Paper

Uses and Users of MFI Loans in Bangladesh

Diversity in MFI loan usage in Bangladesh
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This paper describes the 'financial diaries' methodology followed in Grameen II, and illustrates the financial behavior of 53 households in Bangladesh. The method involved helps the members in:

  • Making diaries of their financial activities,
  • Observing their loan usage patterns over a period of two or three years.

The paper provides data on the loan sources, both formal and informal, and the corresponding amounts.

  • Out of the 53 'diarists,' 43 borrowed 239 loans from MFIs, which were worth $39,000.
  • The borrowers used the loans for:
    • Trading or retail business stock;
    • Asset acquisition or maintenance;
    • On-lending to others;
    • Payment of other debts;
    • Consumption;
    • Mixed uses.

The paper broadly discusses the major findings of the study and states that:

  • Most MFI loans could be allocated to a single broad category of use;
  • Some part of the loans was held back for repayments;
  • Some members handed over the loans to their family members;
  • The loan sizes varied from $80 (lowest, for consumption) to $200 (highest, for business or on-lending).

Concluding on the study, the paper infers that contrary to the MFI expectation, not every loan is utilized in a microenterprise.