2003-CARE & DFID-Microfinance and The Poor

Microfinance and the Poor -
an overview of the sector in

Bangladesh
Harun Rashid - Care INCOME

Frank Matsaert - DFID Bangladesh
MICROFINANCE SECTOR OF
BANGLADESH
CONTENTS OF THE
PRESENTATION
• Background
• Strengths and Weaknesses
• Challenges
• Positive and Negative Impacts
• Innovations
MICROFINANCE SECTOR OF BANGLADESH
10.2
million 3.2
million .87
million .63 .10
million million
> 1000 10-15 5-6 10 - 12 15 - 20
NGOs & GRAMEN & GOVT. INTERNATIONA

GOVT.
COOPs PRIVATE COMMERCIAL L NGOs
SECTOR BANKs MINISTRIES &
PROJECTS
KEY PLAYERS (Numbers of clients, institutions)

BACKGROUND
•Total RLF (Capital base) Tk. 27,460 million
•Cumulative Disbursement Tk. 109,120 million
•Loan Outstanding Tk. 20,812 million
•Average loan size Tk. 3,000 - 4,000
•Net Savings Tk. 8,088 million
•Total Active Borrowers 7,574,269
•Ave. Repayment Rate 95%
•Interest rate on loans 8 - 30%
PORTFOLIO STATUS
Total Outreach BACKGROUND

15 million
. Grameen/Individual/ Flexible 62
92
Methodology
. ME & SE 97 3
. Moderate poor / Extreme poor 75 25
. Borrower / Non-Borrower 80 20
. Rural / Urban 92 8
. Female / Male
90 10
DISTRIBUTION OF OUTREACH
BACKGROUND
42
.13
%
17
.9 4
%
12
.1 9
10 %
.19
4 .1 %
3.3 4 .3 8%
2 .8 3%
1 .4 3% 9%
9%
MAJOR SECTORS OF INVESTMENT

Business
Term loans planning &
management
Entrepreneurs loans Entrepreneurship Group formation
Mandatory
Housing loans Health Development Awareness
Voluntary insurance raising
Health & Sanitary Basic Accounting
Flexible loans Life insurance & Cash Marketing outlay Leadership
Management Development
Daily Seasonal loans Credit Production centre
insurance Product Linking/Networki
Time Deposit Disaster loans diversification Promotional
Property activities ng
Fixed Deposits Special loans insurance Innovation
Infrastructure Information
Term Deposit Consumption loans Crop insurance Research support sharing
TRAINING/ INSTITUTION
SAVINGS CREDIT INSURANCE COUNSELING MARKETING BUILDING
TYPES OF SERVICES OFFER BY MF-NGOs

Service
Charge Others
Foreign 14% 20%
17% Members
PKSF Savings
24% 25%
RLF SOURCES OF MF-NGOs

STRENGTHS
• Social recognition of NGO- MFIs
contribution
• Serving the poor, specially the women
• Development of a ‘credit culture’
• Commitment for impact and sustainability
• Scale, experience and efficiency
• Diversification of income opportunities
• Research & knowledge generation
WEAKNESSES
• Limited sources of RLF
• Weak financial management systems
Restricted pool of experience MF Staff
• Subsidy mentality of NGO-MFI leaders
• Low skills levels and illiteracy of poor
• Weak coordination amongst NGO-MFIs
• High client transaction costs
Current Issues
• Regulatory status of MF-NGOs
• Protection of members’ savings
• MFI management & systems
• Weak governance structures
• Sources of capital
• Overlapping and duplication
Current Issues
• Sustainability versus impact - multiple

objectives
• Lack of diversity - focus on Grameen Model
• Absence of performance standards
• Urbanization
• Response to natural disasters
• Impact maximisation for the poorest
• Need for innovation
CHALLENGES
• Reaching poorest of the poor - mismatch
between ‘micro-success’ and ‘macro-failure’
• Develop new and better financial products
and services
• Improve MFI management and systems
• Resolve regulatory issues
• Credit Rating - greater co-operation
• Serving the urban poor
• Offsetting impact of disaster
• Threat of oligopoly
IMPACT ON HOUSEHOLDS LIVING

BELOW THE POVERTY LINE
• Increased income, employment and asset
formation
• Increase in skills base and production
activities
• Diversification of livelihood strategies,
reduction in vulnerability
• Reduced dependency on informal money
market / money lender
IMPACT ON HOUSEHOLDS LIVE
BELOW THE POVERTY LINE
• Increased participation of women in HH

decision making and better understanding of
their rights
• Reduced men’s violence against women
• Increase of ‘social capital’
• Improvement in HH nutrition, sanitation and
education
• Better practices of health and family planning
SOME NEGATIVE IMPACTS
• Increased burden on women

• Increased indebtedness of borrowers
• Marginal profitability of some MEs
• Enterprise de-capitalization
• Social conflict
• Saturation of traditional markets -
squeezing profits
INNOVATION
• Flexible savings and credit
• Shift towards ‘Enterprise loans’
• Micro-insurance
• Linking MFIs with formal financial
markets
• Private sector involvement
• Individual financial products

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Microfinance and the Poor -

an overview of the sector in

Harun Rashid - Care INCOME

> 1000 10-15 5-6 10 - 12 15 - 20

NGOs & GRAMEN & GOVT. INTERNATIONA

KEY PLAYERS (Numbers of clients, institutions)

Total Outreach BACKGROUND

. Moderate poor / Extreme poor 75 25

MAJOR SECTORS OF INVESTMENT

TYPES OF SERVICES OFFER BY MF-NGOs

RLF SOURCES OF MF-NGOs

• Sustainability versus impact - multiple

IMPACT ON HOUSEHOLDS LIVING

• Increased participation of women in HH

SOME NEGATIVE IMPACTS

• Increased burden on women

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