Title: Local government investment outreach and sustainability of microfinance institutions: A case study of BURO, Bangladesh
Abstract: While the world is fighting poverty and hunger, the new concept of Microfinance has emerged in the last couple of decades to provide loans to marginal and underprivileged people. Outreach and sustainability have become prominent indicators for success for microfinance institutions. Outreach pertains to the range of services; sustainability to a program's long-term existence., looking at the same time to the quantity and quality of services. This study deployed Sustainability Dependency Index (SDI), Sustainability Dependency Ratio (SDR) and Efficiency and Subsidy Intensity Index (ESII) techniques to measure the situation of (the Bangladesh Unemployed Rehabilitation Organization), a prominent microfinance institution of Bangladesh. From the analysis, BURO is found to have progressed towards achieving outreach and sustainability from 2001 to 2005, but then to have seen this trend deteriorate in 2006 and 2007. The study leads to a recommendation that microfinance institutions should concentrate on enhancing financial efficiency and reducing reliance on subsidies. Because the desire for micro credit is increasing day by day, microfinance institutions still have lots of opportunity to put more emphasis on outreach and sustainability factors. This study of BURO shows much that is relevant to the overall microfinance market in Bangladesh. Key Words: Outreach; Sustainability; Microfinance Institutions; Micro Credit; Savings Mobilization; Bangladesh; Bangladesh Unemployed Rehabilitation Organization (BURO); economic development. 1. Introduction There is a growing tendency among development economists and planners to think that microfinance programs have the potential for equitable and sustainable development with an ultimate goal of eradicating poverty. This received momentum from the award of the Noble Peace Prize to Dr. Muhammad Yunus and the Grameen Bank. Bangladesh has acquired a rich experience of poverty alleviation through a rapid expansion of microfinance in the past one and half decades. Microfinance programs have a positive effect from different socioeconomic perspectives. They have for decades provided low-income households with considerable economic and non-economic externalities in developing countries. The outreach and sustainability of microfinance programs are highly important to ensuring that these services are available to large numbers of people and to ensuring the programs' longrun contribution. Knowledge about outreach and sustainability is, however, partial and contested. Although there have been a few works on the outreach and sustainability of reputed top-class microfinance institutions (MFIs) in Bangladesh such as Grameen bank, ASA, etc., no focus has yet been placed on the new generation of microfinance institutions. In this study, the outreach and sustainability of BURO (the Bangladesh Unemployed Rehabilitation Organization), one of the new generation of MFIs in Bangladesh, is analyzed. Attempts are made here to find the ways by which BURO is operating its business and to what extent it is working toward the achievement of sustainable development. 2. Objectives of the Study The primary objective of this study is to analyze the outreach and sustainability of BURO. This leads to objectives of greater generality: (i) To discuss assessment of outreach and sustainability of microfinance institutions. (ii) To identify the factors affecting the outreach and sustainability of microfinance institutions. (iii) To make a comparative study, based on economic analysis, of the standard indicators of financial sustainability and the existing indicators for BURO. (iv) To find out the problems, if any, that MFIs have in attaining outreach and sustainability; and to suggest remedies for the problems encountered. 3. Research Methodology This paper is mainly based on secondary data received from BURO produced through its financial management and management information systems. …
Publication Year: 2009
Publication Date: 2009-10-01
Language: en
Type: article
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Cited By Count: 13
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