savings collected from clients,

cumulative surplus (profit), concessional loan received from sources such as PKSF, grants received from

national and international donors and commercial bank borrowing. Table 5 shows the fund compositionof the microfinance sector in Bangladesh over the last few years. While the total fund increased

significantly over the time, there was only a little change in terms of composition of fund. Total fundincreased from BDT 136 billion to BDT 276 billion in June 2013-a growth rate of 16-20 percent per year.

The most important source of fund turned out to be clients savings which was the single most importantfund support for the sector. The cumulative surplus was the second most important source of fund. Loans

from commercial Banks turned out to be the next more important one. Loan from Palli Karma Sahayak

Foundation (PKSF), a micro finance wholesale funding agency also provides a large portion of loan fundat a subsidized rate. The least important source was appeared to be grants from the donor agencies.

TABLE-5: Source of fund of NGO-MFIs in Bangladesh


5/5

5 of 5

Source of

FundJune '09 June '10 June '11 June '12 June '13

(Million BDT) (%) (Million BDT) (%) (Million

BDT)

(%) (Million

BDT)

(%) (Million

BDT)

(%)

Clients'

Savings

40,526.91 29.73 47,436.35 31.15 63,295.9 34.46 74,989.36 32.62 91,178.01 32.95

Loan from

PKSF

22,666.20 16.63 24,484.12 16.08 31,767.8 17.3 33,576.45 14.61 34,072.27 12.31

Loan from

CommercialBanks

23,896.37 17.53 23,006.41 15.11 23,577.9 12.84 32,652.41 14.20 42,699.37 15.43

Donors'

Fund

4,110.29 3.02 4,109.29 2.7 70,08.37 3.82 7,061.28 3.07 7,104.57 2.57

CumulativeSurplus

36,261.74 26.6 42,339.27 27.8 50,298.7 27.38 65,437.78 28.47 83,262.38 30.09

Other

Funds

8,847.97 6.49 10,907.40 7.16 7,727.32 4.21 16,167.91 7.03 18,390.89 6.65

Total 136,309.48 100 152,282.84 100 183,676 100 229,885.2 100.00 276,707.48 100.00


It is observed that the commercial banks are recently considered as a potential source of fund ofmicrofinance, their share of the total source increased over the last three years. MRA has been putting inefforts to increase loans from commercial banks to the sector by introducing the banks to the NGO-MFIs.

However, borrowing cost from commercial banks is very high due to high interest rate charged and

inflationwhich discourages NGO-MFIs to avail this as a source of fund. Previously donor driven NGOs

are now trying to rely more and more on local sources of fund with the decline in foreign funding, whichstood at only 2.57 percent in June 2013.

Documents

microcredit in Bangladesh