Paper

Bangladesh Microfinance Review

Presenting an overview of the microfinance sector in Bangladesh
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This review presents a detailed overview of the Bangladeshi microfinance sector. It discusses its structure, outreach, efficiency, profitability, and portfolio quality. The review is based on data from the country’s ten largest MFIs. The study was conducted based on financial data for the year 2009.

The review reports a mature industry whose role as global leader has been diluted by the growth of the Indian microfinance sector and by Bangladeshi MFIs' slow adaptation of innovative microcredit products. The domestic financial system has a dual structure with few banks but over a thousand MFIs. The scope for expansion is limited by the estimated 1.20 borrower accounts for each potential borrowing household in the country. Key findings include:

  • Microfinance provision is concentrated in a few large MFIs;
  • Active borrower numbers and portfolio size have increased steadily and contribute to financial inclusion;
  • MFIs are diversifying to include microinsurance services;
  • Cost per borrower is low and operational efficiency is high;
  • Portfolio quality is not so impressive by international standards;
  • Member deposits and internal accruals play a large role in financing MFIs;
  • Investment income compensates for low returns on portfolio.