Moody's hails microlenders

Moody's Investors Services, a US-based rating and research agency, has hailed microfinance institutions (MFIs) of Bangladesh for helping the country set up a sound social safety net.
The firm that rated Bangladesh Ba3 yesterday said the MFIs along with remittance inflows and garment exports have supported the country's steady economic performance.
“Exports and remittances have underpinned an improvement in the country's balance of payments and microfinance has established a critical social safety net that offsets the vagaries of a subsistence level per capita income,” said Moody's in its assessment.
The globally reputed rating firm that has done ratings on over 170,000 corporate, government and structured finance securities also said the MFIs have helped reduce rural poverty in Bangladesh.
The Moody's observation came at a time when the microfinanciers are in the web of debates whether their lending programmes have been able to reduce poverty or not.
Bangladesh's poverty has come down to 31-32 percent at the end of 2010, according to a household income and expenditure survey of the Bangladesh Bureau of Statistics. People lived under poverty line was 40 percent in 2005.
“The MFIs have played a huge role in reducing poverty in the country,” said Muhammad A (Rumee) Ali, chairman of BRAC Bank, an SME-focused lender.
He said the Bangladesh economy has survived the recent global financial shocks due to its growing internal demand.
“There is no doubt that microfinance and remittances have fuelled the internal demand,” said Ali, also a former deputy governor of the central bank.
Economist Zaid Bakht said poverty has come down to slightly over 30 percent, but the industry and services sectors did not contribute significantly.
“The dynamism and vibrancy in our rural economy is largely attributed to access to funds,” said Bakht, a director of Bangladesh Institute of Development Studies.
The economist said remittance has also played an important role in establishing a social safety net, but microfinance has given it an institutional shape.
“Institutional measures (MFIs) have provided the backbone to the social safety net,” said Bakht.
He said the underlying strength of microfinancing on the economy needs to be recognised.
The MFIs work in a wide range of areas -- from agriculture to education, health, environment, gender justice and social enterprises.
Data available as on 2009 shows gross loan portfolio of the MFIs in Bangladesh stood at $2.3 billion and total assets at $3.5 billion. The number of active borrowers was 20.6 million with an average loan balance of $115.6 per borrower.
The number of depositors was 27.8 million at the end of 2009, and their deposits were $1.8 billion.

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