Innovations in Financial Services: Lessons From Bangladesh for East African MFIs

This paper draws insights from the innovations made by microfinance institutions (MFIs) operating in Bangladesh at mobilising savings, disbursing loans and providing insurance in a sustainable and cost effective manner.
The paper finds that:

• By offering open access accounts, which provide clients need-based access to savings accounts, MFIs have been successful in mobilising client deposits;
• With the ambivalent yet benign regulatory environment, the MFIs are allowed to intermediate client deposits, thus reducing MFIs' dependence on grant funds;
• MFIs offer a wide range of innovative loan products suited to different client needs;
• The development of loan products involves market research, concept development and pilot testing;
• Cost reduction and containment is an important element for achieving sustainability among the MFIs;
• The MFIs have not been successful in reaching the bottom fifteen percent of the poorest.

The paper makes a case for adapting successful innovations of Bangladesh to the microfinance environment of East Africa.