Paper
Bangladesh - Rural Finance
Proposing a rural financial market reform strategy that integrates formal and informal sectors
70 pages
This study critically reviews the functioning of rural financial markets (RFMs) in Bangladesh. It aims to identify specific actions that would reduce financial sector constraints to agricultural and rural development.
The study states that RFMs in Bangladesh are fragmented and inadequate to meet the demand for financial services. Savings services in rural areas are limited and credit is available only for the short-term. Public sector institutions are unsustainable and have limited outreach. Member Based Institutions (MBIs) target only one section of the rural population. The informal sector is unlikely to be able to support a major growth initiative by itself. Recommendations include:
- Rural financial sector reforms should aim to create a strong and efficient system of financial intermediation;
- They should be part of a comprehensive strategy aimed at developing RFMs as a whole;
- Diverse intermediaries, such as NGOs, should provide competition to banks;
- Reform should aim to develop an integrated system linking formal, semi-formal, and informal sectors;
- It should exploit the comparative advantages of each sector to promote access to financial serves for poor clients in rural areas.
About this Publication
Published
