Bank lending to microfinanciers makes quantum leap as donors take back seat

Bank lending to the country's microfinance institutions (MFIs) has been on the rise for straight six years, thanks to availability of funds in the banks, and minimum default rate.
Lower interest rates in banks compared with those charged by microfinanciers also helped boost credit flow to the microcredit sector.
The amount or percentage of banks loans in MFIs reached around 19 per cent or Tk 9.4 billion in 2016, which were 17 per cent or Tk 6.8 billion in 2015, 16.4 per cent or Tk 5.1 billion in 2014, 15.2 per cent or Tk 4.7 billion in 2013, 14.2 per cent or Tk 3.2 billion in 2012 and 12.4 per cent or Tk 2.3 billion in 2011.
Director of Microcredit Regulatory Authority (MRA) Main Uddin Ahmed said the banks were finding the sector reliable and the funds were also "very profitable" for the MFIs.
He predicted that the share of banks in the MFIs will continue to rise in future as micro-lenders are gradually funding micro-entrepreneurs.
The size of total fund stood at Tk 40.95 billion in 2016, more than double since 2011.
The industry insiders said the declining trend in donor funds in MFIs was also one of the reasons why microlenders were opting for bank loans.
The share in foreign funding has now declined to the lowest in 20 years to 1.0 per cent from 60 per cent in 1996, thanks to the constant rise of the sector.
On the other hand, savings by the clients now account for 34 per cent and cumulative surplus stood at 35 per cent, making the sector largely self-sustaining.
In another development, the contribution of Palli Karma-Sahayak Foundation (PKSF), the state-owned wholesale funder to the microfinance sector, has been declining since 2011.
The share of lending of PKSF has halved from 16 per cent in 2011 to 8.0 per cent in 2016.
But Deputy Managing Director of PKSF Md. Jashim Uddin said PKSF's contribution did not decline. The contribution remains same in recent years.
The micro-lending sector expanded at a rapid pace compared to lending by the foundation, he argued.
He 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 Tk 2,500 to Tk 3,000 in recent months, recording over 100 per cent rise.
MRA Director Main Uddin Ahmed said the positive growth of microcredit supplies with the support of domestic resources has started since the introduction of pro-active measures and regulations by the regulatory authority.
MRA officials said the MFIs were mostly reliant on external resources during the initial stage of their operations in the country, between the 1980s and 1990s.
Director (Finance) of Buro Bangladesh Mosharraf Hossain said foreign resources played an important role in the process of experimentation at the early stage of the MFIs, their development, expansion and the subsequent widening of the outreach of the microcredit programmes.
He said donors started to withdraw funds from Bangladesh in the 1990s and diverted money to African countries.
The number of microcredit clients reached 27.58 million in 2016 served by 697 MFIs.
Grameen Bank still remains the largest MFI in the country followed by BRAC, ASA and Buro Bangladesh.
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