Linking Up and Reaching Out in Bangladesh

The microfinance sector in Bangladesh has matured rapidly in the past 30 years and now boasts the largest number of clients in the entire world. Despite these successes, the day-to-day operations of most microcredit institutions in Bangladesh are done manually. The introduction of a centralized information and communications technology (ICT) platform in the microfinance sector will provide further cost savings by streamlining data so that errors, omissions, and duplications (client overlap) are eliminated. Moreover, the introduction of a centralized ICT platform will help to ensure transparency through the standardization of information exchange and accounting mechanisms, increase outreach to rural areas, and integrate the largely informal microfinance sector with the formal financial system.'Linking Up and Reaching Out in Bangladesh' shows how the establishment of a centralized microfinance platform would revolutionize the country's microfinance sector. This volume will be a useful guide for practitioners, policy makers, and microfinance institutions around the world.

Acknowledgments	p. ix
Abbreviations	p. xi
Introduction	p. 1
Current Constraints in the Microfinance Industry	p. 2
The Proposed New Microfinance Paradigm	p. 4
Approach to and Methodology behind the Study on Development of a Centralized ICT Platform	p. 5
Recommendations of the Study	p. 6
Note	p. 8
Bangladesh Microfinance Market Overview	p. 9
Country Overview: Bangladesh	p. 9
Microfinance Sector Overview	p. 12
Microfinance Industry Regulators	p. 14
Apex Funding Institution	p. 15
Microfinance Market Size and Major Players	p. 18
Microfinance Networks	p. 22
Formal Financial Sector	p. 24
Remittances	p. 26
Credit Bureaus	p. 27
Microfinance Products and Services	p. 27
Regulatory Regime	p. 31
Market Potential for Growth	p. 31
Market Outreach	p. 33
Other Market Considerations	p. 33
Market Challenges	p. 34
Notes	p. 35
The Proposed Centralized ICT Platform	p. 37
The Role of ICT in Meeting Bangladesh's Microfinance Market Challenges	p. 37
Microfinance Technology: The Traditional Way	p. 40
Centralized ICT Platform: The New Paradigm	p. 44
How to Develop a Centralized ICT Platform	p. 52
Emerging International Practices	p. 55
New Innovations	p. 55
Case Studies: Centralized Platforms for Microfinance	p. 57
Other Efforts Under Way	p. 66
Creating an Enabling Environment: Policy and Regulations	p. 67
Enabling Microfinance Regulations	p. 68
Enabling Financial Sector Regulations and Applications	p. 69
Enabling ICT and Electronic Data Regulations	p. 74
Going Forward	p. 78
Notes	p. 80
Technology Design	p. 81
Models of Technology Deployment	p. 82
The Building Blocks	p. 83
Basic Capabilities	p. 86
Catering to Multiple Users	p. 87
Adapting to Individual Needs	p. 88
Connecting to the Platform	p. 89
Institutional Design	p. 93
Institutional Purpose and Principles	p. 93
Institutional Approaches	p. 95
Analysis of Potential Approaches	p. 98
Recommended Approach	p. 101
Organizational Model	p. 101
Note	p. 103
Cost Projections	p. 105
The Methodology	p. 106
The Assumptions	p. 107
The Cost	p. 108
Sensitivity Analysis	p. 109
Conclusions and Recommendations	p. 113
Conclusions	p. 113
Specific Recommendations	p. 115
Appendix Costing Tables	p. 117
Works Cited and Other Resources	p. 121
Index	p. 125
Figures
Interest Rates	p. 11
Cumulative Microfinance Loan Disbursements, December 2006	p. 13
Bangladesh Microfinance Players	p. 14
Active Borrowers by MFI Class	p. 19
Growth in PKSF's Microenterprise Loan Portfolio	p. 32
Technology Use within MFIs and the Microfinance Industry	p. 41
Role of a Centralized ICT Platform	p. 46
Use of Technology by MFIs to Provide New Products	p. 49
Technology Use to Overcome Overlap	p. 50
Technology and Provision of Safety Nets	p. 50
Technology and Provision of Accurate Online Data	p. 51
Integration of the Financial Sector	p. 51
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Linking Up and Reaching Out in Bangladesh Information and Communications Technology for Microfinance

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