Why has Microfinance been a Policy Success? Bangladesh and Beyond (Presentation)

This paper is based on a study of evidence from secondary sources, which examine the concept of microfinance, the history of microfinance in Bangladesh and its impact. The authors attempt to understand the extent of policy level success for microfinance in Bangladesh.Through this paper, the authors explain that:

• Microfinance is the provision of a range of the poor's financial service requirements, including credit, savings, insurance and remittance management;
• Microfinance in Bangladesh reaches to a significant population of otherwise disadvantaged people;
• Evidence on the economic impact of microfinance is mixed. There is evidence of positive economic impact on clients, although the effects are often small and do not benefit all clients equally;
• The success of microfinance in Bangladesh may be attributed to the:
  • Innovative designing;
  • The nature of the implementation strategy;
  • Flexibility in adaptation to context as demonstrated by the MFIs, supportive policy;
  • Physical and social environment in the country;
  • Effective management of the political economy issues;
  • Presence of effective donors;
  • Visionary leadership (exceptional commitment, ability and performance of all leaders) in all the successful microfinance institutions.

The paper concludes that:

• Microfinance has been a policy success in Bangladesh, especially in the light of the failure of public policy mechanisms like rural credit towards poverty reduction;
• Bangladesh can be called a 'basket case' country, since similar success is not visible beyond the country;
• The success of microfinance sector in Bangladesh is unique, and can be attributed to institutional process learning that may have percolated down to the last player within the organization and through out the sector.