Dynamics of Market Share in the Microfinance Industry in Bangladesh

This paper discusses recent developments in the Bangladeshi microcredit industry. Bangladesh has seen large variations in MFI size. There are large national MFIs, as well as small localized MFIs operating within the confines of a small area. The paper examines data from a recent survey of Pathrail union in Tangail district, a seasoned place for microcredit. The study reveals that:

• Competition for market shares is growing between established national MFIs and newly emerging local MFIs;
• Market segmentation has led to borrowers and MFIs opting for different packages of interest rates and loan amounts;
• MFI size, years of operation in the village, average loan size, deposit interest rates, loan amount disbursed for unique loan purposes are key determinants of MFI shares;
• MFIs are concentrating in proven territories instead of economically backward and/or remote areas in a bid to be competitive.

Finally, MFIs' geographic concentration in economically progressive areas causes concern for the poverty alleviation objectives of the microcredit movement. It would imply that economically backward areas would be intentionally overlooked by MFIs in their aim to be competitive.