With some progress in recent times, the country's microfinance institutions (MFIs) are still facing a myriad of challenges, officials said.
The Microcredit Regulatory Authority (MRA) in its Annual Performance Agreement (APA) has identified major challenges facing many MFIs.
Capital shortage, clients' lack of awareness about their rights and responsibilities and their little financial literacy are among the key problems, it said.
The sector also needs skilled manpower for microcredit operations and greater use of information technology (IT).
The MRA signed the APA with the government in June.
According to the APA, the microcredit regulator is also limping with inadequate workforce.
When asked, MRA executive vice-chairman Amalendu Mukherjee said small MFIs are facing capital crisis.
"Banks show reluctance to finance temporarily licensed MFIs and small MFIs. They value client relations."
He also said, "We're going to start a financial literacy programme. Many large MFIs are already working on it."
Mr Mukherjee said they are set to form a microfinance credit information bureau (MF-CIB) on clients' credit information and that there is a provision to recruit 30 IT professionals.
"To make MFIs dynamic, we've taken a course of action. We've also organised workshops to develop ties between banks and NGOs," he mentioned.
A senior official said many large MFIs are also having trouble with capital crunch.
Clients need to be sensitised to their rights and responsibilities. The MFIs have still a long way to go in this regard, said a source.
According to the APA, the MRA has taken multiple strategies to meet the challenges in the sector.
The MFIs are mainly dependent on clients' savings, bank loans, funds at subsidised rates from Palli Karma-Sahayak Foundation (PKSF) and other sources.
They run different socio-development and service-oriented programmes with foreign donors' funds, an MFI source said.
According to the MRA, some 67 per cent of funds of the MFIs come from income surplus and savings of their members.
As of July 01 of this year, 705 MFIs have been registered with the MRA and 128 are operating on a temporary basis as of May 27, official data shows.
Credit disbursement by registered micro-finance institutions stood at Tk 787.67 billion at the end of June 2016, with a growth rate of 24 per cent, compared to the previous year.
Experts said the MFIs get a negligible amount of funds from donors annually. Hence, their operations will not be affected even if the sector fails to get donor funds.
The MFIs received Tk 5.10 billion from the donors at the end of June 2016.
It was Tk 7.10 billion in June 2013, Tk 6.85 billion in June 2014 and Tk 5.21 billion in June 2015, according to the MRA report.
The sector is broadly financed by savings from clients, cumulative surplus (profit), concessional loan from sources like PKSF, grants from national and international donors and bank borrowing, it cited.
The most important source of funds is clients' savings.
In 2016, savings were the biggest source of funds, followed by commercial and specialised banks.
Besides, PKSF provided a large portion of loans at a subsidised rate, the report said.
The least important funding source was grants from donors. The previously donor-driven MFIs are now trying to rely more and more on internal sources, it said.
Savings by the clients now account for 34.91 per cent and cumulative surplus stands at 35 per cent, making the sector largely self-financing, said the report.
In another development, the PKSF's contribution to the microfinance sector has been declining since 2011, it said.
The number of microcredit clients stood at 27.58 million in 2016.