Improving systemic competitiveness of financial markets: Assessing progress towards systemic change within the financial sector

BFP-B is designed to couple social and economic objectives by a making markets work for the poor (M4P) approach to increase access to finance for MSEs, especially those that are currently underserved by the formal financial sector. The programme aims to deliver sustained change in how market systems for finance work in Bangladesh for the benefit of MSE financing. To achieve this it has operated across the financial systems in various sub-sectors, such as banking, MFI and insurance sector. It has also tried to promote increase usage of DFS and MFS platforms; used challenge fund to incentivize private sector partner to pilot innovative business models; it, through its policy component, has worked with regulators to facilitate private sector conducive regulatory reforms.

Read our latest report on systemic change where we use systemic change tools and processes to assess BFP-B’s progress.

PRO-POOR RELEVANCE STUDY

BFP-B manages around 36 interventions under the Business Finance Challenge Fund (BFCF). The Challenge Fund projects were designed to provide micro, small and medium enterprises (MSMEs) access to insurance coverage and affordable business finance, especially from formal sources. In order to ensure access to finance, the program enables MSMEs to avail Business Development Services (BDS), such as financial literacy, access to financial information, technological solutions etc. According to the program mandate, BFP-B aims to provide Challenge Fund-supported BDS, insurance coverage, and improved financial services to 180,000 MSMEs among which 88,150 will get first-time access to the formal financial sector.

Read our recent research report where we evaluate the incidence of poverty persisting among the beneficiaries of the BFP-B programme.

Progress Assessment of Implementing Policy Recommendations: Using the policy advocacy framework

The Policy Component of BFP-B Project has done multiple studies and came forward with number of recommendations. Then BFP-B prioritized some policy recommendations through consultation with the regulators and other stakeholders. The policy recommendations were prioritized by considering the quick wins that could be achieved within the project period and which will have significant impact on access to finance of MSEs.

Read our report on a study in July and August 2019 to assess the progress of BFP-B policy component activities, capture the current status and estimate a probable achievement by the end of the project. The study also tried to understand the probable impact of the policy changes once those are successfully implemented.

Keynote: Leaving a legacy in market facilitation within the financial sector

Read our keynote paper on our programme.

blog post: battling with the pandemic

Sayeeda, a small tea stall owner in Badda, has been running her stall for over five years now. She started off as a street vendor and managed to get a loan of BDT 20,000 from Sajida foundation five years back.

Her previous loan was repaid by January this year and she took a new loan of BDT 100,000 February this year, to finance the expansion and new inventory. She was done with the expansion and just started to get the new goods in by March this year when the pandemic hit. The government enforced lockdown across the country for over two months starting from 26 March 2020.

Sayeeda’s tea stall had to be closed as it wasn’t a proper convenient store yet and tea stalls are prime places for gathering and hangout for local people. “I had never faced such a lockdown situation before. It was as if nobody knew when the lockdown would be lifted. Me and my family was left without bread and butter” said Sayeeda, describing her plight.

As we enter the winter season in the midst of a COVID-19 pandemic, how will small businesses like Sayeeda’s survive? Read our blog post to learn more about how small businesses had suffered during the COVID-19 lockdowns.

Microfinance credit information bureau: Readiness and capacity building of mfis

BFP-B is supporting the Microcredit Regulatory Authority (MRA), Bangladesh to establish the first Microfinance Credit Information Bureau in the country. The bureau will house the credit histories of millions of microfinance clients, allowing them to access their full credit potential.

The Bangladesh Bank plays a vital role in this initiative, in the development of the CIB software, in providing technical training to MFIs, and supporting the maintenance with the MF-CIB application software and data center.

Download our 2-pager for more information on how the BFP-B and Bangladesh Bank are supporting MFIs in building their capacity for the Credit Information Bureau.

The impact of covid-19 on the microfinance industry in bangladesh

According to latest IMF country focus report, up until the COVID-19 pandemic, Bangladesh’s economy had been growing close to 7 percent a year on average over the past decade. In light of the recent events, it is predicted to see a fall-off in grow to around 2 percent. Assuming the impacts of pandemic have curtailed, economic activities are expected to recover near the end of 2020 and 2021, it is predicted that GDP growth will climb back up to around 6 percent in 2021. (IMF 2020)

The assessment of the microfinance industry by BFP-B is a much needed and timely initiative to obtan a comprehensive understanding of the impact of COVID-19 on Bangladesh’s microfinance institutions, and of this pandemic’s impact on development of the Microfinance Credit Information Bureau (CIB), which, BFP-B is assisting Bangladesh Bank and MRA to set up. As part of this exercise, BFP-B has conducted several interviews with small MFIs and reached out to 16 major MFIs through questionnaires to understand:

• The impact of Covid-19 on MFI’s loan portfolio

• Liquidity situation of MFIs

• Government policy changes to address challenges of low-income communities

Moving the needle on financial inclusion

Over the last 5 years, the Business Finance for the Poor in Bangladesh (BFP-B) programme, a £25 m facility, has been working with the Government of Bangladesh, regulators, commercial financial institutions, and technology companies to disrupt their business environment, and make real the commercial business case to expand finance for small business in Bangladesh - not through compulsion and compliance but through incentives and enablement.

Download the PDF to learn more about our work in financial inclusion for the past 5 years.

White paper: Covid 19 and MFI sector of Bangladesh

The microfinance industry in Bangladesh represents, in its essence, a national ‘safety-net’ infrastructure. It reaches more than ½ of Bangladesh’s 160 million people - mostly low-income people, women, and the vulnerable – with financial and non-financial services with little or no public subsidy. This MFI mediated safety-net infrastructure offers the most reliable means of keeping liquidity flowing among the millions of people and businesses most impacted by COVID 19 and who will largely be left to fend for themselves given the limited size and duration of the national stimulus package. Yet, credit supply pressures are exposing large sections of the microfinance sector to an existential threat, impacting on the liquidity of low-income families and their businesses. Nathan Associates in collaboration with thinkahead Consulting firm prepared a white paper on impact of Covid 19 on MFI sector and how to tackle the storm.

National Financial Inclusion Strategy:

Bangladesh being a leading member of AFI committed internationally in 2014 to develop “National Financial Inclusion Strategy” (NFIS) for Bangladesh as part of signatory of Maya Declaration. This commitment was reiterated in 2015 during the Bangladesh visit of Her Majesty Queen Máxima of the Netherlands by the capacity of UN Secretary-General's Special Advocate for Inclusive Finance for Development (UNSGSA). For stepping toward sustainable fi­nancial inclusion, Bangladesh needs developing its own ‘National Financial Inclusion Strategy’ onward. Accordingly, Bangladesh Bank and Ministry of Finance took an initiative to develop a complete draft of NFIS for Bangladesh with the support from the UK Government (as part of BFP-B project funded by UK aid).

BFP-B case study: maximising WOMEN’S ECONOMIC PARTICIPATION IN BANGLADESH

Promoting gender equality and advancing the status of women and girls is a human right and essential to achieving Sustainable Development Goal 5. According to the gender gap index of the World Economic Forum in 2020, Bangladesh ranks 50th overall out of 153 countries, demonstrating significant improvement and commitment from the 86th place recorded in 2012 (World Economic Forum, 2019).

This case study aims to shed light on what economic and social empowerment could look like for women in Bangladesh and shares best practices for supporting empowerment implemented by the Business Finance for the Poor Programme. It also identifies challenges that remain to be addressed and recommendations for future economic development interventions.

Policy Study: Cluster and Value Chain Financing for MSEs in Bangladesh

This study aims to define interventions that are required to address the challenges for cluster and value chain development and financing and define the role of key finance sector actors. It also provides recommendations to policy makers to develop a more effective policy environment to promote cluster and value chain development and financing in the short, medium and long term.

Policy study: Mobile Financial Services for MSEs in Bangladesh

This study identifies key challenges and opportunities to address access to finance of MSEs by mobile financial service providers. This study includes primary and secondary research and a detailed review of existing literature on use of MFS in Bangladesh.

Policy study: Diagnostics of Micro-enterprise Lending by MFIs in Bangladesh

This research identifies constraints to developing micro-enterprises, especially relating to financing issues. It outlines strategies for promoting and developing micro-enterprises, constraints they face, their current financial and capital structure, intensity of access to different credit markets. It also provides estimates of projected demand for micro-enterprise credit, and it suggests policy options for improving accessibility of micro-enterprises to credit markets. The potential of banks and microfinance institutions in financing of micro-enterprise has particularly been examined in the study. 

Policy Study: Review of SME Credit-related Policies of Bangladesh Bank Areas of further improvement with a focus on Micro and Small Enterprise (mSE) Finance

This study examines stakeholder perspectives and experience of using the mSME and SME Policy of BB. It recommends a suitable definition of mSMEs that may contribute towards formulation of an SME strategy document of the Ministry of Industry, and MRA’s attempt to define micro-enterprises. It also appraises the feasibility of developing two separate policies for financing of different enterprise segments. It also recommends further improvements of Bangladesh Bank’s current SME Policy, which is presumed to include micro-enterprises as well.

Innovative mse: financing products and delivery channels in BANGLADESH

The aim of this study was to understand the regulatory barriers in launching, operationalising, pilot-testing and up-scaling of innovative financing products and delivery channels, by considering the regulator's views on the sustainability or lackings of new or existing regulations. The study reviewed the experiences of the awardees of Challenge Fund (CF), and identified regulatory barriers some of the awardees are facing to implement and conduct business.

Feasibility study on transformation of MFIs

Microfinance sector in Bangladesh can play a larger role in deepening and broadening financial inclusion; serve more underserved customers and fill gaps for existing as well as potential new customers. This is possible through a transformation into a better capitalised and well-regulated form.

The regulators may amend the existing banking law or draft new legislation incorporating special conditions. The Bangladesh Bank may calibrate the transformation process and cushion the transformation shocks in MFIs while strengthening the regulatory rigour over a few years, rather than from the inception of the new entities. Transformation is more suited for the larger MFIs which can mobilise the capital from socially oriented investors and expand the business. The smaller MFIs have the option to continue as MFI and work towards achieving eligibility for transformation.

Addressing market demand through agent banking: lessons learnt

This policy brief has been prepared by extracting key findings from a study, titled “Addressing Market Demand through Agent Banking: Lessons Learnt”. The study was conducted in August, 2018. This brief summarises the rationale of agent banking prospects, identifies barriers to agent banking, understands the current financial landscape, and analyses the existing policies in Bangladesh. The brief also seeks to understand the use of agent banking by customers and explore the opportunities available to regulators, policymakers, and industry players to address the bottlenecks associated with the proliferation of agent banking.

Alternative financing instruments

Diganta and Online Credit Assessment System (OCAS) by Bank Asia

Weather Index Based Insurance