Asia Small and Medium-Sized Enterprise Monitor 2021 Volume III: Digitalizing Microfinance in Bangladesh: Findings from the Baseline Survey

By Asian Development Bank

This thematic third volume of the Asia Small and Medium-Sized Enterprise Monitor 2021 focuses on the digitalization of microfinance in Bangladesh. The MSME sector provides much of the income in rural Bangladesh, but its growth is constrained by limited access to affordable finance. This volume reports on a 2021 baseline study carried out in Bangladesh to pilot a randomized controlled trial to determine whether a digitalized group-based credit scheme could be introduced at an affordable price. The findings provide justification for further study on the digitalization of microfinance.

• Language: English
• Publisher: Asian Development Bank
• Release date: Apr 1, 2022
• ISBN: 9789292694784

Book preview

ASIA SMALL AND MEDIUM-SIZED ENTERPRISE MONITOR 2021

VOLUME III—DIGITALIZING MICROFINANCE IN BANGLADESH: FINDINGS FROM THE BASELINE SURVEY

APRIL 2022

Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO)

© 2022 Asian Development Bank

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Some rights reserved. Published in 2022.

ISBN 978-92-9269-477-7 (print); 978-92-9269-478-4 (electronic); 978-92-9269-479-1 (ebook)

Publication Stock No. TCS220161-2

DOI: http://dx.doi.org/10.22617/TCS220161-2

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Contents

Tables and Figures

Foreword

Limited access to formal financial services is a chronic problem that impedes the growth of micro, small, and medium-sized enterprises (MSMEs) in any country. Governments have provided intensive financial assistance programs to MSMEs during the coronavirus disease (COVID-19) pandemic through debt restructuring, special refinancing schemes, and credit guarantees, which helped improve their access to bank credit. However, financing constraints remain high in many MSMEs in developing Asia. In the nonbank financial sector, it is hoped that microfinance institutions can fill the unmet financing demand from smaller firms and entrepreneurs. Given the post-COVID-19 economy that promotes contactless societies, digital transformation should be further encouraged for businesses, including the microfinance industry.

This thematic third volume of the Asia Small and Medium-Sized Enterprise Monitor (ASM) 2021 focuses on the digitalization of microfinance in Bangladesh. The study aims to assess how the financial services of microfinance institutions can be digitalized to help boost growth among smaller firms and entrepreneurs by using an impact evaluation approach.

The Asian Development Bank partnered with the Bangladesh Institute of Development Studies to conduct the baseline study. The field survey was disrupted by surging COVID-19 cases and subsequent lockdowns in Bangladesh. Yet, the team was able to complete the baseline survey in late December 2021 despite these difficult conditions and prepared the report in early 2022. The study was financed by the Japan Fund for Prosperous and Resilient Asia and the Pacific as part of the ASM project.

The study offers justification to pilot a full-scale randomized controlled trial to assess the effects of a digitalized version of a group-based credit scheme that can expand financial services to smaller firms at an affordable price.