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South Asia
• Bangladesh
• India
• Pakistan

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Grameen Foundation : Where we work : South Asia : Bangladesh

Bangladesh

Bangladesh faces an enormous challenge in reducing poverty. Microfinance institutions have taken a key role in poverty alleviation efforts, providing credit to poor people who lack savings and capital but want jobs in the farm and non-farm sectors.

The Need in Bangladesh

• Bangladesh has a population of more than 140 million with almost half of the population living below the poverty line.
• Most of the population earns less than a $1 a day.

The banking sector in Bangladesh is dominated by the four state-owned commercial banks. The specialized agricultural banks have been lending extensively to the rural area but most of their lending is not targeted to the poor. Both foreign and the private commercial banks have simply stayed away from rural lending, although there have been a few cases of token involvement in microfinance in recent years. With a relatively undeveloped formal financial system, a strong microfinance system has developed in Bangladesh.
The microfinance sector in Bangladesh is one of the worlds largest. Bangladeshi MFIs are best known for their pioneering, large-scale microfinance services. The four largest MFIs— ASA, BRAC, Grameen Bank and Proshika—account for 86 percent of the 14.3 million active borrowers in the country.

Microfinance Sector Development

The development of MFIs took place in several phases. The current model can be traced back to the late 1970s when the needs of Bangladesh needed to be addressed following the country’s independence. Microcredit was first initiated by Grameen Bank and was developed by a team led by Professor Mohammad Yunus.

Since then, many donor institutions have contributed to the expansion of the microfinance industry, providing financial and technical support in the sector.

Government Regulation of Microfinance

The MFI sector in Bangladesh is comparatively unregulated despite its large size. However, the government, NGOs and donors are increasingly focused on the need to develop a supportive regulatory framework. In April 2004, the steering committee of the Bangladesh Bank’s Microfinance Research and Reference Unit was appointed as interim regulator of NGO-MFIs.

Grameen Foundation : Where we work : South Asia : Bangladesh