Microfinance institutions in Bangladesh: achievements and challenges

Abstract

PurposeThe purpose of this paper is to review the Bangladesh experience with microfinance popularly known as microcredit. The success of microfinance in Bangladesh has generated immense interest in other countries of the world. The paper emphasizes the role of autonomous national microfinance fund and analyzes the efficiency of microfinance delivery mechanisms in Bangladesh. The paper examines the new realities/challenges faced by the microfinance movement in Bangladesh.Design/methodology/approachThe paper provides an overview of the evolution of microfinance institutions (MFIs), their coverage of borrowers and activities funded in Bangladesh. Results of some independent impact assessment studies have been presented. Data from various institutions of Bangladesh and from some surveys conducted in Bangladesh are used.FindingsThe paper shows how the concept of microfinance, the MFI and various modalities of delivery of financial services to the poor have contributed to the development efforts of Bangladesh where a large number of people live below the poverty line.Research limitations/implicationsThe paper is based on data and information of a limited time period and covering some selected issues. Further studies may be carried out on second generation issues and problems based on more available data.Practical implicationsThe paper brings out the implications of microfinance as an effective tool for development and poverty alleviation.Originality/valueThe paper points out the practical aspects to build up a robust and sustainable system for increasing the access of the poor to financial services.