Sustainability Issue of Interest-free Micro-finance Institutions in Rural Development and Poverty Alleviation: The Bangladesh Perspective

This study evaluates the sustainability of interest-free MFIs in general and a recently developed microfinance model, Rural Development Scheme (RDS) of Islamic Bank Bangladesh Limited (IBBL) in particular. It uses various indicators to examine the model's institutional, financial and economical sustainability.

Study results demonstrate that the overall performance of RDS is satisfactory. Qualitative and quantitative sustainability and outreach indicators indicate that RDS is sustainable and effective. It is, however, yet to develop its microinvestemt assistance program, although it has strong possibilities in this area. The paper suggests policy implications that will help programs like RDS. They include:

• MFIs should increase the provision of investment money to clients so that their income generating activities run smoothly;
• MFIs should issue modes of investment according to client needs;
• MFIs should increase the number of field officers and supervisors to increase program outreach and reduce pressure on field supervisors;
• RDS should be integrated with IBBL's mainstream banking as a regular program to increase outreach;
• Number of female officers should be increased to serve female clients according to their expectations;
• Frequent training would help field officers and clients develop ethical values, knowledge of Islamic microfinance and skills.