Bangladesh Priorities
Home Menu

Flexible microfinance models - For more economic opportunities

The early success of microfinance in many places around the world caused some to praise it as a panacea for economic development. More recently, however, critics have questioned some aspects of the model...

Read More

Traditional Versus Flexible Microfinance in Bangladesh

Benefits and costs of microfinance systems in Bangladesh 

Download Full Academic Paper

Microfinance

For decades in Bangladesh, microfinance has helped increase income and consumption for the poor, ensured food security for many, created employment opportunities, and empowered women. Nearly 700 microfinance institutions operate in the country today according to the Credit and Development Forum, disbursing approximately Tk 647 billion (Tk 64,700 crore) to 3.4 crore active borrowers.

The early success of microfinance in many places around the world caused some to praise it as a panacea for economic development. More recently, however, some critics have worried that poorer borrowers can become trapped in a spiral of debt, or that entry by for-profit entities has caused microfinance to lose its moral compass. The truth lies somewhere in the middle.

Proposed Strategies

Strategy Takas of benefits per taka spent
Traditional Microfinance 1.7
Flexible Microfinance 2
Traditional Versus Flexible Microfinance in Bangladesh image

Traditional Versus Flexible Microfinance in Bangladesh

New research by Subir Bairagi, an economist at the Institute of Policy and Social Sciences (IPSS), and Wasel Bin Shadat, executive director of IPSS and lecturer of econometrics at the University of Manchester, shows that incorporating flexible repayment models into microfinance can increase its benefits, particularly to borrowers. Each taka spent on these aims stands to do more than 2 takas of social good.

Even though traditional microfinance has made an impact on Bangladeshi society to some extent, it is difficult to define the degree of impact of microfinance on the “ultra poor” because of prevailing rigidity in the system."

- Dr. Subir Bairagi & Dr. Wasel Bin Shadat

Read the full analysis
Flexible microfinance models - For more economic opportunities image

Flexible microfinance models - For more economic opportunities

In a series of op-eds published in The Daily Star and Prothom Alo, Bjorn Lomborg outlined the key findings of the path-breaking research produced by the Bangladesh Priorities project.

While microfinance may not be a cure-all that can eliminate poverty worldwide, it can produce positive - if modest - benefits. And new research from Bangladesh Priorities highlights an innovation in microfinance that promises to boost those benefits even more."

- Bjorn Lomborg

Read more in the Daily Star
What do you think? image

What do you think?

Flexible microfinance can do more than Tk. 2 of social good for each taka spent, improving upon the return from traditional methods. But, do you think it should be a priority? We want you to continue the conversation about how to do the most good for every taka spent by participating in our Facebook poll.

Take the poll