Академический Документы
Профессиональный Документы
Культура Документы
The organization/person willing to operate Microcredit activities in Bangladesh shall submit application
to the Microcredit Regulatory Authority in Prescribed Form and Prescribed manner after getting
registration as an NGO under any of the following acts:
1.
2.
3.
The Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (Ordinance
No. XLVI of 1961);
4.
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 total loan outstanding is around TK 248 billion
(including Grammen Bank TK 72 billion) and savings TK168 billion. The total clients of this sector is 35
million (including 8.4 million clients from Grameen Bank) that accelerates overall economic
development process of the country. Credit services of this sector can be categorized into six broad
groups: i) general microcredit for small-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 as microenterprise loans.
accelerating overall economic development process of the country. The total savings has also
increased by 23.25 percent to BDT 63.3 billion in June 2011 compared to previous year from 26.1
million clients, over 93 percent of them are women.
June, 2008
June , 2009
June, 2010
June, 2011
293
419
516
576
No of Branches
15,077
16,851
17,252
18,066
No. of Employees
98,896
107,175
109,597
111,828
23.45
24.85
25.28
26.08
17.79
18.89
19.21
20.65
143,134.03
145,022.66
1,73,797.60
Amount
Million)
50,610.04
51,362.93
63,304.44
of
Savings(
Tk.
47,386.19
TABLE-2: Size-Wise Loan Outstanding and Savings Compositions (As of 30 June 2011)
Total
Loan
No
Range of
No
ofOutstanding % of TotalNo
Categories
of
Borrowers
Borrower (BDT
Outstanding Savers
MFIs
Million)
Total
ofSavings
(BDT
Million)
%
of
Total
Savings
Up to 1000 85
63973
492.48
0.28
87660
192.20
0.30
1001-2000 177
244974
1566.68
0.90
351054
741.81
1.17
422745
2914.21
1.68
566864
1282.30
2.03
600110000
46
364848
2987.90
1.72
469938
1128.09
1.78
Small
1000150000
103
2218532
19946.10
11.48
2861318
6738.03
10.64
Medium
50001100000
23
1571226
13805.22
7.94
1875363
4713.86
7.45
Large
1000011000000
19
4600621
39483.64
22.72
5527971
14652.13 23.15
Very Large
1000001Above
11162371 92601.36
53.58
100
Table 2 shows the market scenario of NGO-MFIs in Bangladesh. The top three MFIs contribute 54
percent of total loan outstanding as well as savings of the microfinance sector in Bangladesh. Two of
the largest MFIs, viz., BRAC & ASA, are each serving over five million borrowers. There are a few more
developing fast. On the other hand the smallest 428 NGO-MFIs have contributed only 4 percent of
total loan outstanding and 5 percent of total savings. Institutional concentration ratio is highly skewed
in favor of large MFIs: just 22 institutions are in control of 76 percent of the market share while three
largest organizations have control of over 50 percent in terms of both clients and total financial
portfolios.
Total Number
of Borrowers %
Total
Loan
Outstanding
(Tk Million)
%
BRAC
249585
1.30
19128.64
11.27
ASA
140496
0.73
9194.57
5.42
Buro Bangladesh
4857
0.03
187.45
0.11
15008
0.08
1067.96
0.63
8570
0.04
561.26
0.33
RDRS Bangladesh
3029
0.02
141.12
0.08
Shakti Foundation
3885
0.02
149.10
0.09
15552
0.08
1155.40
0.68
TMSS
8816
0.05
621.12
0.37
UDDIPAN
7310
0.04
663.40
0.39
Top 10 MFIs
457108
2.37
32870.01
19.37
617706
3.21
40059.84
23.60
loan outstanding and savings in the sector. Consequently outstanding loan and saving per branch has
also increased. The loan outstanding amount per branch which was TK 8.42 million in 2010 has
increased by 14.4 percent in 2011.
June '06
June '07
June '10
June '11
1,207.34
1,332.66
1,448.36
1,735.52
2,097.83
2494.49
4,377.11
5,048.38
5,614.55
6,188.01
7,558.92
8807.69
75.1%
81.6%
81.2%
78.9%
78.0%
78.8%
Savings to Outstanding
loan ratio
36.7%
32.3%
31.78%
35.5%
35.6%
35.9%
1,413
1,484
1,496
1,036
1,115
1093.33
1,883
1,817
1,843
1,312
1,429
1387.87
7.49
8.4
6.41
8.42
9.63
Savings
per
(Million Tk.)
2.42
2.67
2.28
2.99
3.46
Savings
(Tk.)
per
member
Outstanding loan
borrower (Tk.)
Borrower
to
(member) ratio
per
client
Branch
2.27
Source: MRA-MIS-2011
Fund Composition of the Microfinance Sector in Bangladesh
While the fund composition of NGO-MFIs is changing, total fund has increased over time. In 2010, the
growth was 10.49 percent, which further increased to 20.6 percent in 2011. Total fund in this sector
was Tk. 152.3 billion in 2010 which rose to Tk.183.6 billion in 2011. Palli Karma Shahayak Foundation
(PKSF), the micro finance wholesale funding agency, provides a large portion of loan fund at a
subsidized rate which has increased from Tk. 24.48 billion in 2010 to Tk. 31.76 billion in 2011.
Savings from the clients and surplus income from microcredit operations appeared as two major
sources of fund for NGO-MFIsand are the main strength for their future growth. The clients savings
has increased from 31.11 percent to 34.46 percent in 2011- an indicator suggesting that MRA Rules
have a positive impact on savings collections.
Jun-09
Source of Fund
(Million
Tk.)
Clients' Savings
36,397.32
29.66 40,526.91
29.73 47,436.35
31.15 63295.88
34.46
22,708.58
18.50 22,666.20
16.63 24,484.12
16.08 31767.84
17.30
23577.85
12.84
19.13 23,896.37
17.53 23,006.41
15.11
Donors' Fund
4,549.07
3.71
3.02
2.70
7008.37
3.82
Cumulative Surplus
31,170.02
25.39 36,261.74
26.60 42,339.27
27.80 50298.66
27.38
Other Funds
4,435.49
3.61
6.49
7.16
4.21
4,110.29
8,847.97
Jun-10
(%)
(Million
Tk.)
4,109.29
10,907.40
Jun-11
(%)
(Million
Tk.)
7727.32
(%)
Total
122,747.51
100
136,309.48 100
152,282.84 100
183675.92 100.00
Source: MRA-MIS-2011
It is observed that although the commercial banks are recently considered a potential source of fund
of microfinance, their share of the total source of fund did not increase over the last three years. MRA
has been putting in efforts 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 inflation which 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, which stood at only 3.82 percent in June 2011 which is around 70 percent
higher compared to previous year.
Future of micro-finance
The Bangladesh micro-finance sector is regarded as the largest and most efficient in the world. According to the
Microfinance Information Exchange (MIX) 2009 analysis report on Asia, Bangladesh caters to 22.8 million borrowers
compared to 16 million in India and 57.6 million in the whole of Asia. Grameen Bank (8 million), Brac (6.2 million) and
Asa (5.6 million) together encompass 87% of Bangladesh's vast micro-credit portfolio.
Bangladesh also boasts a Gross Loan Portfolio of $2.5 billion compared to $4.7 billion for South Asia. The cost per
borrower in Bangladesh is also much lower than in other Asian countries. Considering the 160 million population and
the 36.3 % living below the poverty line, there is still abundant scope for growth.
Bangladeshi Microfinance Institutions (MFIs) have advanced from being development partner-supported entities
towards self-sufficient institutions supported by commercial financing. A majority of the loan portfolio of the MFIs is
targeted towards agriculture. The present government is also very pro-poor and the central bank has directed all
banks to provide credit directly to agri-business or through MFI-linkage at competitive rates. The directive was
followed by a few large syndications in the market for the MFIs.
However, the primary sources of financing for smaller MFIs still remain members' deposits and Palli-Karma Sahayak
Foundation (PKSF) funds. MFIs in Bangladesh cannot offer regular deposit/ savings service. Hence, they have to rely
primarily on forced savings collected as a condition for membership or for access to loans. Some analysts argue
whether donor support is a barrier for the microfinance sector to integrate into the mainstream financial sector.
A survey titled "Microfinance Banana Skins 2009," sponsored by Citi Foundation, identified the risks to the business
in light of the recent economic crisis. The survey was followed by a roundtable in Bangladesh, which concluded that
the risks for Bangladesh MFIs are still comparatively lower than in India, Pakistan and some developed states. The
three major risks identified were rising credit risks resulting from competition and lack of MIS, eroding image, and
absence of succession plan.
Credit disbursements of MFIs used to be considered risk-free because of the high recovery rate compared to banks.
But the loan recovery rate has been declining worldwide in the backdrop of the global financial crisis. It has to be
taken into consideration that the crisis is likely to increase credit risk due to economic slowdown. Many microfinance
clients live close to the edge and are perilously exposed to worsening economic conditions.
The economic crisis hit microfinance at a time when credit quality had already been deteriorating for reasons linked to
the intensely competitive nature of the industry and a more calculating attitude to debt among borrowers. The
concern is that the crisis will cause these unwelcome trends to accelerate.
Competition has led to an erosion of lending standards as lenders fight for market share and borrowers accept easy
credit. This is evident from the shift from group lending to riskier individual lending. There is no clear data source to
identify what the actual level of multiple borrowing for the industry or the Portfolio At Risk (Par) is.
Except for the larger few, most MFIs do not follow international reporting standards. Calculation of delinquent loans
by few MFIs remains obscure. Monitoring borrowers who do not have any identification number or track record is a
mammoth task. The MFIs are currently trying to integrate the information contained in the national ID cards but
system support is quite inadequate.
In the absence of any official database, MFIs have to maintain their own records of micro-borrowers and also social
information due to their development orientation. Therefore, there exists a crying need for a strong and effective
databank of micro-borrowers.
The second risk identified is the eroding image of the MFIs, who used to be perceived as philanthropic institutions,
but their commercial operations have raised questions about their true agenda. In reality, compared to commercial
banks, the operational and monitoring costs of MFIs, working in areas where commercial banks would never provide
coverage, is far greater. Surprisingly, the rates charged by MFIs are still lower than the interest rates charged from
unsecured credit card holders by commercial banks.
The third but most worrisome risk relates to the depth of management in the MFI sector. Whether they be large or
small, MFIs are mostly operated like a family-run business with decision-making concentrated in the hands of a key
person. Historically, people with good academic and professional backgrounds have refrained from joining the
industry due to scepticism about the business model and social acceptance issues. Thus, the second-tier
management and/or succession planning has remained hugely underdeveloped over the years.
Now that Bangladesh has established the Micro-finance Regulatory Act 2006 and a Micro-finance Regulatory
Authority, we expect uniform reporting requirements and performance assessment procedure, proper policy
guidelines, a central database of micro-borrowers, and active support for MFIs to become more vibrant for the greater
interest of social and economic emancipation.
The micro-finance industry is now at a crossroads, and to take it to the next trajectory we have to increase our
standards of reporting as well as processing, ensure wider coverage with timely recovery, integrate micro-finance into
the mainstream financial system and, in the process, set global standards for others to follow.
What is Microfinance?
Microfinance refers to the provision of financial services to poor or low-income clients. It offers poor peo
access to basic financial services such as loans, savings, money transfer services and microinsurance. Peo
living in poverty, like everyone else, need a diverse range of financial services to run their businesses, bu
assets, smooth consumption, and manage risks.
What is Microcredit?
Microcredit is the main component of the microfinance services. It is a system of credit delivery and mob
savings specially designed to meet the requirement of the poor and allowing them to improve their living
standard by providing credit support without collateral through augmenting their households income and
facilities. It has evolved as an economic development approach intended to benefit the poor.
Generally it bears a fixed rate of interest agreed upon by both the parties. In microfinance credit means
microcredit where all terms and conditions are more or less formalized, and aspirants of credit services c
know this before entering into a transaction.
What does savings mean?
It generally refers to money deposited, may be with self of the person, or with another individual or instit
The institutions may be formal as the banks are. Again, people also deposit or save money with the micro
institutions, cooperative societies, self-help groups and others. In microfinance accumulation of savings b
agencies is part and parcel of their credit delivery system. The ability to save consistently is considered b
agencies an important indicator of the ability to pay back loans. Savings also reduce dependence on exter
funds for revolving loan fund.
From the members point of view, savings is an asset for future use in emergency, and on saving they also
interest.
What is Compulsory Savings (Forced Savings or Mandatory Savings)?
It is a type of savings the members deposit with the MFIs excess to their general, group or mandatory sav
This savings generally do not have any fixed amount, fixed frequency and any restriction to withdraw. O
savings, generally the rate of interest is low.
Who are Active Members?
Members of groups who attend the group meetings, deposit savings and repay the loan installments regul
following the rules and regulations of the institutions. In operational sense, an active member refers to a m
who has saving with the institution and the institution did not cancelled `membership of the person conc
any reasons.
Who are Borrowers?
The members of the groups who have borrowed loan from and still have loan outstanding with the institu
referred to as borrowers.
What is Group Guarantees?
Also known as peer pressure. In this all the group members collectively guarantee each others loans. Gu
are either implicit with other group members unable to have access to a loan if all members are not regul
their loan payments, or actual guarantees, where group members are liable to repay loans of other membe
group.
Generally, MFIs lend to low-income clients who often have very few assets. Consequently, traditional co
such as property, land, machinery, and other capital assets is often not available. Various innovative mean
reducing the loan loss have been developed, including collateral substitutes and alternative collateral.
What does it mean by Collateral Substitutes?
One of the most common collateral substitutes is peer pressure, either on its own or jointly with group
guarantees. In addition, there are other frequently used forms of collateral substitutes. For example, savin
personal guarantees, etc.
What is Group Guarantees: Many MFIs facilitate the formation of groups whose members jointly gu
each others loans. Guarantees are either implicit guarantees, with other group members unable to access
all members are not current in their loan payments, or actual guarantees, with group members liable if oth
group members default on their loans.
What is Revolving Loan Fund (RLF)?
Is a source of money from which loans are made for small business development projects. A loan is made
person or business at a time and, as repayments are made, funds become available for new loans to other
businesses. Hence, the money revolves from one borrower or to another. Similar to the commercial banki
microfinance the same cycle is followed in RLF.
RLFs provide the initial loans for business start-up and expansion. Often, they are used to fill a "financin
a business development project. The ultimate goal is for these entrepreneurs to become financially indepe
and eligible for loans from commercial banks.
What is an Arrear?
Arrears represent the amount of loan principal that has become due and has not been received. Arrears ge
do not include interest; however, if the MFIs record the interest owing as an asset at the time of loan disb
should also include interest in the amount of arrears. The arrears rate provides an indication of the risk th
will not be repaid. The arrears rate is the ratio of overdue principal (or principal plus interest) to the portf
outstanding:
What is Loan Portfolio or Loan Outstanding: The principal amount of loans outstanding in a micro
institution. Projected interest or service charge is not usually considered as a part of the portfolio. Princip
outstanding is an asset for an MFI; interest or service charge contributes to the income of an MFI and is r
as revenue.
When is a loan reported as overdue?
A loan is reported as overdue (that is, the amount of loan becomes due and have not been paid in time) on
of loan term. Overdue may also be understood as the failure of making installment in time by the borrow
per written or verbal agreement between the debtor and creditor.
What is loan installment or Frequency of Loan Payments?
Loan payments can be made on an installment basis (weekly, biweekly, monthly) or in lump sum at the e
loan term, depending on the cash patterns of the borrower. For most part interest is and principal are paid
together. However, some MFIs charge interest up front (paid at the beginning of the loan term) and princ
the term of the loan, while others collect interest periodically and principal at the end of the loan term.
How to measure the Portfolio Quality?
Portfolio quality ratios provide information on the percentage of non-earning assets, which in turn decrea
revenue and liquidity position of an MFI. Various ratios are used to measure portfolio quality and to prov
information about the portfolio. The ratios are divided into three areas: repayment rates, portfolio quality
and loan loss ratios.
Repayment Rates: Although repayment rate is popular measure used by the donors and the MFIs, it d
in fact indicate the quality of the loan portfolio. Rather, the repayment rate measures the historical rate of
recovery.
Repayment rates measure the amount of payments received with respect to the amount due. It is a good m
for monitoring repayment performance over time. It is also useful for projecting future cash flow, becaus
indicates what percentage the amount due can be expected to be received, based on past experience.
Portfolio at Risk: The portfolio at risk refers to the outstanding balance of all loans that have an amou
overdue. Portfolio at risk is different from arrears because it considers the amount arrears plus the remain
outstanding balance of the loan.
The portfolio at risk ratio is calculated as follows:
The portfolio at risk ratio reflects the true risk of a delinquency problem because it considers the full amo
the loan at risk - this is particularly important when the loan payments are small and loan terms are long.
Who are Delinquent Borrowers?
As a further indication of portfolio quality, it is useful to determine the number of borrowers who are del
relative to the volume of delinquent loans. If there is variation in the size of the loans disbursed, it is help
know whether the larger or smaller loans result in greater delinquency. If the ratio of delinquent borrower
lower than the portfolio at risk or the rate delinquency, then it is likely that larger loans are more problem
smaller ones.
Defining Delinquency: The policy used by an MFI to define delinquent loans directly influences the p
quality ratios and the determination of the MFIs level of risk. If an MFI defines past due (overdue, delin
only after the loan term has ended, the portfolio quality will mean little. The date tah loan term ends has n
relevance to the amount of time a loan is overdue. What matters is the amount of time that has passed sin
borrowers stopped making payments.
What is Lending Interest: It is interest paid by the clients on loans amount borrowed from the MFIs.
microfinance there various ways to calculate lending interest by the borrowers. Two methods are popular
method and declining balance method. There are diversified rates of lending interest, ranging from 10 pe
20 percent in flat method, while in declining balance method the MFIs generally charges 20 percent.
Different methods of calculating Interest Rate.
The Flat Method: In this method interest is calculated as a percentage of the initial loan amount rather th
amount outstanding (declining) during the loan term. Using this flat method means that the interest is alw
calculated on the total amount of loan initially disbursed, even though periodic repayments cause the outs
principal to decline. Often, but not always, a flat rate will be stated for the term of the loan rather than as
periodic (monthly or annual) rate.
The Declining Balance Method: This method calculates interest as a percentage of the amount outstand
the loan term. Interest calculated on the declining balance means that the interest is charged only on the a
that the borrower still owes. The principal amount of a one-year loan, repaid weekly by installments of p
and interest, reduces or declines every week by the amount of principal that has been repaid. This means
borrowers have use of less and less of the original loan each week, until at the end of the year when they
principal outstanding and have repaid the whole loan (assuming 100 percent repayment).