Resource Mobilization by the MFIs in Bangladesh

This paper identifies possible funding sources for Bangladeshi MFIs.

MFIs in Bangladesh started microfinance operations with support from the Central Bank and donor grants. The government established Palli Karma Sahayak Foundation (PKSF) in 1990, as an autonomous wholesale lending agency for MFIs. An analysis of the balance sheets of selected MFIs for the years 2006 and 2007 reveals that:

• Bangladeshi MFIs have been utilizing a number of avenues to finance lending operations;
• Grameen Bank and the Bangladesh Rural Advancement Committee (BRAC) have the ability to attract more capital from diverse sources;
• Other large MFIs are exploring local financial markets to extract structured funds and local and international bank loans;
• Sample MFIs have significant volumes of quasi equity accumulated from retained income, past capital funds, and other reserves;
• External sources of funds include domestic sources such as mandatory member deposits, wholesale loans from PKSF and commercial banks.

The paper states that conversion of PKSF into a specialized development finance institute would help it to widen its financial role, borrow and lend on commercial terms, and extend guarantees to smaller MFIs.