The Bangladeshi government has played a key role in developing microfinance to alleviate poverty. It established the Grameen Bank in 1983, Palli Karma-Sahayak Foundation (PKSF) in 1990 as an apex organization, and the Microcredit Regulatory Authority in 2006 to regulate the industry. The government also supports networking organizations like Credit and Development Forum to build capacity among microfinance institutions. As a result of these efforts, Bangladesh now has over 40 million microfinance borrowers served by various government and non-government organizations, helping to reduce poverty significantly.

1. The Role of Government and Networks in
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Regulation and Support of MFIs
in Bangladesh
Md. Abdul Karim
Managing Director
Palli Karma-Sahayak Foundation(PKSF)
Bangladesh

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Background
• Bangladesh is one of the most poverty prone
countries of the world.
• Poverty alleviation is the central agenda of the
Government.
• During the last ten years, poverty rate of the
country has been reduced to 25% from 42%.

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Background
• International community has appreciated the
success of Bangladesh in poverty reduction.
• Microcredit has enormous contribution in
poverty reduction.
• UNO recognized Bangladesh as `The Pioneer
of Microfinance’ in 2005.

4. Role of Government in Poverty Alleviation through
Microfinance
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• Bangladesh became independent in 1971.
• The Government took initiatives to reconstruct
the country’s infrastructure and economy.
• NGOs (Non-governmental Organization) came
forward to undertake relief and rehabilitation
programs in the war-wrecked country with the
support of the Government.

5. Role of Government in Poverty Alleviation
through Microfinance
• Microcredit programs were first initiated in
Bangladesh through a government project titled
Small Farmers Development Project (SFDP).
• Bangladesh Academy for Rural Development
(BARD) implemented SFDP.
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Establishment of Grameen Bank
• Professor Yunus started the “Grameen Bank project”
in 1976.
• Grameen Bank Project was transformed into a
specialized bank by a government legislation in 1983.

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Grameen Bank
• Grameen has 8.5 million borrowers with a loan
outstanding of BDT 84 thousand million which is
equivalent to USD 1100 million.
• Grameen has secured 20% market share of the
microfinance industry in the country.

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Grameen Bank
• The Grameen Model is being followed in many
countries.
• Grameen has developed many good practices in
implementing Microcredit Programs.
• In 2006 Grameen Bank and Professor Yunus
jointly won the Nobel Peace Prize.

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Emergence of MFIs in Bangladesh
• Grammen’s success inspired the creation of hundreds
of NGO-MFIs.
• Government departments (Social Welfare
Department, NGO Bureau and Department of
Cooperatives etc) registered NGO-MFIs.
• Government of Bangladesh (GoB) ensures favorable
environment for the NGOs for microfinance
programs.

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MFIs in Bangladesh
• The NGOs did not have enough technical
capacity and financial resources to expand their
program as per the demand.
• So, GoB established PKSF as an apex
organization for providing financial supports and
capacity building services to the MFIs.

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Establishment of PKSF
• GoB established PKSF in 1990 as an apex
organization for poverty alleviation through
employment creation.
• PKSF implements its programs through the Partner
Organizations (POs).
• PKSF has become the standard setting organization
in Microfinance sector in the country.

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PKSF
• PKSF set standards and formulated policies.
• PKSF developed performance rating tools for
MFIs.
• At present 273 NGO-MFIs are receiving fund
and capacity building support from PKSF.

13. PKSF
• PKSF has 8.28 million borrowers with an
outstanding loan of BDT 104 thousand million,
equivalent to USD 1300 million.
• The market share of PKSF is around 31% of the
industry.
• The rapid expansion of PKSF’s Microfinace
programs in terms of outreach and institutional
development have become possible due to the
continuous support of the Government.
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Establishment of Institute of Microfinance (InM)
• In 2006, through the support of the Government
and initiative of PKSF, Institute of Microfinance
(InM) was established, with a view to providing
capacity building and research support to MFIs.

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Establishment of Institute of Microfinance (InM)
• InM is conducting research on various aspects
of microfinance and suggesting sustainable
approaches for the sector.
• InM has also been conducting certificate
courses, Diploma courses along with modular
training programs on Microfinance.

16. Microcredit Regulatory Authority (MRA)
• Government created a Microcredit Regulatory
Authority (MRA) in 2006 under the Microcredit
Regulatory Authority Act 2006.
• MRA is the central regulatory body to monitor and
supervise microfinance operations of NGO-MFIs in
Bangladesh.
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MRA
• MRA promulgated Microcredit Regulatory Authority
Rules 2010 in order to ensure transparent operations
of Microcredit programs.
• MRA formulated many policies in the area of
Microcredit operations like the Loan loss policy, the
Service charge calculation policy, the Interest on
savings policy and many others.

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MRA
• MFIs reduced their service charge on Microcredit
loans and started calculating service charges on
Declining balance method instead of Flat rate
method.

19. Microfinance programs run by Banks
• The Government has started microfinance/rural
finance by nationalized commercial banks and private
banks under the supervision of Bangladesh bank, the
central bank of the country.
• About ten nationalized and private banks are
operating microfinance program at present. Banking
sector has 3.5 million borrowers with an outstanding
of BDT 310 thousand million (USD 4000 million)
including rural finance.
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Microfinance Programs of Ministries and
Government Organizations
• Government Ministries and specialized
institutions are operating microfinance
programs with direct support from the
government. The government programs have
covered around 5% of the sector.

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Networking Organizations
• Networking organizations have been established
in Bangladesh with the support of the
Government to provide services to the NGO-MFIs
for creating microfinance friendly
environment for the sector.

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Credit and Development Forum (CDF)
• CDF was established with the support of the
Government in 1992 as a networking
organization in Microcredit Sector.
• CDF provides supports to its members.

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Credit and Development Forum (CDF)
• CDF activities: Building capacity of MFIs,
lobbying, networking & advocating for
Microcredit related issues, conducting research,
disseminating information and best practices
among MFIs, building linkages between MFIs
and funding agency.
• CDF has a network of more than 1500 MFIs.

24. International Network of Alternative Financial
Institutions-INAFI Bangladesh
• INAFI Bangladesh is engaged in promoting inclusive
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development through financial inclusion.
• INAFI focuses on:
 Financial Inclusion
 Social Inclusion
 Climate Change Adaptation and Sustainable
Livelihood.

25. International Network of Alternative
Financial Institutions-INAFI Bangladesh
• INAFI conducts research, develops capacity of
member MFIs, organizes workshops, develops
products and pilots projects through partnership
with MFIs.
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26. Social Safety net Programs of Government
• The Government is providing supports to the poor and the
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destitute people under various safety net programs.
• Old-age allowance, Allowance for widow, deserted and
destitute women, Vulnerable Group Feeding (VGF),
Allowance for freedom fighter, Cash for works, Disaster
Coping Support are the major safety net programs of the
Government.
• These safety net programs support directly or indirectly
the microfinance sector of the country.

27. Conclusion
• With the Government supports mentioned above,
a huge market of microfinance and rural finance
having 40 million borrowers with an outstanding
portfolio of BDT 900 billion (USD 12 billion) is
running in a transparent and efficient way.
microfinance is 55%and 45%is rural finance of this total portfolio
• The microfinance sector is expanding
continuously.
• The Government is extending its support to meet
the changing demands of the sector.
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Thank You