Microfinance: A comparative Study of India and Bangladesh

Financial Market and Instruments

FN-504

Submitted to:

Prof. DEBIDUTTA PATNAIK

By-
Vidushi- 23PGDM-BHU061
Prateek Roy- 23PGDM-BHU034
Tanmoy Majumdar- 23PGDM-BHU059
Ketki Mandal- 23PGDM-BHU025
Microfinance: A comparative Study of India and Bangladesh

Abstract
Microfinance serves as a poverty-easing device all-inclusive. It includes giving little
budgetary administrations to the underprivileged in different settings to upgrade their pay
levels and living measures. This think about compares the execution of Microfinance
Educate (MFIs) in India and Bangladesh concerning advance dispensing, client base, and
budgetary practicality. The examination uncovers that Indian MFIs show higher benefits and
operational productivity compared to their Bangladeshi partners.

Introduction
This thinks about dives into the petulant issue encompassing the challenges confronted by
Microfinance and its movement towards accomplishing its goals. In modern times,
Microfinance plays a critical part in helping low-income family units in breaking free from
destitution. It digs into the clashing perspectives among key partners, such as givers and
monetary educate, affecting the advancement of Microfinance. At first centred on giving
little credits (microcredit) to ruined families to lock in in beneficial exercises or grow their
little businesses, Microfinance has advanced to envelop a more extensive cluster of
administrations like credit, reserve funds, and protections. Recognizing that the destitute
and exceptionally destitute people missing get to conventional formal monetary educate
require a different extend of money related items, Microfinance presently amplifies past
insignificant credit arrangement. It may be characterized as the arrangement of little
advances to ruined people, especially in creating countries, to encourage self-employment
and financial strengthening. This includes a comprehensive suite of monetary
administrations for ruined people, counting advances, reserve funds, credit, cash exchanges,
protections, and benefits plans. The examination in this paper centres on the part of
Microfinance and its challenges within the settings of India and Bangladesh.

This paper endeavours to demonstrate the horde challenges confronted by devastated

families in sparing, contributing, and shielding their vocations. It highlights the sincere
endeavours of these people intending to budgetary limitations and looking for reasonable
arrangement’s custom fitted to their needs. Inquire about underscores the esteem that
ruined people put on budgetary administrations, their want for expanded get to, and the
disappointments they experience in utilizing these administrations. Overseeing cash
successfully is recognized as urgent for improving their quality of life and jobs. Moreover,
the think about examines the points of interest of coordination formal and casual budgetary
frameworks and evaluates the viability of different micro-financing models in India. It points
to recognize the recipients of Microfinance, explain how devastated people advantage from
these administrations, and investigate how Microfinance educate give credits to maintain
vocations and reinforce financial advancement. The paper moreover looks at the part of
governments in supporting Microfinance activities, highlighting the double part they play in
cultivating 'development finance' and credit programs for distraught populaces locally and
all inclusive.

Advancement of miniaturized scale fund

Microfinance created as an industry over third world nations at the same time. It got to be
broadly recognized universally that upgrading the salary levels of low-income communities
was vital for their welfare, in expansion to government welfare programs. The
microenterprise development within the 1970s and 1980s driven to the rise of Non-
Governmental Organizations (NGOs) advertising little credits to the devastated. By the
1990s, numerous of these organizations transitioned into formal monetary educate to get to
and give stores, growing their reach. A critical occasion within the 1970s that boosted
microfinance was the work of Mohammad Yuns, the pioneer of microfinance and originator
of Grameen Bank in Bangladesh. In 2006, Yuns was granted the Nobel Peace Prize for his
endeavours in grassroots financial and social improvement. In India, different formal
budgetary structures were tried, such as Territorial Rustic Banks (RRBs), Locale Central
Credit Agreeable Banks (DCCBs), Nearby Zone Banks (LABs), and the Self-Help Gather (SHG)
Bank linkage program. These activities had changing degrees of victory, provoking gracious
society organizations to recognize the ought to give monetary administrations to the
underprivileged. Credit was progressively seen as a imperative apparatus to break the cycle
of destitution. Thus, Microfinance Teach risen within the 1990s and 2000s, with changing
sizes and outreach capacities, serving thousands to millions of clients across diverse
geological districts through numerous branches.
Microfinance In India
The rise of microfinance stands out as one of the foremost maintainable and successful
devices in empowering financially underprivileged people to get to regulation monetary
administrations. It envelops services such as little investment funds, credit, and protections
custom-made for socially and financially distraught segments of society. Within the Indian
setting, terms like "little and negligible agriculturists," "provincial artisans," and "financially
weaker areas" have been commonly utilized to broadly characterize microfinance clientele.
The later Assignment Drive on Microfinance has sketched out the arrangement of thrift,
credit, and other money related administrations in negligible sums to people in rustic, semi-
urban, or urban zones to upgrade their salary levels and lift living guidelines. Right now, a
critical parcel of microfinance exercises in India basically centres on credit administrations.
Ladies constitute a considerable larger part of clients of microcredit and investment funds
administrations. Different substances such as banks, NGOs, MFIs, and government
organizations play essential parts in providing investment funds and credit offices to the
devastated. Strikingly, there are around one and a half million Self-Help Bunches (SHGs)
expanding credits to lower-income bunches. These organizations point to reach the
foremost helpless populaces, grow programs into already underserved locales, especially in
northern and northeastern states, and viably move microfinance clients into micro-
entrepreneurs.

The energy of microfinance is gaining footing to become a noteworthy force in India. The
hone of SHGs giving credits to bunches of financially distraught ladies without collateral has
gotten to be a fundamentally part of country back. Within the post-reform time, provincial
banks that were already unbeneficial have moved their focus away from serving rustic
populaces. SHG-based microfinance, backed and encouraged by NGOs, has risen as a
reasonable elective to conventional loaning, empowering outreach to the destitute without
causing over the top operational and checking costs. Recognizing the importance of this
approach, the government and NABARD have made concerted endeavours the part of SHGs.
Over a long time, over half a million SHGs have been connected to banks, with a noteworthy
concentration in South India, especially in Andhra Pradesh. Despite striking
accomplishments, the scale of microfinance in India remains deficiently to create a
substantial impact on destitution mitigation. In any case, with key execution and openings
for the improvement of the underprivileged, microfinance holds the potential to convert the
financial scene of India.

A few of the critical highlights of microfinance are as takes after:

• The borrowers are by and large from low-income foundations

• Loans profited beneath microfinance are as a rule of a small amount that's micro loans
• The credit residency is brief
• MF advances do not require any collateral
• These credits are usually reimbursed at higher procedures
• The reason of most microfinance credits is pay era

Market share of financial instruments in outstanding portfolio

Microfinance Institutional Structure:

Within the domain of microfinance, there exist different organizations that can be
categorized as "Standard" and "Elective" Microfinance Educate (MFIs).

Mainstream Microfinance Institutions

A microfinance institution (MFI) is a substance that gives monetary administrations to
people in require, enveloping a different cluster of suppliers recognized by their legitimate
system, mission, technique, and supportability. Verifiably, MFIs developed between the
1950s and 1970s, with governments and benefactors initially focusing on giving subsidized
agrarian credit to little and minimal agriculturists to upgrade efficiency and livelihoods. By
the 1980s, the focus shifted to microenterprise credit, specifically targeting destitute ladies
to invest in little businesses, in this manner empowering resource amassing and family wage
development. These activities driven to the rise of Non-Governmental Organizations (NGOs)
that provided financial administrations to the underprivileged. In the 1990s, these
institutions transitioned into formal budgetary substances to access and loan client reserve
funds, in this manner growing their outreach.

On the other hand, Elective MFIs can be characterized as organizations that offer money
related administrations such as credit unions, downscaled commercial banks, money related
NGOs, or credit agreeable administrations custom fitted for the economically impeded.

Characteristics of Microfinance Institutions:

 Formal suppliers are substances subject to common laws and particular keeping
money controls and supervision, counting improvement banks, reserve funds and
postal banks, commercial banks, and non-bank budgetary mediators.
 Semiformal providers are registered substances administered by common and
commercial laws but regularly not beneath managing an account control and
supervision, such as money related NGOs, credit unions, and cooperatives.
 Casual suppliers incorporate non-registered bunches like pivoting reserve funds and
credit affiliations (ROSCAs) and self-help bunches.
 Possession structures of MFIs shift broadly, extending from government-owned
substances like rustic credit cooperatives in China to member-owned credit unions in
West Africa, socially minded shareholders in Latin America, and profit-maximizing
shareholders in microfinance banks in Eastern Europe.
 A few suppliers only centre on advertising money related administrations to the
destitute, counting preparing, specialized assistance, health administrations, and
strengthening programs.
 The services demanded by and tailored for the poor are comparable to those
required by the common populace, with non-collateralized "micro-loans" being a
well-known benefit conveyed through different group-based and individual
strategies. The sorts of administrations offered are compelled by the legitimate
structure of the supplier, especially in non-regulated educate.

In substance, a microfinance institution is an organization dedicated to giving monetary

administrations to the foremost financially helpless people. The standard microfinance
teaches in India include substances just like the National Agricultural Bank for Provincial
Advancement (NABARD), Little Businesses Improvement Bank of India (SIDBI), Lodging
Advancement Fund Organization (HDFC), commercial banks, territorial country banks
(RRBs), and credit agreeable social orders, all effectively included in expanding microfinance
administrations.

Alternative Microfinance Institutions:

Alternative Microfinance Institutions have developed to address the hole between the
request and supply for microfinance administrations. These educate, frequently alluded to
as the Assignment Drive, specialize in giving thrift, credit, and other money related products
in little sums with the primary objective of improving income levels and lifting the living
guidelines of underprivileged people. This category incorporates:
  Non-Governmental Organizations (NGOs) essentially included in advancing self-help
groups (SHGs) and encouraging associations between SHGs and banks through
activities like the NABARD conspire.
 A few NGOs straightforwardly expand credits to borrowers, either through channels
just like the Grameen Bank or with back from financing offices such as RMK, SIDBI,
FWWB, and different benefactors.
 In India, Microfinance Educate are structured as cooperatives like SEWA Bank and
different Mutually Aided Agreeable Thrift and Credit Social orders (MACTS).
 Moreover, Microfinance Teach work as non-banking fund companies such as BASIX,
CFTS, Mirzapur, and SHARE Microfin Ltd.

Moreover, outstanding alternative microfinance institutions in this segment incorporate

SEWA Bank in Gujarat, AS-SEFA and its Sarva Jana Seva Kosh Ltd. in Tamil Nadu, MYRADA in
Karnataka which manages alliances of SHGs in nine locale, as well as SHARE, BASIX, CARE,
MACTs, the Agreeable Improvement Establishment (CDF), Sangha Mitra, a company
supporting village investment funds and credit sanghas, and PRADAN, which has set up
various SHGs and comparable activities.

Challenges Associated with Mainstream Microfinance Institutions:

The effectiveness of microfinance administrations is hindered by issues related to legitimate,

administrative, and organizational systems. Despite standard budgetary teach having
plentiful stores, the lower credit store proportion needs allure. Regions like eastern Uttar
Pradesh, Bihar, Orissa, and the Northeast exhibit credit deposit ratios of 20-30 percent. Key
reasons for this ineffectualness incorporate:

1. Borrower Unfriendly Products and Methods:

 Absence of education among most clients prevents get to services.
 Tall documentation necessities for advance applications.
 Items come up short to reach rural populaces viably.

2. Rigidity and Delay:

 Unbending frameworks and extensive documentation forms debilitate borrowers
from looking for advance credits.

3. Tall Transaction Costs, both Authentic and Unlawful:

 Tall exchange costs, including multiple trips, decrease the offer for borrowers.

4. Social Commitment versus Commerce Opportunity:

 Microfinance is regularly seen as a social commitment instead of a practical trade
opportunity.

5. Financing to Elective Microfinance Teach:

  The NABARD Act disallows the renegotiating of private segment monetary
institutions by Elective Microfinance Educate.
 The SIDBI Act restricts loans to agrarian and partnered divisions, in spite of
numerous self-help bunch individuals locks in in such exercises.

Additionally, the lawful and administrative system presents additional challenges:

 Policymakers believe that poor individuals need the ability to spare and repay
credits, driving to tall regulatory costs.
 Standard teach see microfinance advances as hazardous, troublesome to oversee,
and with moo benefit, coming about in limitations beneath the RRB Act on private
shareholding and imposing business models.

Challenges faced by Alternative Microfinance Institutions:

Whereas the essential objective of Microfinance Educate is to bridge the developing
difference between request and supply, a noteworthy parcel of these educate are set up as
Non-Governmental Organizations (NGOs) to get to subsidizing. In any case, standard
financing substances like SIDBI and NABARD, as well as specialized financing educate like
RMK and FWWB, ordinarily prioritize subsidizing only for NGOs. In expansion to this, a few
other issues contribute to the challenges confronted by these teach, counting:

 Money related troubles driving to the foundation of improper lawful structures.

 Need of a commercial centre or introduction.
 Lacking administration and responsibility instruments.
 Nearness of disconnected and divided legitimate systems.
 Utilization of unseemly legitimate groups.

MICROFINANCING IN BANGLADESH

Within the 1970s, exploratory activities in Bangladesh and a few other countries given little
advances to ruined ladies for contributing to micro-businesses. This frame of
microenterprise credit depended on solidarity bunch loaning, where each part of a gather
ensured reimbursement for all individuals.

The rise of microfinance in Bangladesh implies a noteworthy move and opportunity to

upgrade monetary administrations within the nation. With over 50% of a populace of 128
million living underneath the destitution line, commercial banks have not been viable in
elevating the lower-income section.

Over the past two decades, NGOs and Microfinance Teach in Bangladesh have essentially
adjusted the strategy of Grameen Bank and created reasonable monetary benefit
arrangements to engage and bolster ruined people.
In Bangladesh, the scene of microfinance comprises NGOs, cooperatives, open segment
programs, and the famous Grameen Bank. Right now, the nation has over 1000
microfinance NGOs, each of which has grasped microfinance as a centre movement. These
NGOs have initiated the microfinance industry, leading to monopolistic competition. There's
a developing realization among numerous people approximately the need to survey
whether microfinance programs ought to be unmistakable from other improvement
activities.

Whereas the managing an account sector in Bangladesh has been advancing gradually,
there's presently an increased centre on upgrading administrations for the improvement of
the underprivileged to adjust with unused patterns and keep up economical financial
conditions. Investment funds have been on the rise, exhibiting critical potential, however
clients look for quality sparing administrations from dependable organizations.
Concurrently, the request for credit is additionally increasing.

As these openings unfurl, numerous develop NGO-MFIs are recognizing the must be
coordinated into the formal monetary framework to bolster their development and offer
expanded monetary administrations as per showcase requests. Measurable information
from December 1999 demonstrates that microfinance in Bangladesh as of now caters to
100% of destitute families, totalling around 13 million people. The Bangladesh Rustic
Improvement Board (BRDB) and Service of Youth-sponsored programs have exceptional
credits, whereas Grameen Bank clients have gathered considerable reserve funds and
advances.

Endeavours are powers to mobilize nearby assets through different reserve funds and credit
items. NGOs presently offer a range of reserve funds items, counting day by day, obligatory,
intentional, constrained, legally binding reserve funds, and time stores. They are moreover
upgrading responsiveness to credit requests, broadening credit products to include
everyday credit, renting credits, lodging credits, among others. However, there's a require
for organizations to enough meet the veritable needs of their clients.

Within the advancing microfinance segment of Bangladesh, there's a need of wise

estimating for investment funds, credit, or protections by NGO-MFIs. Costs are frequently
set based on winning rates without considering operational costs. Around 52% of NGOs give
intrigued on investment funds at rates slightly lower than commercial banks. As the
microfinance industry within the country progresses, the part of promoting inside
Microfinance Teach develops as a significant figure.
There are four primary sorts of teach included in microfinance exercises in Bangladesh-
a) Grameen Bank
b) NGO-MFIs that have gotten licenses from MRA
c) Commercial and specialized banks
d) Government supported microfinance programs (e.g. Through BRDB, agreeable social
orders and programs beneath diverse services)
 Institution-wise Aggregate Cumulative Loan Disbursement

NGO-MFIs in Bangladesh illustrate constrained consideration to cost-effectiveness and

regularly neglect money related contemplations. The winning slant among NGOs is to
prioritize social destinations, basically acting as guardians of community welfare. It is worth
highlighting that NGO-MFIs work with a double order enveloping social and commercial
objective. The social mission emphasizes expanding outreach to the ruined populace and
guaranteeing benefit maintainability through reinvestment of recuperated reserves.

Conversely, the commercial perspective relates to exercises such as cultivating work

openings, contributing to the Net Household Item (GDP), and encouraging send out profit.
NGO-MFIs endeavour to cater to the wants of all people, independent of their financial
status, by working towards the generally welfare of the community. The primary objective
of NGO-MFIs' social mission is to deliver custom-made money related administrations
specifically to the doorsteps of underprivileged people with the point of combating
destitution.
COMMERCIALISATION OF MICROFINANCE IN BANGLADESH
The level of commercialization within the microfinance division may be a reflection of how
conducive the operational environment is for the foundation and development of
commercial microfinance teach (MFIs). Commercialization in this industry is impacted by
different components, counting the steady nature of the arrangement environment for the
development of commercial MFIs, the adequacy of the lawful and administrative system in
encouraging the advancement of commercial MFIs, and the accessibility of market-based
financing sources for commercial MFIs.

The basic components of the operational environment that affect the commercialization of
the microfinance industry can be categorized into three main areas:

1. Policy Environment
 Government approaches that impact the advance of MFIs towards
commercialization, such as arrangements like intrigued rate caps and advertisement
hoc obligation absolution programs that seem prevent MFI commercialization.
 The nearness of subsidized government or donor-backed microcredit programs that
might block the progression and development of commercial MFIs.

2. Lawful and Administrative Framework

 The legal scene concerning secured exchanges, including the legal viewpoints of
making, enlisting, and upholding claims, as well as those related to microenterprise
foundation and development.
 The presence of credit detailing administrations like credit bureaus and credit rating
organizations that give important data to MFIs with respect to borrower financial
soundness, exceptional advances, collateral sorts, etc., and to potential MFI financial
specialists through appraisals based on portfolio quality and resource values.
 The administrative and supervisory system overseeing MFIs that mobilize intentional
investment funds from the open or budgetary teach, and the viability of the
administrative body in satisfying its oversight duties.

3. Cash Markets and Capital Markets

 The openness of commercial sources of capital for MFIs, counting second-tier loan
specialists like summit teach, private venture reserves, and commercial bank loans.

The movement towards commercialization of MFIs is typically quickened by a vital choice

made by the owners/managers of an MFI to grasp a profit-oriented approach beside a
point-by-point commerce arrange to execute the methodology pointed at achieving
complete monetary self-sufficiency and improving outreach levels. Understanding that
building up a strong budgetary institution is crucial for accomplishing noteworthy outreach
infers that MFIs must set interest rates to cover costs and continuously seek operational
efficiencies.

Supporters of this procedure appropriately fight that charging intrigued rates to cover costs
is reasonable since numerous clients as of now pay higher rates to casual moneylenders.
MFIs that execute cost-covering intrigued rates display an engaging alternative for clients,
indeed if the rates they charge may show up tall compared to those of commercial banks.
The suitable benchmark for evaluating intrigued rates from the client's viewpoint is the
casual segment where they ordinarily get to reserves, instead of the commercial keeping
money division, which at times caters to this showcase.

As an MFI's interest and expense incomes initially cover operating costs and after that the
costs of loanable stores, it can be seen as increasingly working on a commercial premise.
Productivity of MFIs facilitates the extension of operations through retained profit or get to
market-based funding sources. Working as a for-profit, formal financial institution
represents a noteworthy turning point within the commercialization of MFIs because it
means compliance with prudential controls and supervision, demonstrating full integration
into the formal money related framework.

By the by, MFIs seek after changing levels of commercialization, as not all aspire to convert
into formal financial teach.

Challenges OF Microfinance in India and Bangladesh

To examine the challenges confronted by Microfinance in India and Bangladesh, it is basic to
recognize that both nations are within the formative stage. The essential deterrents in
creating countries spin around lack of education and destitution, which essentially affect the
financial execution. Microfinance has developed as a vital device in combating lack of
education and destitution, in this manner contributing to the financial advance of these
nations. This thinks about digs into various perspectives, counting the comparison of
individualistic and agreeable approaches, the models of Self-Help Group(SHG) and
Bangladesh Grameen Groups (BGG), and the dynamics of Federations and Cooperatives.

The examination recommends that whereas the individualistic approach may involve less
complications, it also poses higher exchange costs and dangers for both nations. On the
other hand, although the initial cost of gather arrangement within the cooperative approach
may be soak, it can abdicate productive results within the long term. In terms of
strengthening, SHGs in India show higher adequacy compared to BGGs, especially in
advancing mindfulness, investment funds, and self-reliance, subsequently lessening
budgetary reliance. Thus, budgetary teach in Bangladesh tend to support BGGs for
establishing long-term credit relationships.

In India, the state of microcredit is concerning, with as it were 22% of open division banks
distributing insignificant 10% of their net bank credit to the weaker sections, including
microcredit clients. This dissimilarity stems from attitudinal and organization limitations,
requiring the usage of suitable approaches to address these challenges. Key zones for
intercession incorporate characterizing microfinance authoritatively, guaranteeing the
arrangement of microfinance administrations, deciding endowment approaches, changing
managing an account approach, improving administration data frameworks, and
streamlining authoritative forms.
Aspects of Indian microfinance

Despite the nearness of different deficiencies within the domain of Indian Microfinance,
there are striking ranges of interest that distinguish it from the scene in Bangladesh, inciting
a closer examination to reveal the basic reasons. An essential component of microfinance,
the Errand Drive set up in 1999, has proven to be significantly more viable than traditional
microcredit activities. This Errand Constrain emphasizes the provision of essential financial
services, including thrift and credit offices, to devastated people in provincial, semi-urban,
and urban settings, enabling them to upgrade their pay levels and raise their living
benchmarks. Eminently, promoters of Self-Help Groups underscore the significance of
mobilizing reserve funds as the foundational component of monetary services.

Moreover, Microfinance programs have seen quick development in later a long time,
exemplified by different activities such as the development in enrolment of Sa-Dhan, a
prominent affiliation, and the striking increase in loans dispensed by part educate. The CARE
CASHE Program has too made noteworthy strides by collaborating with little NGO-MFls and
community-managed microfinance organizations, in this manner extending outreach and
affect. Furthermore, the expansion of Grameen replicators and the rise of organizations like
SHARE Microfin Restricted emphasize the developing influence and reach of microfinance
activities.

The advancing landscape of microfinance has impelled different association models

between banks and MFls, with educate like ICICI Bank leading the way in inventive hones
such as discount advance reserves, securitization of microfinance obligation, and the
introduction of specialized retail items just like the Kissan Credit Card. The government's
commitment to advancing microfinance, as prove by the initiatives.
reported within the 2005 national budget, reflects a developing acknowledgment of the
sector's potential for driving monetary consideration and financial strengthening.

In exploring the challenges of microfinance, it is significant to follow to key standards

sketched out by organizations like CGAP, emphasizing the require for a different extend of
money related administrations past fair credits, the foundation of economical budgetary
frameworks, and the significance of building solid nearby educate. By tending to these
principal standards and challenges, microfinance can successfully serve as a powerful
apparatus in combating destitution and cultivating comprehensive financial development.

Challenges remain
Whereas there have been outstanding and promising activities inside the domain of
microfinance in India, there's a squeezing got to adjust with a worldwide vision that
emphasizes get to to a comprehensive cluster of monetary administrations. The
fundamental components required for scaling up microfinance operations are as of now
well-documented, with effective microfinance institutions displaying imaginative
approaches to conveying credit, investment funds, and related administrations to
underserved populaces. Besides, there's a developing intrigued among banks and other
substances with broad reach to cater to marginalized fragments of society. The integration
of data innovation presents openings to improve effectiveness and decrease costs related
with providing microfinance to those in require. The key challenge lies in successfully
leveraging existing information on maintainable microfinance hones on a bigger scale, in this
manner building up monetary frameworks that cater to the wants of the underprivileged
and contribute to their financial headway.
Challenges ahead
Effective microfinance teach have illustrated that advertising money related administrations
to underserved populaces can successfully diminish destitution whereas moreover being a
financially reasonable try. Right now, there's a more grounded agreement on the necessities
for guaranteeing the supportability of microfinance activities. In any case, a significant
challenge in accomplishing economical microfinance lies within the limited institutional and
managerial capabilities at the level of retail microfinance teach. Typically, apparent in
insufficiencies such as lacking administration data frameworks, subpar vital arranging, and
tall operational costs. Besides, there's a discernible shortage of organizations competent of
giving secure reserve funds mechanisms for the impeded and successfully leveraging these
nearby reserve funds for forward loaning purposes.

Figure: Pyramid Status of Microfinance

Microfinance Industry Overview: The Microfinance industry has total loan portfolio of
1,89,069 crore as on June 30, 2019, which represents a growth of 38% over June 2018.
Geographically top 5 states contribute 55% to pan India loan portfolio as on June 30, 2019.
Across lender categories, NBFC-MFIs continue to dominate the industry in terms of portfolio
outstanding with 37% market share as on June 30, 2018, which increased to 38% as on June
30, 2019. Among lenders, Banks have highest average ticket size as on June 30, 2019.
As on June 30, 2019, Microfinance space comprises of 152 institutions.
NBFC–MFIs account for 55% of the industry players, in terms of numbers. These institutions
are distributed among portfolio outstanding buckets ranging from less than `10 crore to
greater than ` 5000 crore. NBFC–MFIs and NBFCs contribute to all portfolio outstanding
buckets ranging from less than `10 crore to greater than `5000 crore.
Disbursement Trends: Loan disbursal in terms of volume registered 4% growth from AMJ’18
to AMJ’19. Most prevalent ticket sizes for lending during this period are `20k-`30k ticket size,
followed by `30k-`40k ticket size loans across institutions. There is also a spike in
disbursements from January 01, 2019, to March 31, 2019.
Industry Risk Profile: Industry risk profile shows an improvement in 90+ delinquency from
0.51% in June 2018 to 0.40% in June 2019. Among states, Tamil Nadu, and Bihar feature in
top 5 states in terms of outstanding portfolio and low delinquency; other such states are
Karnataka and Uttar Pradesh.
New To Credit Customer view: This edition gives a view on the New to credit (NTC)
penetration on pan India basis with quarterly NTC rates ranging between 23% and 28%.
NBFC-MFIs contributed highest to the NTC population in AMJ’19. The edition gives a further
peek into zone wise NTC sourcing across institutional categories; SFBs and NBFCs have their
highest NTC sourcing from the South zone at 32% & 42% respectively.

State Profile: A comprehensive state profile of West Bengal showcases the trends/
behaviour of the state in contributing highest to pan India Microfinance outstanding
portfolio as on 30thJune 2019.
Overall, the state has a portfolio of `27,649 crore spanning over 1.01 crore live loans. North
24 Paraganas, Murshidabad and Nadia contribute 27% of the portfolio outstanding of West
Bengal while overall delinquency of the state is 0.20%.

 RULES & REGULATIONS OF MICRO FINANCE INSTITUITIONS OF INDIA:

1. Rules & controls of Miniaturized scale fund instituitions of India:

Microfinance educate (MFIs) play a significant part in giving budgetary administrations to

underserved populaces, particularly in creating nations like India. To guarantee the
steadiness and keenness of the microfinance segment, different rules and directions
administer the operations of MFIs. In India, these directions are set by numerous
administrative bodies, fundamentally the Save Bank of India (RBI), the National Bank for
Farming and Rustic Advancement (NABARD), and the Securities and Trade Board of India
(SEBI), among others:

1. Save Bank of India (RBI) Directions:

The RBI, being the central bank of India, plays a significant part in directing the budgetary
segment, counting microfinance. Key directions forced by the RBI incorporate:

- Prudential standards for pay acknowledgment, resource classification, and provisioning to

guarantee the monetary wellbeing of MFIs.
- Rules on intrigued rates charged by NBFC-MFIs, which are Non-Banking Budgetary
Company - Small scale Back Teach. These rules point to avoid usurious loaning hones and
advance mindful loaning.
- Know Your Client (KYC) standards, requiring MFIs to confirm and confirm the character of
their clients to anticipate extortion and cash washing.
- Detailing necessities, commanding MFIs to yield occasional reports to the RBI, covering
perspectives such as portfolio quality, capital ampleness, and compliance with
administrative standards.

2. National Bank for Agribusiness and Rustic Improvement (NABARD) Rules:

NABARD, as a key institution for country advancement and horticulture fund, gives rules and
bolster to MFIs working in rustic regions. These rules ordinarily incorporate:

- Renegotiating offices, where NABARD gives stores to MFIs for on-lending to rustic
borrowers at concessional rates.
- Capacity building bolster, counting preparing programs and specialized help to improve the
productivity and adequacy of MFIs in coming to underserved communities.

3. State Government Directions:

In expansion to central controls, state governments may to force directions on MFIs working
inside their locales. These controls may envelop:

- Authorizing prerequisites, sketching out the method for enlistment and operation of MFIs
inside the state.
- Intrigued rate caps, indicating the most extreme rates of intrigued that MFIs can charge on
their credits to borrowers.
- Shopper security measures, such as grievance redressal components and divulgence
prerequisites, pointed at shielding the interface of borrowers.

4. Securities and Trade Board of India (SEBI) Directions:

In case an MFI works as a microfinance-focused shared support or offers other speculation

items, it may drop beneath the administrative domain of SEBI. SEBI controls may
incorporate:

- Financial specialist assurance measures, guaranteeing that MFIs follow to

straightforwardness and revelation necessities to ensure the interface of financial
specialists.
- Compliance standards related to the issuance and exchanging of securities, if the MFI
raises stores from the open through capital markets.

5. Reasonable Hones Code (FPC):

MFIs are regularly required to follow to a Reasonable Hones Code, which diagrams
standards of decency, straightforwardness, and mindful loaning. The FPC ordinarily covers:

- Revelation of terms and conditions, guaranteeing that borrowers are completely educated
around the taken a toll, terms, and conditions of the monetary items advertised by the MFI.
- Grievance redressal instruments, giving roads for borrowers to hold up complaints and
look for determination for grievances in a convenient way.
- Moral hones, forbidding coercive or injurious hones within the recuperation of credits and
advancing aware and compassionate treatment of borrowers.

6. Shopper Security Directions:

Different buyer security directions may apply to MFIs, pointing to protect the interface of
borrowers and guarantee reasonable treatment. These directions may incorporate:

- Rules on transparent pricing, requiring MFIs to reveal the successful intrigued rates and
other charges related with their budgetary items in a clear and reasonable way.
- Instruments for debate determination, empowering borrowers to look for plan of action in
case of debate or grievances emerging from their intuitive with the MFI.

7. Credit Data Companies Controls:

MFIs are ordinarily required to comply with controls related to credit announcing and data
sharing with credit bureaus. These controls point to:

- Advance mindful loaning hones by empowering MFIs to survey the financial soundness of
borrowers based on their credit history and reimbursement behavior.
- Ensure the security rights of borrowers by guaranteeing that their individual and monetary
data is taken care of safely and utilized as it were for legitimate purposes.

8. Corporate Administration Rules:

MFIs are anticipated to follow to corporate administration standards to guarantee

straightforwardness, responsibility, and successful oversight. Key perspectives of corporate
administration rules incorporate:

- Composition and working of the board of executives, guaranteeing that the board
comprises qualified people with diverse skills and encounters significant to the microfinance
segment.
- Inner controls and hazard administration frameworks, planned to distinguish, survey, and
moderate dangers related with the MFI's operations, counting credit chance, operational
hazard, and compliance chance.

In conclusion, the microfinance segment in India is subject to a comprehensive

administrative system pointed at advancing money related incorporation, securing the
interface of borrowers, and guaranteeing the solidness and keenness of the monetary
framework. MFIs working in India must explore through these rules and directions to
conduct their operations in a compliant and economical way, in this manner contributing to
the financial advancement of underserved communities over the nation.
2. Rules & directions of smaller scale back institutions of Bangladesh:

Microfinance institutions (MFIs) in Bangladesh play a significant part in giving money related
administrations to underserved populaces, especially in country regions. The administrative
environment administering MFIs in Bangladesh is directed essentially by the Microcredit
Administrative Specialist (MRA), which was built up in 2006 beneath the Microcredit
Administrative Specialist Act. Underneath, we'll dig into the point-by-point rules and
regulations that MFIs in Bangladesh must follow to:

Microcredit Administrative Specialist (MRA):

The Microcredit Administrative Specialist (MRA) is the central administrative body directing
MFIs in Bangladesh. Its essential capacities incorporate authorizing and directing MFIs,
guaranteeing compliance with administrative necessities, and advancing the feasible
development of the microfinance segment. The MRA defines arrangements, rules, and
controls to administer the operations of MFIs, with the overarching objective of advancing
budgetary consideration and destitution mitigation.

Permitting and Registration:

MFIs in Bangladesh are required to get licenses from the Microcredit Administrative
Specialist (MRA) to function legitimately. The authorizing handle includes assembly certain
criteria related to administration structure, capital ampleness, administration mastery, and
operational capacity. MFIs must moreover experience periodic inspections and reviews to
preserve their licenses and guarantee continuous compliance with administrative measures.

Intrigued Rate Cap:

The MRA sets a most extreme intrigued rate cap that MFIs can charge on their advances to
borrowers. This cap points to avoid usurious loaning hones and guarantee that microcredit
remains reasonable for low-income borrowers. The intrigued rate cap is occasionally
surveyed and adjusted based on winning financial conditions and wants of borrowers.

Portfolio Quality and Detailing:

MFIs are required to preserve tall benchmarks of portfolio quality and report their money
related execution to the Microcredit Administrative Specialist (MRA) frequently. This
incorporates information on advance payment, reimbursements, portfolio at chance, and
other key markers of budgetary wellbeing. MFIs must follow to prudential standards for
wage acknowledgment, resource classification, and provisioning to guarantee the quality of
their credit portfolios.

Client Assurance and Reasonable Practices:

The MRA orders MFIs to follow to client security standards and reasonable hones in their
operations. This incorporates straightforward estimating, mindful loaning hones, divulgence
of credit terms and conditions, and components for grievance redressal. MFIs are required
to treat their clients decently and ethically, respecting their nobility and rights as borrowers.

Administration and Administration Benchmarks:

MFIs are anticipated to preserve tall guidelines of administration and administration to
guarantee the astuteness and maintainability of their operations. This incorporates having a
well-defined administration structure, qualified and experienced administration group,
vigorous inner controls, and hazard administration frameworks. MFIs must too follow to
moral benchmarks and codes of conduct in their dealings with clients and partners.

Social Execution Administration:

The MRA energizes MFIs to consolidate social execution administration hones into their
operations, centering on the affect of their administrations on clients and communities. This
incorporates evaluating and detailing on social results such as destitution diminishment,
women's strengthening, and monetary incorporation. MFIs are anticipated to adjust their
mission and targets with the broader objectives of social and financial improvement.

Capacity Building and Preparing:

The MRA provides capacity building bolster and preparing programs to MFIs to improve
their operational effectiveness, hazard administration capabilities, and outreach to
underserved populaces. This incorporates specialized help, ability improvement activities,
and information sharing stages to fortify the capacity of MFIs and their staff.

Collaboration and Coordination:

The MRA promotes collaboration and coordination among MFIs, government offices,
benefactor organizations, and other partners to foster a steady environment for
microfinance improvement. This incorporates encouraging associations, advancing best
hones, and supporting for approaches that advance money related consideration and
destitution mitigation.

In conclusion, the administrative system overseeing MFIs in Bangladesh is planned to

promote the feasible development of the microfinance division while ensuring client
assurance, budgetary soundness, and destitution lightening. MFIs are subject to
comprehensive directions and oversight by the Microcredit Administrative Specialist (MRA),
which sets measures for permitting, intrigued rates, portfolio quality, client security,
administration, and social execution administration. Compliance with administrative
prerequisites is basic for MFIs to function lawfully and contribute successfully to the
financial advancement of Bangladesh.
3.Rules & directions of smaller scale fund institutions of Bangladesh:

Microfinance educate (MFIs) in Bangladesh play a vital part in giving monetary

administrations to underserved populaces, especially in country regions. The administrative
environment overseeing MFIs in Bangladesh is directed essentially by the Microcredit
Administrative Specialist (MRA), which was set up in 2006 beneath the Microcredit
Administrative Specialist Act. Underneath, we'll dig into the point by point rules and controls
that MFIs in Bangladesh must follow to:

Microcredit Administrative Specialist (MRA):

The Microcredit Administrative Specialist (MRA) is the central administrative body managing
MFIs in Bangladesh. Its essential capacities incorporate permitting and controlling MFIs,
guaranteeing compliance with administrative necessities, and advancing the economical
development of the microfinance division. The MRA defines approaches, rules, and controls
to administer the operations of MFIs, with the overarching objective of advancing monetary
consideration and destitution lightening.

Authorizing and Enrolment:

MFIs in Bangladesh are required to get licenses from the Microcredit Administrative
Specialist (MRA) to function lawfully. The permitting prepare includes assembly certain
criteria related to administration structure, capital ampleness, administration ability, and
operational capacity. MFIs must experience occasional assessments and reviews to preserve
their licenses and guarantee continuous compliance with administrative benchmarks.
Intrigued Rate Cap:

The MRA sets the greatest intrigued rate cap that MFIs can charge on their advances to
borrowers. This cap points to avoid usurious loaning hones and guarantee that microcredit
remains reasonable for low-income borrowers. The intrigued rate cap is intermittently
checked on and balanced based on prevailing economic conditions and desires of
borrowers.

Portfolio Quality and Detailing:

MFIs are required to preserve tall guidelines of portfolio quality and report their budgetary
execution to the Microcredit Administrative Specialist (MRA) routinely. This incorporates
information on credit distributions, reimbursements, portfolio at chance, and other key
pointers of budgetary wellbeing. MFIs must follow to prudential standards for pay
acknowledgment, resource classification, and provisioning to guarantee the quality of their
advance portfolios.

Client Assurance and Reasonable Hones:

The MRA mandates MFIs to follow to client security standards and reasonable homes in
their operations. This incorporates straightforward estimating, mindful loaning hones,
revelation of credit terms and conditions, and components for grievance redressal. MFIs are
required to treat their clients reasonably and morally, regarding their dignity and rights as
borrowers.

Administration and Administration Benchmarks:

MFIs are anticipated to preserve tall guidelines of administration and administration to

guarantee the keenness and maintainability of their operations. This incorporates having a
well-defined administration structure, qualified and experienced administration group,
vigorous inside controls, and chance administration frameworks. MFIs must moreover
follow to moral measures and codes of conduct in their dealings with clients and partners.

Social Execution Administration:

The MRA encourages MFIs to join social execution administration hones into their
operations, centering on the affect of their administrations on clients and communities. This
incorporates surveying and announcing on social results such as destitution diminishment,
women's strengthening, and budgetary consideration. MFIs are anticipated to adjust their
mission and targets with the broader objectives of social and financial advancement.

Capacity Building and Preparing:

The MRA gives capacity building bolster and preparing programs to MFIs to improve their
operational efficiency, chance administration capabilities, and outreach to underserved
populaces. This incorporates specialized help, ability improvement activities, and
information sharing stages to reinforce the capacity of MFIs and their staff.

Collaboration and Coordination:

The MRA advances collaboration and coordination among MFIs, government organizations,
giver organizations, and other stakeholders to cultivate a strong environment for
microfinance improvement. This incorporates encouraging organizations, advancing best
hones, and supporting for approaches that advance money related incorporation and
destitution lightening.

In conclusion, the administrative system overseeing MFIs in Bangladesh is outlined to

advance the maintainable development of the microfinance segment whereas guaranteeing
client protection, budgetary solidness, and destitution easing. MFIs are subject to
comprehensive controls and oversight by the Microcredit Administrative Specialist (MRA),
which sets guidelines for authorizing, intrigued rates, portfolio quality, client assurance,
administration, and social execution administration. Compliance with administrative
prerequisites is fundamental for MFIs to function legitimately and contribute viably to the
financial improvement of Bangladesh financial improvement of Bangladesh.

 Major Contrasts between the MF Instituitions between India & Bangladesh:

Whereas both India and Bangladesh have dynamic microfinance divisions pointed at
advancing money related consideration and destitution mitigation, there are a few
major contrasts within the rules and controls administering microfinance teach (MFIs) in
these nations:

1. Administrative System:

India:
MFIs in India are controlled by numerous substances, counting the Save Bank of India
(RBI), National Bank for Horticulture and Country Advancement (NABARD), and
Securities and Trade Board of India (SEBI), each with its possess set of rules and controls.
Bangladesh:
The Microcredit Administrative Specialist (MRA) serves as the central administrative
body supervising MFIs in Bangladesh, with a center on permitting, supervision, and
approach detailing.

2. Permitting Prepare:

India:
MFIs in India may have to be get licenses or enlistments from different administrative
specialists, each with it possess permitting prerequisites and strategies.
Bangladesh:
The authorizing prepare for MFIs in Bangladesh is centralized beneath the Microcredit
Administrative Specialist (MRA), streamlining the method and guaranteeing consistency
in administrative measures.

3. Intrigued Rate Direction:

India:
The RBI sets rules on intrigued rates charged by NBFC-MFIs, pointing to anticipate
usurious loaning hones and guarantee reasonable treatment of borrowers.
- Bangladesh:
The MRA in Bangladesh sets a most extreme intrigued rate cap that MFIs can charge on
their credits, giving clarity and consistency in estimating over the segment.

4. Announcing Prerequisites:

India:
MFIs in India are required to report monetary execution and administrative compliance
to numerous administrative specialists, each with its possess detailing necessities.
Bangladesh:
Detailing prerequisites for MFIs in Bangladesh are centralized beneath the Microcredit
Administrative Specialist (MRA), streamlining compliance and oversight.

5. Social Execution Administration:

- India:
Whereas social execution administration is encouraged in India, there's no centralized
 specialist directing or ordering its execution.
- Bangladesh:
The MRA in Bangladesh effectively advances social execution administration hones,
empowering MFIs to assess and report on their social affect on clients and communities.

In general, whereas both India and Bangladesh have vigorous microfinance segments,
the contrasts in their administrative systems reflect varying approaches to oversight and
administration, with Bangladesh utilizing a more centralized and streamlined
administrative structure compared to India's multi-agency approach.

2. Different instruments utilized my MF Teach in India:

Microfinance teach (MFIs) in India utilize different apparatuses to successfully serve

their clients and accomplish their mission of money related consideration and
destitution lightening. A few of the key devices utilized by MFIs incorporate:

1. Gather Loaning:
MFIs regularly utilize bunch loaning techniques where little bunches of borrowers
collectively ensure each other's credits. This not as it were diminishing the hazard for the
MFI but too cultivates a sense of community and peer bolster among borrowers.

2. Joint Obligation:
Joint risk could be a center include of bunch loaning, wherein bunch individuals are
collectively capable for the reimbursement of advances. This social collateral instrument
empowers borrowers to back each other and guarantees higher reimbursement rates.

3. Person Loaning:
A few MFIs also offer person advances, especially to more built-up clients or those who
don't fit into bunch loaning structures. Person loaning permits for more custom-made
money related items and may cater to particular needs or trade necessities.

Industry portfolio exceptional as on 30thJune 2019 is '189,069 crore, a development of

38% from '137,266 crore as on 30thJune 2018 NBFC-MFIs have biggest showcase share
extending between 37% - 39ross quarters finishing from June 2018 to June 2019 As on
30thJune 2019, Banks have the most elevated normal ticket measure at '45,350 taken
after by SFBs at '32,946 Over divisions Banks have the least 90+ wrongdoing at 0.18% as
on 30thJune 2019

4. Investment funds Mobilization:

MFIs energize clients to spare frequently through reserve funds accounts or group-based
reserve funds plans. Investment funds mobilization not only promotes budgetary teach
among clients but also provides a steady financing source for the MFI's lending exercises.
5. Budgetary Proficiency and Preparing:
MFIs give money related education and preparing programs to engage clients with the
information and abilities fundamental for successful money related administration,
business, and commerce advancement.

6. Innovation and Computerized Platforms:

Numerous MFIs use innovation and computerized stages for different purposes, counting
loan disbursement, reimbursement collection, client information administration, and
inaccessible observing. This improves operational productivity, decreases costs, and moves
forward access to money related administrations for inaccessible and underserved
populaces.

7. Microinsurance:
MFIs may offer microinsurance items to secure clients against different dangers, such as edit
disappointment, sickness, or characteristic fiascos. Microinsurance makes a difference
moderate the affect of stuns on clients' jobs and improves their flexibility.

8. Client-Centric Approach:
MFIs prioritize a client-centric approach, fitting their items and administrations to meet the
needs and inclinations of their target clientele. This may include conducting client
overviews, center bunch discourses, and input components to guarantee that offerings are
important and responsive to client needs.

By utilizing these apparatuses and techniques, MFIs in India point to advance money related
consideration, empower marginalized communities, and contribute to economical economic
development.

Different apparatuses utilized my MF Instituitions in Bangledesh:

Microfinance teach (MFIs) in Bangladesh utilize a assortment of instruments and techniques

to improve monetary consideration and lighten destitution. Some of the key devices utilized
by MFIs in Bangladesh incorporate:

1. Group-Based Loaning:
MFIs in Bangladesh frequently utilize bunch loaning techniques where little bunches of
borrowers jointly apply for and reimburse advances. This approach cultivates social
cohesion, peer bolster, and guarantees higher reimbursement rates through collective
obligation.

2. Joint Obligation:
Comparative to India, MFIs in Bangladesh execute joint obligation loaning, where gather
individuals are collectively mindful for advance reimbursements. This social collateral
instrument empowers borrower responsibility and diminishes default dangers.
3. Reserve funds Mobilization:
MFIs empower clients to spare routinely through investment funds accounts, bunch reserve
funds plans, or person reserve funds plans. Investment funds mobilization advances money
related flexibility among clients and gives a steady subsidizing source for future ventures or
crises.

4. Microinsurance:
MFIs offer microinsurance products to protect clients against dangers such as illness, death,
trim disappointment, and common catastrophes. Microinsurance helps mitigate the affect
of stuns on clients' employments and shields against financial vulnerabilities.

5. Monetary Proficiency and Capacity Building:

MFIs give money related proficiency preparing and capacity-building programs to enable
clients with basic monetary management skills, business enterprise preparing, and
information approximately their rights and obligations as borrowers.

6. Innovation Integration:
Numerous MFIs in Bangladesh are progressively leveraging innovation, counting versatile
managing an account, computerized payments, and information analytics, to streamline
operations, upgrade proficiency, and reach inaccessible and underserved populaces more
successfully.

7. Item Expansion:
MFIs offer a extend of monetary items past credit, counting investment funds, protections,
settlements, and non-financial administrations custom-made to meet the differing needs of
clients, counting rustic business visionaries, ladies, and smallholder ranchers.

8. Social Execution Administration:

MFIs prioritize social execution administration, observing and assessing their affect on
clients' lives, counting destitution lessening, strengthening of ladies, and social
consideration. This guarantees arrangement with their social mission and responsibility to
partners.

By utilizing these devices and methodologies, MFIs in Bangladesh aim to promote budgetary
incorporation, engage marginalized communities, and contribute to destitution lessening
and economic development across the nation.
5. Major Contrasts between the MF Educate instruments between India & Bangladesh:

Microfinance teach (MFIs) in India and Bangladesh utilize comparable instruments and
methodologies to advance monetary incorporation and destitution easing, but there are
eminent contrasts based on the administrative environment, social setting, and financial
conditions of each nation.

1. Gather Loaning vs. Person Loaning:

India:
MFIs in India overwhelmingly utilize bunch loaning techniques, emphasizing joint obligation
and peer bolster among borrowers.
Bangladesh:
Whereas gather loaning is predominant in Bangladesh, there's a more prominent
accentuation on person loaning, especially for more set up clients or those with trade
needs. This reflects the differing inclinations and needs of clients in Bangladesh.

2. Intrigued Rate Control:

India:
The Save Bank of India (RBI) controls intrigued rates charged by NBFC-MFIs, guaranteeing
reasonableness and straightforwardness in loaning hones.
Bangladesh:
The Microcredit Administrative Specialist (MRA) sets a greatest intrigued rate cap for MFIs,
giving clarity and consistency in estimating over the segment. This centralized approach
contrasts from India's multi-agency direction.

3.Innovation Integration:

India:
MFIs in India are progressively leveraging innovation for credit payment, reimbursement
collection, and client information administration to upgrade productivity and reach
inaccessible populaces.
Bangladesh:
Whereas innovation selection is additionally developing in Bangladesh, it may be
moderately slower due to foundation challenges and lower computerized proficiency rates,
affecting the scale and scope of innovative apparatuses conveyed by MFIs.

4. Social Execution Administration:

India:
Social execution administration hones, such as affect appraisal and client security, are
empowered but may change over MFIs due to assorted administrative necessities and
organizational needs.
Bangladesh:
The Microcredit Administrative Specialist (MRA) effectively advances social execution
administration, guaranteeing that MFIs evaluate and report on their social affect on clients
and communities reliably. This reflects a more standardized approach to social execution
administration in Bangladesh.

5. Item Enhancement:

India:
MFIs in India offer a wide run of budgetary items and administrations past credit, counting
reserve funds, protections, and settlements, catering to assorted client needs and
inclinations.
Bangladesh:
Whereas item broadening is additionally watched in Bangladesh, the accentuation may be
more on microinsurance and reserve funds mobilization, reflecting the priorities of MFIs and
the needs of clients within the nearby setting.

In conclusion, whereas MFIs in both India and Bangladesh share common objectives of
monetary incorporation and destitution easing, contrasts in administrative systems,
technological infrastructure, and client inclinations lead to varieties within the apparatuses
and techniques utilized by MFIs in each nation.
Bangladesh MF Structure:
In Bangladesh, Microcredit Regulatory Authority (MRA) holds the exclusive mandate as the
sole regulatory authority overseeing the microfinance sector. Its purview extends across the
industry, except banks and select government entities that follow their distinct regulatory
frameworks. Presently, the microfinance landscape in the country boasts a diverse range of
participants, including Microfinance Institutions (MFIs) licensed by the MRA, the renowned
Grameen Bank, Commercial Banks, and various governmental agencies. In the fiscal year
2022-2023, these entities collectively impacted an astounding 69.35 million individuals,
providing an array of services encompassing credit, deposits, and a plethora of social
development initiatives. These services play an indispensable role in nurturing micro-
entrepreneurship, elevating human resources, and fostering employment opportunities.
Crucially, they have significantly contributed to Bangladesh’s financial inclusion efforts,
embracing a remarkable 42.05% of the total population within their ambit. While MRA-
licensed MFIs dominate the microfinance sector, the contributions of other organizations
remain noteworthy.

These microfinance entities can be classified into four distinct categories:

• MRA Licensed MFIs: The Microcredit Regulatory Authority (MRA), Bangladesh’s sole
regulatory authority for the microfinance sector, has given 882 licenses to qualified MFIs
and Cancelled 151 due to non-compliance as of 30 June 2023. Within the MRA’s jurisdiction,
a total of 731 MFIs is actively engaged in providing microcredit services to an impressive
40.86 million individuals. As of the same date, the cumulative loan outstanding reached BDT
1504.20 billion, with a substantial total loan disbursement of BDT 2493.02 billion recorded
during the period. Additionally, these MFIs collectively held total savings amounting to BDT
620.55 billion. This expansive presence underscores MRA-licensed MFIs commitment to
promoting financial inclusion and empowering 20 Microfinance in Bangladesh (Annual
Statistics), June-2023 Ch. 1 individuals, particularly those in underserved communities, by
providing them with access to essential banking services.
• Grameen Bank: As of the present day, Grameen Bank extends its financial services to an
impressive clientele, with 10.36 million individuals in Bangladesh benefiting from its
offerings. The bank’s extensive outreach is facilitated through a network of 2,568 branch
locations strategically positioned throughout the country. The loan disbursement raises to
247.57 billion bdt while the loan outstanding stands at 161.5 billion bdt.
• Scheduled, non-scheduled, and specialized banks: State-owned commercial banks
(SOCBs), private commercial banks (PCBs), and specialized banks, such as Sonali Bank
Limited, Janata Bank Limited, Islami Bank Bangladesh Limited, and Bangladesh Krishi Bank,
provide direct microfinance services to the impoverished individuals. These banks provided
microfinance services to 4.83 million people during fiscal year 2022-2023. As of June 30,
2023, a total of 16 banks had diligently submitted their reports on their microfinance
activities for the fiscal year 2022-2023 to the Microcredit Regulatory Authority (MRA).
• Microfinance activities by various government departments/ Institutions/ Special
Programs: Different government departments/institutions/ agencies carry out small-scale
microfinance programs to accomplish specific organizational goals. During the fiscal year
2022-2023, data reported to the Microcredit Regulatory Authority (MRA) indicates that
these 13 government entities collectively provided microfinance services to an impressive
16.567 million individuals. This underscores the diverse and multifaceted nature of
microfinance efforts in Bangladesh, with government agencies actively contributing to the
broader mission of financial inclusion and poverty alleviation.

Growth of MF sector in Bangladesh