Microfinance Practice: [MFP] CGAP Newsflash: How Bangladesh Averted a Microcredit Crisis

CGAP Newsflash: How Bangladesh Averted a Microcredit Crisis

A new CGAP report released today, A Microcredit Crisis Averted: The Case of Bangladesh, indicates that during the period 2008 to 2010, Bangladesh microfinance institutions (MFIs) successfully averted a microcredit crisis. The report finds that MFIs took the independent and necessary steps of slowing growth and placing renewed focus on repairing finances, improving internal controls, fixing staffing challenges and re-establishing credit discipline to avoid the crisis.

The report analyzes a decade's worth of financial and performance audits as well as other numbers provided by the four largest MFIs. To bring a client-level perspective to the data, the report authors conducted random interviews with 43 low-income rural Bangladeshi households in 2013. These interviews illustrate the financial portfolios of the people interviewed, including their use of formal, semi-formal and informal tools.

Based on the interviews, the authors observed that cases of the most serious kind of over-indebtedness, where there is a permanent drop in household welfare, are not common now, nor were they during the high growth period. While the small sample of household interviews limits more general conclusions, the interviews did reveal a level of debt stress among some clients that the microfinance industry needs to take seriously.

Visit CGAP.org to read the full report, explore the household interviews and register for an upcoming web chat with two of the authors, Greg Chen and Stuart Rutherford.

CGAP

You have been sent this email because you are on the CGAP emailing list. If you prefer not to receive further emails, please email us at CGAP@WorldBank.org