Bangladesh: Foreign Funds for MFIs Drop over Internal Buoyancy

Jul 2015
Bangladesh, July, 25 2015 - Foreign funds for the country's micro-finance institutions (MFIs) have noticeably been on the decline, as savings, retained earnings and local funds have bolstered their financial strength.

The donor funding has now declined to around 2.19 per cent in 2014 from 60 per cent in 1996, thanks to the tightened regulation of the Microcredit Regulatory Authority (MRA), a recent report said.

According to the MRA, the MFIs survived mostly on external resources during the initial stage of their operations in the country from 1980s to 1990s.

Foreign resources played an important role at the early stage of the MFIs, their development, expansion and subsequent widening of the outreach of their micro-credit programmes.

The declining level of dependence on donor funding has been attributed by relevant observers to a host of factors like a substantial growth of the industry, the regulator's careful watch, improvement in the overall poverty situation, capacity building of MFIs etc.

Director of MRA Shazzad Hossoin said higher amount of domestic resources generated by the MFIs helped reduce dependency on external funds.

He said the Palli Karma Sahayak Foundation (PKSF) also played a significant role to meet the funding problems.

The PKSF was created in 1990 to channel funds to the MFIs form the government sources.

According to the latest data of the MRA, the savings by the clients now account for 34.21 per cent of the aggregate amount of outstanding micro-credits, PKSF 11.04 per cent, commercial banks 16 per cent, cumulative surplus 32.28 per cent, government fund 0.11 per cent and other funds 1.36 per cent while the donor fund is only 2.19 per cent of total amount of micro-credit.

Mr. Hossoin said the amount of savings per member has been increasing over the years.

In 2006, such savings per member amounted to Tk 1,207 which stood at around Tk 2,600 in recent months, reflecting a 100 per cent increase in the last six years.

The outstanding amount of loan per borrower also increased over the years and an average annual growth rate of such amount stood at about 17 per cent in 2011.

Executive Director of Policy Research Institute (PRI) Ahsan H Mansur said the microcredit sector in the country is no more a micro initiative; the MFIs are shifting to small initiatives.

He said MFIs do not require foreign funds as the microcredit sector has grown considerably in the country. The MFIs have also strengthened their capacity and their resource base.

"The demand-side reflected a declining trend as many borrowers of micro-credits graduated from their earlier poverty level," he adds.

Mr Mansur said there are not enough opportunities now for both recipients and lenders of microcredits.


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