Despite the fact that microfinance has attained its objectives, its appeal and acceptance has waned in recent years. In the age of mobile and internet technologies, this loan programme can be redefined.
Bangladesh is widely known as the origin of microfinance. The pioneer two NGOs, Grameen Bank and BRAC, have taken this poverty reduction tool to different places in the world, especially in Asia and Africa. This has been acclaimed by the United Nations and other international organisations. Certainly the objectives of microfinance have undoubtedly already been achieved.
Microfinance was inaugurated in the 1980s for a specific, target group of people (given their poverty level). It doesn’t have the generalised character required to reach all people.
However, in course of time, as in the case of other financial products, microfinance has lost its attraction and credibility due to bureaucracy, high interest rate, high operating costs, and other negative aspects of the loans.
This is the era of mobile and internet technologies. Everyone has all the information available and internet-based commerce has become more popular in the country. Government access to information (a2i), digitisation of services and enhancement of data driven 4G network, are clear indications of an information and communication technology-based (ICT-based) economy in the making.
So, it is prime time to introduce the crowdlending platform in Bangladesh for microfinance activities. It has potential to replace the old microfinance format. It will create opportunities for potential entrepreneurs to ask for microfinance loans with preset terms of repayment, based on their business potential. Entrepreneurs could use videos or pictures that best describe their business ideas and, at the same time, ensure their business credibility.
Sharing of the total amount for any particular project by multiple lenders reduces the total risks. Obviously, a lending platform needs to play a vital role for credit assessment and other issues of the fund raisers to protect the interest of lenders. To make the fintech microfinance successful, internet and mobile banking needs to be synchronised.
Surprisingly, there seems to have been only one fundraising platform in Bangladesh, and that too is obsolete. There also doesn’t seem to be any government regulations on this head. Again, SME (small and medium enterprises) loans involve high bank interest and a lot of bureaucratic hurdles.
All over the world, crowdlending platforms are gaining popularity for microfinance activities that create self-employment and contribute to the GDP simultaneously. Fintech entrepreneurs have enormous potential in this sector as it is still a nascent area in the Bangladeshi finance industry. Existence of three components can change the total financing for the SMEs through crowdlending. They are, government regulations, fintech entrepreneur’s enthusiasm and right informative education for the crowdlending microfinance activities.
Three issues caught my attention before: First, the student movement against job quota; secondly, over 47 per cent graduate unemployment; and thirdly, microfinance opportunities for SMEs in Bangladesh. If we want to correlate all issues and find a solution, we can draw a Fintech sustainable conclusion for the future. Sustainability can’t be achieved without developing SME business in Bangladesh.
If we focus on our neighbours, especially China, we will see that their development started with SMEs. Sustainable development in Bangladesh depends much on adroit policymakers and their long-term vision.
The author writes from Sweden and can be contacted at firstname.lastname@example.org <mailto:email@example.com>