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 as of June, 2013, total loan outstanding is around BDT 341 billion (including
Grameen Bank BDT 84 billion), savings BDT 226 billion, the total clients is 33 million (including 8.04
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. At the first
time MRA received applications from 4241 NGO-MFIs for licenses which the law makes mandatory for
all NGO-MFIs. At that time MRA has decided to issue licenses to MFIs which have more than 1,000
clients or minimum loan outstanding to BDT 4 million, subject to meeting institutional requirements.
However, till May 2014, MRA had approved licenses in favor of 742 NGOs and canceled licenses of 44
NGOs. There are another 43 applications 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 May 2014, 3456
applications have been rejected. Recently MRA has invited new applications for obtaining license to
conduct microcredit activities among which 92 institutions have been given primary approval.
State of Microcredit in Bangladesh:
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. Total outstanding loan of this sector (only licensed
MFIs) has increased by 21 percent from BDT 211 billion in June 2012 to BDT 257 billion in June, 2013,
disbursed among 19.27 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 24 percent from
BDT 75.20 billion in June 2012 to BDT 93.99 billion in June 2013 among 24.60 million clients.
TABLE-1: Basic Statistics of NGO-MFIs in Bangladesh
Particulars

June, 2009

June,2010

June, 2011

June, 2012

June, 2013

419

516

576

590

649*

No of Branches

16,851

17,252

18,066

17,977

14,674

No. of Employees

107,175

109,597

111,828

108,654

110,734

No. of Clients (Million)

24.85

25.28

26.08

24.64

24.60

No. of borrowers (Million)

18.89

19.21

20.65

19.31

19.27

Amount of Loan Outstanding

(BDT. Million )

143,134.03

145,022.66

1,73,797.60

211,283

257,010

Amount of Savings (BDT.

Million)

50,610.04

51,362.93

63,304.44

75,206

93,990

No. of Licensed NGO-MFIs

*Total Licensed NGO-MFIs was 698 but only 649 submitted MIS report.
Source: MRA-MIS Database-2013

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Table 1 shows the overall trend of microfinance statistics in Bangladesh. This sector has created direct job
opportunities for over 110,734 people at June 2013; 81 percent of them are male and 19 percent are
female. The sector had outstanding loans of BDT 257 billion disbursed to 19.27 million borrowers, and
had accumulated BDT 93.99 billion as savings from around 24.60 million clients over 93 percent of
them are women through more than 14,000 branches, by 649 NGO-MFIs licensed by MRA.
TABLE-2: Size-Wise Loan Outstanding and Savings Compositions (As of 30 June, 2013)
Categories

Range of
Borrowers

No of
MFIs

Up to 1000

170

1001-2000

165

2001-6000

123

6001-10000

42

10001-50000

105

Medium

50001100000

22

Large

1000011000000

20

1000001 and
Above

Very Small

Small

Very Large

Total

649

No of
Borrowers

Total Loan
Outstanding
(BDT
Million)

% of Total
Outstanding

No of
Savers

Total
Savings
(BDT
Million)

% of
Total
Savings

135,130

1,831.37

0.71

183,504

538.48

0.57

232,729

1,955.97

0.76

837.35

0.89

436,916

3,962.65

1.54

312,069
579,741

1,870.75

1.99

1,652.38

1.76

9,792.37

10.42

322,254

3,765.44

1.47

404,944
3,202,366

2,374,418

26,809.01

10.43

1,588,952

22,735.43

8.85

1,933,230

7,228.29

7.69

5,722,781

71,403.24

27.78

7,476,576

26,467.58

28.16

124,546.89
257,010.00

48.46
100

10,478,226
24,570,656

45,602.80
93,990.00

48.52
100

8,452,815
19,265,995

Source: MRA-MIS Database-2013

Table 2 shows the market scenario of NGO-MFIs in Bangladesh. The top two MFIs contribute around 50
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 four million borrowers. There are a few more
developing fast. On the other hand the smallest 500 NGO-MFIs have contributed only 4.4 percent of total
loan outstanding and 5.2 percent of total savings. Institutional concentration ratio is highly skewed in
favor of large MFIs: just 22 institutions are in control of 77 percent of the market share while two largest
organizations have control of over 50 percent in terms of both clients and total financial portfolios.

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TABLE-3: Market Share of Micro Enterprise Loan (Top MFIs) as of June, 2013
NGO-MFIs

Total Number of
ME Borrowers

Total Number
Borrowers

% of ME
Borrowers

BRAC

391,072

4,220,283

9.27

ASA

178,457

4,232,532

Buro
Bangladesh

39,630

TMSS

Total ME Loan
Outstanding
(BDT Million)

Total Loan
Outstanding (BDT
Million)

% of ME
Loan
Outstanding

19,128.64

66,446.03

28.79

4.22

9,194.57

55,733.98

16.50

950,234

4.17

187.45

12,999.58

1.44

13,260

659,584

2.01

621.12

7,945.47

7.82

Jagoroni
Chakra
Foundation

35,428

330,995

10.70

1,067.96

6,835.08

15.62

Society
for
Social Service

20,293

390,371

5.20

1,155.4

6,122.08

18.87

UDDIPAN

11,645

258,082

4.51

663.4

3,713.60

17.86

Shakti
Foundation

1,108

391,597

0.28

149.1

3,032.34

4.92

Padakkhep
Manobik
Unnayan
Kandra

11,636

195,687

5.95

561.26

2,704.77

20.75

RDRS
Bangladesh

4,794

212,351

2.26

141.12

1,912.55

7.38

Top 10 MFIs

707,323

11,841,716

5.97

32,870.02

167,445.48

19.63

Total
MFIs

953,717

19,265,995

4.95

67,168.33

257,010.00

26.13

649

Source: MRA-MIS Database-2013

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 67 billion which is
around 26 percent of total loan outstanding in which the top ten NGO-MFIs contributed around 48
percent. It also shows that BDT 67 billion is disbursed to 9.5 lakh borrowers which are only around 5
percent of total borrowers. The table expresses that not only the top NGO-MFIs others are also running
more than 50 percent ME loan programs of this sector.
Selected Indicators of NGO-MFIs in Bangladesh:
It is observed from table 4 that savings per member has been increasing over the years. In 2009 savings
per member was BDT 1,735 which stands at BDT 3,820 in 2013 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 21 percent in 2013 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 2009 to 2013. The number of members and borrowers per
branch has decreased over the years. This has been mainly due to rapid horizontal expansion of branches
in new geographical areas. It became more difficult for the newer MFIs to find new members because the
older and large MFIs already occupied a large client base. Substantial rate of increase in the sizes of loans
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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 almost twofold between
2009-2013.The loan outstanding amount per branch stood at BDT 17.5 million whereas saving per branch
stood at 6.41 million in 2013.
TABLE-4: Selected Indicators of NGO-MFIs in Bangladesh
Particulars

June '09

June '10

June '11

June '12

June '13

Savings per member

(BDT)
Outstanding loan per
borrower (BDT)

1,735.52

2,097.83

2,494.49

3,052.18

3,820.73

6,188.01

7,558.92

8,807.69

10,941.63

13,337.31

Borrower to client
(member) ratio

78.90%

78.00%

78.80%

78.37%

78.33%

Savings to
Outstanding loan
ratio
Borrower per
Branch
Member per Branch

35.50%

35.60%

35.90%

35.59%

36.57%

1,036

1,115

1,093

1,074

1,072

1,312

1,429

1,388

1,371

1,368

Outstanding loan per

branch (Million
BDT)
Savings per Branch
(Million BDT)

6.41

8.42

9.63

11.75

17.51

2.28

2.99

3.46

4.18

6.41

Source: MRA-MIS Database-2013

Fund composition of the Microfinance sector in Bangladesh:

The sector is broadly financed by the following types of sources: savings collected from clients,
cumulative surplus (profit), concessional loan received from sources such as PKSF, grants received from
national and international donors and commercial bank borrowing. Table 5 shows the fund composition
of the microfinance sector in Bangladesh over the last few years. While the total fund increased
significantly over the time, there was only a little change in terms of composition of fund. Total fund
increased from BDT 136 billion to BDT 276 billion in June 2013-a growth rate of 16-20 percent per year.
The most important source of fund turned out to be clients savings which was the single most important
fund support for the sector. The cumulative surplus was the second most important source of fund. Loans
from commercial Banks turned out to be the next more important one. Loan from Palli Karma Sahayak
Foundation (PKSF), a micro finance wholesale funding agency also provides a large portion of loan fund
at a subsidized rate. The least important source was appeared to be grants from the donor agencies.

TABLE-5: Source of fund of NGO-MFIs in Bangladesh

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Source of
Fund

Clients'
Savings
Loan from
PKSF
Loan from
Commercial
Banks
Donors'
Fund
Cumulative
Surplus
Other
Funds
Total

June '09

June '10

June '11

(Million BDT)

(%)

(Million BDT)

(%)

(Million
BDT)

(%)

40,526.91

29.73

47,436.35

31.15

63,295.9

34.46

22,666.20

16.63

24,484.12

16.08

31,767.8

23,896.37

17.53

23,006.41

15.11

4,110.29

3.02

4,109.29

36,261.74

26.6

8,847.97
136,309.48

June '12
(Million
BDT)

June '13

(%)

(Million
BDT)

(%)

74,989.36

32.62

91,178.01

32.95

17.3

33,576.45

14.61

34,072.27

12.31

23,577.9

12.84

32,652.41

14.20

42,699.37

15.43

2.7

70,08.37

3.82

7,061.28

3.07

7,104.57

2.57

42,339.27

27.8

50,298.7

27.38

65,437.78

28.47

83,262.38

30.09

6.49

10,907.40

7.16

7,727.32

4.21

16,167.91

7.03

18,390.89

6.65

100

152,282.84

100

183,676

100

229,885.2

100.00

276,707.48

100.00

Source: MRA-MIS Database-2013

It is observed that the commercial banks are recently considered as a potential source of fund of
microfinance, their share of the total source increased 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 2.57 percent in June 2013.

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