Microfinance Institutions and Legal Status: An Overview of the Microfinance Sector in Bangladesh

Although the microfinance sector in Bangladesh is mainly driven by Non-Governmental-Organizations (NGOs), there are other types of Microfinance Institutions (MFIs) that also provide financial services to the poor. Despite the criticism of microfinance programs, the current poverty situation in Bangladesh still requires such programs for consistently battling poverty. Hence, the aim of this paper is to profile the microfinance sector based on their legal status and investigate any possible differences (if any) between them in various aspects. After a thorough investigation of the sector, it was found that around 33 million of the clients are being served by the mainstream MFIs (NGO and Grameen Bank) while another 10-15 million clients are served by other types of MFIs (financial cooperatives, credit unions, various ministries etc.), accounting for the one-third of the total population in Bangladesh. While the mainstream MFIs basically works with poor, other categories of MFIs are concerned with relatively wealthy clients. Looking into the financial performance and social intermediation of the MFIs, the NGO-MFIs performed better than other types of MFIs in the sector.