The Current Situation of Microfinance in Bangladesh

Since its inception, microfinance has evolved as an economic development approach to benefit low-income people in rural and urban areas. Bangladesh has one of the longest histories with microfinance. Since various pilot programs and experiments were conducted by Grameen Bank and BRAC, microfinance has undergone continuous improvement in the country.
Now, Bangladesh boasts a large number of well-known microfinance institutions (MFIs) including Grameen Bank, BRAC, and the Association of Social Advancement (ASA). Simultaneously, many smaller MFIs have started operations throughout Bangladesh. As of December 2008, 402 MFIs possess a license from the Microcredit Regulatory Authority (MRA) and 4,236 MFIs have applied for a license.i
As the microfinance market has matured in recent years, competition has increased among major MFIs. Against this backdrop of intense competition, overlapping loan problems among major MFIs and borrowers has emerged as a problem in Bangladesh. While poor people have more choices from which MFIs to borrow money, the number of people who use multiple loans from various MFIs has been increasing. As a result, there are ever more heavily indebted people in Bangladesh, and this is beginning to pose a threat to MFIs and the microfinance industry. Considering how many MFIs operate in Bangladesh, the microfinance market seems to have become saturated.
The object of this study is to analyze the overlapping loan problems based on previous research and interviews the author conducted with ASA borrowers and ASA field staff in Rajshahi and Comilla, Bangladesh in 2009. It will then describe issues caused by those overlapping loan problems. In conclusion, it will recommend measures that the whole microfinance industry in Bangladesh should take to prevent this problem from worsening.