NGO-MFISIN BANGLADESH VOLUME-X, JUNE 2013 A STATISTICAL PUBLICATION OF MICROCREDIT REGULATORY AUTHORITY NGO-MFls in Bangladesh A Statistical Publication Volume-X, June 2013 Microcredit Regulatory Authority (MRA) NGO-MFIs in Bangladesh, Volume-X June 2013 Copyright: Microcredit Regulatory Authority Published by: Microcredit Regulatory Authority June 2014 ii Contents Chapters Title Page No. Chapter-1 State of Microfinance 01-16 Chapter-2 Basic Information 17-76 Chapter-3 Total Cost- Financial & Operational Cost 77-110 Chapter-4 Profitability-Portfolio Yield, Interest Rate Spread, 111-142 Return on Asset & Operational Self Sufficiency Chapter-5 Composition of Sources of Fund 143-274 Chapter-6 Size-wise Distribution of Loan Outstanding and Savings 275-440 iii Chapter-1 State of Microfinance Microcredit Around The World Globally, microfinance has been growing as an institutionalized sector through devising different measures of performance improvement, cost efficiency and efficient regulation. Despite having several risks like among others over-indebtness, political interference, political instability etc. described by microfinance banana skin survey 2012, this industry had experienced good progress in terms of the number of borrowers, volume of the sector, innovation in product development and service delivery around the world during 2012. Similar to 2012, microfinance growth will continue in FY 2013 even with greater rate had been predicted by several global microfinance think tanks. According to the prediction of responsAbility research1, global expected growth in microfinance sector for 2013 was 15% to 20% and they predicted this growth will vary across regions in following rate. Graph-1: Prediction on worldwide microfinance growth. South Africa 10%-20% Central America 10% Sub-Saharan Africa 10%-15% Middle East and 10%-15% North Africa Central Asia and the 15%-20% Caucasus Eastern Europe 5% South and East Asia 20%-30% Global 15%-20% Source: ResponsAbility Research But 2013 appeared as a critical year for global economy. Private investment was seriously vacil- lated during mid-year by the abrupt slowdown of private capital inflow into the emerging markets. It was predicted that almost all the sectors of global economy will go berserk. However fortunately microfinance market was not affected by this climate of uncertainty with overall loan volume grew by almost 20% (responsAbility Investments AG, 2013). World wide social rating score by region shows that MFIs in the Middle East and North Africa and Latin America and the Caribbean did well. The median overall score in Africa and Asian regions are 54% and 60% respectively (responsAbility Investments AG, 2013). African MFIs have low median score in the social performance management and client protection areas, at 53% and 49%, respectively. Variation within country is also evident in Africa for instance, overall scores range between 22% and 70%. Following graph shows the performance of different regions in social performance of MFIs. 1. ResponsAbility research is a global microfinance research institution which publishes a research paper on global microfinance sector annually. 2 Graph-2: Social performance of microfinance in different regions Achievements of Social Performance Areas per Region 75 Excellent 70 Good MENA 66% 67% LAC 65 64% 63% 65% 61% 64% 61% ECA 60 60% 57% 57% 58% 55% Asia 55 54% 53% Africa Median scrores per region 50 Fair 49% 45 Overall SPM2 Client Human Outreach Protection Resources Services and Change Source: Convergence 2014 Business environment for microfinance is very much essential. How government, MFIs and other actors act in the sector has real significance on the performance on microfinance. The economists’ Financial Intelligence Unit along with other organizations like Multilateral Investment Fund (MIF), CAF- Development Bank of Latin America, Citi Microfinance and Center for Financial Inclusion at Accion publish Global microscope on the microfinance business environment for this purpose. This report provides yearly update about the performance of global microfinance sector. It is consists of 12 indicators of three kinds namely Regulatory Framework and Practices, Supporting Institutional Framework and Adjustment Factor: Stability. In 2013 report, Asian region consists of 12 countries (seven in East Asia and five in South Asia) ranked third among the five microscope’s regions in overall score. Asian countries did well in regulatory framework and practices. They got second highest score in this part. As a whole, this region had the third-highest score on Supporting Institutional Framework and was the third-strongest in terms of stability. Bangladesh being pioneer in microfinance is also pioneering in regulatory issues. It had established a seperate regulatory body for microfinance sector. In 2013 Bangladesh had achieved commendable success in consumer protection, capacity building of MFIs, reducing fund crisis of MFIs etc. Pakistan (3rd), Philippines (4th) and Cambodia continued in the global top ten, where as Cambodia improved its position from eighth to sixth place (The Economist, 2013). Pakistan and Cambodia shows great strength in Credit Bureau’s coverage to their microfinance borrowers. Their credit bureau showed 90% and 80% coverage of microfinance clients. India and Mongolia improved their position from 22nd to 16th and from 25th to 21th 2SPM stands for social performance management 3 respectively because of their improvement in the dispute-resolution systems for microfinance client. On average, the Asian region leads globally in policy and practice for financial transactions through agents, such as mobile and correspondent banking (The Economist, 2013). Pakistan and Philippines are leading in this regard. Pakistan made good progress regarding bridging the MFIs and mobile phone operators for mobile banking and Philippines implemented electronic wallets and correspondent relationship for micro-insurance. Eastern Europe and Central Asia (ECA)’s score rose in global microscope 2013. Countries of this region had biggest gain contrarily largest decline during that time. Azerbaijan and Georgia’s score improvement boosted score of this region in the microscope 2013. On the contrary Kyrgyz Republic’s score decline caused large decline of the overall score of this region. Kyrgyz Republic experienced seven points decline: droped from 30th position to 38the position. In 2013 microscope report ECA’s overall score was second from the last but this region performed well on the supporting institutional framework category, outscoring every region except Latin America and the Caribbean (The Economist, 2013). Armenia had performed steadily over the year while Bosnia and Herzegovina, Tajikistan and Turkey experienced slight decline. Transparency was very excellent in this region. On average, ECA countries posted the highest scores for both accounting transparency and transparent pricing (The Economist, 2013). Most the countries of this region had adopted standard accounting practices. Armenian central bank developed financial-services shopping tool designed to help clients comparing competing products from different financial institutions (FIs) and Azerbaijan’s central bank had issued rules promoting interest rate transparency. MFIs association has augmented these rules with voluntary code of ethical standards for regulated micro-lenders. Latin America and the Caribbean (LAC) region, like previous year, is leading in the regional list of Microscope 2013 report with highest overall regional score. This region was in the peak in supporting institutional framework criterion but ranked third on Regulatory Framework and Practices criterion of microscope 2013. In fact, five of the 21 LAC countries (Paraguay, Honduras, Costa Rica, Guatemala and Haiti) scored higher in the Regulatory Framework category than on Institutional Framework (The Economist, 2013). Scoring about 15 points higher from second-placed region, LAC region was leading in political stability criterion of microscope 2013. Five countries out of top ten ranked countries of microscope 2013 report were from this region. Peru and Bolivia were the first and second respectively in the global ranking while Colombia, El Salvador and Dominican Republic were also in the top ten list. Peru was leading in the microfinance market with very congenial business environment for microfinance market. It has low barriers to entry and competitive market places characterized by adequate supervision and solid credit bureaus. On the contrary, though Bolivia placed second in the global microscope ranking in present year it’s score has declined due to changes in the regulatory environment. Dominican Republic improved its ranked into top ten by improving in pricing transparency, financial transaction through agent and regulatory capacity. Government in several countries of these regions also improved regulation of financial agents, creating opportunities for further innovation in correspondent and mobile banking. 4 Middle East and North Africa (MENA) region was the lowest ranked region in microscope 2013 report. Though it has showed slight improvement in the supporting institutional framework and stability categories but it remained lowest scores in all the three categories. Few regulatory changes had been made in MENA region during past few years. Morocco updated its Microfinance Associations Law and updating of 2002 NGO law is still under consideration in Egypt. 35th Morocco was the highest MENA country and other top ranked MENA