Commitment of loans: In the backdrop of global double-dip recession and over-indebtedness crisis in microcredit sector in several countries, Bangladeshs

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 No. of Licensed NGOMFIs No of Branches No. of Employees No. of Clients (Million) Total borrowers (Million) Amount of Loan Outstanding (Tk. Million ) Amount of Savings( Tk. Million) June, 08 293 15,077 98,896 23.45 17.79 134,680.96 47,386.19 June , 09 419 16,851 107,175 24.85 18.89 143,134.03 50,610.04 June, 10 516 17,252 109,597 25.28 19.21 145,022.66 51,362.93 June, 11 576 18,066 111,828 26.08 20.65 1,73,797.60 63,304.44

Source: MRA-MIS Database-2011

No. of Licensed NGO-MFIs

600 400 200 0 June, 08 June , 09 June, 10 June, 11 293 516 419 576 21 20 19 18 17 16

Total borrowers (Million)

20.65 18.89 17.79 19.21

June, 08 June , 09 June, 10 June, 11

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)
Total Loan No Range of No of Outstanding % of Total No Categories of Borrowers Borrower (BDT Outstanding Savers MFIs Million) Up to 1000 85 1001-2000 177 Very Small 2001-6000 120 600110000 Small Medium Large 1000150000 50001100000 10000146 103 23 19 63973 244974 422745 364848 2218532 1571226 4600621 492.48 1566.68 2914.21 2987.90 19946.10 13805.22 39483.64 0.28 0.90 1.68 1.72 11.48 7.94 22.72 87660 351054 566864 469938 2861318 1875363 5527971 Total of Savings (BDT Million) 192.20 741.81 1282.30 1128.09 6738.03 4713.86 14652.13 % of Total Savings 0.30 1.17 2.03 1.78 10.64 7.45 23.15

1000000 Very Large 1000001Above 3 11162371 92601.36 53.58 100 14274780 33856.028 53.51

576 20649290 173797.60 Source: MRA 2011

26014948 63304.44 100

Total Outstanding (%)

4.58 11.48 7.94 53.58

22.72

Very Small

Small

Medium

Large

Very Large

Total Savings (%)

5.28 10.64 7.45 53.51 23.15

Very Small

Small

Medium

Large

Very Large

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 BRAC ASA Buro Bangladesh Jagoroni Chakra Foundation Padakkhep Manobik Unnayan Kandra RDRS Bangladesh Shakti Foundation Society for Social Service TMSS UDDIPAN Top 10 MFIs Total 576 MFIs Source: MRA 2011 Total Number of Borrowers % 249585 140496 4857 15008 8570 3029 3885 15552 8816 7310 457108 617706 1.30 0.73 0.03 0.08 0.04 0.02 0.02 0.08 0.05 0.04 2.37 3.21 Total Loan Outstanding (Tk Million) % 19128.64 9194.57 187.45 1067.96 561.26 141.12 149.10 1155.40 621.12 663.40 32870.01 40059.84 11.27 5.42 0.11 0.63 0.33 0.08 0.09 0.68 0.37 0.39 19.37 23.60

Table 3 depicts the scenario of micro enterprise loan, i.e., loans above BDT 50,000, of different NGOMFIs 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 Savings (Tk.) per member 1,207.34 per 4,377.11 client 75.1% 81.6% 32.3% 1,484 1,817 7.49 2.42 81.2% 31.78% 1,496 1,843 8.4 2.67 78.9% 35.5% 1,036 1,312 6.41 2.28 78.0% 35.6% 1,115 1,429 8.42 2.99 78.8% 35.9% 1093.33 1387.87 9.63 3.46 5,048.38 5,614.55 6,188.01 7,558.92 8807.69 1,332.66 1,448.36 1,735.52 2,097.83 2494.49 June '06 June '07 June '08 June '09 June '10 June '11

Outstanding loan borrower (Tk.) Borrower to (member) ratio

Savings to Outstanding loan ratio 36.7% Borrower per Branch Member per Branch 1,413 1,883

Outstanding loan per branch (Million Tk.) 6.19 Savings per (Million Tk.) Branch 2.27

Source: MRA-MIS-2011

Particulars Savings (Tk.) per member

June '06 1,207.34 per 4,377.11

June '07 1,332.66 5,048.38

June '08 June '09 1,448.36 5,614.55 1,735.52 6,188.01

June '10 2,097.83 7,558.92

June '11 2494.49 8807.69

Outstanding loan borrower (Tk.)

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 Jun-08 Source of Fund Clients' Savings Loan from PKSF (Million Tk.) 36,397.32 22,708.58 (%) Jun-09 (Million Tk.) (%) Jun-10 (Million Tk.) (%) Jun-11 (Million Tk.) (%) 34.46 17.30 12.84 3.82 27.38 4.21

29.66 40,526.91 18.50 22,666.20 19.13 23,896.37 3.71 3.61 100 4,110.29 8,847.97 25.39 36,261.74

29.73 47,436.35 16.63 24,484.12 17.53 23,006.41 3.02 6.49 4,109.29 10,907.40 26.60 42,339.27

31.15 63295.88 16.08 31767.84 23577.85 15.11 2.70 7.16 7008.37 7727.32 27.80 50298.66

Loan from Commercial Banks 23,487.03 Donors' Fund Cumulative Surplus Other Funds Total 4,549.07 31,170.02 4,435.49 122,747.51

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