About the BFP-B programme
Business Finance for the Poor in Bangladesh is a facility to create economic opportunities for small businesses by changing the behaviour of market actors in the financial sector. From 2015-2019, we worked towards improving the policy and regulatory environment for financial institutions, inducing private sector investment in expanding the frontiers of finance and improving credit worthiness of small businesses. At present, we are facilitating the Micro Credit Regulatory Authority to establish Micro Finance Credit Information Bauer in Bangladesh( MF-CIB) for enhancing the credit worthiness of micro finance borrowers.
Small businesses are among the main drivers of growth for countries worldwide. In Bangladesh, small businesses employ over half of the country’s workforce and contribute to a quarter of GDP.
These 8 million small business, also known officially as cottage, micro and small enterprises (CMSEs) are the foundation of the country’s private sector.
Access to and use of formal financial services is one the major drivers of growth of small businesses in Bangladesh and the rest of the world, according to World Business Environment Survey Investment Climate Surveys.
This means credit for investments, digital payments to efficiently send and receive money for goods and services, deposit accounts and digital wallets to safely store excess liquidity, and insurance to de-risk investments.
Yet 75% of Bangladeshi small business are unserved by the formal financial sector, while the rest are under-served. Financial institutions have little incentive to serve the small business segment because capital constraints, conservative boards and regulatory environment discourage investment in a segment with high costs of risk assessment and distribution.
Many small businesses choose not to use formal services even where these are available. There is little incentive to use available services due to limited product and channel offering, and inflexible product and pricing features.
This means small businesses struggle to grow, and the wider benefits of healthy and growing small businesses to the overall economy are muted.
Creating opportunities countrywide
The BFP programme is a partnership between DFID Bangladesh and the Government of Bangladesh. It is executed under the Financial Institutions Division of the Ministry of Finance and implemented with the Bangladesh Bank. BFP-B managed by economic consultancy Nathan Associates London Ltd.
Improving the policy and regulatory environment
The BFP-B aims to improve the policy and regulatory environment for financial institutions, incentivising them to make long-term investments in growing their small business portfolio.
We do this by generating evidence and actionable recommendations to build the case for regulatory change, improving sector coordination and building consensus between regulators and market actors to facilitate adoption of recommendations for policy change, and advising and assisting the Ministry of Finance and regulators to implement these changes.
Triggering private sector investments
BFP-B is catalysing private sector investment in developing new prototypes and scaling viable business models that serve small businesses based on understanding challenges small businesses face in accessing and using financial services.
By absorbing some of the financial-risk associated with investing in these business models through a grant of up to 50% of the project, we expect the private sector to overcome market failures that would otherwise prevent them from making an initial investment, either from the cost of information discovery, costs of mitigating risks or simple lack of available capital.
Enhancing the credit worthiness of small businesses
We are also improving the credit worthiness of small businesses, enabling financial institutions to reduce the cost of risk assessment and improve the risk-adjusted returns of lending and investing in small businesses.
We do this by investing in private sector proposed commercially-viable business solutions and assisting the Microcredit Regulatory Authority to establish a functioning microfinance credit information bureau.
About Nathan Associates
The BFP-B programme is managed by Nathan Associates London Ltd.
Nathan Associates (Nathan) is a global economics and management consulting firm which has been at the forefront of working with government and business since its founding in 1946.
Our international practice areas include financial sector development, private sector development, women’s economic empowerment, economic policy and governance, and trade and logistics.
Nathan staff have recognised, in-depth knowledge and expertise working in their respective fields. Since 2000, Nathan has successfully managed more than 120 long-term projects in over 50 countries.
We have 270 employees in Asia, Europe and North America, and we work with a wide range of donors including CGAP, Comic Relief, DFID, the EIB, IFC, Mastercard Foundation, SIDA, USAID and the World Bank.