1. The Role of Government and Networks in17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitRegulation and Support of MFIsin BangladeshMd. Abdul KarimManaging DirectorPalli Karma-Sahayak Foundation(PKSF)Bangladesh

2. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitBackground Bangladesh is one of the most poverty pronecountries of the world. Poverty alleviation is the central agenda of theGovernment. During the last ten years, poverty rate of thecountry has been reduced to 25% from 42%. 3. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitBackground International community has appreciated thesuccess of Bangladesh in poverty reduction. Microcredit has enormous contribution inpoverty reduction. UNO recognized Bangladesh as `The Pioneerof Microfinance in 2005. 4. Role of Government in Poverty Alleviation throughMicrofinance17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmit Bangladesh became independent in 1971. The Government took initiatives to reconstructthe countrys infrastructure and economy. NGOs (Non-governmental Organization) cameforward to undertake relief and rehabilitationprograms in the war-wrecked country with thesupport of the Government. 5. Role of Government in Poverty Alleviationthrough Microfinance Microcredit programs were first initiated inBangladesh through a government project titledSmall Farmers Development Project (SFDP). Bangladesh Academy for Rural Development(BARD) implemented SFDP.17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmit 6. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitEstablishment of Grameen Bank Professor Yunus started the Grameen Bank projectin 1976. Grameen Bank Project was transformed into aspecialized bank by a government legislation in 1983. 7. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitGrameen Bank Grameen has 8.5 million borrowers with a loanoutstanding of BDT 84 thousand million which isequivalent to USD 1100 million. Grameen has secured 20% market share of themicrofinance industry in the country. 8. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitGrameen Bank The Grameen Model is being followed in manycountries. Grameen has developed many good practices inimplementing Microcredit Programs. In 2006 Grameen Bank and Professor Yunusjointly won the Nobel Peace Prize. 9. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitEmergence of MFIs in Bangladesh Grammens success inspired the creation of hundredsof NGO-MFIs. Government departments (Social WelfareDepartment, NGO Bureau and Department ofCooperatives etc) registered NGO-MFIs. Government of Bangladesh (GoB) ensures favorableenvironment for the NGOs for microfinanceprograms. 10. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitMFIs in Bangladesh The NGOs did not have enough technicalcapacity and financial resources to expand theirprogram as per the demand. So, GoB established PKSF as an apexorganization for providing financial supports andcapacity building services to the MFIs. 11. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitEstablishment of PKSF GoB established PKSF in 1990 as an apexorganization for poverty alleviation throughemployment creation. PKSF implements its programs through the PartnerOrganizations (POs). PKSF has become the standard setting organizationin Microfinance sector in the country. 12. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitPKSF PKSF set standards and formulated policies. PKSF developed performance rating tools forMFIs. At present 273 NGO-MFIs are receiving fundand capacity building support from PKSF. 13. PKSF PKSF has 8.28 million borrowers with anoutstanding loan of BDT 104 thousand million,equivalent to USD 1300 million. The market share of PKSF is around 31% of theindustry. The rapid expansion of PKSFs Microfinaceprograms in terms of outreach and institutionaldevelopment have become possible due to thecontinuous support of the Government.17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmit 14. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitEstablishment of Institute of Microfinance (InM) In 2006, through the support of the Governmentand initiative of PKSF, Institute of Microfinance(InM) was established, with a view to providingcapacity building and research support to MFIs. 15. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitEstablishment of Institute of Microfinance (InM) InM is conducting research on various aspectsof microfinance and suggesting sustainableapproaches for the sector. InM has also been conducting certificatecourses, Diploma courses along with modulartraining programs on Microfinance. 16. Microcredit Regulatory Authority (MRA) Government created a Microcredit RegulatoryAuthority (MRA) in 2006 under the MicrocreditRegulatory Authority Act 2006. MRA is the central regulatory body to monitor andsupervise microfinance operations of NGO-MFIs inBangladesh.17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmit 17. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitMRA MRA promulgated Microcredit Regulatory AuthorityRules 2010 in order to ensure transparent operationsof Microcredit programs. MRA formulated many policies in the area ofMicrocredit operations like the Loan loss policy, theService charge calculation policy, the Interest onsavings policy and many others. 18. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitMRA MFIs reduced their service charge on Microcreditloans and started calculating service charges onDeclining balance method instead of Flat ratemethod. 19. Microfinance programs run by Banks The Government has started microfinance/ruralfinance by nationalized commercial banks and privatebanks under the supervision of Bangladesh bank, thecentral bank of the country. About ten nationalized and private banks areoperating microfinance program at present. Bankingsector has 3.5 million borrowers with an outstandingof BDT 310 thousand million (USD 4000 million)including rural finance.17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmit 20. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitMicrofinance Programs of Ministries andGovernment Organizations Government Ministries and specializedinstitutions are operating microfinanceprograms with direct support from thegovernment. The government programs havecovered around 5% of the sector. 21. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitNetworking Organizations Networking organizations have been establishedin Bangladesh with the support of theGovernment to provide services to the NGO-MFIsfor creating microfinance friendlyenvironment for the sector. 22. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitCredit and Development Forum (CDF) CDF was established with the support of theGovernment in 1992 as a networkingorganization in Microcredit Sector. CDF provides supports to its members. 23. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitCredit and Development Forum (CDF) CDF activities: Building capacity of MFIs,lobbying, networking & advocating forMicrocredit related issues, conducting research,disseminating information and best practicesamong MFIs, building linkages between MFIsand funding agency. CDF has a network of more than 1500 MFIs. 24. International Network of Alternative FinancialInstitutions-INAFI Bangladesh INAFI Bangladesh is engaged in promoting inclusive17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitdevelopment through financial inclusion. INAFI focuses on: Financial Inclusion Social Inclusion Climate Change Adaptation and SustainableLivelihood. 25. International Network of AlternativeFinancial Institutions-INAFI Bangladesh INAFI conducts research, develops capacity ofmember MFIs, organizes workshops, developsproducts and pilots projects through partnershipwith MFIs.17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmit 26. Social Safety net Programs of Government The Government is providing supports to the poor and the17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitdestitute people under various safety net programs. Old-age allowance, Allowance for widow, deserted anddestitute women, Vulnerable Group Feeding (VGF),Allowance for freedom fighter, Cash for works, DisasterCoping Support are the major safety net programs of theGovernment. These safety net programs support directly or indirectlythe microfinance sector of the country. 27. Conclusion With the Government supports mentioned above,a huge market of microfinance and rural financehaving 40 million borrowers with an outstandingportfolio of BDT 900 billion (USD 12 billion) isrunning in a transparent and efficient way.microfinance is 55%and 45%is rural finance of this total portfolio The microfinance sector is expandingcontinuously. The Government is extending its support to meetthe changing demands of the sector.17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmit 28. 17TH MICROCREDIT SUMMIT#17MCSumGENERATION NEXT: INNOVATIONS IN MICROFINANCEmitThank You