Bangladesh: Three Microlenders ‘Control two-thirds of MF Industry’

Aug 2011
Dhaka, Bangladesh, August, 26 2011 - Three of the country's top micro-lenders control some two-thirds of the microfinance industry, which now accounts for more than seven per cent of Bangladesh's total outstanding credit, a study has said Thursday.

Grameen Bank, Brac and Asa jointly made up 62 per cent of the country's 18.5 million micro-borrowers and 69 per cent of the sector's gross loan portfolio, according to just released Bangladesh Microfinance Review.

The study done by Brac Development Institute said average borrower numbers and portfolio have risen steadily over time although Asa has recorded a fall of 32 per cent of its active borrower accounts in 2008 and 2009.

It said microfinance industry in Bangladesh is among the most matured in the world with average loan balance rising in real terms from $71 per borrower to $119 in 2009, increasing from 15 per cent of the Gross National Income to 20 per cent in just four years.

The study results follow a barrage of criticism against the microfinance industry. Earlier this year Prime Minister Sheikh Hasina equated the microlenders who charge excessive interests to blood-suckers.

In March the industry suffered the biggest setback in its three decades history when Professor Muhammad Yunus, the founder of Grameen Bank, was removed unceremoniously from his partly state-owned bank.

The government's Micro-credit Regulatory Authority has also tightened its noose around the business-minded small lenders, capping the interest rate at 27 per cent and easing their loan repayment.

The study said despite the setback the country's microfinance coverage is still extensive with around 18.5 million people being active borrowers and at $14, the cost per borrower in Bangladesh is one of the lowest worldwide and the operational efficiency is high.

A panel of distinguished experts including BRAC executive director Mahabub Hossain, Rashid Faruqee, Institute of Microfinance, Steve Rasmussen, CGAP and Hassan Zaman, Bangladesh Bank provided insights on the research findings.

Sanjay Sinha, managing director of MicroCredit Ratings International Ltd (M-RCIL) presented the main findings of the study. The programme was chaired by Professor Syed M Hashemi, director, BDI.

According to the study, the industry has $2.72 billion of credit outstanding, which is 7.33 per cent of the $37.1 billion outstanding credit in the country's entire financial system.

The industry is also fast consolidating with the three micro-lending heavyweights, GB, Brac and Asa increasingly calling the shots after steadily expanding their outreach throughout last decade.

"After the largest 15 MFIs (micro finance institutions), the remaining 730 MFIs just account for 19 per cent of borrower accounts and 18 per cent of sector's portfolio," it said.

It, however, said the portfolio quality is not so impressive by international standards with high and variable long-term portfolio at risk around the 5-6 per cent level.

The study also presents findings regarding outreach, growth, profitability, sustainability and risk.

Mahabub Hossain of Brac strongly objected to some of the findings of the report including the revelations that the microfinance industry is now saturated and there is hardly any scope for expansion.

"The industry can still grow at a hefty pace provided we diversify our products and enhance quality of service," he said, adding that the interest rate caps set by the MRA will be counter-productive.

Mr Hossain said traditional lenders still prevail in many villages, accounting for 15-16 per cent of the total loans disbursed in rural areas - a sign that there is still a big scope for growth for the micro-lenders.

The Brac executive director was also critical of the weekly repayment system, saying it is not the way to finance the poor borrowers as it put a lot of stress on them.

Professor Hashemi indicated that BDI would conduct the study annually to provide transparent financial information on the MFIs.


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