Despite the expansion of microcredit and banking system, more than 26 per cent of the households in the country still rely on the informal financial services like local lenders, found a new study of the Institute of Microfinance. The study, presented at a conference on Saturday, showed that 65.69 per cent of the households had access to the formal financial services like banks and qausi-formal markets like microfinance institutions.
The InM organised the two-day conference on microfinance and development starting on Saturday at Palli Karma-Sahayak Foundation auditorium in the city aiming to contributing to the national policy discussion through disseminating research finding.
InM chairman Qazi Kholiquzzaman Ahmed inaugurated the conference.
The study on access to financial services in Bangladesh, presented by InM executive director MA Baqui Khalily, showed that overall 76.77 per cent households in the country had access to financial services in any financial markets.
It said that the country’s financial service system had grown because of the huge presence of MFIs that covers around 43.23 per cent households in the country while the formal banking system covers around 37 per cent.
But, it said, informal credit market continues to exist in the country covering around 26 per cent of the households, where formal and quasi-formal financial services are neither available nor do they offer flexibility these savers need.
Regarding the role of MFIs in financial system, it said, although critics are often unable to understand the role of MFIs and evaluate their role in terms of impact on poverty alleviation, MFIs have been playing a greater role in financial system development. ‘With this wider network, MFIs have been contributing to resource mobilisation and use of resources through lending,’ it said.
The study showed that only 0.99 per cent of households in the country had access to private banks in the last five years, 3.43 per cent to the government commercial banks, 3.33 per cent to the government development banks against around 39 per cent to quasi-financial systems like NGO and MFIs including Grameen Bank.
Another study of the InM said that with an average micro enterprise, rural households drew around 36 per cent of income and they were much better off in terms of income, consumption and poverty.
Visiting fellow SR Osmani from department of economics of the University of Ulster, UK in the third session titled microfinance and poverty, said in absence of microcredit, extreme poverty in rural Bangladesh would have been 9-12 per cent higher and overall poverty would have been about 5 per cent higher in 2010.
The InM studies showed that despite having access to finance, more than 50 per cent households had to spend their entire savings and 20 per cent took loans with high interest in mitigating the crisis related to death and health shock.
The speakers at the conference stressed designing of a fresh and innovative micro insurance package that would offer more meaningful coverage to the beneficiaries.
In his speech Kholiquzzaman Ahmed said, ‘We have made improvement in poverty reduction, but now we have to make it sustainable. We have to fulfil demands of the poor people through financial inclusion. Microcredit can keep remarkable contribution to these goals.’
Former banker Mamun Rashid said it was possible by the exiting banks to enhance financial inclusion and giving permission to nine new banks in the country was not required in this connection.
‘If the rural banking gets momentum, the financial inclusion will be enhanced. Insurance coverage of the rural people still remains at 1 per cent. Mobile banking in the rural areas also can develop the financial inclusion in the country.’
-With New Age input
