Multiple Memberships (Overlapping) in Microcredit Markets of Bangladesh

Multiple MembershipsInstitute of Microfinance (InM) and Palli Karma-Sahayak Foundation (PKSF) jointly organised a national seminar entitled “Multiple Memberships (Overlapping) in Microcredit Markets of Bangladesh” at PKSF Auditorium (PKSF Bhaban, Agargaon, Dhaka-1207) on 18 December 2011.

The seminar was aimed at addressing and disseminating the findings from a study entitled “Multiple Memberships (Overlapping)” regarding the nature, causes and impact of multiple memberships (overlapping) in the microcredit markets of Bangladesh.

Dr. Qazi Kholiquzzaman Ahmad, Chairman, PKSF graced the event as the Chief Guest, and the seminar was chaired by Dr. Quazi Mesbahuddin Ahmed, Managing Director, PKSF. Mr. Khondkar Ibrahim Khaled, Chairman, Bangladesh Krishi Bank was present as the Special Guest. Dr. Md. Mosleh Uddin Sadeque, Interim Executive Director, InM welcomed the participants to the seminar.

The keynote speaker of the seminar was Professor M. A. Baqui Khalily, Department of Finance, University of Dhaka, and Team Leader, Multiple Memberships (Overlapping) Study, InM. The national survey of the study was conducted over randomly selected 4143 households from 118 villages in 17 upazilas of randomly selected 12 districts of 6 divisions. The survey provided the trend in individual membership by overlapping household memberships over the past ten (10) years. However, the study mainly focused on household membership overlapping.

The study showed both individual and household overlapping in microcredit have increased over time—the individual overlapping rate was found to increase from 8.58 percent in 2000 to 31.02 percent in 2009. On the other hand, the household overlapping rate has increased from 13.27 percent in 2000 to 42.51 percent in 2009. It is a reflection of higher demand for credit.

The major findings of the study explored the possible roles of 4 factors in causing multiple borrowing. The study found that ‘Enterprise Financing’ is the dominant head in the microcredit loan, followed by ‘Lumpy Expenditure’. Almost 59 percent of the loan taken by overlapping households was used in enterprise financing. However, household overlapping rate was found comparatively higher for those who used loan for the purposes of ‘Lease-in of Land’, and ‘Repayment of Previous Loan’. But the percentage of loans used for repayment of loans was quite low.

The study revealed that, overall there is positive impact of overlapping in the microcredit markets of Bangladesh. There is no evidence of growing indebtedness for the overlapping households. It is found that overlapping households are better off in terms of total assets, net worth, savings, consumption, employment days, and non-food expenditures, than the non-overlapping households.

Multiple Memberships01Professor Khalily pointed out that overlapping itself is not a problem; it is how the borrowers use money. Poor households are vulnerable and whatever gains they derive from microcredit are lost, in many cases, because of high intensity of idiosyncratic and co-variate shocks.

At the open floor (question-answer) discussion session, various queries came up from the participants, and Professor Khalily replied to the questions and clarified the outcomes of the research study. The findings of such a study are expected to help policymakers understand the reality regarding overlapping which deserves special attention in alleviating poverty.

The seminar became lively by the active participation of microfinance stakeholders, practitioners, academicians, researchers, policymakers, and other eminent personnel from reputed institutions and organisations.

The Institute for Inclusive Finance and Development (InM) is registered as an independent non-profit institution under the Societies Registration Act 1860.
The Institute works for developing the overall capacity of the financial sector and strengthening the links between the financial and real sectors through undertaking research, training, education, knowledge management and other programmes in priority areas including inclusive finance, microfinance, poverty and development.

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