Islamic Microfinance:Bangladesh Experience

Mohammad Abdul MannanManaging Director & CEO

Islami Bank Bangladesh Limited

2

Demography &

Area : 147,570 km2

Population : 168.9 million

Literacy : 61.5%

GDP : $ 205.3 billion (44th)

Per Capita : $ 1,314

Inflation (PP/Average) : 5.65% /6.10%

Reserve : $ 27.5 billion

Export : $ 31.6 billion

Import : $ 43.2 billion

Foreign Remittance : $ 15.3 billion

Next 11 emerging economy

Gained the status of Lower middle income country

Banking Sector

• State owned Banks : 5

• Specialized Banks : 3

• Foreign Banks : 9

• Private Banks : 39 (Islamic Banks-8)

(Conventional Banks-31)• Total Banks : 56

• Branches : 9263

• Manpower : 160,000+

• Total Deposits :$100 billion

• Total Credits :$87.7billion

• Number of Deposit Accounts : 76.80 million

3

3

Islamic Banking in Bangladesh

4

• Full Fledged Islamic Banks : 8

• Islamic Banking Branches : 19

• Islamic Banking Windows : 25

• Number of Branches : 960

• Deposit : $20.8 billion

• Investment : $18.8 billion

• Manpower : 27837

5

• Bangladesh-the birthplace & hub of microfinance

• Grameen model by Noble Laureate Prof. Dr. Md. Yunus Started in 1983

• Microfinance inroads in finance landscape of country

Features:

• General Credit program

• Group based approach/ membership system

• Centre based arrangement

• Individual Savings

• Insurance coverage

Microfinance in Bangladesh

6

No. of MFIs : around 2100

Clients : 30 million

Loan Portfolio : US$ 5.5 billion

Loan Portfolio Growth : 15%

Recovery Rate : around 96%

Savings : US$ 4.1 billion

6

Microfinance Activities in Bangladesh

Sl. Name of MFIEstablis

hmentInvestment Share Savings Share

1 Grameen Bank 1976 1,234.92 23% 2,427.38 60%

2 BRAC 1974 1,436.60 26% 515.46 13%

3 ASA 1992 1,284.46 23% 568.54 14%

4 RDS (IBBL) 1995 265.00 5% 87.77 2%

5 BURO BD 1990 249.06 5% 79.36 2%

6 TMSS 1980 177.11 3% 58.01 1%

7SSS(Society for social service)

1986 110.18 2% 52.54 1%

8 UDDIPON 1984 76.61 1% 30.81 1%

9 Others (MFIs) - 649.08 12% 233.37 6%

10National position

- 5,483.01 100% 4,053.24 100%

Market Share of Microfinance in Bangladesh

While, total Islamic Microfinance clients in the world is about 1

million. More than Half of them is in Bangladesh and over 80

percent of them is concentrated in Indonesia, Bangladesh and

Afghanistan. Islamic Microfinance in Bangladesh is mostly

operated by-----

• IBBL’s Rural Development Scheme(RDS), founded in 1995

• SIBL, Al-Arafah

• Muslim Aid Bangladesh operating since (1991)

• Al Falah A’am Umayan Sangasta(AFAUS), Dinajpur in 1989

• TMSS Islamic Microfinance (TIMF) started in 2008

• RESCUE started operation in 1991 in Rangpur district

• Noble Foundation and Literary society, Bogra.

8

Islamic Microfinance

9

Islamic Microfinance: RDS Model

IBBL’s Rural Development Scheme(RDS), founded in 1995

10

IBBL: At a Glance

Asset Size : USD 9,294 Million

Branches : 304+

Manpower : 13622

Market Share

Import :11%

Export :10%

Remittance :27%

SME : 17%

Employment generation : 2.5 million people

Highest Taxpayer in Banking sector

Industry : 32.36%

Trade : 35.98%

Real Estate : 8.35%

Agri. & Agro Industry :11.99%

Micro Credit(RDS) : 3.64%

11

Sector-wise Business Exposure

12

Share of IBBL in country’s Microfinance

Source: Credit Development Forum

Share of IBBL's Microfinance to PCBs 52.05%

Share of IBBL to SCBs & PCBs 25.85%

Share of IBBL to PCBs Retail microfinance 98.90%

IBBL share in country microfinance through banking

& public institutes8.05%

13

Launched in : 1995

Mode of Finance : Baim, HPSM & Musharaka

Investment Size : US$ 145 – US$ 714

Male Members : 15%

Female Members : 85%

Rate of Recovery : 99%

RDS model of IBBL

IBBL covers 50% world Islamic microfinance

14

Particulars 2015 National Rank

No of Village 18,615

7th

position

among

2100

MFIs

of the

Country

No. of Member 9,47,305

Cumulative Disbursement (Million BDT)

(Million USD)

130445.12

$310

Outstanding (Million BDT)

(Million USD)

20798.82

$264

Share in IBBl’s to total investment 3.64%

Members Savings (Million BDT)

(Million USD)

6,890

$87.77

Key Information on RDS

Shariah based micro-finance

Collateral free

Farming and off-farming activities

Job Creation

Welfare and ethical services

Quard facilitates for sanitation

Lowest profit rates

15

RDS: Special Features

16

Farmers

Sharecroppers

Persons engaged in off-farm activities

Fishermen

Women and distressed people

Target Group

17

0

50

100

150

200

250

300

2010 2011 2012 2013 2014 2015

23 30 42 5

8 73 8

8

6590

132

175

221

265

Savings Investment

Trends of Savings and Investments(Million US$)

18

10751 11482

12857

15371

17163

18086

18615

10000

11000

12000

13000

14000

15000

16000

17000

18000

19000

20000

2009 2010 2011 2012 2013 2014 2015

RDS Expansion: Village coverage

19

3,3

35

74,3

15 217,4

25

523,9

41

560,4

99 733520

836227

911470 9,4

7,3

05

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1996 2000 2005 2010 2011 2012 2013 2014 15-Jun2015

Increase of Members

Crops, 24%

Nursery/Forestry, 1%

Agricultural Equipment, 2%

Livestock, 10%

Poultry/Bird, 1%

Fisheries, 4%Rural Transport,

5%

Rural Housing, 15%

Off-farm Activities, 37%

Others, 1%

20

RDS: Sector-wise Investment

Size-wise Investment:

Fig. taka in million

41%

34%

13%

9%3%

Upto $190

$191 to 380

$381 to 640

$641 to 1275

$1276 to above

22

Graduation RDS to MEIS and SME

23

IBBL follows a Finance Plus Approach

Finance

IBBL’s Integrated Approaches to Financial Inclusion

Health

Education

Nutrition

24

IBBL’s Integrated Approach to Microfinance and Financial Inclusion (RDS & UPDS

Model)

RDS

Financial Inclusion

Micro-Investment

(Upto Tk. 75,000)

Micro-Enterprise(Upto Tk. 400,00)

Ultra-Poor (Financed

through Qard coming from charity fund)

Social Inclusion

Education

- Pre-primary

- Maqtab

- Adult Education

- Award & Scholarship

Training

Health Service

- Medical Camp

- Circumcision Camp

-Medical Assistance

-Welfare Gift

-Qard for housing, sanitation & Tube well

Relief & Rehabilitation

Environment

CSRUPDS

RDS Graduation Process

25

Tk.75,000

($1000)

↑

↑

Tk.5000

($65)

MEIS Investment Size

$1000 - $5000

Collateral Free

Investment

◊ Graduated from RDS

◊ Stay at least 3 years

Inve

stm

en

t

Siz

e

◊ Investment with Collateral

26

Qard Program for RDS

USD$ 12.74 million (Tk.100 crore) fund creation

-Qard for distressed members & the ultra poor -Revolving basis -Qard for 1(one) year

Non-Financial Services(Welfare activities)

• Training for the beneficiaries and centre leaders;

• Health awareness development program;

• Relief Distribution Program

27

• Sanitation program;

• Treatment assistance for the poor members;

28

Non-Financial Services(Welfare activities)

Non-Financial Services (Welfare activities)

• Education program

• Scholarship Award Program

• Distribution of education materials

• Waiver of the liabilities of incapable members;

• Plantation program

29

• Extending RDS activities to all the 86,000 villages of the country.

• Addressing the ultra poor by developing Quard/Charitable Fund.

• Extensive investment in SME sector in the rural areas in view to

create huge employment.

• Encouraging bio-gas and solar panel in the rural house-holds.

continued--

----

Future Plan

• Ensuring zero level drop-out of the children of RDS members from primary education.

• Attaining 100% coverage of the beneficiaries in respect of pure drinking water and sanitation.

• Ensuring health safety-net of RDS beneficiaries.

• Extending massive plantation especially in the coastal areas.

• Alleviate poverty from the country

Future Plan

3232