Microfinance in SAARC Region: Review of Microfinance Sector of Bangladesh

This document reports on the state of Bangladesh's microfinance sector.

Pioneered by the Grameen Bank, the microfinance sector in Bangladesh has undergone tremendous transformation in the last three decades. This transformation has been characterized by increases in outreach and portfolio size and a proliferation of MFIs. The sector offers diversified services and contributes to rural development. Microfinance has been recognized as a major contributor to poverty reduction and functions under a new regulatory regime. The Bangladeshi microfinance model has been replicated in many countries.

The review studies the impact of microcredit programs of various organizations on the poor and extremely poor segments of the population. It confirms the positive impacts of microfinance on poverty reduction, increase in employment and income of households and improvement in quality of life. Finally, it lists the following challenges that the Bangladeshi microfinance sector faces:

• Continued vulnerability of poor due to external factors;
• Overlapping of microcredit services;
• Lack of new and more demand-driven products;
• Slow growth of the rural economy;
• Unfavourable policies;
• Lack of monitoring of sector growth;
• Lack of research and innovation;
• Lack of resources.