Home ›› 12 Oct 2022 ›› Front
Microcredit disbursements throughout Bangladesh have jumped by an impressive 26.87 per cent in FY22 compared year-on-year, fueled by a steady rise in economic activities as Covid restrictions eased, and lenders adopted more borrower-friendly policies.
The growth percentage of microcredit disbursement – compared to FY21 – more than doubled in FY22, while the growth percentage of loan recovery nearly quadrupled in the same period, show latest data from the Bangladesh Bank.
Microfinance institutions (MFIs) disbursed Tk 1,91,833 crore in FY22, an increase from Tk 1,51,209 crore recorded in FY21. The credit disbursement growth was only 10.96 per cent in FY21 compared to the previous fiscal year.
Besides, MFIs recovered loans amounting to Tk 1,65,269 crore in FY22, which is an increase of 18.29 per cent compared to FY21. The institutions had recovered Tk 1,39,712 crore in FY21, which was a 4.8 per cent increase than that of FY20.
Experts point out that the disbursement of microcredits dropped in FY21 because of the economic headwinds triggered by Covid pandemic. As the crisis eased towards the end of last year, the demand for loans to start smaller businesses increased.
This resulted in a greater amount of microcredit disbursements in the just concluded fiscal year, they added.
Speaking to The Business Post, BRAC Chairperson Hossain Zillur Rahman said, “The pent-up demand in the economy increased as the pandemic gradually eased. The MFIs behaved very humanely during the pandemic.
“As the disbursement of new loans did not drop, the recovery efforts were not that strict. MFIs had taken timely steps in providing and collecting loans, and the results of their initiatives are now visible in Bangladesh Bank data.”
MM Akash, a professor at the Dhaka University’s Department of Economics, said, “The rules were relaxed for disbursing and recovering loans amid the Covid crisis, and this positive trend continued even after the crisis eased.
“Besides, the economy gradually recovered from the Covid shock, pushing up demand for loans. These factors contributed to the growth in microcredit disbursements.”
Inflationary pressure to hit microcredit
The high inflation and USD shortage, triggered by the Russia-Ukraine war, have caused the prices of almost every essential commodity spiral out of control. Under such circumstances, the disbursement of microcredits might not see a growth similar to the last FY.
Industry insiders also expressed concerns that such credit may be used for consumer spending.
In this context, BRAC Chairperson Hossain Zillur Rahman said, “MFIs disburse microcredit based on business activities. We do not have any concerns about borrowers eating up loans to cover their families’ day-to-day expenditure – under the high inflationary pressure.
“However, the borrowing capacity of microcredit borrowers may decrease due to increased inflationary pressure. We might witness this effect in the current financial year.”
Adding that the credit growth may not be sustainable, Prof Akash said, “There are two reasons. First, the inflationary pressure will reduce the borrowers’ ability to repay loans, and second, the relevant rules will not remain as relaxed as they are now.
“The demand will remain, but these two factors will cause loan disbursements to decline.”
State Minister of Planning Shamsul Alam had recently said, “Inflation rate stood at more than 9 per cent during this August and September.”
It should be noted that point-to-point inflation rose in a single month in August to the highest rate in a decade.
How much did top MFIs disburse?
BRAC, ASA, Grameen Bank and Proshika disbursed over 60 per cent of the total micro loans in FY22. The four non-government organisations (NGOs) disbursed Tk 1,15,720 crore, out of total disbursement amount Tk 1,91,833 crore in the last FY.
Among them, the world’s largest non-government organisation, BRAC distributed over one fourth of the total amount last FY. The company disbursed Tk 49,100 crore in FY22, which is 17.16 per cent higher than the previous fiscal year.
ASA was in the second position in terms of microcredit disbursements in FY22. The organisation disbursed loans amounting to Tk 44,640 crore that year, which is 37.44 per cent higher compared to that of FY21.
Grameen Bank disbursed loans amounting to Tk 20,660 crore in last fiscal year, and the growth was 4.98 per cent compared to FY21. However, the institution’s loan disbursements did not increase in FY21, instead it declined by 4 per cent compared to FY20.
According to central bank data, Proshika achieved the highest growth in loan disbursements last FY. The disbursement growth rate was 69.23 per cent, and the amount disbursed was Tk 1,320 crore in FY22, when compared year-on-year.
Loan recoveries rose too
The microcredit recovery rate was very good in the last FY. That year, MFIs recovered Tk 1,65,269 crore, which was a 18.29 per cent growth compared to the previous FY. Meanwhile, the year-on-year recovery growth rate was only 4.8 per cent in FY21.
An analysis of the central bank data shows that Proshika has done the best in terms of loan recovery. The organisation’s recovery growth was 66.23 per cent or Tk 510 crore in FY22. Its recovery amount was Tk 1,280 crore during the same period.
Meanwhile, BRAC’s recovery increased by Tk 3,490 crore or 7 per cent in FY22 and the recovery amount was Tk 52,760 crore in the same FY. ASA’s recovery increased by 23 per cent or Tk 71 crore and the amount of recovery was Tk 375 crore in the last FY.
Grameen Bank’s microcredit recovery however has decreased by Tk 350 crore or 1.69 per cent compared to the previous financial year. The recovery amount of the NGO was Tk 20,320 crore in the last FY.
Commenting on the issue, BRAC Chairperson Hossain Zillur Rahman, said, “The activities – in which the micro-borrowers are involved – mostly meet domestic demand. As a result, their businesses began to recover as the pandemic eased, which made repayments much easier.
