Financial inclusion for the ‘missing middle’

January 2, 2018

Reading Time: 3 minutes

The capability to borrow money when needed, whether for short-term or long-term purposes, is a convenience valued by everyone. Access to credit is not only helpful for investing in enterprises, or managing crises, but it also provides the opportunity to access better standards of living.

Abdur Kadir Dhaly teaches mathematics at Maleka Banu Adarsha Uccha Biddalay in Uttara. He shares a flat with his colleague in Dhaka, while his wife and two children live in their hometown outside the capital. For many years, he has been saving to buy a plot of land near the city. However, a month before his final payment, he noticed that he was short of BDT 100,000.

Abdur quickly scanned alternative financing options. He began applying for loans, confident that his permanent job, a monthly salary of BDT 28,000, and a history of never having missed a payment would suffice. He spent considerable time and resources gathering numerous documents, but his loan applications were eventually rejected by every institution he applied to.

As the week of the payment date approached, Abdur saw his dream of living with his family in his own land in Dhaka slowly begin to fade.

While loans can be used to purchase land as retirement security, pay semester fees or invest in businesses, they are also valued by a growing professional demographic. Loans provide flexible financing options for a range of purposes, including purchasing consumer items, such as mobile phones or large screen televisions.

Access to credit is also important for the country. It leads to higher spending, boosts trade activity and raising, in turn, revenue and income levels in the economy. Wherever credit is used to invest in productive activity, employment is created through new businesses and entrepreneurs. It is no surprise, then, that the government is taking initiatives each year to disburse more loans to foster entrepreneurship and promote sustainable development of the country.

Yet, banking facilities still do not cover half of the adult population in Bangladesh, depriving them of the ability to borrow, or securely deposit their savings and earn interest.

Microfinance evolved in Bangladesh from the philosophy that people with limited incomes are ‘bankable’, and denying them access to finance not only deprives them from fulfilling their financial needs, but also stifles economic activity at the bottom of the pyramid.

It began with microcredit, small loans, to rural women to initiate income-generating activities. This eventually evolved into microfinance- the complete suite of financial services that now includes credit, savings, mobile money and even microinsurance, serving every demographic across rural and urban Bangladesh.

Yet, there is one segment that remains largely excluded: salaried workers with moderate to low incomes.

Consider Abdur Kadir Dhaly, or a supervisor of a garments factory, or a librarian at a college. Despite stable incomes, they are not seen as creditworthy borrowers by mainstream financial institutions, and are usually not eligible for credit cards, or trendy loan schemes by banks.

They also do not fit the profile of a traditional microfinance borrower. With low pay, lack of banking experience, coupled with the demand for paperwork by banks that many feel they cannot meet, it is common for people from this segment to borrow from insecure and expensive sources.

Notably, this ‘missing middle’ demographic is the largest segment of the country’s economy.

In November 2017 BRAC’s microfinance programme introduced the ‘nirbhorota loan’, recognising this immense need in the finance market. Over 7,000 jobholders across Bangladesh have already applied for loans at least once since it was piloted in September 2015. In light of growing demand, BRAC is making this service available from 675 branches in 64 urban and semi-urban districts of the country.

Now, one of nirbhorota’s newest clients, Abdur Kadir Dhaly says, “It took me just five days to get the loan. A salary certificate, my national ID and a recommendation from my colleague were all I needed”.

Bangladesh has made huge economic strides resulting from the financial services provided at both the top and bottom of the pyramid. As the country strives to reach the middle-income status, it is critical to ensure that the middle of the pyramid is adequately served too.


The writer is an external communications specialist for BRAC Microfinance and Targeting the Ultra Poor Programmes.

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Sajal ssrkar
Sajal ssrkar
4 years ago

I want to know brac nirbhorota office address at siddirgonj narayangonj