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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.


LICENSING STATUS OF THE NGO-MFIS IN BANGLADESH
The Microcredit Regulatory Authority (MRA), established by the government in August 2006, received applications from 4241 private institutions (NGO-MFIs). But, around 1000 applications of them were found to be very small organizations that had fewer than 1000 borrowers or less than the USD 58,000 in outstanding loans that is generally considered as the minimum initial operating portfolio of a single branched MFI to be sustainable. However, till August 2012 the MRA had approved licenses in favor of 651 NGOs. There are another 210 applications are under process for a final decision although they are mostly small organizations but with some potentiality to become viable in course of time. As of August 2012, 3380 applications have been rejected. Recently MRA has invited new applications for obtaining license to conduct microcredit activities.


STATE OF MICROCREDIT IN BANGLADESH
In the backdrop of global ‘double-dip’ recession and over-indebtedness crisis in microcredit sector in several countries, Bangladesh’s microfinance sector shows strong resilience and continues to contribute towards enhancement of macroeconomic growth. Bangladesh microfinance sector is mature now and its assets constitute around 3 percent of GDP in 2011. Total outstanding loan of this sector (only licensed MFIs) has increased by 20.0 percent from BDT 145.0 billion in June 2010 to BDT 173.8 billion in June, 2011 disbursed among 20.7 million poor people, helping them to be self-employed and 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.


TABLE-1: Basic Statistics of NGO-MFIs in Bangladesh (As of 30 June 2011)

Particulars

June, 2008

June , 2009

June, 2010

June, 2011

No. of Licensed NGO-MFIs

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

No. of Clients (Million)

23.45

24.85

25.28

26.08

Total borrowers (Million)

17.79

18.89

19.21

20.65

Amount of Loan Outstanding (Tk. Million )

134,680.96

143,134.03

145,022.66

1,73,797.60

Amount of Savings( Tk. Million)

47,386.19

50,610.04

51,362.93

63,304.44

Source: MRA-MIS Database-2011

Table 1 shows the overall trend of microfinance statistics in Bangladesh. This sector has created direct job opportunities for over 111,800 people; 80 percent of them are male and 20 percent are female. At the end of June 2011, the sector had outstanding loans of BDT 173.8 billion disbursed to 20.7 million borrowers, and had accumulated BDT 63.3 billion as savings from around 26.10 million clients – over 93 percent of them are women – through more than 18,000 branches, by 576 NGO-MFIs licensed by MRA.


TABLE-2: Size-Wise Loan Outstanding and Savings Compositions (As of 30 June 2011)

Categories

Range of Borrowers

No of MFIs

No of Borrower

Total Loan Outstanding (BDT Million)

% of Total Outstanding

No of Savers

Total Savings (BDT Million)

% of Total Savings

Very Small

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

2001-6000

120

422745

2914.21

1.68

566864

1282.30

2.03

6001-10000

46

364848

2987.90

1.72

469938

1128.09

1.78

Small

10001-50000

103

2218532

19946.10

11.48

2861318

6738.03

10.64

Medium

50001-100000

23

1571226

13805.22

7.94

1875363

4713.86

7.45

Large

100001-1000000

19

4600621

39483.64

22.72

5527971

14652.13

23.15

Very Large

1000001-Above

3

11162371

92601.36

53.58

14274780

33856.028

53.51

 

576

20649290

173797.60

100

26014948

63304.44

100

Source: MRA 2011

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.


TABLE-3: Scenario of Micro Enterprise Loan

NGO-MFIs

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

Jagoroni Chakra Foundation

15008

0.08

1067.96

0.63

Padakkhep Manobik Unnayan Kandra

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

Society for Social Service

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

Total 576 MFIs

617706

3.21

40059.84

23.60

Source: MRA 2011

Table 3 depicts the scenario of micro enterprise loan, i.e., loans above BDT 50,000, of different NGO-MFIs in Bangladesh. It is observed that micro enterprise loan outstanding is BDT 40 billion which is around 24 percent of total loan outstanding in which the top ten NGO-MFIs contributed around 19 percent. It also shows that BDT 40 billion is disbursed to around 6 lakh borrowers which are only 3 percent of total borrowers. The table expresses that only the top NGO-MFIs are capable to run micro enterprise loan.


Selected Indicators of NGO-MFIs in Bangladesh
It is observed from table 4 that savings per member has been increasing over the years. In 2006 savings per member was Tk. 1,207 which stands at Tk.2495 in 2011 – an increase to more than double within the last five years. The loan outstanding per borrower also increased over the years and average growth rate of loan outstanding per borrower is around 17 percent in 2011 compared to the previous year. The loan outstanding per borrower has increased by more than 100 percent within the last five years. These two indicators, savings per member (average saving size) and outstanding loan per borrower (average loan size) increased over time perhaps due to the increase in the income level of the poor resulting in an increase in their need for higher amount of loans from the MFIs. The ratio between borrowers to clients (members) remained steady for the last few years, which is within 70 to 80 percent and the savings to outstanding loan ratio has also been stable from 2006 to 2011. Since the total number of branches of MFIs has increased at a much higher rate in 2011 compared to the previous year, the number of members and borrowers per branch has decreased. Substantial rate of increase in the sizes of loans per borrower and savings per member has resulted in a rise in the total 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.


TABLE-4: Selected Indicators of NGO-MFIs in Bangladesh

Particulars

June '06

June '07

June '08

June '09

June '10

June '11

Savings per member (Tk.)

1,207.34

1,332.66

1,448.36

1,735.52

2,097.83

2494.49

Outstanding loan per borrower (Tk.)

4,377.11

5,048.38

5,614.55

6,188.01

7,558.92

8807.69

Borrower to client (member) ratio

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%

Borrower per Branch

1,413

1,484

1,496

1,036

1,115

1093.33

Member per Branch

1,883

1,817

1,843

1,312

1,429

1387.87

Outstanding loan per branch (Million Tk.)

6.19

7.49

8.4

6.41

8.42

9.63

Savings per Branch (Million Tk.)

2.27

2.42

2.67

2.28

2.99

3.46
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.


TABLE-5: Selected Indicators of NGO-MFIs in Bangladesh

Source of Fund

Jun-08

Jun-09

Jun-10

Jun-11

(Million Tk.)

(%)

(Million Tk.)

(%)

(Million Tk.)

(%)

(Million Tk.)

(%)

Clients' Savings

36,397.32

29.66

40,526.91

29.73

47,436.35

31.15

63295.88

34.46

Loan from PKSF

22,708.58

18.50

22,666.20

16.63

24,484.12

16.08

31767.84

17.30

Loan from Commercial Banks

23,487.03

19.13

23,896.37

17.53

23,006.41

15.11

23577.85

12.84

Donors' Fund

4,549.07

3.71

4,110.29

3.02

4,109.29

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

8,847.97

6.49

10,907.40

7.16

7727.32

4.21

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.


Growth of Top NGO-MFIs in Bangladesh
Figure 1 shows the growth of cumulative disbursement of loans of the top NGO-MFIs in Bangladesh over the last 5 years. The total disbursement of BRAC and ASA is BDT 1000 billion as of June 2011. Although their total disbursement is overwhelmingly high but growth rate has reduced over the last four years. The total disbursement of most of the MFIs has increased during the last four years but yearly growth rate did not increase except for Shakti Foundation for Disadvantaged Women (SFDW).


Fig. 1. Cumulative Loan Disbursement of the Top NGO-MFIs

 


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